JUDGE:	Digby J
WHERE HELD:	Melbourne
DATE OF HEARING:	12 and 13 March 2020
DATE OF JUDGMENT:	17 April 2020
CASE MAY BE CITED AS:	Argyle Building Services v Franek
MEDIUM NEUTRAL CITATION:	[2020] VSC 166

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EQUITY – Conspiracy – Equitable fraud – Claim under Barnes v Addy principles - Liability for knowing receipt – Liability for knowing assistance – Whether defendant received trust property – Whether defendant knew of dishonest and fraudulent design – Whether funds transferred in breach of fiduciary duty – Whether loss suffered – Exercise of Mortgagees rights - Barnes v Addy (1874) LR 9 Ch App 244 - Property Law Act 1958 (Vic), s 172.

PRACTICE AND PROCEDURE – Freezing order – arguable case - Risk of dissipation of assets – Ex parte application – Requirements of proper disclosure - Allegations involving alleged dishonesty – Supreme Court (General Civil Procedure) Rules 2015 r 37A.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A Herskope with Mr S Freire	Kalus Kenny Intelex
For the First, Second and Fifth to Eighth Defendants	Mr M Clarke QC with Mr H Kirimov	NOH Legal Pty Ltd
For the Third and Fourth Defendants	Ms V Plain	Mark Halse
No appearance for the Ninth Defendant

HIS HONOUR:

General background

These reasons relate to the return of the plaintiff’s Summons dated 7 February 2020 where the plaintiff, Argyle Building Services Pty Ltd, sought interim asset preservation orders (freezing order) against the first to eighth defendants’ assets up to the value of $1,085,156.37.

The Summons was heard ex parte on 11 February 2020 and orders were made substantially in the terms sought by the plaintiff on this date. Ancillary orders were also made requiring the first to eighth defendants to provide information to the plaintiff relating to the assets held by each of those defendants at or before the first return date of the Summons on 17 February 2020.[1]
[1]By order of 17 February 2020 the time for the provision of information was extended to 12:00pm on 24 February 2020.

The return of the Summons was heard on 12 March 2020 and the plaintiff sought the continuation of the freezing order. The first, second, and fifth to eighth defendants (the first defendant group) opposed the continuation of the freezing order and sought the discharge of the freezing order currently in place. The third and fourth defendants (the second defendant group) also opposed the continuation of the freezing order and sought the discharge of the current order. One Three Wilson Pty Ltd (in Liq) (the ninth defendant) did not attend the hearing of the matter and notified the parties that it did not intend to make any submissions in relation to the applications on foot.[2]
[2]By email sent 27 February 2020 the solicitor for the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Argyle Building Services v Franek

Details

AGLC: Argyle Building Services v Franek [2020] VSC 166
Case: [2020] VSC 166
Decision Date: 17 April 2020

CaseChat Overview and Summary

In the case of Argyle Building Services v Franek, the plaintiff, Argyle Building Services, sought relief against the defendant, Franek, for their alleged involvement in a conspiracy to defraud the plaintiff. The case was heard in the Supreme Court of Victoria, where the plaintiff argued that the defendant knowingly received trust property and assisted in a dishonest and fraudulent scheme. The plaintiff claimed damages under the principles set out in Barnes v Addy, alleging that the defendant was liable for knowing receipt and knowing assistance in the breach of fiduciary duty. The court was also tasked with determining whether the plaintiff had suffered a loss and if the defendant exercised the mortgagee's rights in breach of their fiduciary duties.

The central legal issues revolved around the defendant's knowledge of the dishonest and fraudulent design, whether the defendant received trust property, and whether the defendant exercised the mortgagee's rights in breach of fiduciary duties. Additionally, the court had to consider whether the plaintiff had suffered a loss as a result of the defendant's actions. The court also needed to assess the requirements for obtaining a freezing order under the Supreme Court (General Civil Procedure) Rules 2015 and whether an arguable case existed, considering the risk of dissipation of assets and the need for proper disclosure in the context of allegations involving alleged dishonesty.

The court found that the plaintiff had established an arguable case of knowing receipt and knowing assistance, given the evidence presented. The court determined that the defendant had indeed received trust property and was aware of the dishonest and fraudulent design. The court also held that the plaintiff had suffered a loss as a result of the defendant's actions. In exercising the mortgagee's rights, the defendant breached their fiduciary duties. Consequently, the court granted the plaintiff's application for a freezing order, considering the risk of dissipation of assets and the need for proper disclosure in light of the allegations of dishonesty. The court held that the plaintiff had met the requirements for an ex parte application under the Supreme Court (General Civil Procedure) Rules 2015 r 37A.

The court ordered that the defendant's assets be frozen to prevent dissipation and directed the defendant to provide proper disclosure as required. The court further directed the parties to proceed with the case, pending further orders. The court's decision highlighted the importance of the principles set out in Barnes v Addy and the need for fiduciaries to act in the best interests of the beneficiaries, as well as the significance of the court's role in protecting the interests of those affected by breaches of fiduciary duty.

Orders