Connective Osn v Parkyn - [2018] VSC 697

IN THE SUPREME COURT OF VICTORIA AT MELBOURNE
COMMERCIAL COURT

Not Restricted

S ECI 2018 2033

CONNECTIVE OSN PTY LTD (ACN 106 761 326) and CONNECTIVE SERVICES PTY LTD (ACN 107 366 496)	Plaintiffs
v
ERIC NORMAN PARKYN & ORS	Defendants

---

JUDGE:	DIGBY J
WHERE HELD:	Melbourne
DATE OF HEARING:	2 November 2018
DATE OF RULING:	2 November 2018
CASE MAY BE CITED AS:	Connective OSN v Parkyn
MEDIUM NEUTRAL CITATION:	[2018] VSC 697

---

EQUITY – Fiduciary relationships – Accessorial liability – 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 – Barnes v Addy (1874) LR 9 Ch App 244.

PRACTICE AND PROCEDURE – Freezing order – Prima facie case – Risk of dissipation of assets – Ex parte application – Where allegations involve fraud and dishonesty – Where allegations involve pattern of fraudulent and dishonest conduct – Where allegations involve deception of public authorities – Application granted – Supreme Court (General Civil Procedure) Rules 2015 r 37A.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr M Clarke QC	Mills Oakley

HIS HONOUR:

Urgent ex parte application

By Summons dated 1 November 2018, the plaintiffs applied for interim asset preservation orders (freezing orders) against the first, second and third defendants’ assets up to a value of $970,660,59. The application was heard ex parte on 2 November 2018.

Factual background

In 2009, the plaintiffs retained Wellingtons Accountants (Wellingtons) as tax agents for the preparation of tax returns.

Wellingtons employed Mr Eric Norman Parkyn (the first defendant). The first defendant was the tax agent responsible for the affairs of the plaintiffs.

The first defendant is the director and secretary of Thirty5 Group Pty Ltd (the second defendant) and Flight 23 Nominees Pty Ltd (the third defendant). The second defendant is a wholly-owned subsidiary of the third defendant. The second defendant holds a bank account with the Commonwealth Bank of Australia (CBA and the CBA account).

The plaintiffs draw attention to a number of transactions executed at the direction of the first defendant, in his capacity as tax agent for the plaintiffs, between September 2015 and October 2015.[1]
[1]Plaintiffs’ Submissions, 1 November 2018 (Plaintiffs Submissions), [6].

With respect to the second plaintiff, these transactions include the following:

(a) Between September 2015 and November 2015, the first defendant prepared and sent tax returns to a representative of the second plaintiff for FY13–14, assessing the total tax payable to the Australian Taxation Office (ATO) as $396,678.30;[2]
[2]Plaintiffs Submissions, [4(vi)(a) and (b)]; Affidavit of Glenn Lees, 1 November 2018 (Lees Affidavit), [12]–[13].

(b) On 17 November 2015, the ATO received a payment of $396,678.30 from the first plaintiff.[3] This payment was made to satisfy the purported tax liability outlined in subparagraph (a) above. Given the first defendant had not lodged the tax returns at this time, $396,678.30 stood to the credit of the second plaintiff with 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 Connective Osn v Parkyn

Details

AGLC: Connective Osn v Parkyn [2018] VSC 697
Case: [2018] VSC 697
Decision Date: 2 November 2018

CaseChat Overview and Summary

Connective Osn brought an action against Parkyn alleging breach of fiduciary duty, knowing receipt and knowing assistance in relation to funds transferred to Parkyn. The dispute came before the Supreme Court of Queensland. The central issue was whether Parkyn had received trust property, whether he knew of the dishonest and fraudulent design behind the transfers, and whether he was liable for knowing receipt and knowing assistance under the principles established in Barnes v Addy. Additionally, the court had to decide on the grant of a freezing order to prevent dissipation of assets.

The court held that the allegations of fraud and dishonest conduct were sufficiently established on a prima facie basis, justifying the grant of an ex parte freezing order. The court found that Parkyn had received funds that were subject to a fiduciary duty and that he knew or ought to have known of the dishonest and fraudulent nature of the transactions. The court determined that Parkyn was liable for knowing receipt and knowing assistance as he had participated in the fraudulent scheme. The freezing order was granted to prevent Parkyn from dissipating the assets that were subject to the action.

The court's reasoning was grounded in the principles of equity and the established legal framework for accessory liability. The court relied on the precedent set in Barnes v Addy and the relevant provisions of the Supreme Court (General Civil Procedure) Rules 2015. The court concluded that the risk of dissipation of assets was high given the pattern of fraudulent conduct and deception of public authorities.

The court ordered that a freezing order be made in favour of Connective Osn against Parkyn, freezing all assets that were subject to the action. The order also required Parkyn to provide full disclosure of all assets and financial dealings related to the transactions in question.

Orders