Dr Bill Lyon Pty Limited v Smooth as Silk Laser Cosmetic Clinic Pty Limited (No 3)

[2019] NSWSC 549

Supreme Court

New South Wales

Medium Neutral Citation:

Dr Bill Lyon Pty Limited v Smooth as Silk Laser Cosmetic Clinic Pty Limited (No 3) [2019] NSWSC 549

Hearing dates:

10 May 2019

Date of orders:

10 May 2019

Decision date:

14 May 2019

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

(1)   Discharge order 1 of the orders made by the Court on 15 March 2019 that the reference made on 11 July 2018 on the issue of causation and quantum to the Hon. Kevin Lindgren QC be stayed pending further order of the Court.

 

(2)   Direct that the plaintiffs notify the Hon. Kevin Lindgren QC of order 1 above.

 (3)   The defendants’ notice of motion filed on 14 February 2019 be dismissed with costs.

Catchwords:

CIVIL PROCEDURE – Stay of proceedings – Concurrent civil and criminal proceedings – whether stay necessary to achieve justice between competing rights of parties – whether issues and evidence relevant to both sets of proceedings – prejudice to parties – admissions already made by defendant

Cases Cited:

Griffin David James v Sogelease Australia Limited [2002] NSWCA 421
McMahon v Gould (1982) 7 ACLR 202
Niven v SS [2006] NSWCA 338

Category:

Procedural and other rulings

Parties:

Dr Bill Lyon Pty Ltd (First Plaintiff)
Dr Bill Lyon Services Pty Ltd (Second Plaintiff)
Smooth as Silk Laser and Cosmetic Clinic Pty Ltd (First Defendant)
Tommy Meyir Yitzhak Jodlovich (Second Defendant)

Representation:

Counsel:

 

HW Somerville (Plaintiffs)
D Groundwater – WMD Law (Defendants)

 

Solicitors:

  Henry Williams Lawyers (Plaintiffs)
WMD Law (Defendants)

File Number(s):

2018/158608

Judgment

Introduction

1. On 10 May 2019, I made orders discharging orders staying these proceedings, pending the determination of criminal proceedings against the second defendant, Mr Tommy Jodlovich. At the time, I indicated that I would publish my reasons for doing so later. These are those reasons.

Background

2. The proceedings arise out of the sale by the first defendant, Smooth As Silk Laser and Cosmetics Pty Ltd, a company controlled by Mr Jodlovich, to the first plaintiff, Dr Bill Lyon Pty Ltd, a company controlled by Dr Bill Lyon for $650,000. The sale contract was entered into on 5 September 2017. The plaintiffs contend that the first plaintiff was induced to enter into the contract by misrepresentations made by Mr Jodlovich, who, among other things, is said to have falsified records to support some of the misrepresentations. It is in respect of that conduct that Mr Jodlovich has been charged.

3. The plaintiffs commenced the proceedings on 21 May 2018. Mr Jodlovich was charged on 22 June 2018.

4. It appears that following the laying of charges the question arose whether these proceedings should be stayed. On 3 July 2018, the solicitors for the defendants wrote to the solicitors for the plaintiffs saying relevantly:

Our client has re-considered his position and has instructed us that he will not seek a stay of the proceedings.

Our client unreservedly admits liability in this matter. Accordingly, the only question to be determined is that of quantum.

5. Following that letter, on 11 July 2018 the Court entered judgment for the plaintiffs in respect of liability, ordered that the defendants pay the plaintiffs’ costs of the proceedings to date and made the following order:

Pursuant to Pt 20 R14 of the Uniform Civil Procedure Rules 2005 (the UCPR), the issue of quantum is referred to Kevin Lindgren (the Referee) for inquiry and report.

6. The plaintiffs have provided extensive evidence to the Referee. It appears that they have incurred approximately $600,000 in costs in connection with the proceedings to date.

7. On 14 February 2019, the defendants filed a notice of motion to stay the proceedings until such time as the criminal proceedings are determined. No explanation has been given for the change in attitude.

8. On 15 March 2019, the Court ordered by consent that “The reference made on 11 July 2018 on the issue of causation and quantum to the Hon. Kevin Lindgren QC be stayed pending further order of the Court”. That order was made in a context in which the criminal proceedings were listed for a three day hearing commencing on or about 16 April 2019. It is not clear why the order was made in that form. What was referred to the Referee was the question of quantum.

9. On the first day of the criminal proceedings, Mr Jodlovich appeared unrepresented and applied to have the hearing vacated on the basis that he was unable to fund his legal representation pending the sale of one or more properties that he owned. As a consequence, the hearing date was vacated and the criminal proceedings were listed for mention before the Local Court at 9.30 am on 24 May 2019.

10. It is unclear now when the criminal proceedings will be heard. It will not be before August this year and may be later. It is in that context that the plaintiffs indicated that they were no longer willing to consent to a continuation of the stay, necessitating the defendants’ notice of motion.

Relevant legal principles

11. A defendant is not entitled as of right to a stay of civil proceedings pending the determination of parallel criminal proceedings: McMahon v Gould (1982) 7 ACLR 202 at 206-7; Niven v SS [2006] NSWCA 338. Rather, the Court will only grant a stay where a stay is necessary so as to achieve justice between the competing rights of the plaintiff and defendant: see Griffin David James v Sogelease Australia Limited [2002] NSWCA 421 and the cases cited there.

Consideration

12. In the present case, it is likely that the plaintiffs will suffer substantial prejudice if the stay continues. They have already spent approximately $600,000 in preparing their evidence, much of which is likely to have been spent after the defendants indicated that they did not intend to apply for a stay. The plaintiffs borrowed money in connection with the business and the evidence is that the business is making a loss. The defendants do not dispute liability and the only question is the quantum of the plaintiffs’ loss. The criminal proceedings may not be determined until the end of this year and it is apparent that it will be a number of months before the Referee is able to complete the reference once work is resumed. At the very least, the plaintiffs have reasonable prospects of recovering a substantial sum of money from the defendants. A continuation of the stay will extend the period of time the plaintiffs are out of pocket. Although the plaintiffs are corporate entities, they are companies through which Dr Lyon carries on a practice. The evidence is that the delay in resolving the matter is having a substantial effect on Dr Lyon’s wellbeing.

13. The defendants contended that unless the stay was continued they would suffer prejudice because it was intended that Mr Jodlovich would provide an affidavit in the reference; and that would be inconsistent with or undermine his right to silence in the criminal proceedings. However, why that was so was not satisfactorily explained by the defendants.

14. There is no obvious overlap between the issues to be determined in the criminal trial and the issues to be determined in the reference. The issues in the criminal proceedings concern the question whether Mr Jodlovich falsified documents to induce the plaintiffs to acquire the business. Having regard to the admissions made by the defendants, that is not an issue in these proceedings, let alone in the reference. Rather, the issue before the Referee is what loss the plaintiffs suffered as a consequence of acquiring the business and whether the plaintiffs took adequate steps to mitigate their loss. Those issues will turn largely on accounting evidence and evidence concerning the way in which the plaintiffs conduct the business.

15. Mr Groundwater, who appeared for the defendants, submitted that one issue that was also before the Referee was causation; and that the defendants would want to lead evidence from Mr Jodlovich that the plaintiffs could not have relied on the defendants’ representations because the information supplied by the defendants to the plaintiffs was supplied on the instructions of the plaintiffs’ accountants. That same evidence would also be very relevant to the defence of the criminal charge.

16. I concluded that no weight should be placed on this consideration for two reasons.

17. First, there was no evidence that supported that submission.

18. Second, in my opinion, it was very difficult to reconcile that submission with the admission made by the defendants. It appears that in relation to causation, the defendants intend to allege before the Referee that there was no causation because the information on which the plaintiffs relied was supplied on instructions from the plaintiffs’ accountants. That amounts to a suggestion that those accountants were a party to any fraud committed by the second defendant and that the plaintiffs were bound by their conduct. Leaving aside the question whether Mr Groundwater had a proper basis to make such a serious allegation, it seemed to me that such an allegation was inconsistent with the admission of liability. In effect, it amounted to a submission that the defendants were not liable because, to the extent that the information provided by them was false, the plaintiffs knew (by their agents, the accountants) that to be the case. In any event, at the very least, a case in those terms would need to be pleaded so as not to catch the plaintiffs by surprise. However, no such case has been pleaded.

19. It appears that the defendants also seek to advance a more orthodox reliance case to the effect that the plaintiffs did not rely on anything the defendants said, but instead relied on information they obtained from their accountants. Whether that case can be advanced consistently with the admission made by the defendants may be open to question. In any event, it is difficult to see how Mr Jodlovich could provide any relevant evidence on that question. That case depends on what the plaintiffs were told by their accountants and whether they decided to act on that information irrespective of what Mr Jodlovich said to them.

20. Mr Groundwater also suggested that Mr Jodlovich was likely to give evidence in the reference going to other aspects of quantum – such as whether certain equipment or stock was present in the business at the time of sale and whether certain equipment was working at that time. However, that evidence would be irrelevant to the criminal proceedings; and it is difficult to see how Mr Jodlovich would be prejudiced by giving it in these proceedings.

21. It is true that if Mr Jodlovich did provide an affidavit in connection with these proceedings it is likely he would cross-examined on it. However, it is difficult to see how any of that cross-examination would concern matters relevant to the criminal proceedings. This is not a case where any cross-examination of Mr Jodlovich before the Referee would be a “dry run” of his cross-examination in the criminal proceedings, assuming he chose to give evidence in those proceedings.

22. It may be that Mr Jodlovich decides not to give evidence in these proceedings because of the pending criminal proceedings. But that is a choice for him to make. If he makes that choice, the defendants will still be able to defend the plaintiffs’ claim. The plaintiffs must prove the damages they suffered and the defendants will have the opportunity to persuade the Referee that they should be entitled to cross-examine the plaintiffs’ witnesses and they will have the opportunity to make submissions to the Referee. They will also have an opportunity to lead other evidence, including expert accounting evidence. Having regard to those matters, I concluded that the prejudice to the plaintiffs of continuing the stay would outweigh any prejudice the defendants would suffer if the stay were lifted.

23. For those reasons, I made the following orders:

1. Discharge order 1 of the orders made by the Court on 15 March 2019 that the reference made on 11 July 2018 on the issue of causation and quantum to the Hon. Kevin Lindgren QC be stayed pending further order of the Court.

2. Direct that the plaintiffs notify the Hon. Kevin Lindgren QC of order 1 above.

3. The defendants’ notice of motion filed on 14 February 2019 be dismissed with costs.

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Decision last updated: 14 May 2019