Large v Djamirze

1. [1]

   On 11 July 2018 the plaintiffs consented to an order that they provide security for the costs of the defendant in the sum of $60,000 to be paid into Court:

2. [2]

   Now, by Notice of Motion filed on 12 April 2019 the defendant seeks further security in the sum of $240,635.

3. [3]

   The first plaintiff, Mr Corey Large, resides in California. The second and third plaintiffs are incorporated in British Columbia. The fourth and fifth plaintiffs are incorporated in Australia but lack the means to meet a costs order. There is therefore no dispute that the jurisdiction to order further security is enlivened.

4. [4]

   In my opinion, the application for security should nonetheless be refused because:

Background

1. [5]

   Mr Large is the brother in law of the defendant, Mr Alexander Djamirze.

2. [6]

   Mr Large is a movie actor and director. Relevantly to this application, he directed and acted in the movie “In Like Flynn”, a biographical film about the early life of the actor Errol Flynn.

3. [7]

   The second to fifth plaintiffs are companies associated with the production of the movie.

4. [8]

   Between January 2016 and April 2017 the plaintiffs transferred USD2.24 million to Mr Djamirze for the purpose of investment by Mr Djamirze in the foreign exchange market. The plaintiffs claim that the money was to be invested until such time as the funds were required by the Australian plaintiffs for the making of the film.

5. [9]

   Of the USD2.24 million transferred to Mr Djamirze, Mr Djamirze returned to the plaintiffs USD1.33 million. Some USD1 million was lost.

6. [10]

   The plaintiffs claim damages from Mr Djamirze based on, amongst other causes of action, breach of contract and misleading or deceptive conduct.

Costs of enforcement

1. [11]

   As the claims of the plaintiffs overlap and rely upon the same facts to be established by the same evidence, it appears likely that if a costs order is made in favour of Mr Djamirze, it will be one for which Mr Large is jointly and severally liable.

2. [12]

   Mr Large resides in California but recognition of a judgment of this Court can be obtained in California under the “Uniform Foreign-Country Money Judgments Recognition Act” in the California Civil Procedure Code: see §§ 1715(a) and 1718.

3. [13]

   There is before me evidence of a Californian attorney, Mr Douglas Emhoff, a partner of DLA Piper (US), to the effect that the likely fees of obtaining recognition of an order of this Court in the California Superior Court would be in the range of USD7,500 to USD15,000.

4. [14]

   Mr Emhoff stated:

5. [15]

   I have been taken to an unreported decision of the Court of Appeal for the Second District in California where a decision of the Supreme Court of Western Australia was enforced in California without difficulty: Mercator Property Consultants Pty Ltd v Sumampow (2nd D Cal Ct App, B236491, 5 March 2012).

6. [16]

   Further, in Carrey v ACP Publishing Pty Ltd (Supreme Court (Vic), 11 December 1997, 6 February 1998, unrep) Hedigan J said, in a case involving another perhaps more famous movie actor:

7. [17]

   As I have mentioned the second and third plaintiffs are companies incorporated in British Columbia. Enforcement of NSW judgments in British Columbia is relatively straight forward because it is a jurisdiction with which Australian judgments have reciprocity of treatment: s 5 of the Foreign Judgments Act 1991 (Cth); reg 4 and item 3 of the Schedule to the Foreign Judgments Regulations 1992 (Cth).

8. [18]

   There is evidence before me from Mr Jeffrey Horswill, a partner of DLA Piper (Canada) based in Vancouver, that the cost of enforcing a NSW judgment in British Columbia is likely to be less than CAD10,000 and that recognition of a NSW judgment “can be accomplished via a simple application brought without notice.”

9. [19]

   Usually, when an application for security for costs is based upon the fact that the plaintiff resides outside NSW, the quantum of costs that should be ordered is the “additional costs of realising the costs order in a foreign country as opposed to Australia”: Dense Medium Separation Powders Pty Ltd v Gondwana Chemicals Pty Ltd [2011] NSWCA 84 at [32] (Young JA with whom Campbell and Whealy JJA agreed); see also In the matter of SCW (Express Detailing) Pty Ltd [2011] NSWSC 688 at [32] (White J); Daya v CX Reinsurance Company Ltd [2012] NSWSC 1213 at [27] (Brereton J).

10. [20]

    I see no reason why a different approach should be taken in this case.

11. [21]

    Mr Djamirze already has $60,000 security. It is not likely that the costs of enforcing any costs order in California and British Columbia will exceed that sum.

12. [22]

    That alone is a reason to refuse Mr Djamirze’s application.

The timing of the application

1. [23]

   The application is also brought late in the day.

2. [24]

   The proceedings were commenced in February 2018.

3. [25]

   The security ordered by consent on 11 July 2018 was expressed to be for the costs of Mr Djamirze up to and including the close of evidence in chief and including a mediation.

4. [26]

   A mediation took place on 14 November 2018.

5. [27]

   The mediation was unsuccessful and on 30 November 2018 the matter was set down for hearing for 10 days in July 2019. On 12 December 2018 the hearing date was changed to 12 August 2019.

6. [28]

   The application for further security was made on 12 April 2019, and very shortly after service by the plaintiffs on Mr Djamirze of their proposed Amended Commercial List Statement in which the allegations of fraudulent conduct by Mr Djamirze against the plaintiffs was first raised.

7. [29]

   The explanation for the delay in bringing this application was given by Mr Djamirze’s solicitor, Mr Michael Heffernan, in his affidavit of 6 June 2019, as follows:

8. [30]

   I do not find this a convincing reason for this application only being brought on 12 April 2019.

9. [31]

   From the time the mediation failed on 14 November 2018, it must have been obvious to Mr Djamirze that this case would have to proceed to a hearing.

10. [32]

    The matter had been allocated a 10 day hearing date since 30 November 2018.

11. [33]

    Whether or not, as has happened, the plaintiffs’ chose to expand the ambit of their claims, Mr Djamirze has known since 30 November 2018 that a 10 day hearing lay ahead and must have been in a position to know, whether or not the plaintiffs amended their claim, the likely costs that would be incurred.

12. [34]

    I find this factor weighing against the provision of further security.

Prospects of success

1. [35]

   The plaintiffs contend that their prospects of success in the proceedings are substantial.

2. [36]

   Uniform Civil Procedure Rules 2005 (NSW) r 42.21(1A)(a) provides that a matter to which the Court may have regard in considering a security for costs application is "the prospects of success or merits of the proceedings".

3. [37]

   The Court of Appeal has recently emphasised that when looking at the merits of the proceedings it may be necessary to go further than concluding that the proceedings are not frivolous and that there are real issues to be tried.

4. [38]

   Thus, in Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 at [98], Bathurst CJ, Leeming JA, Barrett AJA said

5. [39]

   Mr Livingston, who appeared for the plaintiffs, submitted that there are two features of the plaintiffs’ claims which point to a high likelihood that the plaintiffs will have some success against Mr Djamirze, sufficient to prevent any order for costs being made in Mr Djamirze’s favour.

6. [40]

   I shall deal with each in turn.

7. [41]

   Mr Djamirze sent Mr Large a number of WhatsApp messages which were to the effect that it was “easy” and “risk free” to engage in foreign exchange trading.

8. [42]

   Thus, on 9 January 2016, prior to the plaintiffs advancing any money to Mr Djamirze, Mr Djamirze messaged Mr Large “$1 mill will give us $200k per month easy”.

9. [43]

   On 27 January 2016, again before any funds were advanced, Mr Djamirze messaged Mr Large:

10. [44]

    On 4 February 2016 after Mr Large had advanced USD100,000, he messaged Mr Djamirze “[j]ust need to see one month first”. Mr Djamirze replied: “[w]ith $2 mill, being very very conservative, we can stop working and just trade”.

11. [45]

    On 24 February 2016 Mr Djamirze messaged Mr Large “[w]ith $10 mill we will make $1 mill a month easy”.

12. [46]

    On 1 March 2016 Mr Djamirze messaged Mr Large:

13. [47]

    On 4 April 2016 Mr Large messaged Mr Djamirze “I’m taking a risk here if we lost that” to which Mr Djamirze replied:

14. [48]

    Mr Large asked:

15. [49]

    Mr Djamirze replied:

16. [50]

    No doubt, at the trial, these optimistic statements will be seen in a wider context which may well include:

17. [51]

    However, the unqualified nature of the statements made by Mr Djamirze suggests the plaintiffs have serious prospects of making out their case of misleading or deceptive conduct.

18. [52]

    Mr Livingston pointed to evidence suggesting that the plaintiffs have strong prospects of establishing that, on three occasions Mr Djamirze sent Mr Large what purported to be screenshots of Mr Large’s “ledger balance” which were fabricated.

19. [53]

    On 29 March 2016 Mr Large messaged Mr Djamirze: “Can you send me the chart that shows 290,000”.

20. [54]

    On the same day Mr Djamirze sent Mr Large what purports to be a screenshot of Mr Large’s “Previous Ledger Balance” showing a balance of $293,016.61.

21. [55]

    Mr Djamirze now admits in his Commercial List Response that the screenshot was not from Mr Large’s trading account, but rather from the trading accounts of a Mr Bursch.

22. [56]

    Mr Altan, who appeared for Mr Djamirze, accepted that this screenshot was of “the wrong account”.

23. [57]

    On 3 January 2017 Mr Djamirze sent Mr Large a screenshot that purported to show a balance of $809,594.

24. [58]

    The plaintiffs’ solicitor, Mr Jonathan Ellis, has conducted a search of the relevant documents and concluded that there are no “matching trades” to justify such a balance.

25. [59]

    The plaintiffs’ forensic accountant, Mr Alex Bell, has determined that, in fact, Mr Large’s opening balance on 3 January 2017 was $658,338 and the closing balance of $260,740.

26. [60]

    Finally, on 29 March 2017 Mr Djamirze sent Mr Large a screenshot which showed that Mr Large’s balance was $1,043,384.38.

27. [61]

    Again, Mr Ellis has done searches of the relevant documents which, he contends, show that the trades which occurred do not match this figure.

28. [62]

    Mr Livingston submitted that the plaintiffs’ case at trial will be that the most likely explanation, on the whole of the evidence, is that Mr Djamirze falsely created a “demonstration account” and operated that demonstration account so as to fabricate a record of trades that did not occur and sent a screenshot of that record to Mr Large.

29. [63]

    Mr Djamirze has given no explanation for these matters and, in his Commercial List Response has simply “not admitted” them.

30. [64]

    This was not a satisfactory response to these allegations. Practice Note SC Eq 3 at [11] requires a defendant to “admit or deny the allegations the plaintiff makes” and does not permit a “non-admission”.

31. [65]

    Leaving aside monies lost in foreign exchange trading, Mr Livingston pointed to material suggesting the plaintiffs have good prospects of showing that Mr Djamirze has actually misappropriated some of the money advanced to him for trading purposes.

32. [66]

    Mr Bell has identified that USD39,772 sent by the plaintiffs to Mr Djamirze which was not ever transferred from Mr Djamirze’s USD Currency Account to the plaintiffs’ Forex Trading Accounts.

33. [67]

    Mr Djamirze gave no explanation for this transaction in an affidavit his swore on 23 October 2018.

34. [68]

    In an affidavit sworn on 6 June 2019 Mr Heffernan foreshadowed that Mr Djamirze’s explanation for this transaction will be that the USD39,772 was an amount to which Mr Djamirze was entitled by reason of an agreement with Mr Large concerning the division of profits from foreign exchange trading.

35. [69]

    Mr Altan submitted that Mr Djamirze’s case would be that Mr Djamirze agreed with Mr Large that profits would be distributed 40:40:20 between Mr Djamirze, Mr Large and an outside investor.

36. [70]

    In that regard Mr Altan pointed to WhatsApp messages between Mr Djamirze and Mr Large on 9 January 2016 as follows:

37. [71]

    It is hard to see how this exchange could justify Mr Djamirze appropriating the USD39,772 on account of profits.

38. [72]

    The WhatsApp exchange suggests that profit would only be distributed after the time when the investor “wants out”.

39. [73]

    That appears to be consistent with an email exchange between Mr Djamirze and Mr Large on 22 September 2015 in which it was agreed:

40. [74]

    Mr Livingston submitted that analysis of the trading statements establishes that from time to time Mr Djamirze transferred money out of the plaintiffs’ Forex Trading Account into that of Mr Bursch. In his Commercial List Response, Mr Djamirze admits that these transfers were made.

41. [75]

    There is no evidence in the WhatsApp exchanges between Mr Large and Mr Djamirze to which I have been taken to suggest that the Mr Large consented to these transfers.

42. [76]

    Mr Djamirze has given no explanation for them.

43. [77]

    The plaintiffs claim that USD116,050.60 was withdrawn from the plaintiffs’ Forex Trading Accounts but not returned to the plaintiffs.

44. [78]

    Mr Livingston submitted that the statements from those trading accounts, read with Mr Djamirze’s bank statements, showed this money was deposited into Mr Djamirze’s USD account and then transferred either to his personal AUD accounts or to unidentified sources.

45. [79]

    Mr Bell’s expert report suggested the figure is higher. Mr Bell opined:

46. [80]

    In his Commercial List Response, Mr Djamirze has once again and contrary to the Practice Note, “not admitted” these allegations.

47. [81]

    These matters suggest that the plaintiffs have substantial prospects of showing that Mr Djamirze has misappropriated something in the order of USD180,000 in total.

48. [82]

    Of course, it will be a matter for the trial judge to make a final determination about this, and all other matters concerning the plaintiffs’ claim.

49. [83]

    However the matters justify the submission advanced by Mr Livingston that the prospects of Mr Djamirze’s obtaining a costs order in his favour are low and do not themselves justify an order for security.

Conclusion

1. [84]

   For these reasons, I decline to order further security.

2. [85]

   Mr Djamirze’s Notice of Motion filed 12 April 2019 should be dismissed with costs.