Talacko & Ors v Talacko & Ors [2009] VSC 387

2 Paragraph 11 of the Order made on 23 June 2009 read as follows:

1. Subject to the laws of the Jurisdiction in which each Property is located, the Defendant must permit the special referee to inspect the properties internally and externally accompanied by a Representative of each party on a date or dates nominated by the special referee, being a date or dates on or before 31 July 2009.

Each Property was listed in the first column in Schedule A to the Order.

3 By his Order made on 24 July 2009 Kyrou J amended the date in the earlier Order from 31 July 2009 to 24 August 2009.

4 The two alleged breaches of the Order of Kyrou J made on 23 June 1990 as amended on 24 July 1990 ("the Order") were as follows. First, that the defendant:

did refuse to permit the Special Referee appointed by the Court to inspect the Properties listed in Attachment A to the Orders by 24 August 2009.

PARTICULARS

The Defendant, by his attorney in the Czech Republic, Daniela Burešová wrote to the Special Referee by letter dated 13 August 2009 refusing permission for inspection at a time when it would not be possible thereafter to comply with the terms of Order 11 by 24 August 2009.

did refuse to permit the Special Referee appointed by the Court to inspect the Properties listed in Attachment A to the Orders by 24 August 2009.

PARTICULARS

The Defendant, by his attorney in the Czech Republic, Daniela Burešová wrote to the Special Referee by letter dated 24 August 2009 refusing permission for inspection.

5 The recent history of this protracted dispute is set out in some detail in the judgment of Kyrou J given on 21 August 2009 in the 2009 proceeding[2] and the following summary is drawn from that judgment. It is sufficient for present purposes to note that the Order of 23 June 2009 appointed a Special Referee to prepare a valuation and report in respect of a number of properties in the Czech Republic, Slovakia and Germany ("the Properties"). Interests in these Properties were transferred to the defendant under the restitution laws passed in those countries after the fall of the Communist regimes in what were then Czechoslovakia and East Germany. This proceeding was commenced by the plaintiffs alleging a breach by the defendant of an agreement made in 1990 with his sister and brother to hold his interests in the Properties on trust for the three siblings in equal shares. The dispute was settled by the parties in 2001, but the plaintiffs reinstated this proceeding in 2005 alleging that Mr Talacko had breached the terms of the settlement. In 2008, Osborn J held that Mr Talacko had breached the terms. Subject to resolution of some outstanding defences, Mr Talacko is liable to pay equitable compensation to the plaintiffs in accordance with the terms of settlement. In March 2009, the trial of these remaining issues in this proceeding was set down for hearing commencing on 5 October 2009.

6 In an affidavit sworn on 9 September 2008, the defendant stated that:

My sole intention with respect to the properties is to continue to rehabilitate and modernise them to a comparable state to which they were prior to them being forcibly taken from my parents. I have no intention of selling, disposing, encumbering or in any other way dealing with the properties other than in the normal course of letting some of them out on normal commercial terms where that is permitted.

Yet in May 2009 the defendant transferred interests in the Properties in the Czech Republic to his sons, David and Paul Talacko, by way of gift. Those sons were two of his four children. They lived overseas in the Czech Republic or the United Kingdom, whereas the remaining son and a daughter lived in Australia. By the time the plaintiffs learned what had happened, some of the transfers had been registered, whilst the registration of other transfers was still pending. There was evidence that once lodged the transfers could not be withdrawn without the consent of both transferor and transferees.

7 On 11 June 2009, Kyrou J made an order in this proceeding restraining Mr Talacko from taking any further step by himself or by his employees, agents or attorneys from selling, transferring, donating or otherwise dealing with any of the Properties, and directing him to immediately take all such steps as he was able to withdraw any applications for transfers and any documents relating to applications or transactions that he, his employees, agents or attorneys had lodged with any Real Estate Registry in the Czech Republic in respect of any of the Properties. Despite this order, by a letter dated 17 June 2009 Mr Talacko's Czech attorney, Daniela Burešová, provided information to the Cadastral Registry in Prague that the Registry had requested for the purpose of progressing some of the transfers to David and Paul Talacko.

8 On 13 July 2009 the plaintiffs filed a summons seeking to have Mr Talacko dealt with for contempt on the grounds that Dr Burešová's letter had breached the order made by Kyrou J on 11 June 2009 and that Mr Talacko had not provided copies of taxation documents in accordance with an order made on 23 June 2009. As there was evidence which suggested that Mr Talacko was about to leave the jurisdiction, Bongiorno J issued a warrant for his arrest. After a hearing that evening, he was remanded in custody. On 14 July 2009, Byrne J dismissed the summons filed the previous day because the order of 11 June 2009 did not contain an indorsement pursuant to r.66.10(3) of the Rules. However, later that date, on a fresh summons, Byrne J made an order which, as varied on 15 July 2009, prevented Mr Talacko from leaving Victoria or from attending any point of international departure and placed restrictions on Mr Talacko's access to a passport. This injunction remained in force at the time of the hearing before me. In an affidavit sworn on 15 July 2009, Mr Talacko said that Dr Burešová had sent the letter of 17 June 2009 without his instructions.

9 On 17 July 2009, the plaintiffs commenced this proceeding, naming David Talacko and Paul Talacko as the second and third defendants. The causes of action against them include, inducing their father to breach the terms of settlement, causing loss by unlawful means and conspiracy, and knowing participation in Mr Talacko's breach of trust and breach of fiduciary duty. Since that day, orders have been made in one form or another restraining David Talacko and Paul Talacko from taking any further steps by themselves or by their employees, agents or attorneys for the purpose of, or in furtherance of, the registration made to them of any of the eight properties. Such orders were repeated in the Order made on 10 August 2009. Included in the Order were what were called Mareva-type orders against both the second and third defendants. Amongst other things, these orders required each of them by 15 August 2009 to send letters to the Cadastral Registrar in Prague requesting that no further steps be taken to register transfers of the Properties; restrained each of them from selling, transferring, donating or otherwise dealing with any of the Properties; and required each of them by 19 August 2009 to complete, sign and forward the cancellation documents relating to the Properties sent to them by their father. Orders for substituted service on David and Paul Talacko were also included in the Order, Kyrou J being satisfied that they had been avoiding service.

10 In an affidavit sworn on 24 August 2009, Howard Rapke deposed that on 14 August 2009 he received a copy of an email sent that day by Mr James Hollas of Jones Lang LaSalle, the Special Referee appointed by the Court, to Dr Daniela Burešová, the defendant's attorney in the Czech Republic.[3] That email attached a letter dated 13 August 2009 from Dr Burešová to Mr Hollas. As it is this letter which is said to constitute the defendant's first refusal to permit the Special Referee to inspect the Properties, it is appropriate to set it out in full:

Thank you for your e-mail, to which I reply as follows:

A few days ago I learnt that Mr Jan Talacko, one of my clients that I have been representing since 1990, had appointed me a local contact for cooperating with you in valuing his properties.

He certainly did so in view of the fact that I know all information regarding the houses concerned - in addition to legal representation, that is to say, I devote myself to a complete administration of buildings. So I was surprised that your representatives had come for example to the house in Rybná 29 without announcing their arrival in advance, had not introduced themselves to the tenants and according to the information of the co-owner of the restaurant, inadequate pressure was even exerted on the tenants.

Admittedly, Mr Jan Talacko appointed me a contact person, but all that he has done in Australia over a minimum of the last two months I do not consider as legal acts made freely, free of any duress.

If a man of eighty with such a poor state of health as my client is put in remand prison without any warning, passports are seized to him and is forbidden to travel to the country whose citizen he is and in which he owns properties, nobody will believe that whatever he signs or promises before an Australian court is valid.

I know that your company was appointed by an Australian court to develop price opinions with respect to the properties my client owned. You are sure to know that he donated all his properties in Prague to his two sons, Paul Anthony Talacko and David Talacko, who permanently live and work in the Czech Republic.

The relevant deeds of donation are valid under Czech law and are registered with the Land Registry in Prague. Everyone in the Czech Republic has a right to make such deeds of donation as proprietary law is protected by the Constitution.

My client made the above-mentioned donation, among other things, by reason of his age and state of health: it was no longer easy for him to make decisions on complicated issues concerning a number of his properties.

The taking of donation back, which he did in Australia under pressure on the part of the court, is not eligible of being registered in the land register without the consent of the donees. Under our (Czech) rule of law, the registration of deeds of donation is carried out retrospectively as of the day of submission of a proposal for registering a gift in the Land Registry. It follows from this that Mr Jan Talacko has not been the owner of any property since May 13 of this year.

For all the reasons given above I assume that valuing the properties is quite irrelevant.

Since May 13, 2009, Mr Jan Talacko has not been the owner of the properties concerned. Their exclusive and lawful owners are David and Paul Talacko and the inviolability of their possessions and proprietary rights is, among other things, protected by the Constitution of the Czech Republic. It is therefore exclusively up to them (according to laws in force) whether and to whom they allow to enter their properties. Despite my efforts, I have not succeeded in obtaining their consent up to now. However, in the event that I am given this consent, I will, of course, inform you without delay.

My client, Mr Jan Talacko, has no longer any power to change this decision.

11 Mr Hollas' email dated 14 August 2009 to Dr Burešová read:

Dear Dr Burešová

Thank you for your letter dated the 13th of August. The content of the letter is somewhat surprising and confusing, so to help clarify the issue I have attached the letter so that the individuals I have copied in on this email are able to read it as well.

First and foremost I would like to point out that at no point have I or any representative of Jones Lang LaSalle inspected Rybná 29, or indeed any other of the properties in question. Therefore I have absolutely no idea about what you are talking about in relation the claimed inspection and exerting pressure on tenants etc.!

Secondly I have not been advised about any "donation" of the properties to Mr Talacko's sons and therefore am assuming I still need to inspect all the properties for the purposes of this court case. I will therefore be contacting you next week with a view to commencing the inspections.

Lastly, as indicated in my last email, could you confirm that you have details of floor measurements for all of the properties, along with information on regulated tenancies.

12 Mr Rapke further deposed in his affidavit that on 17 August 2009 he received a copy of an email from the Associate to Justice Kyrou to Mr Hollas which stated, in part, that:

I have referred to Justice Kyrou your email and the attached letter from Dr Burešová. His Honour has instructed me to inform you that you are to perform your functions as special referee in accordance with the order appointing you and that nothing to [sic] Dr Burešová's letter affects that order or your functions. As I explained in my email on Friday, the order itself sets out what you are to do in the event that you are not able to inspect any of the properties for any reason.

13 Mr Rapke then deposed in his affidavit that on 17 August 2009 he received a copy of an email from Mr Michael Witt of Findlay Arthur Phillips, solicitors for the defendant, to Mr Hollas, which stated that:

I am instructed that subsequent to your email Dr Burešová telephoned you to clear up the confusion that may have been caused by her letter which should not have been sent to you. I am also instructed that she should be able to provide you with information concerning floor areas and regulated tenancies today (Monday) your time.

14 Mr Rapke also deposed that on the same day he received a copy of an email from Mr Hollas to the Associate to Justice Kyrou, which stated that:

I have been in contact with Ms Burešová and hopefully today she will be able to assist me by providing additional information and setting up the inspections.

15 In a further affidavit sworn on 25 August 2009, Mr Rapke deposed that on that day at 12.15 am he received a copy of an email from Mr Hollas to Dr Burešová sent at that time. Mr Hollas' email read.

Dear Ms Burešová,

We have been trying to contact you, for a number of days now, by phone and by email. We urgently need to speak to you in order to arrange the required inspections of the properties.

Can you please contact me, or my colleague Jana Hrobska, so that we can make the necessary arrangements.

16 In another affidavit sworn on 26 August 2009, Mr Rapke deposed that during the previous night he had received an email from Mr Hollas which stated, in part:

To all concerned,

Enclosed is the original letter dated the 24th of August, received from Ms Burešová and written in Czech. We have also provided a very basic translation. Whilst there are a number of issues which are unclear, the principle [sic] point to note is that we will not be given permission to internally inspect any of the properties. This will obviously have a significant impact on the reliability of our valuation.

Ms Burešová has agreed to meet us tomorrow at 14.00 pm [sic] at our offices to have a general discussion and hopefully provide us with some additional information on the Estate. We have also been in contact with the Plaintiffs contact in the CR, Mr Joseph Hlavicka, who unfortunately is away on holiday. We have, however, been able to arrange for a colleague of Mr Hlavicka to attend the meeting.

17 As the enclosed letter from Dr Burešová to Mr Hollas dated 24 August 2009 is said to constitute the defendant's second refusal to permit the Special Referee to inspect the Properties, it is again appropriate to set out the translated version in full:

To your letter dated 20/8/2009, my answer as follows:

In addition to the letter dated 17.8.09, I have sent you a letter dated 18.8.09 about constructions on land plots that are leased. I have not had any missed phone call from any of you on mine [sic] cell phone. I would like to meet you. I suggest meet you on Wednesday 26.8.09 at 14.00 in your office. Concerning financial information, I got information that the court was passed on with tax returns, which contain all the annual income and expenditure, ie the bank and treasury.

At your request about any kind of natural performance I can tell you that a natural performance never went through any accounting system and was not carried out.

On your question regarding Dresden I can convey to you the following:

These properties were, according to my information, issued in restitution to all parties, that means 2/3 for the applicants and 1/3 to my client Jan Talacko. Because, by reconstruction and usage of a property, the majority makes the decision, my client can not manage these properties. I was told that the plaintiffs will manage the properties. At the time of transmission, buildings were in good condition, occupied by tenants and currently, according to my information from hearsay, buildings are ruined, tenants evicted and almost without value.

The question is, whether the buildings in Prague would not be in same bad shape, if they would have been issued into third joint care.

At the time of issuing, three Prague buildings were in emergency condition. For example on building in Melantrichova Street we have undertaken three valuation reports of authorised experts and statisticians. In the rear wing of a building in Melantrichova Street ceilings and floors sing [sic], front wing ...

Unfortunately, I got information that the new owners do not want the representatives of your company or representatives of plaintiffs to enter the properties in Prague. This decision I am forced to respect.

If you need any more information, we will discuss them on Wednesday. If you propose another date, I am ready to adapt even late hours.

18 Finally, in an affidavit sworn on 27 August 2009, Mr Rapke deposed that on that day he received a bundle of correspondence consisting of letters from Dr Burešová apparently passing between her and Mr Hollas. The exhibited correspondence was a three page letter dated 17 August 2009 in Czech with an English translation and a one page letter dated 18 August 2009 in Czech with no translation. The letter dated 17 August 2009 contained details of the properties in Prague, such as area, whether they were leased, regulated rental or unoccupied, and what type of business was operated if the premises were commercial.

19 Mr Rapke also deposed that, at 1.49 am on 27 August 2009, he received an email from Mr Hollas attaching a basic summary of the meeting he had on 26 August 2009 with the plaintiffs' representative, Ms Lenka Neuzilova and the defendant's representative, Mrs Daniela Burešová. Included in the summary was the following:

The Defendant's representative confirmed that we would not be able to undertake any internal inspections of the properties. The reason given was that Mr J Talco's [sic] sons now own the properties (via donation) and they have refused to grant us permission to inspect. The Plaintiffs' rep advised that the ownership of the properties/sites has not in fact changed, but this did not alter the fact that we cannot gain access to the properties.

20 At the conclusion of the plaintiffs' case, Mr Williams of counsel, who appeared for the defendant, submitted that there was no case to answer. His principal submission was that there was no evidence that the defendant had refused to permit the Special Referee to inspect the Properties "on a date or dates nominated" by him, being a date on or before 24 August 2009. He submitted that this was the only obligation imposed on the defendant by the Order made by Kyrou J on 23 June 2009 as amended on 24 July 2009, and that until the Special Referee nominated a date or dates for inspection, the occasion for compliance with the Orders had not arisen. That is, one of the elements of a charge of contempt, breach of the terms of the Order,[4] had not been established.

21 In my opinion, this submission is a complete answer to the two charges of contempt. There is no evidence that the Special Referee had ever nominated a date or dates for inspection of the Properties, and thus there was no evidence that the defendant had refused to permit the Special Referee to inspect the Properties "on a date or dates nominated" by him. It would appear that the Special Referee has made the understandable mistake of seeking Dr Burešová's co-operation in finding mutually convenient times rather than going ahead and nominating a date or dates for inspection of the Properties regardless of whether or not such dates were suitable for the parties' representatives in the Czech Republic.

22 Nevertheless the charges of contempt being a quasi-criminal proceeding, the terms of the Orders have to be read strictly and each element of the contempt has to be proved beyond reasonable doubt.[5]

23 The way in which the charges of contempt were worded would suggest that the plaintiffs have read the Order as requiring the defendant to consent to inspection of the Properties by 24 August 2009. Thus, the reference in the particulars of the first charge to the alleged refusal being "at a time when it would not be possible thereafter to comply with the terms of Order 11 by 24 August 2009". This was not a correct reading of the Order, in my opinion. In any event, Mr Howells of counsel, who appeared for the plaintiffs, conceded during argument that even if Dr Burešová's letter of 13 August 2009 constituted a refusal, it would still have been possible to carry out the inspections by 24 August 2009 if, for example, an appropriate letter had been written in response to the Special Referee's email of 14 August 2009.

24 A second argument advanced by Mr Williams in support of the no case submission was that neither letter from Dr Burešová constituted a refusal by the defendant to do anything. He submitted that the relevant part of each letter was simply an assertion by Dr Burešová that she was powerless to overcome the opposition of Mr Talacko's sons, as the new owners of the Properties, to an inspection of them. Mr Williams pointed out that nowhere did Dr Burešová say in either letter that the defendant refused to permit the inspections. On the contrary, in her letter of 13 August 2009 she said that despite her efforts, she had not succeeded up to now in obtaining the sons' consent to the inspections, but in the event that she was given this consent:

And in her letter of 24 August 2009, Dr Burešová agreed to meet the Special Referee at a time proposed by him and indicated a willingness to provide information about the Properties, as she had already done in her letters dated 17 and 18 August 2009. What she said she could not do was override the refusal of the sons, as the new owners, to permit any inspections.

25 Mr Williams submitted that the statement in Dr Burešová's letter of 13 August 2009, that for all of the reasons she had given she had assumed that "valuing the properties is quite irrelevant", was an entirely wrong proposition but was not a refusal. He submitted that it was open to the Special Referee to correct her misunderstanding, which he did. But this did not make this particular statement a refusal to permit inspections.

26 Mr Williams submitted that the relevant meaning of "refuse" was clear. He referred to the dictionary definitions, the most apt one of which was "to express a determination not (to do something)".[6] He also referred to the definition found in a legal dictionary,[7] namely, "to deliberately and inexcusably not comply".[8] Neither letter, it was submitted, satisfied these definitions.

27 Mr Howells submitted that in her letter of 13 August 2009, Dr Burešová attacked the validity of this Court's orders concerning Mr Talacko and denied that they had any application, given the fact that Mr Talacko had donated the Properties to his sons. Her assertion that her client no longer had any power to permit inspection of the Properties, if his sons did not consent, was, Mr Howells submitted, a refusal. Counsel further submitted that in her letter of 24 August 2009, Dr Burešová repeated her refusal to permit inspection of the Properties.

28 In my opinion, the question of whether either of Dr Burešová's letters constituted a refusal by the defendant to permit inspection of the Properties partly depends on whether Mr Talacko remained the owner of, or had the capacity to give permission to inspect, any of the Properties. As previously stated, transfers of some of the Properties in the Czech Republic by Mr Talacko to his sons had been registered by the time the plaintiffs learned of the purported gifts and brought this development to the attention of the Court on 11 June 2009. According to Mr Howells, the finalised registrations affected only the agricultural land at Repy and Kbely and not the Properties in Prague which, he said, had the greatest monetary value. But, as Mr Williams pointed out, none of this evidence was contained in any of the affidavits on which the plaintiffs relied in support of the amended summons.

29 Further, there was no evidence that Mr Talacko had remained the owner of the Properties in Prague up to the time of the alleged refusal. It was not clear from the letter of 13 August 2009 whether Dr Burešová was saying that the sons' ownership was retrospective to 13 May 2009 because the registration of the transfers by donation of the Properties in Prague had been completed by that date, or whether she was saying that their ownership became retrospective immediately once the transfers were lodged and even before the registration of the transfers was completed.

30 I favour the first construction of Dr Burešová's letter. Although it was suggested from the Bar table that this would not have been a factually correct statement, I consider that the plaintiffs had to prove that at the time of the alleged refusal the defendant still owned, or had the capacity to give permission to inspect, each of the Properties the subject of the refusal. Otherwise, there was no proof that the defendant was capable of complying with the Order, and one of the elements of a charge of contempt, that the terms of the order were capable of compliance,[9] would not have been established.

31 Mr Howells sought to meet this point by referring to the defendant's solicitor's email to the Special Referee in which Mr Witt said that Dr Burešová's letter "should not have been sent to you". He submitted that this indicated that inspection could and would be granted by the defendant, because otherwise the solicitor would also have been advising the Special Referee that Mr Talacko no longer had any power or capacity to permit inspections. Yet only a few days later Dr Burešová again wrote saying that there could be no inspection without the sons' consent.

32 Mr Howells submitted that if the defendant were no longer the owner of any of the Properties then he should have brought this to the Court's attention on 23 June 2009 or 24 July 2009 in order to prevent the Court making orders that would be a nonsense and therefore would not be capable of compliance. I agree that this should have been done, if that were the situation. Whether or not Mr Talacko would have been believed is, perhaps, another question. But, here, the issue is whether the defendant was still the owner at the time of the alleged refusal not at some earlier time. In any event, such issues are not relevant to the question of contempt. The Order stands. The question is whether it has been breached.[10] Without proof that Mr Talacko had the capability to permit inspection of any of the Properties, there has been no refusal, in my opinion.

33 The alternative construction of the letter of 13 August 2009 was that, as the plaintiffs seemed to assume, Dr Burešová was asserting that the sons' ownership of these Properties was retrospective to the lodging of the transfers on 13 May 2009 even though the registration of the transfers was not yet completed, and that the defendant therefore no longer had any power or capacity to give permission to inspect. If this was what Dr Burešová was asserting in her letter, then it seems to me that, in order to prove the contempt beyond reasonable doubt, the plaintiffs had to put evidence before the Court that her view was not correct under Czech law. Mr Howells disputed this. He submitted that the legal proposition was rather extraordinary given that the registration might never be completed. He submitted that the plaintiffs were not required to disprove every crazy claim by or on behalf of a defendant. So much may be accepted. I do not agree, however, that the question of what might be the legal consequence of the lodging of a transfer for registration under Czech law falls into that category. After all, paragraph 11 of the Order was expressed to be "subject to the laws of the jurisdiction in which each Property is located". The only relevant evidence before the Court was the assertion by Dr Burešová, an attorney in the Czech Republic, that this was the consequence under Czech law. In the circumstances, in my opinion, the plaintiffs had to prove beyond reasonable doubt that this view was not correct.

34 Thus, however one reads Dr Burešová's letter of 13 August 2009, it seems to me that the plaintiffs have not established that either of her letters in question constituted a refusal by the defendant to permit inspection of the Properties.

35 For the above reasons, I consider that the no case submission should be upheld. The plaintiffs' amended summons filed on 27 August 2009 will, therefore, be dismissed.

36 This conclusion means that it is unnecessary to consider whether, service of the Order not having been admitted, the plaintiffs should be permitted to re-open their case to rely on the affidavit of service of Catherine J Hollis sworn on 29 July 2009 and filed on 5 August 2009, which stated that the Order of Kyrou J made on 23 June 2009 and the Order of Kyrou J made on 24 July 2009, with an indorsement under r.66.10(3) of the Rules, had been served on the defendant on 25 July 2009.

[1] Talacko v Talaco [2009] VSC 385.

[2] Talacko v Talacko [2009] VSC 349.

[3] Mr Hollas' email communications were sent to the solicitors for the plaintiffs, the solicitors for the defendant, the Court and various other persons.

[4] Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201, [31] (Gillard J).

[5] Hinch v Attorney-General (Victoria) [1987] HCA 56; (1987) 164 CLR 15 49 (Deane J); Witham v Holloway (1995) 183 CLR 525, 534 (Brennan, Deane, Toohey and Gaudron JJ), 548 (McHugh J).

[6] The Macquarie Dictionary, Second Revision.

[7] Butterworths Australian Legal Dictionary, 1997.

[8] Rejman v Dunsmore (1983) 32 SASR 151, 159 (Wells J).

[9] Advan Investments Pty Ltd v Dean Gleeson Motor Sales Pty Ltd [2003] VSC 201, [31] (Gillard J).

[10] Pico Holdings, Inc v Voss [2002] VSC 319, [42]-[44] (Gillard J).