Classic Finance Pty Ltd v Cielo Publishing Pty Ltd
[2017] VCC 1751
•28 November 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised (Not) Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-16-00117
| CLASSIC FINANCE PTY LTD | Plaintiff |
| v | |
| CIELO PUBLISHING PTY LTD and ORS | Defendants |
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JUDGE: | HIS HONOUR JUDGE ANDERSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 November 2017 | |
DATE OF JUDGMENT: | 28 November 2017 | |
CASE MAY BE CITED AS: | Classic Finance Pty Ltd v Cielo Publishing Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 1751 | |
REASONS FOR DECISION
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Catchwords: Practice and procedure – Warrant of Seizure and Sale – Application to set aside warrant – Pleadings – Sufficiency of defence and counterclaim.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Koroneos | Koroneos Lawyers |
| For the third and fourth Defendants | In person |
HIS HONOUR:
1 Following a hearing on 23 November 2017, orders were made extending the stay of a Warrant of Seizure and Sale (“the warrant”) pending the delivery of these reasons for decision and the making of a referral to the Victorian Bar pro bono scheme.
2 In these reasons, I will provide the basis for making orders –
a. dismissing the application by the third and fourth defendants to set aside the warrant;
b. striking out the third and fourth defendants’ counterclaim forming part of their amended defence and counterclaim dated 11 September 2017;
c. refusing the third and fourth defendants leave to file a further amended defence and counterclaim in the form of the proposed pleading dated 16 November 2017.
3 Also in these reasons, I shall attempt to detail the present stage the proceeding has reached for the information of pro bono counsel who may be prepared to assist the third and fourth defendants by providing advice and, if required, drafting documents. As the proceeding is fixed for trial on 12 February 2018, there is some urgency in this regard.
4 The plaintiff, Classic Finance Pty Ltd (“Classic Finance”) and the first defendant, Cielo Publishing Pty Ltd (“Cielo Publishing”), entered into an Invoice Discounting Deed and a General Security Deed on 21 May 2015 (“the Deeds”).
5 The obligations of Cielo Publishing pursuant to the Deeds were secured by a deed of guarantee and indemnity executed by the third and fourth defendants, Mr Dimitri Vorontsov and his mother Mrs Natalya Vorontsova, on 21 May 2015 (“the Guarantees”).
6 A writ was issued on about 14 January 2016. Default judgment was entered against the third and fourth defendants on 8 April 2016 for the sum of $360,868.32 plus interest and costs.
7 The third and fourth defendants applied to set aside the judgment. By order made on 9 May 2016, Judicial Registrar Tran set aside the judgment. However, she recorded in the order that, in an affidavit filed on behalf of the third and fourth defendants, they “agree to pay funds in use of $253,938 but not fees and charges”. At the hearing before Judicial Registrar Tran, the third and fourth defendants “admitted that the sum owing was $243,309.18”. Judgment was entered for that sum.
8 Since the entry of judgment against the third and fourth defendants for the sum of $243,309.18 on 9 May 2016, the following has occurred:
a. on 27 October 2016, the third and fourth defendants paid the sum of $10,000;
b. applications have been made by the third defendant to pay the judgment debt by instalments; the first on 8 July 2016. The applications have been unsuccessful. The history of these applications is set out under “Other Matters” in the order of Judicial Registrar Burchell made 15 February 2017 and the order of her Honour Judge Marks made 15 May 2017 confirming the Judicial Registrar’s orders;
c. applications by the third and fourth defendants seeking leave to review the orders of Judicial Registrar Tran made 9 May 2016, were dismissed by his Honour Judge Macnamara on 4 April 2017 (reported at [2017] VCC 389), and “on the papers” by his Honour Judge Anderson on 30 May 2017;
d. an application by the third and fourth defendants for “a stay of the orders and the warrant until filing an appeal to Court of Appeal and application being decided by Court of Appeal” was dismissed by his Honour Judge Woodward on 24 May 2017. His Honour’s reasons are reported at [2017] VCC 636.
Whether the warrant should be set aside
9 In relation to the Warrant of Seizure and Sale, the third and fourth defendants submit that it should be set aside for the following reasons:
a. the Sheriff should have executed in relation to personal property (the artworks) before executing in relation to real property (the properties at Safety Beach and Mt Martha);
b. the warrant and later correspondence from the Sheriff misstated the amount owing under the judgment debt;
c. the plaintiff had withdrawn caveats lodged in respect of the Safety Beach and Mt Martha properties;
d. the judgment debt may have already been recovered by the plaintiff pursuant to an insurance policy.
10 :a. The real and personal property In “statements of financial situation” sworn by the third and fourth defendants on 7 November 2016, they stated that their assets included, “collection of art – avant-garde 1980-1990’s” valuation of the art collection at “USD180,000 - USD250,000 - AUD242,987- AUD337,482 (at exchange rate 0.74)”, which he said was “of higher value than the debt”. The artworks were seized by the Sheriff on 25 May 2017 and the third and fourth defendants were notified by letter dated 17 July 2017 that the artworks would be sold by public auction unless the judgment debt, with interest and costs, was paid.
11 On about early September 2017, the Sheriff notified the plaintiff’s solicitors “that there was a real possibility that there could be no net recovery [from a sale of the artwork] once all sale costs are accounted for”. In these circumstances, the plaintiff’s solicitors requested the sheriff “that the seized artwork be returned to the debtors and for the warrant to be executed against the real estate properties of the debtors”.
12 It is now expected that the Sheriff will execute in respect of the Safety Beach and Mt Martha properties. Mr Vorontsov submitted that the warrant should be set aside so that the third and fourth defendants might refinance the mortgage loans over the properties. However, this submission was made on the basis that the additional funds raised could then be used to engage lawyers to contest the balance of the claim (and perhaps to pursue applications for leave to appeal against earlier orders), and not for the purpose of paying the judgment sum.
13 Mr Vorontsov stated during submissions that the Safety Beach property had a value of $720,000 and was currently mortgaged for $428,000 and the Mt Martha property was valued at $560,000 and mortgaged for $349,000. In the statements of Financial Situation dated 7 November 2016, the figures stated are:
Safety Beach – value $589,000, mortgage $439,546
Mt Martha – value $380,000, mortgage $319,200.
14 These matters do not provide a basis for setting aside the warrant.
15 b. Was the judgment sum misstated in the warrant? The Warrant of Seizure and Sale dated 22 February 2017 makes allowance for the payment of $10,000. That allowance is also taken into account in the calculation of interest. The warrant specifies the costs of the warrant, and indicates that the Sheriff’s fees and expenses will be a further unspecified sum. The total of the specified sums is $258,195.90. There appears to be no error in the warrant.
16 A letter from the Sheriff to the third and fourth defendants dated 24 February 2017, indicates that the total amount owing by them is $277,304.09 with interest of $68.30 accruing each further day.
17 In a letter dated 4 May 2017, the Sheriff noted that the sum then owing was $282,768.08. On 7 June 2017, the Sheriff said that the amount owing was $284,134.49 and on 17 July 2017 that $287,075.13 was owing.
18 Mr Vorontsov communicated with the Sheriff’s Office in May 2017 about the art collection. In that correspondence, he did not query the figures given by the Sheriff, and there is no evidence that either the third or fourth defendants have done so since then. The plaintiff’s solicitors sent an email to the Sheriff on 1 November 2017 querying how the amount of $87,075.13 referred to in the letter dated 17 July 2017 was made up, but has not yet received a response.
19 In my view, these are not matters which affect the validity of the warrant.
20 c. Whether the withdrawal of caveats affects the situation: On 10 December 2015, the plaintiff lodged caveats in respect of both the Safety Beach and Mt Martha properties. The caveats have now been withdrawn, apparently in response to litigation by the third and fourth defendants against the plaintiff in the Supreme Court for the withdrawal of caveats.
21 The plaintiff had shortly after the issue of the warrant registered the warrant on the titles of the properties, as it was entitled to do in respect of an unsatisfied warrant. The withdrawal of the caveats does not affect the protection offered by the registration of the warrant.
22 : d. Whether the judgment debt was recovered from an insurerThe plaintiff has filed an affidavit deposing to the fact that it was not insured against the loss it seeks to recover in the proceeding. The affidavit was filed in response to a direction by the Court on 2 November 2017 that the plaintiff must file affidavit material including “any documents relating to the receipt of a payment pursuant to an insurance policy in respect of the agreement with the first defendant”.
23 No basis has been shown to effectively challenge either the validity of the warrant or the judgment upon which it was based.
The defence and counterclaim of the third and fourth defendants
24 The current defence and counterclaim of the third and fourth defendants is the amended defence and counterclaim dated 11 September 2017. As I noted in paragraph 1(g)(i) of the order made 2 November 2017, “the amended defence contains only admissions, non-admissions and denials”. This would effectively only put the plaintiff “to its proof” at trial.
25 The counterclaim had other problems, some of which were highlighted in paragraph 1(g)(ii) of the order. The third and fourth defendants were given the opportunity to file and serve a proposed further amended defence and counterclaim. This was done on 16 November 2017.
26 By the proposed amendments to the defence:
a. a number of the plaintiff’s allegations are admitted rather than simply being not admitted;
b. in relation to a number of allegations which are denied, it is further alleged in particular that:
i. the first defendant “was wound-up on 16/09/16 by the plaintiff among other creditors in Federal Court proceedings”;
ii. “the plaintiff has terminated the ID Deed without cause to capitalise on early termination fees and charges”;
iii. “between 1 June and 7 September 2015 [the first defendant] paid out $73,820 from the original loan amount, which is more than 30 percent of the amount in less than 3 months on 12 months”;
iv. the first defendant “has never failed to provide the required information about the Transfer Account”;
v. the first defendant “did not breach the GS Deed [and] has never defaulted to the plaintiff”;
vi. “during the company’s operations [the first defendant] did not have any contracts or GS Deed with the plaintiff on 28/04/15”;
vii. “the plaintiff has failed to mitigate its losses by pursuing” the second defendant;
ix. other customers of the plaintiff have complained of the interest, fees and charges payable upon early termination of finance agreements;
x. the plaintiff’s financial services licence “expired in May 2014”. The plaintiff provided “financial services without a valid financial licence”;
xi. “the plaintiff had full insurance over [the first defendant’s] deeds and collected the insurance in the favour of the plaintiff, while still pursuing with the litigations to maximise their profits”;
xii. the plaintiff’s agreements with the first defendant contained “unfair conditions” and “unfair contract terms” breaching s12BF(1) of subdivision BA of the Australian Securities and Investments Commission Act 2001, in respect of which the plaintiff’s claims in the present proceeding are based.
27 If at all possible, it would be desirable for these allegations, if they are to be pursued, to be repleaded in a more conventional way. If the third and fourth defendants are not able to do this, with or without legal assistance, the Court will need to consider whether it will allow the third and fourth defendants to nevertheless raise these matters at trial by way of defence.
28 In relation to the counterclaim in the present pleading (part of the document dated 11 September 2017), the matters referred to in paragraph 1(g)(ii) of the order made 2 November 2017 seem to no longer be pursued. The proposed counterclaim, included with the document dated 16 November 2017, appears to raise the following matters:
a. a claim, apparently in tort, for “physical and emotional suffering and distress” resulting from the plaintiff “intentionally inflict[ing] emotional distress and caus[ing] damage to [the third and fourth defendants]”;
b. the “plaintiff’s actions towards winding up the first defendant” caused the third defendant to lose “guaranteed employment for minimum of 10 years and maximum 30 years at $120,000 per annum with adjusted pay increase of 5 percent per annum”;
c. both these matters are also alleged to have resulted in the third and fourth defendants having been “gravely injured in their feelings, credit and reputation [and having] suffered physical and emotional distress, have been humiliated and embarrassed and have suffered loss and damage, including special damage [and entitle them] to an award of aggravated damages”.
29 These allegations raise other problems, including:
a. the tortious claim is said to be based on an email dated 3 May 2016 from David Thorn, the plaintiff’s chief operating officer to the third defendant. The email reads as follows:
“Thanks for the email.
The 3 months that was agreed upon in my email dated 17 February 2016 was subject to 3 conditions and unfortunately you only met one of those conditions which was to supply the real estate agent agreement for the sale of Dromana Parade. The other conditions relating to a payment of $180K and confirmation of your first mortgage weren’t met. That being the case we proceeded with our legal against and obtained default judgement against Natalya and yourself.
Now that we have the judgement in place we will be applying to wind up Cielo Publishing Pty Ltd and Vorontsov Pty Ltd and we will also being applying for bankruptcy against you both.
Should you wish for these not to occur you will need to pay the amount of $372,967.77 before both applicants are granted.
Regards” ;
b. insofar as there is a claim for damages for personal injuries, including psychological injury, the provisions of the Wrongs Act 1958 (Vic) are likely to impact on the feasibility of the claims;
c. insofar as the “plaintiff’s actions” relied upon are the matters which entitled the plaintiff to the judgment given in the orders made 9 May 2016, the third and fourth defendants’ reliance upon those actions may not be possible;
d. in the winding up of the first defendant, the plaintiff was not the petitioning creditor, but simply one of a number of supporting creditors.
30 In the circumstances, the present counterclaim in the document dated 11 September 2017 should be struck out and leave should not be granted for the filing of a counterclaim in the form of part of the document dated 16 November 2017. A further amended defence in the form of the relevant part of the document dated 16 November 2017 should also not be permitted to be filed at this stage. The orders foreshadowed in paragraph 2 of these reasons shall be made.
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Certificate
I certify that these 9 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 28 November 2017.
Dated: 28 November 2017.
Zeinab Ali
Associate to His Honour Judge Anderson
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