Alexandra Bennett (and others according to the attached schedule) v Estate of Jan Emil Talacko (deceased) (An Undischarged Bankrupt) (and others according to the attached schedule)
[2020] VSCA 99
•30 April 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2019 0012
| ALEXANDRA BENNETT (and others according to the attached schedule) | Applicants |
| v | |
| ESTATE OF JAN EMIL TALACKO (DECEASED) (AN UNDISCHARGED BANKRUPT) (and others according to the attached schedule) | Respondents |
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| JUDGES: | BEACH, McLEISH and NIALL JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 30 March 2020 |
| DATE OF JUDGMENT: | 30 April 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 99 |
| JUDGMENT APPEALED FROM: | [2018] VSC 751 (McDonald J) |
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DAMAGES – Tort of unlawful means conspiracy – Loss of opportunity damages – Transfer of foreign properties to impede recovery of anticipated judgment debt – Loss of opportunity to recover judgment debt against foreign properties – Chance of recovering judgment debt against properties by succeeding in foreign proceedings assessed at 20 per cent – Whether judge’s uncontested findings compelled assessment that no, or lesser, chance of recovery – Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, applied – Malec v JC Hutton Pty Ltd (1990) 169, considered – No error shown – Appeal dismissed.
COURTS – Judgments and orders – Special leave to appeal judgment refused – Enforcement of judgment debt stayed because of bankruptcy of judgment debtor – Whether judgment ‘final and unappealable’ for purposes of foreign law, notwithstanding stay – Judgment ‘final and unappealable’ – Talacko v Bennett (2017) 260 CLR 124, considered.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr P H Solomon QC with | Brand Partners |
| Mr O M Ciolek | ||
| For the Fourth Respondent | Mr D G Collins QC with | Strongman & Crouch |
| Mr J B Masters |
BEACH JA
McLEISH JA
NIALL JA:
The applicants are Alexandra Bennett, Martin Talacko and Rowena Talacko along with the executors of the estate of their late mother, Margaret Talacko. They seek leave to appeal from a decision of a judge of the Trial Division assessing damages in their favour for loss of a commercial opportunity. The judge assessed them as having a 20 per cent chance of recovering an Australian judgment debt against certain properties in the Czech Republic through two legal proceedings in the Czech Republic, and made a deduction from the damages sum accordingly. The applicants contend that their prospect of recovery through those proceedings should have been assessed as negligible (or, alternatively, less than 20 per cent) and their damages should have been correspondingly higher.
The first of the Czech proceedings was brought by the applicants against the second and third respondents, David Talacko and Paul Talacko. By that proceeding, the applicants seek to set aside agreements between David and Paul and Jan Emil Talacko (David and Paul’s father, being Alexandra, Martin and Rowena’s uncle), by which Jan Emil donated the properties in question to David and Paul. This proceeding remains on foot. It is convenient to refer to it as the ‘donation proceeding’.
By the second proceeding, the applicants seek to enforce in the Czech Republic orders of the Supreme Court of Victoria made in 2009 which awarded judgment against Jan Emil and ordered him to pay equitable compensation and costs. It is convenient to refer to this proceeding as ‘the enforcement proceeding’. As explained later, if successful in the donation proceeding, the applicants would have standing to commence a fresh enforcement proceeding against David and Paul, with a view to enforcement of the Victorian judgment against the properties.
The applicants, together with the estate of the late Helena Talacko, who was the sister of Jan Emil and Peter Talacko (Margaret’s late husband), successfully established at trial that Jan Emil, his wife Judith, David and Paul conspired, by the donation agreements, to injure the applicants by means of Jan Emil unlawfully divesting himself of the properties against which a judgment in the then pending equitable compensation proceeding could have attached, thereby establishing (subject to damage) the tort of unlawful means conspiracy. The present application for leave to appeal concerns the judge’s assessment of damages for that tort.
As we have said, the applicants contend that the judge erred in assessing them as having a 20 per cent chance of succeeding in both the donation and the enforcement proceedings, and should have instead assessed their chances as negligible or, alternatively, less than 20 per cent. If so, the applicants would have been entitled to a greater sum by way of damages, as the opportunity to enforce the Victorian judgment debt against the Czech properties would have been wholly lost (or at least more likely to have been lost than was found by the trial judge).
The estate of Helena Talacko is not an applicant in the present application. Her executor has been named as the sixth respondent. The other respondents are, in order, the bankrupt estate of Jan Emil, who died intestate in 2014, David, Paul, Judith and State Trustees Ltd, by reason of the statutory vesting of an intestate person’s estate in that entity between the time of death and grant of administration.[1] Only Judith Talacko, the fourth respondent, took part in the present matter, both at trial and before us.
[1]Administration and Probate Act 1958, s 19.
For the reasons that follow leave to appeal will be granted, but the appeal will be dismissed.
Factual background
This matter has a long, complex history, involving multiple proceedings in Australia and the Czech Republic.
In 1948, Alois and Anna Talacko, the grandparents of Alexandra, Martin and Rowena on the one hand, and David and Paul on the other, left Czechoslovakia and settled in Australia with their three children Helena, Peter and Jan Emil. At the time of their departure, Alois and Anna owned properties including:
(a) five properties in the historic centre of Prague (‘the Prague properties’);
(b) horticultural land at Řepy, on the outskirts of Prague (‘the Řepy property’);
(c) land in Kbely, a suburb of Prague (‘the Kbely property’);
(d) a private forest plantation at Sucha in the north of what is now the Slovak Republic (‘the Sucha property’); and
(e) an apartment building and adjacent vacant land in Dresden, Germany (‘the Dresden property’).
Following their departure from Europe, these properties were seized by and vested in the state, being Czechoslovakia and East Germany respectively.
Alois and Anna died in Melbourne, in 1964 and 1984 respectively.
In 1989, communist rule in Czechoslovakia ended. The possibility arose of restitution of private property previously seized by the state. Helena, Peter and Jan Emil discussed seeking restitution of their parents’ properties.
What agreement, if any, was reached between the siblings in respect of the restitution of their parents’ properties was the subject of a separate proceeding, which ultimately settled. In that proceeding, Peter and Helena (and those who claim through them) had contended, and Jan Emil (and those who claim through him) denied, that in March 1991 the three siblings reached an agreement to jointly pursue restitution of their parents’ properties and to equally share any proceeds.
In any event, in September 1991, Jan Emil alone applied for the restitution of the Prague properties. At that time, he was the only sibling entitled to make such a claim, as he was the only sibling who was both a Czech citizen and resident at the time. Later, after being granted residency rights, Helena and Peter made their own claims, but their claims were affected by limitation provisions which applied to the relevant restitution laws.
In March 1992, the Prague properties were restored to Jan Emil, either solely or in part. Later, other properties which had formed part of Alois and Anna’s estate were either restored to Jan Emil solely or in part, or purchased by him, including the Řepy and Sucha properties.
The first proceeding
In 1995, Peter died. In 1998, his widow Margaret (as executrix of his estate) and their children Alexandra, Martin and Rowena, together with Helena instituted a proceeding, in which they claimed an equitable interest in the properties now held by Jan Emil that had previously formed part of Alois and Anna’s estate. They sought relief for alleged breach of agreement, breach of trust and fiduciary obligations. It is convenient to refer to this proceeding as the ‘first proceeding’.
The hearing of the first proceeding commenced on 21 February 2001 but it was settled two days later.
Two of the terms of the settlement agreement are presently relevant.
Clause 1 of the agreement required that Jan Emil transfer to a person or entity nominated by Margaret, Alexandra, Martin, Rowena and Helena all the rights, title and interest he had or shall have in respect of the Dresden, Řepy, Kbely, and Sucha properties.
Clause 6 of the agreement provided that, should Jan Emil breach any term of the agreement, then Margaret, Alexandra, Martin, Rowena and Helena would be entitled to enter judgment for an order that he pay equitable compensation for breach of fiduciary duty in respect of each of the properties the subject of the first proceeding. This excluded the Dresden property, but included, in addition to the Řepy, Kbely, and Sucha properties, the Prague properties.
After the execution of the settlement agreement, Jan Emil did not transfer any of his interests in the properties referred to in cl 1. In 2003, transfer documents for those properties were prepared by lawyers for Margaret, Alexandra, Martin, Rowena and Helena and provided to Jan Emil, but he did not execute them.
In July 2005, Margaret, Alexandra, Martin, Rowena and Helena reactivated the first proceeding. After being reinstated, it was split into separate trials as to liability and quantum.
In November 2007, there was a trial before Osborn J as to liability. On 24 April 2008, he delivered judgment, finding that Jan Emil had breached the settlement agreement.[2] Relevantly, the failure to transfer the relevant properties constituted a breach of cl 1. As a result, cl 6 was enlivened, entitling Margaret, Alexandra, Martin, Rowena and Helena to enter judgment for an order that Jan Emil pay equitable compensation for breaches of fiduciary duty in respect of the Prague, Řepy, Kbely, and Sucha properties.
[2]Talacko v Talacko [2008] VSC 128.
A trial as to quantum was conducted before Kyrou J in October 2009. On 24 November 2009, he gave judgment to the effect that Margaret, Alexandra, Martin, Rowena and Helena were entitled to equitable compensation in the amount of €10,073,818.[3] Orders were made requiring Jan Emil to pay equitable compensation in that amount, together with costs of the first proceeding on an indemnity basis. It is convenient to refer to these orders as the ‘Kyrou J orders’.
[3]Talacko v Talacko [2009] VSC 533.
An appeal from the judgments in respect of both liability and quantum was heard by this Court in November 2010. On 18 March 2011, judgment was delivered dismissing the appeal.[4]
[4]Talacko v Talacko (2011) 31 VR 340. Later that year, the High Court refused special leave to appeal: Talacko v Talacko [2011] HCATrans 301.
The donation agreements
On 12 May 2009, after judgment had been delivered in respect of liability, but before the trial as to quantum had commenced, Jan Emil, David and Paul executed three donation agreements in Prague. By those agreements, Jan Emil purported to give David and Paul the Prague, Řepy and Kbely properties by way of gift. Two days later, applications to transfer ownership of those properties to David and Paul were filed with the real estate registry in Prague.
Within a month, Margaret, Alexandra, Martin, Rowena and Helena became aware of the donation agreements and the applications to transfer ownership in the properties, after their Prague–based lawyer, Joseph Hlavička, made inquiries of the real estate registry.
The second proceeding
Subsequently, on 17 July 2009, Margaret, Alexandra, Martin, Rowena and Helena brought another proceeding against Jan Emil, his sons David and Paul, and his wife Judith (‘the second proceeding’). In that proceeding, they claimed damages for, amongst other things, unlawful means conspiracy. In respect of that claim, Margaret, Alexandra, Martin, Rowena and Helena contended that the donation agreements constituted an equitable fraud, and that Jan Emil, David, Paul, and Judith had conspired to injure them because the properties which Jan Emil purported to divest by the donation agreements were properties against which the anticipated judgment debt in the first proceeding might have been enforced.
The Czech proceedings
On 4 November 2011, after the filing of the second proceeding, but before the trial in that proceeding, Margaret, Alexandra, Martin and Rowena lodged two proceedings in the District Court of Prague.
The first proceeding is the donation proceeding, brought against David and Paul. In that proceeding, Margaret, Alexandra, Martin and Rowena seek orders that the donation agreements are legally ineffective.
The second proceeding was brought against Jan Emil. We have referred to this above as ‘the enforcement proceeding’. In that proceeding Margaret, Alexandra, Martin and Rowena sought recognition and enforcement of the Kyrou J orders against Jan Emil under Act No 97 of 1963 of the Czech Republic (‘the 1963 Act’). Following Jan Emil’s death, that proceeding is suspended because there is no representative of the estate. The judge found, and it is not in dispute, that it is very likely that the proceeding will be terminated. However, success in the donation proceeding would provide Margaret, Alexandra, Martin and Rowena with standing to institute a separate enforcement proceeding, in which they could seek to enforce the Kyrou J orders against David and Paul, and, through them, execute against the Prague, Řepy and Kbely properties. We refer to this below as the ‘future enforcement proceeding’. That proceeding would take place, not under the 1963 Act, but under Act No 91 of 2012 of the Czech Republic (‘the 2012 Act’). Both laws contain the requirement that the foreign judgment sought to be recognised and enforced be ‘nabyla právní moci’, whose meaning is a matter of debate mentioned below.[5]
[5]Shortly before she died in 2012, Helena also lodged an enforcement proceeding and a proceeding similar to the donation proceeding. The enforcement proceeding was later dismissed because her executor, Jan Talacko, did not comply with an order to file evidence. But he too would have standing to institute a fresh enforcement proceeding to enforce the Kyrou J orders against David and Paul, if successful in his donation proceeding.
On 7 November 2011, several days after the proceedings were filed in the Czech Republic, Jan Emil was made bankrupt. The Federal Court of Australia made a sequestration order against his estate on the application of Margaret, Alexandra, Martin, Rowena and Helena, Jan Emil having failed to pay to them, amongst other sums, the judgment debt under the Kyrou J orders. As will be seen, Jan Emil’s bankruptcy has complicated the enforcement of the Kyrou J orders.
Returning to the Czech proceedings, on 3 January 2012, in the enforcement proceeding, the District Court of Prague approved the Kyrou J orders for recognition and enforcement.
Jan Emil lodged an appeal against that decision. Before it was heard, the Prothonotary of the Supreme Court of Victoria, on 4 July 2012, issued a certificate, purportedly pursuant to the Foreign Judgments Act 1991 (Cth). That certificate, issued on behalf of Margaret, Alexandra, Martin and Rowena, certified that the Kyrou J orders were final, conclusive and binding.[6]
[6]The Prothonotary subsequently issued two other certificates purportedly under the Foreign Judgments Act, certifying that the Kyrou J orders were final, conclusive and binding: a certificate issued on 4 June 2013 on behalf of Helena, and a certificate issued on 23 February 2015 amending and replacing the first certificate issued on behalf of Margaret, Alexandra, Martin and Rowena.
Jan Emil’s appeal in the enforcement proceeding was then heard by the Municipal Court of Appeal in Prague. On 4 October 2012, that Court, relying on the Prothonotary’s certificate, confirmed the decision of the District Court approving the Kyrou J orders. Amongst other things, the Municipal Court of Appeal was satisfied that two of the conditions to enforcement in the Czech Republic were met: (a) there was the requisite reciprocity between Australian and Czech law, and (b) the Kyrou J orders were sufficiently ‘final’. Following this decision, there was enforcement of the Kyrou J orders against bank accounts held by Jan Emil. This resulted in the recovery of 293,274 Kč, a fraction of the judgment debt.
On 31 October 2012, Jan Emil lodged an extraordinary appeal against the decision of the Municipal Court of Appeal. That appeal was heard by the Supreme Court of the Czech Republic. On 18 December 2014, that Court overturned the decision of the Municipal Court of Appeal in Prague and remitted the enforcement proceeding for further hearing. The basis of the Supreme Court’s decision was narrow and procedural: Jan Emil had not yet been given an opportunity to comment on correspondence received by the Municipal Court of Appeal from an Australian government official. Other than on that basis, the Supreme Court upheld the decision of the Municipal Court of Appeal, including as to the satisfaction of the requirements of reciprocity and finality.
The certificates application
In May 2015, Judith made an application in the Trial Division, relevantly seeking declarations that the Prothonotary’s certificate, and another certificate issued in February 2015 which purported to amend and replace that certificate, were invalid.[7] The application was heard by Sloss J. She held that the certificates were invalid because: (a) s 58(3) of the Bankruptcy Act 1966 (Cth) operated to impose a stay of execution of the Kyrou J orders for the purposes of s 15(2) of the Foreign Judgments Act; (b) Margaret, Alexandra, Martin and Rowena, on whose behalf the certificates were issued, were therefore not competent to apply for them; and (c) absent a competent application, the Prothonotary could not have validly issued a certificate in respect of the Kyrou J orders. Sloss J delivered her reasons on 12 November 2015. On 4 February 2016, she made final orders relevantly declaring the certificates invalid.
[7]Talacko v Talacko (2015) 305 FLR 353.
On 28 July 2016, this Court (Ashley and Priest JJA, Santamaria JA dissenting) allowed an appeal from Sloss J’s decision, and set aside the orders declaring the certificates invalid.[8]
[8]Bennett v Talacko (2016) 312 FLR 159.
On 3 May 2017, the High Court of Australia allowed an appeal from this Court’s decision and restored the orders of Sloss J.[9]
[9]Talacko v Bennett (2017) 260 CLR 124.
The High Court held that the prevention of the execution of a judgment brought about by s 58(3) of the Bankruptcy Act was a ‘stay’ for the purposes of s 15(2) of the Foreign Judgments Act. That provision bars application for a certificate in respect of a judgment until ‘any stay of enforcement’ of the relevant judgment has expired.
Kiefel CJ, Bell, Keane, Gordon and Edelman JJ held that that construction served the evident purpose of s 15(2): to prevent the enforcement by a foreign legal system of an Australian judgment not enforceable under Australian law.[10]
[10]Ibid 145 [68].
Nettle J, agreeing, made additional observations in relation to the purpose of s 15(2), which are referred to further below.[11]
[11]Ibid 149–50 [83]–[84].
The second proceeding continues
In the meantime, the second proceeding had gone to trial in March 2015.
By this time, Helena, Margaret and Jan Emil had each died.[12]
[12]Helena died on 10 May 2012, Margaret on 30 September 2013, and Jan Emil on 3 November 2014.
On 7 August 2015, judgment was delivered in the second proceeding.[13]
[13]Talacko v Talacko [2015] VSC 287.
In relation to the claim for damages for unlawful means conspiracy relating to the donation agreements, the judge held that all but one of the elements of the tort had been established. He was satisfied that: (a) there had been an agreement between Jan Emil, David, Paul and Judith for the purpose of denying Margaret, Alexandra, Martin, Rowena and Helena access to properties which they could seek to encumber to satisfy the judgment debt arising from the Kyrou J orders; (b) the donation agreements, which were the vehicle for this purpose, constituted an equitable fraud, and therefore ‘unlawful means’; and (c) the donation agreements were executed with the intention of injuring Margaret, Alexandra, Martin, Rowena and Helena by frustrating their ability to satisfy the judgment debt.
However, the judge held that the element of pecuniary loss was not present. This was because any loss was contingent on the outcomes of the enforcement and donation proceedings. Specifically, the judge found that the donation agreements would not cause pecuniary loss unless and until the applicants were to succeed in the enforcement proceeding and fail in the donation proceeding (so that the Kyrou J orders were recognised for enforcement against Jan Emil in the Czech Republic but could not be enforced against the properties because the donation agreements survived challenge).[14] As a result, the tort of unlawful means conspiracy was not perfected.
[14]Ibid [168].
On 22 September 2015, the judge made final orders in the second proceeding. The applicants and Jan Talacko (as executor of Helena’s estate) appealed to this Court from those orders. The appeal was heard on 29 May 2017.
On 27 June 2017, this Court delivered judgment allowing the appeal.[15]
[15]Bennett v Talacko [2017] VSCA 163.
The Court held that the donation agreements had caused the applicants and Helena to suffer pecuniary loss in at least two forms (thus perfecting the tort of unlawful means conspiracy). First, there was loss in the form of a loss of opportunity to recover the judgment debt against the properties. Primarily, this was because the transfer of the properties diminished the value of the opportunity to enforce the judgment debt by creating an additional obstacle to enforcing the debt against those properties.[16] In addition, there was loss in the form of expenses incurred in seeking to set aside the donation agreements.[17] The Court made orders remitting the second proceeding to the Trial Division to determine the quantum of damages to be awarded in respect of the claim for unlawful means conspiracy.
[16]Ibid [111]–[112] (Beach and McLeish JJA and Keogh AJA).
[17]Ibid [113].
On 24 July 2017, Judith filed two applications for special leave to appeal to the High Court from the judgment and orders of this Court (one against the present applicants and the other against Helena’s estate). The applications were dismissed, on the basis that the case did not then present a suitable vehicle for the consideration of principles governing the identification of loss in the tort of unlawful means conspiracy.[18] After the trial judgment in the present application, Judith filed fresh applications for special leave in respect of this Court’s judgment and orders. Those applications for special leave are in abeyance pending the present application.
[18]Talacko v Bennett [2017] HCATrans 267.
In July and August 2018, there was a trial in the second proceeding on the remitted issues of quantum. On 7 December 2018, judgment was delivered.[19] On 20 December 2018, the judge made final orders.
[19]Talacko v Talacko [2018] VSC 751 (‘Reasons’).
Judge’s reasons
The judge first identified the principles applicable to the assessment of damages for loss of opportunity.[20] In light of those principles, he identified the relevant loss of opportunity as the reduction, following the donation agreements, in Helena, Alexandra, Martin, Rowena and Margaret’s opportunity to recover the judgment debt against the properties.[21]
[20]See Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 355 (Mason CJ, Dawson, Toohey and Gaudron JJ).
[21]Reasons [7]. The judge also assessed damages by way of expenses, together with aggravated and exemplary damages. No issue is now taken with his findings as to these heads of damage.
The value of that reduction, the judge found, was to be assessed by: (a) determining the value of the opportunity to recover the judgment debt against the properties prior to the execution of the donation agreements on 12 May 2009; (b) determining the value of the opportunity to recover the judgment debt against the properties following the execution of the donation agreements; and (c) subtracting the second value from the first.[22] The trial judge stated that it was implicit in this Court’s reasoning that the value of the loss of opportunity be more than negligible.[23] The correctness or otherwise of that conclusion, which appeared to play no part in the judge’s later reasoning, was not raised by either party in the present application and we say nothing further about it.
[22]Ibid.
[23]Ibid [6]–[8].
Next, the judge determined the appropriate date for the assessment of the loss of opportunity.[24] He held that it was appropriate, in the circumstances, to depart from the general rule that damages be assessed at the date at which the cause of action arises, so as to most fairly compensate for the wrong suffered. This was because, among other reasons, the donation agreements were entered into before, and in anticipation of, the judgment debt which they diminished the prospects of recovering. Accordingly, the judge assessed the loss of opportunity at 30 September 2013, some years after the donation agreements were entered into. This finding is not now in issue.
[24]Ibid [15]–[23].
Next, the judge determined the first value necessary to calculate the loss: the value of the opportunity to recover the judgment debt against the properties prior to the execution of the donation agreements. The judge found that, prior to the donation agreements, there was a 75 per cent chance of recovering the judgment debt against the properties through Jan Emil’s future trustee in bankruptcy. This was because it was highly likely that, absent the donation agreements, the following sequence of events would have occurred: (a) Jan Emil would have been served with bankruptcy notices in early 2010; (b) soon after, the Federal Court would have granted an application for an order that Jan Emil surrender his passport; (c) the Federal Court would have made a sequestration order in late 2011, appointing a trustee in bankruptcy; (d) Jan Emil would have refused to comply with a request to voluntarily transfer title of the properties to his trustee in bankruptcy; (e) his trustee would have obtained legal advice alerting him to the option of obtaining an order under s 77(1)(e) of the Bankruptcy Act; (f) the trustee would have successfully sought such an order from the Federal Court, compelling Jan Emil to transfer title to the properties to him; (g) Jan Emil, after exhausting all rights of appeal in respect of the order, would have transferred title to the properties to his trustee; (h) the trustee would have been registered as owner of the properties; and (i) the properties would then have been sold by the trustee in 2013, and the proceeds of sale distributed by 30 September 2013.[25] The judge’s assessment described above is also not challenged.
[25]Ibid [54].
The judge then turned to assessing the second value necessary to calculate the loss: the value of the opportunity to recover the judgment debt against the properties after the donation agreements. He found that, after the donation agreements, there was only a 20 per cent chance of recovering the judgment debt against the properties by successfully pursuing the donation proceeding and the future enforcement proceeding.
It is necessary to explain the process by which the judge arrived at that value.
First, the judge held that the donation agreements extinguished any possibility of recovering the judgment debt against the properties through Jan Emil’s trustee in bankruptcy.[26] This was because, after the donation agreements, Jan Emil was no longer the owner of the properties and the transfer of the properties could not be unilaterally reversed by him or his trustee. This foreclosed any possibility of his trustee securing a transfer of the title in the properties, selling them, and distributing the proceeds.
[26]Ibid [55]–[56].
The institution of the donation proceeding, the judge explained, did not revive the possibility of the trustee securing title in the properties. This was because, even if the applicants were to succeed in that proceeding, title in the properties would not revert to Jan Emil’s estate. Rather, David and Paul would retain title in the properties, and the applicants would have standing to enforce the equitable compensation judgment directly against them.
Secondly, the judge held that the donation agreements also extinguished any possibility of recovering the judgment debt against the properties in the enforcement proceeding.[27] This was because that proceeding was brought against Jan Emil, and by the donation agreements, he had divested himself of the properties. The opportunity to enforce the Kyrou J orders against the properties by that proceeding was thus rendered valueless. As already explained, that proceeding is currently suspended and very likely to be terminated.[28]
[27]Ibid [86].
[28]Ibid [64]; see also [31] above.
Thirdly, and as a result, there remained only one possible method of recovering the judgment debt against the properties: the applicants succeeding in the donation proceeding and then in the future enforcement proceeding.
Accordingly, it was necessary to evaluate the prospects of success in those proceedings as well as the prospect that success in both proceedings would actually lead to the recovery of the judgment debt against the properties.
The judge’s analysis proceeded by reference to the prospects of success in the donation proceeding. In that proceeding, the applicants seek orders, pursuant to s 42a of Act No 40 of 1964 of the Czech Republic (‘the Czech Civil Code’), that the donation agreements are legally ineffective in relation to them. The judge found that the applicants were likely to satisfy three statutory conditions for making the order sought: (a) that the relevant legal act (the making of the donation agreements) was done in the three years preceding the institution of the proceeding; (b) that the relevant legal act was done by the debtor (Jan Emil) for the ‘purpose of curtailing his creditors’; and (c) that the debtor’s counterparty or counterparties knew of the debtor’s purpose.[29] However, the judge noted the evidence of Mr Hlavička that success in the donation proceeding faced three obstacles, namely (a) the need to establish reciprocity between the Australian and Czech courts, (b) the ongoing insolvency of Jan Emil’s estate and (c) the need for a certificate or confirmation of finality and enforceability in respect of the Kyrou J orders.[30]
[29]Reasons [65]–[66].
[30]Ibid [67].
It is perhaps unclear whether the identified obstacles arise strictly in the donation proceeding itself or would arise in any subsequent enforcement proceeding. At all events, Mr Hlavička identified the obstacles as impediments to ‘success’ and it is clear that they are the matters critical to the applicants’ overall prospects of success in the Czech proceedings.
The judge then addressed the requirement of reciprocity. Essentially, the requirement of reciprocity is the requirement that the foreign judgment sought to be enforced in the Czech Republic would be reciprocally enforced; that is, that an equivalent judgment of a Court of the Czech Republic would be enforced in the foreign jurisdiction. There was debate, however, as to the degree of specificity with which reciprocity had to be demonstrated — whether in general terms only or by reference to judgments of the same kind as, or having the particular features of, that in question.
The judge noted that there was competing evidence as to whether or not the Kyrou J orders could satisfy this requirement. Dr Tomáš Richter, an expert on Czech law, had given evidence there were ‘solid grounds’ to expect that a Czech court would consider the requirement of reciprocity met.[31] This was because the Supreme Court of the Czech Republic, in its earlier decision in the enforcement proceeding, had accepted that the Kyrou J orders satisfied the reciprocity requirement.[32] On the other hand, Mr Hlavička had given evidence doubting that the question of reciprocity had been fully determined by the Supreme Court decision in the enforcement proceeding, on the basis that the question of reciprocity had been re–opened by another court in the donation proceeding.[33]
[31]Ibid [69].
[32]See [36] above.
[33]Reasons [70].
The judge also made reference to Nettle J’s observations in Talacko v Bennett in respect of s 15(2) of the Foreign Judgments Act. Nettle J observed that the purpose of s 15(2) is to ensure that the requirement of reciprocity is satisfied at Australian law:
That is to say, a foreign judgment should not be enforceable in this country unless it is enforceable according to the laws of the country of the original court, and, reciprocally, a certificate should not issue under s 15 to facilitate enforcement of a judgment of an Australian court in a foreign jurisdiction unless the judgment is enforceable according to the laws of this country.
As Santamaria JA observed, if a foreign country had enacted a law like s 58(3) of the Bankruptcy Act, a judgment of a court of that country would not be enforceable in that country and, perforce of s 6(6) of the Foreign Judgments Act, could not be enforced in this country … Likewise, it would not be a ‘final and conclusive judgment’ according to the common law of this country, and consequently it could not be sued upon in this country.[34]
[34]Talacko v Bennett (2017) 260 CLR 124, 149–50 [83]–[84] (Nettle J, Gageler agreeing at 148 [78]) (citations omitted).
Those observations, the judge found, ‘called into question’ whether a judgment debt stayed by operation of s 58(3) of the Bankruptcy Act, such as the Kyrou J orders, could satisfy the requirement of reciprocity for the purposes of Czech law.
The judge then addressed the relevant certification requirements (dealing with the second and third obstacles together).
The primary certification requirement is a substantive requirement as to the status of the foreign judgment: essentially, that it be sufficiently final. The judge observed that the nature of this requirement was contested, with consequences for the prospects of the Kyrou J orders satisfying the requirement. As foreshadowed earlier, this contest turned in large part on competing evidence as to the meaning of the requirement that the judgment be ‘nabyla právní moci’.[35]
[35]The judge did not resolve this question of fact. The applicants made no criticism in this respect: see [89] below.
Mr Hlavička gave evidence that the 2012 Act required that the foreign judgment sought to be enforced be ‘final and enforceable’ (‘nabyla právní moci’). If so, the Kyrou J orders would have difficulty satisfying the requirement while s 58(3) of the Bankruptcy Act continued to apply to prevent their enforcement. The judge found that this was so, notwithstanding the decision of the Supreme Court of the Czech Republic in which it was accepted that the Kyrou J orders satisfied the requirement, because that decision: (a) has no precedential value at Czech law; (b) preceded the High Court of Australia’s decision in Talacko v Bennett; and (c) was made before certificates of finality issued by the Prothonotary of the Supreme Court of Victoria, upon which Czech courts in the enforcement proceeding had relied, had been set aside.[36]
[36]Reasons [79].
By contrast, Dr Richter gave evidence that the 2012 Act required that the requirement of ‘nabyla právní moci’ meant that the foreign judgment sought to be enforced need only be ‘final and unappealable’. If so, the judge observed, there is the possibility that the Kyrou J orders might satisfy the requirement because they are now unappealable, albeit that their enforcement is stayed.[37]
[37]Ibid [76]–[77].
There is a further procedural certification requirement that must be met in order for the donation proceeding to succeed. It is that the Czech courts are provided with certification, or confirmation, from a ‘relevant public authority’ of the foreign state that the foreign judgment has the necessary status of finality.[38] Whether the Prothonotary of the Supreme Court of Victoria would provide such confirmation depended, the judge found, on the nature of the substantive requirement: that is, it depends on whether or not the Prothonotary would need to certify or confirm that the Kyrou J orders are ‘final and enforceable’ or ‘final and unappealable’.
[38]Ibid [80].
The judge held that the High Court’s decision in Talacko v Bennett extinguished any prospect of the Prothonotary providing certification or confirmation that the Kyrou J orders are ‘final and enforceable’ while their execution remained stayed by operation of s 58(3) of the Bankruptcy Act.[39]
[39]Ibid [83].
On the other hand, the judge accepted that there was at least some possibility of certification or confirmation of the Kyrou J orders as ‘final and unappealable’. However, such certification or confirmation was ‘highly unlikely’ in the face of two obstacles.
First, Nettle J’s observations in Talacko v Bennett that a foreign judgment which is not enforceable by reason of a foreign bankruptcy would not be ‘final and conclusive’ for the purposes of Australian law would suggest, conversely, that the Kyrou J orders, stayed by the Bankruptcy Act, would also not be ‘final and conclusive’ for the purposes of Czech law.[40]
[40]Ibid [82]–[82].
Secondly, the judge found that Talacko v Bennett forecloses the possibility of the Prothonotary providing any further certificate of finality under s 15 of the Foreign Judgments Act in respect of the Kyrou J orders while their execution remains stayed by operation of s 58(3) of the Bankruptcy Act. Further, the judge held that it is highly unlikely that the Prothonotary would issue some alternative form of certification or confirmation that the Kyrou J orders were ‘final and unappealable’, given that doing so would seem to undermine the purpose of s 15 of the Foreign Judgments Act identified by the High Court in Talacko v Bennett: to prevent the enforcement by a foreign legal system of an Australian judgment not enforceable under Australian law, and so to prevent the dissipation of a bankrupt’s overseas assets to the prejudice of other creditors.[41]
[41]Ibid [83].
In respect of the prospects of success in the donation proceeding, the judge concluded:
It is likely that the plaintiffs will be able to establish that the requirements prescribed by s 42a of the Czech Civil Code to set aside the [donation agreements] are satisfied. It is also possible that, notwithstanding the High Court judgment in Talacko v Bennett, the Court hearing the Donation Proceedings will conclude that the Kyrou J judgment is ‘final and unappealable’ (as opposed to ‘final and enforceable’). It is possible that the Court will conclude that there is reciprocity between Australia and the Czech Republic as regards the enforcement of a judgment debt such as the Kyrou J orders. It is possible, but highly unlikely, that the plaintiffs will obtain certification from the Prothonotary of the Supreme Court of Victoria that the Kyrou J judgment is final and unappealable.[42]
[42]Ibid [87].
Although success in the donation and future enforcement proceedings is necessary to enforcing the Kyrou J orders against the properties, as the judge observed, it is not sufficient. The Kyrou J orders cannot be enforced against the properties unless David and Paul own the properties if and when enforcement occurs. The judge accepted that the two proceedings will be likely to take up to ten years to conclude, and, in that time, it is possible that David and Paul will succeed in divesting themselves of the properties and so elude any enforcement against the properties.[43]
[43]Ibid [88].
The judge then concluded the assessment by: (a) determining the value of the opportunity to enforce the Kyrou J orders against the properties before the agreements (75 per cent of the value of the orders); (b) determining the value of the opportunity to enforce the Kyrou J orders after the donation agreements (20 per cent of the value of the orders); and then (c) subtracting the latter from the former to arrive at the value for the loss of opportunity (55 per cent of the value of the orders). He stated:
I have concluded that the value of the plaintiffs’ opportunity prior to the Donation Agreement to enforce the judgment debt against the Properties represents 75 per cent of the Kyrou J judgment and the plaintiffs’ respective share of the costs order made in September 2013. I assess the plaintiffs’ chance of successfully pursuing the Donation Proceedings and any subsequent enforcement proceedings against the second and third defendants at 20 per cent … After making allowance for the 20 per cent chance of successfully pursuing the Donation Proceedings, the value of the plaintiffs’ chance to enforce the judgment debt against the Properties which was lost by reason of the Donation Agreement is 55 per cent. I accept the plaintiffs’ submission that the amount received by way of mitigation should be subtracted from the value of the lost opportunity before applying the
20 per cent discount.[44]
[44]Ibid [89].
Ground of appeal
The applicants advance the following proposed ground of appeal:
The learned trial judge erred in assessing the applicants’ chance of successfully pursuing the Donation Proceeding (as defined in the Reasons) and any subsequent enforcement proceeding against the second and third respondents (the second and third defendants) at 20%. Instead, his Honour should have assessed that chance either:
(a)as being of negligible commercial value, and therefore at 0%; or alternatively
(b)at a figure greater than 0% but less than 20%.
Parties’ submissions
Applicants’ submissions
The applicants submitted that, on the basis of the judge’s findings and undisputed evidence, the finding that the applicants’ chance of successfully pursuing the donation proceeding and any subsequent enforcement proceedings was 20 per cent was in error. It was not submitted that the judge had misapprehended any evidence, erroneously found any facts or made any other specific error. Rather, the submission was that it was erroneous for the judge not to have concluded, based on his own findings and the undisputed evidence, that the commercial value of the chance of success in the Czech courts was zero.
Senior counsel for the applicants, Mr Solomon QC, concentrated on two of the ‘material obstacles’ identified by Mr Hlavička and accepted by the trial judge: the lack of a certificate or confirmation of finality of the Kyrou J orders and the need to establish reciprocity between the Australian courts and the courts of the Czech Republic.[45]
[45]Ibid [67].
In respect of the question of certification (or confirmation), Mr Solomon identified two issues. First, the question arose as to who could issue the relevant certificate or confirmation. Secondly, there was the question what the certificate or confirmation was required to state.
As to the first issue, Mr Solomon referred to the finding of the trial judge that the Kyrou J orders could not be enforced unless a certificate was provided ‘by a relevant public authority of the foreign State’ as required by s 14 of the 2012 Act.[46] This finding was founded in the unchallenged evidence of Dr Richter. Moreover, the trial judge held that it was ‘highly unlikely’ that the Prothonotary would provide any form of confirmation to the applicants as to the finality of the Kyrou J orders while those orders were stayed by operation of s 58(3) of the Bankruptcy Act.[47] Mr Solomon submitted that it had never been suggested by the fourth respondent that the applicants would be able to provide a certificate as to the Kyrou J orders being final and enforceable, at least while bankruptcy was pending. This had not been put to Dr Richter, nor had it been mentioned in the closing submissions of the fourth respondent. It was submitted that Mr Hlavička had given evidence that the necessary certificate was required to state that the judgment was final and enforceable.[48]
[46]Ibid [80].
[47]Ibid [83]; see also [75]–[77] above.
[48]Ibid [76].
It was further submitted that, although the bankruptcy of Jan Emil had come to an end late in 2019, as it had been apprehended it would at the time of the trial, this made no difference because the issuing of a certificate would still be apt to undermine the scheme of the Bankruptcy Act. For that reason, the decision of the High Court in Talacko v Bennett still stood in the way of the issuing of a certificate.
On this basis, the applicants submitted that the live controversy between the parties concerned whether, at some point, the applicants could obtain a certificate or other confirmation as to the final and unappealable quality of the Kyrou J orders. The fourth respondent had contended for this conclusion, relying on the evidence of Dr Richter. However, it was submitted that the fourth respondent had at no stage put to Mr Hlavička that a certificate as to the Kyrou J orders being final and unappealable would have sufficed. In that context, the judge had been correct to refer to the clear evidence of Mr Hlavička, not challenged by the fourth respondent, that the certification requirement was one of ‘finality and enforceability’.[49]
[49]Ibid [76].
The trial judge had made no finding of fact in respect of the question whether the certificate or confirmation was required by the words ‘nabyla právní moci’ to address finality and enforceability or finality and ‘unappealability’.[50] Mr Solomon made it clear that the applicants did not seek to challenge the approach of the trial judge in this respect.
[50]Ibid [76], [77], [87]. For present purposes, we prefer the term ‘unappealability’ to the strictly correct ‘unappealableness’.
Finally, it was submitted that, in relation to the question who was responsible for certifying or confirming as to the status of the Kyrou J orders, it had not been suggested at any time that this could be done by any non–public authority.[51]
[51]Reasons [80], [82], [83].
Mr Solomon then turned to the question of reciprocity. He submitted that it was only useful to evaluate this question through the prism of the issuing of a certificate as to finality and ‘unappealability’. That was because, if the requirement was one of finality and enforceability, that requirement was not able to be met for the reasons set out above. It was submitted that, even if a certificate as to the final and unappealable nature of the Kyrou J orders would satisfy the requirements of Czech law, the reasons of Nettle J in the High Court decision made it clear that the common law of Australia would impose a more restrictive condition.[52] This meant, in turn, that reciprocity could not be established. The applicants again relied on the evidence of Dr Richter in this regard.
[52]See [68] above.
The applicants referred also to the additional difficulties facing the Czech proceedings. First, the judge’s findings disclosed that there was the likelihood that the proceedings would take up to a further ten years to resolve.[53] In addition, there was evidence that gave grounds for concern that David and Paul may seek to dispose of the properties in the meantime.[54]
[53]Reasons [60]–[61], [88].
[54]Ibid [85], [88].
In the circumstances, the applicants submitted that, in order for the Czech proceedings to succeed, it was necessary for them to satisfy a series of ‘compounding contingencies’. This required due regard to be had to the effect of each contingency upon the others.[55]
[55]Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25, 50 (Lee J, Sheppard J agreeing at 26) (‘Poseidon’); Maritime Union of Australia v Fair Work Ombudsman [2015] FCAFC 120.
Fourth respondent’s submissions
The fourth respondent submitted that, based on the findings of the judge which had not been challenged, the judge was well entitled to assess the chance of success in the Czech proceedings at 20 per cent. She pointed in particular to the findings of the judge: first, that the applicants were likely to be able to establish the necessary requirements to set aside the donation agreements; secondly, that it was possible that the court hearing the donation proceeding would conclude that the Kyrou J orders are final and unappealable; thirdly, that it was possible that the Czech court would conclude that there was reciprocity between Australia and the Czech Republic as regards the enforcement of the Kyrou J orders; and fourthly, that it was possible, but highly unlikely, that the applicants would obtain certification from the Prothonotary that the Kyrou J orders are final and unappealable.
The fourth respondent submitted that, before interfering with the damages assessment, an appellate court should be satisfied that the trial judge has acted on a wrong principle, misapprehended the facts or can be seen to have made a wholly erroneous estimate. It was submitted that it is not enough that the appellate court might have made a different assessment.[56] It was said that the ultimate question is whether the chance of recovery that has been assessed is beyond the limits of what a sound discretionary judgment could reasonably adopt.[57]
[56]Miller v Jennings (1954) 92 CLR 190, 195–6 (Dixon CJ and Kitto J) (‘Miller’); CSR Readymix (Australia) Pty Ltd v Payne [1998] 2 VR 505, 508; Fletcher Construction Australia Ltd v Lines Macfarlane & Marshall Pty Ltd [No 2] (2002) 6 VR 1, 27 [87], 29 [94] (Charles, Buchanan and Chernov JJA).
[57]Miller (1954) 92 CLR 190, 197.
The fourth respondent submitted that the process of assessing contingencies is an evaluative determination of a discretionary nature and an inexact and non–scientific process.[58] It was submitted that appellate restraint was especially appropriate where the trial judge had evaluated the loss of a chance by reference to hypothetical events.[59] The fourth respondent submitted that it could be seen from the three principal findings upon which the trial judge relied that the applicants had failed to demonstrate that his assessment was wholly erroneous or outside the range of a sound discretionary judgment.
[58]BestCare Foods Ltd v Origin Energy LPG Ltd [2013] NSWSC 1287 [175] (Stevenson J); Manuel v Lane [2013] NSWCA 61 [9] (Emmett JA, Meagher JA agreeing at [1], Ward JA agreeing at [2]).
[59]Falkingham v Hoffmans (2014) 46 WAR 510, 524 [47] (Pullin and Murphy JJA) (‘Falkingham’); McCartney v Orica Investments Pty Ltd [2011] NSWCA 337 [126] (Giles JA, Macfarlan JA agreeing at [192], Young JA agreeing at [193]) (‘McCartney’).
The first of those findings was that it was likely that the applicants would be able to establish that the requirements prescribed by s 42a of the Czech Civil Code in order to set aside the donation agreements were satisfied.[60] It was noted that one of those requirements was that the party seeking to have the transaction set aside had a claim which was enforceable in the Czech Republic.
[60]See [64] above.
The second finding was that it was possible that, notwithstanding the High Court judgment in Talacko v Bennett, the Czech court hearing the donation proceedings will conclude that the Kyrou J orders are ‘final and unappealable’. By her notice of contention, the fourth respondent submitted that it could not be doubted that the Kyrou J orders are final and unappealable. It was submitted that the reasons of Nettle J in Talacko v Bennett cast no doubt on the finality of the orders. The proposition that the orders could not be enforced as a matter of Australian law said nothing against their finality or as to the separate question whether they could be enforced as a matter of Czech law. It was submitted that the Czech courts had already found that the Kyrou J orders were enforceable as a matter of Czech law. The fact that the decision of the Supreme Court had set aside that decision on procedural grounds did nothing to undermine that finding.
Thirdly, the fourth respondent pointed to the judge’s finding that it was possible that the Czech court would conclude that there is reciprocity between Australia and the Czech Republic as regards the enforcement of a judgment debt such as that constituted by the Kyrou J orders. By her notice of contention, she submitted that the judge should have found that such a finding was likely to be made.
Mr Collins QC, on behalf of the fourth respondent, pointed to the decision of the Municipal Court in which it was held that the Australian insolvency proceedings could not have any relevant effect on the execution proceedings in the Czech Republic. He submitted that this was consistent with a finding that, while the Australian bankruptcy does not permit the recovery of Czech assets, that result did not apply under the laws applying in the Czech Republic, lest there be a ‘falling between two stools’. Mr Collins submitted that the effect of the Czech Supreme Court’s decision was that this finding had been deemed to be correct.[61] He submitted that the requirement of reciprocity in Czech law went to reciprocity in a general sense rather than complete reciprocity in the sense of identical treatment of an individual judgment. This was advanced as a further reason why the judge should have found that a Czech finding in favour of reciprocity was likely, rather than only possible.
[61]See [36] above.
Mr Collins further submitted that the evidence, correctly understood, showed that the requirement of Czech law was that the Kyrou J orders be final and unappealable, not final and enforceable. It was submitted that this also contributed to the sound basis for the overall assessment reached by the trial judge.
The fourth respondent submitted that it would be contrary to authority for the trial judge to have assessed the chance of a particular outcome dependent on a number of contingencies by an arithmetic process of multiplying those contingencies.[62] Such an approach would produce an unrealistically low figure. She submitted that the applicants’ case was essentially that they had no prospect of success in the donation and future enforcement proceedings in the Czech Republic. It was submitted that that contention was inconsistent with the applicants’ continuing prosecution of those proceedings, their lawyers’ continuing to charge fees in respect of them and their own successful damages claims before the trial judge in respect of the costs and expenses of those proceedings. The fourth respondent also pointed to the evidence of Mr Hlavička, who gave evidence at the trial which the fourth respondent characterised as amounting to a statement that he could not predict the outcome of the donation proceedings. It was submitted that this evidence supported the evaluation of the trial judge.
[62]Poseidon (1991) 105 ALR 25, 41 (Burchett J, Sheppard J agreeing at 26).
Analysis
The judge proceeded by applying the following principles laid down by the High Court in Sellars v Adelaide Petroleum NL:
Notwithstanding the observations of this Court in Norwest, we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s 52(1), should be ascertained by reference to the court’s assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.
On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant’s case to say that the commercial opportunity was valueless on the balance of
probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.[63]
[63](1994) 179 CLR 332, 355 (Mason CJ, Dawson, Toohey and Gaudron JJ) (emphasis in original).
The applicants take no issue with this approach (subject, of course, to their pending applications for special leave in respect of this Court’s earlier judgment as to proof of damage).[64] As already mentioned, nor do they challenge the findings made by the judge except for his final assessment of the 20 per cent figure. Instead, they submit that those findings compelled the inference that the commercial value of the applicants’ chance of success in the relevant Czech proceedings, in all the circumstances, was negligible.
[64]See [51] above.
The applicants pointed to the judge’s findings as to it being ‘possible’ that the court hearing the donation proceeding will conclude that the Kyrou J orders are ‘final and unappealable’, ‘possible’ that reciprocity will be established and ‘possible, but highly unlikely’ that the applicants will obtain certification from the Prothonotary that the Kyrou J orders are ‘final and unappealable’. By themselves, these findings do not point to, still less compel, any particular figure as reflecting the overall probability of success in the Czech proceedings.
Recognizing this, the applicants point to further factual findings and other evidence. In relation to the donation proceeding, they refer to the judge’s finding that it is arguable, based on the reasoning of Nettle J set out earlier, that a judgment debt that has been stayed at Australian law will not meet the Czech requirement of reciprocity. They also refer to the judge’s finding that the applicants will need to provide a certificate from a relevant public authority as to the finality of the Kyrou J orders.[65] In that regard, the unchallenged evidence of Mr Hlavička was that the requirement went to finality and enforceability, rather than ‘unappealability’.[66] The judge had acknowledged only a possibility that certification as to the latter would suffice.[67] As to a certificate of that kind, its provision by the Prothonotary would undermine what was said to be the purpose of s 15 of the Foreign Judgments Act as identified by the High Court, namely to guard against dissipation of a bankrupt’s estate, making it highly unlikely that the Prothonotary would provide any form of confirmation while the judgment was stayed.[68]
[65]Reasons [80].
[66]Ibid [76].
[67]Ibid [77].
[68]Ibid [83].
It is true that, if one threads together the judge’s findings as to the obstacles facing the applicants, it is only ‘possible’ that the Czech courts will find the requisite reciprocity, and only ‘possible’ that the relevant requirement will be found to be ‘final and unappealable’. Even in the event that the latter finding is made, it is ‘highly unlikely’ that the Prothonotary will provide the necessary certification. These descriptors suggest a low overall prospect of success. But 20 per cent, in the context of prospects of success of litigation, is low — very low. Conversely, the recognition of the identified possibilities, both individually and taken together, indicates that the litigation could succeed. In those circumstances, it would arguably have been contrary to the judge’s findings to have concluded that the overall prospects were negligible or zero. At the very least, one interpretation of the findings is that they pointed to a prospect of success that was not negligible. In our view, it cannot be said that the findings compelled the contrary conclusion.
The judge was faced with an evaluative exercise which involved a number of variables. The question before us is whether those variables, as identified by the judge, pointed to a weak case or to a hopeless one. This is very much a matter of impression. It is exactly the kind of qualitative evaluation with which an appellate court should be slow to interfere. As Brennan and Dawson JJ observed in Malec v JC Hutton Pty Ltd,[69] ‘[d]amages founded on hypothetical evaluations defy precise calculation’. For that reason, in the absence of identified error in the trial judge’s findings or method, an appellate court examining an award of damages based on an assessment of contingencies should not simply substitute its own evaluation.[70]
[69](1990) 169 CLR 638, 640.
[70]Poseidon (1991) 91 ALR 225, 42 (Burchett J, Sheppard J agreeing at 26). See also Falkingham (2014) 46 WAR 510, 524–5 [47]–[49] (Pullin and Murphy JJA); McCartney [2011] NSWCA 337 [126] (Giles JA, Macfarlan JA agreeing at [192], Young JA agreeing at [193]).
We are unable to discern any necessary inconsistency between the judge’s findings and his summation of the prospects of success in the relevant Czech proceedings. Rather, his overall evaluation not only sits comfortably with, but illuminates, his findings. It illuminates his findings because it confirms that the judge regarded the possibilities he identified as real rather than remote or theoretical.
We are reinforced in that conclusion by the fact that, as the judge noted, the Supreme Court of the Czech Republic considered that the requirement of reciprocity was satisfied. Although not binding on a later court, this matter plainly bears on the likelihood of that matter being established again. In that regard, the evidence of Dr Richter was that there were ‘solid grounds’ to expect that would happen.
We also note some matters raised in the evidence, not mentioned by the judge but which point to the rather fluid nature of the evidence with which he was dealing. First, although only asked about it in passing, Mr Hlavička did accept that it ought not be possible to commence an enforcement proceeding in the Czech courts until the Australian judgment was ‘both final and unappealable’. To that extent, his evidence agreed with that of Dr Richter. Further, while it was not specifically put to Mr Hlavička that his translation ‘final and unenforceable’ was wrong, he did accept the proposition that ‘final and enforceable’ meant ‘final and conclusive’ in the sense that the judgment ‘could not be varied by any subsequent decision as to the status of the obligation that’s decided in the decision’. Moreover, he accepted that a notary could satisfy the certification or confirmation requirement.
These parts of the evidence are a reminder that the judge was dealing with multiple permutations as to how the relevant Czech proceedings might unfold. That background reinforces our conclusion that the 20 per cent assessment was consistent with the judge’s findings.
Finally, we note that the fourth respondent submitted, based on the evidence of Mr Hlavička that it was ‘very difficult to predict the end result of the donation proceeding’ and that the applicants could win the case or lose it, that the applicants’ own lawyer had contradicted their contention that the prospects of success were negligible. It was further submitted that the applicants’ own continued pursuit of the donation proceeding was inconsistent with that contention. There is obvious force in those submissions, but this was not a factor relied on by the judge and was not pursued by way of notice of contention, so we say no more about it.
Notice of contention
In the circumstances, it is not necessary to deal with the notice of contention. However, it is desirable that we indicate our acceptance of the fourth respondent’s contention that the Kyrou J orders are final and unappealable. That conclusion follows inescapably from the decision of the High Court refusing special leave to appeal in respect of those orders.[71]
[71]See n 4 above.
In that regard, we consider that, in describing the assumption that the Kyrou J orders were ‘final’ for the purposes of s 14 of the 2012 Act as ‘highly questionable’, the judge may have read too much into the reasons of Nettle J in Talacko v Bennett. The judge set out the relevant passage, with added emphasis, as follows:
As Santamaria JA observed, if a foreign country had enacted a law like s 58(3) of the Bankruptcy Act, a judgment of a court of that country would not be enforceable in that country and, perforce of s 6(6) of the Foreign Judgments Act, could not be enforced in this country by registration under Pt 2. Likewise, it would not be a ‘final and conclusive judgment’ according to the common law of this country, and consequently it could not be sued upon in this country.[72]
[72]Talacko v Bennett (2017) 260 CLR 124, 150 [84], quoted in Reasons [81].
The judge held that these observations supported the proposition that a judgment which has been stayed pursuant to s 58(3) of the Bankruptcy Act is not a final judgment according to the common law of Australia. He found that the fact that the Kyrou J orders had been stayed was a ‘significant obstacle’ to confirmation being provided by the Supreme Court of Victoria that the judgment is ‘final and unappealable’.[73]
[73]Reasons [82].
To the extent that this finding was based on the likely disinclination of the Prothonotary to certify or confirm that the Kyrou J orders were final, the fourth respondent does not take issue with it. Her challenge is confined to the observations drawn from the reasoning of Nettle J and the judge’s failure to find that the Kyrou J orders are final and unappealable.
In the passage in question, Nettle J was addressing the prospect of enforcement. The composite expression ‘final and conclusive judgment’ must be understood in that context. He was not expressing any opinion as to the discrete question of ‘finality’, still less ‘unappealability’. Apart from the context of the observations, this is borne out by the consequence Nettle J identifies, namely that the judgment ‘could not be sued upon in this country’. It is plain from that reference that the passage is concerned with enforcement rather than finality and ‘unappealability’. We would therefore uphold the contention that the judge ought to have held that the Kyrou J orders are final and unappealable.
For these reasons, as well, the trial judge’s ultimate assessment has not been shown to be in error, and so ought to be upheld.
Conclusion
Leave to appeal should be granted but the appeal must be dismissed.
- - -
SCHEDULE OF PARTIES
| ALEXANDRA BENNETT | First Applicant |
| MARTIN TALACKO | Second Applicant |
| ROWENA TALACKO | Third Applicant |
| ALEXANDRA BENNETT AND DAVID ADAMS (AS EXECUTORS OF THE ESTATE OF MARGARET HELEN TALACKO) | Fourth Applicant |
| and | |
| ESTATE OF JAN EMIL TALACKO (DECEASED) (AND UNDISCHARGED BANKRUPT) | First Respondent |
| DAVID TALACKO | Second Respondent |
| PAUL ANTHONY TALACKO | Third Respondent |
| JUDITH GAIL TALACKO | Fourth Respondent |
| STATE TRUSTEES LTD (ACN 064 593 148) | Fifth Respondent |
| JAN TALACKO (AS EXECUTOR OF THE ESTATE OF HELENA MARIE TALACKO) | Sixth Respondent |
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