Duncan v National Australia Bank

[2007] FCA 95

FEDERAL COURT OF AUSTRALIA

Duncan v National Australia Bank [2007] FCA 95

INTERLOCUTORY APPLICATION – application for damages for undertaking given by counsel – application dismissed.

STEPHEN JAMES DUNCAN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF AVERIL GAY GARRETT v NATIONAL AUSTRALIA BANK & ORS

SAD 29 OF 2005

LANDER J
8 FEBRUARY 2007
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 29 OF 2005

BETWEEN:

STEPHEN JAMES DUNCAN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF AVERIL GAY GARRETT
Applicant

AND:

NATIONAL AUSTRALIA BANK
First Respondent

SHU MU TSENG
Second Respondent

PETER IVAN MACKS IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF ANDREW MORTON GARRETT
Third Respondent

ANDREW MORTON GARRETT AND JOSEPH NICOLAZZO AS TRUSTEES OF THE ANDREW GARRETT FAMILY TRUST NO 3
First Cross Respondents

EVAJADE PTY LTD
Second Cross Respondent

MARGARET JOYCE BAKER
Third Cross Respondent

BARBARA FRANCIS GARRETT
Fourth Cross Respondent

ANDREW KENNETH SANDOW TRADING AS ANDREW SANDOW BUSINESS SERVICES
Fifth Cross Respondent

ZOLTAN VARVEGHY
Seventh Cross Respondent

ANTOINE JAQUES ALCIDES
Eighth Cross Respondent

JUDGE:	LANDER J
DATE OF ORDER:	8 FEBRUARY 2007
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1.The application for damages on an undertaking as to damages be dismissed.

2.The first cross respondent pay the costs of the applicant and the second and third respondents.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 29 OF 2005

BETWEEN:

STEPHEN JAMES DUNCAN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF AVERIL GAY GARRETT
Applicant

AND:

NATIONAL AUSTRALIA BANK
First Respondent

SHU MU TSENG
Second Respondent

PETER IVAN MACKS IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF ANDREW MORTON GARRETT
Third Respondent

ANDREW MORTON GARRETT AND JOSEPH NICOLAZZO AS TRUSTEES OF THE ANDREW GARRETT FAMILY TRUST NO 3
First Cross Respondents

EVAJADE PTY LTD
Second Cross Respondent

MARGARET JOYCE BAKER
Third Cross Respondent

BARBARA FRANCIS GARRETT
Fourth Cross Respondent

ANDREW KENNETH SANDOW TRADING AS ANDREW SANDOW BUSINESS SERVICES
Fifth Cross Respondent

ZOLTAN VARVEGHY
Seventh Cross Respondent

ANTOINE JAQUES ALCIDES
Eighth Cross Respondent

JUDGE:	LANDER J
DATE:	8 FEBRUARY 2007
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1. This is an application by the first cross-respondent, Andrew Morton Garrett, as trustee of the Andrew Garrett Family Trust No 3, for an order that the applicant, Mr Duncan, and the third respondent, Mr Macks, pay damages pursuant to an undertaking given by them by counsel on 1 March 2006.  This matter has a long history.  Mr Macks is the trustee of the bankrupt estate of Andrew Morton Garrett and Mr Duncan, the trustee of the bankrupt estate of Averil Garrett.  Mr Garrett was made bankrupt on 24 September 2004 and Ms Garrett on 22 December 2004.  There has been a multitude of actions brought by Mr Garrett in relation to the events leading up to his bankruptcy and events since his bankruptcy.

2. In 2005, the trustees of the two estates sought to recover the assets of the estate and the assets of trusts of which Mr and Ms Garrett were trustees prior to their bankruptcy.  Following their bankruptcy, Evajade Proprietary Limited, a company apparently controlled by Mr Garrett, became the trustee.

3. Evidence disclosed that during 2005, assets were transferred from one trust to another ahead of the efforts of the two trustees to recover the assets.  On 31 January 2006, Mr Garrett gave two undertakings to the Court.  The first was that no further charges would be created affecting the assets of the Andrew Garrett Family Trust No 3.  The second undertaking was that no further charges would be created affecting the assets of the Andrew Garrett Family Trust No 1 or No 2.

4. A number of directions hearing were heard in early 2006.  On 1 March 2006, Mr Sandow, who was then the director of Evajade Proprietary Limited, purported to resign and Mr Garrett asserted that by virtue of a power of attorney over Evajade, he had appointed a new director to Evajade, a Mr Tsouvelis, who was not then present in Court.

5. Later in the course of that hearing, Mr Garrett asserted that on 9 February 2006 a person named Mr Joseph Nicolazzo had been appointed joint trustee of the Andrew Garrett Family Trust No 3.  The addition of the joint trustee to the Andrew Garrett Family Trust No 3 had the inevitable consequence of causing the matter to be adjourned to enable Mr Nicolazzo to be joined as a party and to afford the cross-claimants an opportunity to re-amend their statement of claim.  In addition, Mr Garrett asserted on that day that he had been appointed as joint trustee of the Andrew Garrett Family Trust No 1 and No 2 on 27 January 2006, which also had the inevitable consequence of delaying the proceedings.

6. Towards the end of the hearing on 1 March 2006, I asked Mr Garrett to give undertakings to the Court that he would not appoint any new trustees for any of the Andrew Garrett Family Trusts and he would not dispose of any assets of any of the three Andrew Garrett Family Trusts without the leave of the Court.  Mr Garrett indicated that he could give the first undertaking but could not give the second.  He referred to an unexecuted assignment of debt which purported to assign the Berringer Blass royalty stream to Zoltan Varveghy and Antoine Jacques Alcides for consideration of $1 plus, (1) assignment of international bill of exchange with serial number 12123353, and ASIN:CB!79472537 to the account of Andrew Morton Garrett and Joseph Nicolazzo as trustees of the Andrew Garrett Family Trust No 3; (2) execution of irrevocable direction and authority to Berringer Blass Wine Estates in favour of Andrew Morton Garrett as trustee of the Andrew Garrett Family Trust No 3 for $100,000 per annum; (3) a fee of $US25 million payable pro rata on success judgement of the damages of $US50 million in an action to be brought against the defendant, to be named in a Court action brought in the name of Zolton Zarszeghy (sic), Antoine Jacques Alcides and Credit Net Bank International (plaintiffs).

7. The assignment of debt had been executed by Mr Garrett but not by Mr Nicolazzo, Mr Varveghy or Mr Alcides.  I put it to Mr Garrett during the hearing that if his execution of the assignment of debt had the effect of devaluing the asset of the Berringer Blass royalty stream, that he might be in breach of the undertaking he made to the Court on 31 January 2006.  If executed, the effect of the assignment of debt was to effectively replace an asset of the Andrew Garrett Family Trust No 3 with a chose in action.

8. I adjourned the matter to enable Mr Varveghy, Mr Alcides and Mr Nicolazzo to be joined as parties.  I also made orders in the nature of injunctions so as to protect the position pending their being joined.  On the undertaking given by Miss Maharaj QC on behalf of the cross-claimant, Mr Macks, the orders I made were:

   ‘Until Further orders:

   1.The seventh and eighth cross-respondents are restrained from executing a document, being an assignment of debt, between Andrew Morton Garrett and Joseph Nicolazzo as trustees of the Andrew Garrett Family Trust (No 3), and Zoltan Varveghy and Antoine Jacques Alcides, and described as Exhibit MM in these proceedings.

   2. The first cross-respondent, Joseph Nicolazzo is restrained from executing the document referred to in paragraph 5(i) hereof and described as Exhibit MM in these proceedings.

   3.The trustees of the Andrew Garrett Family Trust (No 1) and the Andrew Garrett Family Trust (No 2) and the Andrew Garrett Family Trust (No 3), are restrained from disposing of, or dealing in any way with any of the assets of those trusts.

   4.The seventh and eighth cross-respondents, Zoltan Varveghy and Antoine Jacques Alcides are restrained from disposing of, or dealing in any way with any assets acquired by them pursuant to the terms of the document described in 5(i) hereof and described as Exhibit MM in these proceedings.’

9. On 31 March 2006, because events had changed, I discharged that order.  Mr Garrett now seeks damages which he says the Andrew Garrett Family Trust No 3 has suffered as a result of the making of those orders. In my opinion, the application fails in its premise.  I am not satisfied on any of the evidence which has been put to me that the orders made were inappropriate, having regard to the circumstances which then existed.

10. There was a history leading up to 1 March 2006 which disclosed that Mr Garrett was taking steps to put assets beyond the reach of the trustees.  The trustees had been given no notice prior to the hearing that it was intended that the transaction which was contemplated in exhibit MM would occur.  They were entitled, in my opinion, to seek to restrain the execution of the document pending their investigations.

11. For those reasons, the application for damages on the undertaking as to damages is dismissed.

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.

Associate:

Dated:       8 February 2007

Counsel for the Applicant:	Mr M Hayes
Solicitor for the Applicant:	Cosoff Cudmore Knox
Counsel for the First Respondent:	The First Respondent did not apear
Counsel for the Second Respondent:	Mr J Wilkinson
Solicitor for the Second Respondent:	Cowell Clarke
Counsel for the Third Respondent:	Ms E Trebilcock
Solicitor for the Third Respondent:	Lipman Karas
Counsel for the First Cross-Respondent:	Mr Garrett appeared in person
Counsel for the Second to Eighth Cross-Respondents:	The Second to Eights Cross-Respondents did not appear
Date of Hearing:	8 February 2007
Date of Judgment:	8 February 2007