Sayer v Tomanovic

1. [1]

   The parties to these proceedings have been locked in dispute in three separate pieces of litigation in this Court. Two of the proceedings were in the Equity Division and the present proceedings were in the Common Law Division of the Court. The proceedings were ultimately heard together by Austin J who gave judgment on 5 March 2010: Tomanovic v Argyle HQ Pty Ltd; Tomanovic v Global Mortgage Equity Corporation Pty Ltd; Sayer v Tomanovic [2010] NSWSC 152.

2. [2]

   An appeal by the Defendant Mr Tomanovic to the Court of Appeal in respect of two equity proceedings was successful: Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) 288 ALR 310. As a result of orders made by the Court of Appeal in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) [2011] NSWCA 256; (2011) 288 ALR 385 the matter went before Black J who, amongst other things, determined that the net amount which was payable by the present Defendants to the Plaintiffs after the common law judgment was set off against various amounts, was $510,924: In the matter of Global Mortgage Equity Corporation Pty Limited [2013] NSWSC 1586. Black J ordered that there be a stay of orders made by him until 14 February 2014: In the matter of Global Mortgage Equity Corporation Pty Limited [2013] NSWSC 1818.

3. [3]

   On 16 February 2015 the Court of Appeal dismissed the Defendants’ appeal from the judgment of Black J: Tomanovic v One Australia Pty Limited [2015] NSWCA 11.

4. [4]

   On 12 March 2015 the Defendants filed an application for special leave to appeal to the High Court limited to issues arising in the proceedings heard by Black J. That special leave application is fixed for hearing on 7 August 2015.

5. [5]

   On 16 June 2015 the Plaintiffs filed a Notice of Motion seeking a freezing order in an amount of $293,008.00 relating to the judgment of Black J. When the matter came before the Duty Judge an undertaking was given by the First Defendant in terms acceptable to the Plaintiffs. The Notice of Motion was adjourned to the Duty Judge on 9 July 2015 and thereafter to me sitting as the Duty Judge for the hearing of that Motion on 15 July 2015.

6. [6]

   On 19 June 2015 the Defendants issued a Notice to Produce under r 21.10 Uniform Civil Procedure Rules 2005 (NSW) in respect of 19 documents or groups of documents. The service of that Notice to Produce caused the Plaintiffs to file a second Notice of Motion on 7 July 2015 seeking to set aside the Notice to Produce. That Motion also came to me to be heard at the same time as the Notice of Motion seeking a freezing order.

7. [7]

   Since the purpose of the Notice to Produce was said to relate to an issue to be determined in relation to the freezing order the parties agreed that it was appropriate that the Motion to set aside the Notice to Produce should be heard first followed by the hearing of the Motion for a freezing order.

8. [8]

   The Plaintiffs sought a limited freezing order, not over the whole of the Defendants’ assets, but over net proceeds of sale of three properties in which the First Defendant had an interest. The properties were these:

9. [9]

   Moreover, the amount the subject of the freezing order is limited to around $270,000.

10. [10]

    This amount is calculated as follows:

11. [11]

    During the course of argument I raised with counsel for the Plaintiffs the appropriateness of including an amount for the costs of the special leave application to the High Court when that sum was based on a belief that the special leave application would be unsuccessful. Counsel accepted that it would be appropriate to remove those costs from the calculation. In those circumstances the amount which the Plaintiffs seek to be the subject of the freezing order is an amount of $273,448.04.

12. [12]

    The basis for the application is that the Plaintiffs had ascertained that Mr Tomanovic had listed the Dural property for sale. The Plaintiffs’ solicitor made enquiries of the selling agent who informed the solicitor that an urgent sale of the property was required. Mr and Mrs Tomanovic had accepted an offer of $2.5 million for the property in May 2015. That sale had fallen through. The property was not to go to auction because it was essentially “a fire sale” and would sell quickly because “it has to be sold quickly before the proceeds from the sale are frozen”. Counsel for the Defendants objected to that evidence which was contained in a letter written by the Plaintiffs’ solicitors to the Defendants’ solicitors prior to the filing of the Motion. I allowed the evidence because I considered that s 75 of the Evidence Act 1995 (NSW) was satisfied.

13. [13]

    Mr Tomanovic acknowledges that the property at Dural is on the market. In his affidavit of 19 June 2015 he said this:

14. [14]

    I heard argument first in relation to the Notice to Produce and then in relation to the freezing order. I reserved my decision on 15 July 2015. On 20 July 2015 my associate received an email from the Plaintiffs’ solicitor requesting that the Motion be re-listed so that the Plaintiffs could re-open their case and present further evidence of which they had only become aware after I reserved my decision.

15. [15]

    The matter was re-listed on 22 July 2015. Solicitors for two other parties sought leave to appear. Those parties were Mrs V Tomanovic and Gallande Pty Ltd which was the caveator in respect of the three parcels of land the subject of the motion.

The Notice to Produce

1. [16]

   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:

2. [17]

   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.

3. [18]

   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.

4. [19]

   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.

5. [20]

   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.

6. [21]

   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.

7. [22]

   Accordingly, the Notice to Produce should be set aside.

The freezing order

1. [23]

   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.

2. [24]

   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.

3. [25]

   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.

4. [26]

   Rule 25.14 relevantly provides:

5. [27]

   In Trad Financial Services White J said at [15]:

6. [28]

   In Samimi v Seyedabadi McColl JA said:

7. [29]

   In Bhushan Steel Ltd v Severstal Export GmbH [2012] NSWSC 583 Sackar J said:

8. [30]

   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.

9. [31]

   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.

10. [32]

    However, the evidence adduced on 22 July 2015 put a different perspective on the matter.

11. [33]

    On 16 July 2015 the solicitors for the Defendants wrote to the Plaintiffs’ solicitors saying:

12. [34]

    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.

13. [35]

    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.

14. [36]

    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:

15. [37]

    The $10,000 to be paid to Bobi Damcevski was for legal fees and expenses in litigation against Mr Sayer including these proceedings.

16. [38]

    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.

17. [39]

    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.

18. [40]

    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.

19. [41]

    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.

20. [42]

    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.

21. [43]

    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.

22. [44]

    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.

23. [45]

    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.

24. [46]

    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.

25. [47]

    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.

26. [48]

    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.

27. [49]

    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.

28. [50]

    The Plaintiffs are entitled to a freezing order in the amount of $273,448.04 on giving the usual undertaking as to damages.

29. [51]

    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.

30. [52]

    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.

31. [53]

    The parties should bring in Short Minutes to reflect these reasons.