Durolek v Pier (WA) Pty Ltd
[2018] WASCA 187
•23 OCTOBER 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: DUROLEK -v- PIER (WA) PTY LTD [2018] WASCA 187
CORAM: MITCHELL JA
HEARD: 19 OCTOBER 2018
DELIVERED : 19 OCTOBER 2018
PUBLISHED : 23 OCTOBER 2018
FILE NO/S: CACV 78 of 2018
BETWEEN: BELINDA DUROLEK
Appellant
AND
PIER (WA) PTY LTD (ACN 609 009 270) as trustee for ISANDI TRUST
First Respondent
JEAN MAURICE PTY LTD (IN LIQUIDATION) (ACN 155 115 656)
Second Respondent
FRANCK DUROLEK
Fourth Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: KENNETH MARTIN J
Citation: PIER (WA) PTY LTD AS TRUSTEE FOR ISANDI TRUST -v- JEAN MAURICE PTY LTD (IN LIQ) [No 6] [2018] WASC 204
File Number : CIV 2935 of 2016
Catchwords:
Practice and procedure - Application for suspension order pending appeal - Section 15 Civil Judgments Enforcement Act 2004 (WA) - Special circumstances - Unusual features of primary court orders - No practical prejudice to first respondent if stay is granted - Limited stay granted in relation to appellant's interest in her residence
Legislation:
Civil Judgments Enforcement Act 2004 (WA), s 15
Result:
Application granted in part
Category: B
Representation:
Counsel:
| Appellant | : | Mr L A Warnick |
| First Respondent | : | Mr K A Dundo |
| Second Respondent | : | No appearance |
| Fourth Respondent | : | No appearance |
Solicitors:
| Appellant | : | Havilah Legal |
| First Respondent | : | KD Legal (Perth) |
| Second Respondent | : | No appearance |
| Fourth Respondent | : | No appearance |
Case(s) referred to in decision(s):
Currie v Currie [2018] WASCA 30
Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308
Firmware Technologies Inc v Asia Platinum Group Ltd [2016] WASCA 179; (2016) 50 WAR 453
Pier (WA) Pty Ltd v Jean Maurice Pty Ltd [2018] WASC 22
Pier (WA) Pty Ltd v Jean Maurice Pty Ltd [No 2] [2018] WASC 23
Pier (WA) Pty Ltd v Jean Maurice Pty Ltd [No 3] [2018] WASC 24
MITCHELL JA:
At the conclusion of the hearing of the appellant's application for a suspension order, I ordered that, until the determination of this appeal or further order, enforcement of the judgment debt is suspended in relation to the appellant's interest in her Mandurah residence. These are my reasons for making that order.
Background
Acquisition of businesses by Pier and subsequent claim
On 26 August 2016, the first respondent (Pier) acquired two businesses from the second respondent and the former third respondent, Sancho Bakery Pty Ltd (Jean Maurice and Sancho Bakery, collectively the Vendors). Pier paid $1.8 million for those businesses.[1] At the time of the acquisition, the fourth respondent (Mr Durolek) was the sole director and secretary of Jean Maurice and Sancho Bakery.[2] The appellant (Mrs Durolek) is married to Mr Durolek and was a director of Jean Maurice until March 2016.[3] Mr Durolek had deposed that he owned all of the shares in Jean Maurice. Mr and Mrs Durolek both deposed that they had a beneficial interest in the shares of Sancho Bakery, which were owned by a family trust.[4]
[1] Pier (WA) Pty Ltd v Jean Maurice Pty Ltd (in liq) [No 6] [2018] WASC 204 (Pier No 6) [4].
[2] Affidavit of Franck Durolek sworn 20 February 2017 in the primary proceedings (annexure KXD2 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 2.
[3] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 3 and 4.
[4] Affidavit of Franck Durolek sworn 20 February 2017 in the primary proceedings (annexure KXD2 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 15; Affidavit of Belinda Durolek sworn 20 February 2017 in the primary proceedings (annexure KXD3 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 16.
An earlier conditional agreement to purchase the businesses for $2.45 million had been negotiated in February 2016.[5]
[5] Pier No 6 [35].
On 9 November 2016, Pier commenced the primary proceedings against the other parties to the appeal and the former third respondent (defendants). In those proceedings, Pier pleaded a cause of action of breach of contract against Jean Maurice and Sancho Bakery. It also pleaded a cause of action of misleading and deceptive conduct and deceit against all of the defendants. It was pleaded that:
(1)The agreement for the sale of the businesses was made on about 28 May 2016 (Agreement).[6]
(2)Before the Agreement was made and, or alternatively, during the 'period of due diligence', the defendants made representations (Representations) to Pier in relation to the wages costs and payment of franchise fees.[7]
(3)Each of the Representations was made in trade and commerce,[8] and was false, misleading or deceptive in that wages were understated and franchisees were not paying royalty fees.[9]
(4)The Representations were made fraudulently.[10]
(5)Pier relied on the Representations in entering into the Agreement, carrying out its due diligence and paying the purchase price at settlement on 26 August 2016.[11]
(6)Pier suffered, and continues to suffer, loss and damage by reason of those matters.[12]
[6] Amended Statement of Claim, par 4.
[7] Amended Statement of Claim, par 7.
[8] Amended Statement of Claim, par 11.
[9] Amended Statement of Claim, par 8.
[10] Amended Statement of Claim, par 9.
[11] Amended Statement of Claim, par 10.
[12] Amended Statement of Claim, par 13.
Pier pleaded that Mr and Mrs Durolek made the Representations or were involved in making them. It alleged that Mr and Mrs Durolek contravened s 18 of the Australian Consumer Law, aided Jean Maurice and Sancho Bakery to do so or were knowingly concerned in such contravention. Particulars alleged that Mrs Durolek was a director of Jean Maurice until 8 March 2016, remained actively involved in the management and day-to-day operations of the Vendors' business at Joondalup and instructed and authorised a business agent to advertise and sell the business to Pier.[13]
Initial freezing orders on 14 November 2016
[13] Amended Statement of Claim, par 12.
At an ex parte hearing on 14 November 2016, the primary judge made freezing orders against the defendants operating up to 1 December 2016. The freezing order against Mrs Durolek (Freezing Order) prohibited her from in any way disposing of, dealing with or diminishing the value of any of her assets except as permitted by the order.[14] The order permitted dealings where the unencumbered value of her assets exceeded $2 million.[15] Order 11 of the Freezing Order provided that the order did not prohibit Mrs Durolek from making certain payments, including of her ordinary living expenses and reasonable legal expenses.
Service of writ and Freezing Order on Mrs Durolek
[14] Order 7.
[15] Order 8 and order 9.
On 24 November 2016, at her Mandurah residence, a director of Pier served Mrs Durolek with documents including the writ and the Freezing Order made on 14 November 2016.[16]
Extension of Freezing Order granted on 1 December 2016
[16] Affidavit of Isak Buitendag sworn 30 November 2016 in the primary proceedings (annexure KXD1 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal).
A further hearing took place before the primary judge on 1 December 2016. At that time, all defendants were represented by a Mr P Hardie. The primary judge made an order extending the Freezing Order until the hearing and determination of the action, or further order.
Affidavits as to assets sworn on 20 February 2017
On 19 January 2017, the primary judge made ancillary orders requiring Mr and Mrs Durolek to swear affidavits setting out to the best of their ability information including all of their 'assets worldwide'.[17] On 15 February 2017, the time for compliance with those orders was extended to 27 February 2017.[18]
[17] Orders 6 and 8.
[18] Order 2.
In purported compliance with those orders, Mr and Mrs Durolek swore affidavits disclosing their assets on 20 February 2017. The affidavits disclosed that they owned a property in Kallaroo and two properties in Mandurah (one of which was their home residence) as joint tenants. The total value of those three properties was estimated at between $2.8 million and $3 million. Those properties were encumbered by first mortgages in favour of National Australia Bank Ltd (NAB), securing a line of credit with a limit of $3.06 million. As at 31 January 2017, the amount owed to NAB under that facility was $3,059,110.76.[19]
[19] Affidavit of Franck Durolek sworn 20 February 2017 in the primary proceedings (annexure KXD2 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 5 - 10; Affidavit of Belinda Durolek sworn 20 February 2017 in the primary proceedings (annexure KXD3 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 4 - 9.
Mrs Durolek's affidavit also disclosed a leasehold interest in an apartment at Hillarys Boat Harbour which she purchased in 2006 for $360,000. She deposed that the current value of that leasehold interest was estimated at $350,000 (although the annexed appraisal was for a Kallaroo property rather than the Hillarys apartment). Mrs Durolek deposed that an interest-free loan from her parents of $376,260, repayable on demand, was used to fund the purchase. Mrs Durolek deposed that she had not made any repayments on the loan, which was secured by a mortgage to her parents of her leasehold interest registered in June 2011.[20]
[20] Affidavit of Belinda Durolek sworn 20 February 2017 in the primary proceedings (annexure KXD3 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 10 - 14.
Mr Durolek's affidavit deposed that he owned 29 Lingots of 1 kg of gold, purchased on or about 30 November 2016 for €1,066,825.10. Mr Durolek deposed that the gold was stored at a bank in France.[21] Mr Durolek deposed that the net sale proceeds of both businesses, being $1,604,731.26 were:[22]
(1)paid into an Australian bank account of Sancho Bakery on 26 August 2016;
(2)transferred to Mr Durolek's French bank account on or about 30 August 2016, with the funds becoming available in that account on or about 2 September 2016; and
(3)used to purchase the gold Lingots on 30 November 2016.
[21] Affidavit of Franck Durolek sworn 20 February 2017 in the primary proceedings (annexure KXD2 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 13 and 14.
[22] Affidavit of Franck Durolek sworn 20 February 2017 in the primary proceedings (annexure KXD2 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 30 and 31 and annexures FD15 - FD17.
It is now accepted by Mrs Durolek and Pier that Mr Durolek lied about the existence of the gold.
Affidavits as to rental income sworn 24 April 2017
On 24 April 2017, Mr and Mrs Durolek both swore affidavits disclosing rental income they had received from the Kallaroo, Mandurah and Hillarys properties. This was required by an ancillary order made by the primary judge on 6 April 2017. Both deposed to the receipt of rent from the Kallaroo property and one of the Mandurah properties.[23] Mrs Durolek deposed that rent from the Hillarys property was paid directly to her mother 'to service the Hillarys Mortgage'.[24]
Travel restriction orders made on 26 June 2017
[23] Affidavit of Franck Durolek sworn 24 April 2017 in the primary proceedings (annexure KXD4 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 7 - 9; Affidavit of Belinda Durolek sworn 24 April 2017 in the primary proceedings (annexure KXD5 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 5 and 6.
[24] Affidavit of Belinda Durolek sworn 24 April 2017 in the primary proceedings (annexure KXD5 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 6.
On 15 June 2017, the primary judge ordered Mr and Mrs Durolek to deliver to their counsel, who represented all defendants at the hearing, all of their passports.
On 26 June 2017, on an ex parte application by Pier, the primary judge made orders restricting travel by Mr and Mrs Durolek. The orders required Mr and Mrs Durolek to deliver their passports to the Registrar of the Court, and not to depart Australia for a foreign country without further order of the court (Travel Restriction Orders).
Amendment of Freezing Order made on 11 and 19 July 2017
On 11 July 2017, on an ex parte application by Pier, the primary judge made orders amending the freezing orders against the defendants. Order 11 of each order was removed, meaning that the exception allowing payment of matters including ordinary living expenses and reasonable legal expenses no longer applied.
The primary judge also made orders on 11 and 19 July 2017 requiring agents of Mr and Mrs Durolek to retain rental payments received from their four identified properties located in Western Australia.
Order for payment made on 7 September 2017
A further hearing was held before the primary judge on 7 September 2017. The defendants were represented at that hearing by a Mr S O'Brien. The primary judge made an order requiring the Vendors and Mr Durolek to pay $1.6 million to an account of Pier's solicitors, or alternatively to deliver the 29 gold Lingots referred to in Mr Durolek's affidavit of 20 February 2017 to the Principal Registrar (Payment Order). Mrs Durolek was expressly excluded from the operation of the Payment Order. The time for compliance with the Payment Order expired on 26 September 2017.
The primary judge published written reasons for making the Payment Order.[25] The primary judge referred to Mr Durolek's February affidavit, noting that the transfer of the proceeds of the sale of the business and its purported use to purchase gold was prima facie a breach of the freezing orders.[26] His Honour noted that he had, on 6 April 2017, ordered that Mr Durolek deliver to the Principal Registrar all certificates of ownership of the gold Lingots. A purported certificate of ownership was provided by Mr Hardie, the defendant's solicitor, on 12 April 2017.[27]
[25] Pier (WA) Pty Ltd v Jean Maurice Pty Ltd [2018] WASC 22 (Pier No 1).
[26] Pier No 1 [41].
[27] Pier No 1 [46] - [52].
The primary judge referred to subsequent evidence suggesting that the certificate of ownership was forged, and that Mr and Mrs Durolek had left Australia. The primary judge indicated that evidence as to the possible forgery of the certificate led him to take what his Honour described as the 'very draconian step' of removing the usual living allowance exception from the freezing orders.[28] The primary judge considered a further order requiring payment of the disputed amount or delivery of the gold Lingots to be justified in those circumstances.
Springing order on 28 September 2017
[28] Pier No 1 [53] - [66].
On 28 September 2017, a further hearing took place at which the defendants were represented by a Mr J Smith. The primary judge extended time for compliance with the Payment Order to 4pm on 5 October 2017. The order (Springing Order) also provided that, upon there still being default at that extended time:
(1)all defendants' defences and counterclaims would then be automatically struck out; and
(2)judgment would be automatically entered for Pier against the defendants for damages and statutory compensation to be assessed under subsequent directions of the court.
The primary judge published written reasons for making the Springing Order.[29] His Honour noted that his orders of 7 September 2017 had not been complied with and there was no attempt to explain why the orders were not, or could not be, complied with. He referred to evidence of the forged certificate of ownership of 29 gold Lingots, Mr and Mrs Durolek's departure from Australia in apparent contravention of ancillary orders and evidence of the results of the return of subpoenas issued to banks indicating undisclosed bank accounts. The undisclosed accounts included a Bankwest account in the name of Mrs Durolek.[30] In those circumstances, the primary judge considered a springing order to be appropriate by reference to criteria articulated in this court's decision in Firmware Technologies Inc v Asia Platinum Group Ltd.[31]
Default judgment on 5 October 2017
[29] Pier (WA) Pty Ltd v Jean Maurice Pty Ltd [No 2] [2018] WASC 23 (Pier No 2).
[30] Pier No 2 [16]; [18]; [20]; [24] - [28].
[31] Firmware Technologies Inc v Asia Platinum Group Ltd [2016] WASCA 179; (2016) 50 WAR 453 [44] - [48].
The springing order sprung when there was a failure by the Vendors and Mr Durolek to pay the $1.6 million or deliver the 29 gold Lingots by 4pm on 5 October 2017.
On 10 October 2017, a judgment in favour of Pier against all defendants for damages and statutory compensation to be assessed was extracted.
Refusal of extension of time to comply with springing order on 16 January 2018
On 16 January 2018, the primary judge considered what was, in effect, the defendants' application for an extension of time in which to comply with the Springing Order. The primary judge published written reasons for refusing the application.[32] In the course of recounting the history of the matter, the primary judge observed:
My springing orders extended to all the defendants. That followed in circumstances where there was evidence before me at 28 September 2017 through Ms Pendlebury's affidavit of a bank account of [Mrs Durolek] which should have been disclosed, but which had not been disclosed in accord with prior asset disclosure orders that I had made against all defendants. [6]
[32] Pier (WA) Pty Ltd v Jean Maurice Pty Ltd [No 3] [2018] WASC 24.
Later, the primary judge observed:
[The Springing Order] also took effect deliberately not only against [Jean Maurice, Sancho Bakery and Mr Durolek] but also against [Mrs Durolek].
That was by a reason of further events I related in [Pier No 2] concerning [Mrs Durolek's] non-compliance with my earlier asset disclosure orders concerning an undisclosed bank account of hers but which came to light. [42] - [43]
The primary judge declined to extend time in circumstances where the Vendors and Mr Durolek did not propose to comply with the orders and there was no explanation of what became of the proceeds of the sale of the businesses.
Judgment after trial
An assessment of damages hearing took place in May 2018. On 2 July 2018, the primary judge assessed damages for Pier against all defendants in the amount of $1,208,970.32 inclusive of interest. The freezing orders and Travel Restriction Orders were to continue until further order or the payment in full of the judgment debts, interest and costs. Pier No 6 contains the primary judge's reasons for assessing damages in that amount. Judgment of that date has been extracted.
These proceedings
On 17 August 2018, Mrs Durolek filed an appeal notice against the judgment entered on 2 July 2018. The appeal notice noted that the last day for appealing was 23 July 2018 and an extension of time in which to appeal was required.
Also on 17 August 2018, Mrs Durolek filed an application in the appeal relevantly seeking a suspension order suspending enforcement of judgment against her until the determination of the appeal. Submissions advanced on her behalf indicated that a limited order was sought in the following terms:
Enforcement of the judgment appealed against is suspended as against [Mrs Durolek] until determination of this appeal, except in relation to any interest held by [Mrs Durolek] in [the West Sussex properties].
On 20 September 2018, Mrs Durolek filed her appellant's case in the appeal. There are two grounds of appeal.
Ground 1 contends that the primary judge erred in law in determining that it was just to make the Springing Order against Mrs Durolek. It is contended that the primary judge's exercise of discretion was unreasonable and unjust in circumstances where:
(a)the execution of the Springing Order prevented Mrs Durolek from advancing her substantive arguments as a defendant in the primary proceedings, being arguments that were unrelated to the subject matter of the Springing Order.
(b)The Springing Order was to be executed upon default in compliance with an ancillary order which was not made against Mrs Durolek and with which Mrs Durolek was not obliged to comply.
(c)Mrs Durolek did not receive notice of the proposed Springing Order and did not have a reasonable opportunity to respond to the material presented in support of the application of the springing order.
Ground 2 contends that the primary judge erred in law and fact in making the Freezing Order as against Mrs Durolek, in that his Honour:
(a)failed to make any finding that Pier had a good arguable case against Mrs Durolek; and
(b)could not have made any such finding on the evidence presented to the court.
Evidence on the application for a suspension order
In support of her application for a suspension order, Mrs Durolek relies on two affidavits sworn by her on 16 August 2018 and 17 August 2018. Pier relies on the affidavit of Kirk Anthony Dundo sworn on 13 September 2018.
In general terms, Mrs Durolek claims ignorance about the business dealings of the Vendors and about the primary proceedings, which she says were handled by Mr Durolek.
Mrs Durolek deposed that she and Mr Durolek left Australia on 20 June 2017 and went to Thailand.[33] This was 5 days after the order requiring Mr and Mrs Durolek to hand over their passports, and 6 days prior to the date on which the Travel Restriction Orders were made. They then travelled to England. Mr Durolek left England for France on 22 September 2017.[34] Mrs Durolek says that she found out about the Springing Order after she arrived in France on 3 October 2017.[35] She says that, by the time she found out about the Springing Order, the other party had got its judgment. Mrs Durolek says that she returned to Australia on 9 April 2018, and surrendered her passport the following day.[36]
[33] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 24.
[34] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 28.
[35] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 29.
[36] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 40 and 41.
Mrs Durolek deposes as to her belief that she had a good defence to Pier's action as she did not play any role in the sale of the businesses and did not say anything at all to the buyer or agent. She says that she did not get the chance to put this defence to the court because of the Springing Order.[37]
[37] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 48.
Mrs Durolek also gives evidence as to her current assets. The position in relation to the Kallaroo and Mandurah properties is unaltered, save that the aggregate estimated value of the properties is now between $3.01 million and $3.15 million. The amount owed under the NAB facility as at 16 August 2018 is $3,059,977.97.[38]
[38] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 59.
Mrs Durolek says that the Hillarys apartment is the home of her parents. She says that she bought it with funds provided by her parents, by way of loan, when they were planning to migrate to Australia. This evidence is to be contrasted with paragraph 6 of her affidavit of 24 April 2017, referred to at [14] above, which referred to rent from the Hillarys apartment being paid to her mother. Mrs Durolek gives evidence that the estimated value of the Hillarys apartment is $310,000 and the amount owed to her parents, secured by mortgage, is still $376,260.[39]
[39] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 62 - 65.
Mrs Durolek also deposes that she and Mr Durolek are owners of the following overseas properties:[40]
(1)six flats in West Sussex valued at £900,000 and encumbered by a mortgage in the amount of £747,500; and
(2)a property in France with an estimated value of €170,000, encumbered by a mortgage to a financial institution in the amount of €145,000.
[40] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 66 - 70.
The title documents annexed to Mrs Durolek's affidavit of 16 August 2018 indicated that the West Sussex properties were acquired on 30 November 2016.[41] Paragraph 79 of that affidavit concedes that those properties were purchased using the proceeds of the sale of the businesses to Pier. The copy of the certificate of title for the property in France is in French, but appears to be a certificate issued by a notary on 3 February 2003.[42] This indicates that Mr and Mrs Durolek have owned the property in France since that time.
[41] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, annexure BD9.
[42] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, annexure BD12.
The failure of Mrs Durolek to disclose the existence of these overseas properties in her affidavit sworn on 20 February 2017 in the primary proceedings would appear, prima facie, to constitute a failure to comply with the ancillary order made on 19 January 2017 in a significant respect.
What Mrs Durolek describes as a mortgage of the West Sussex flats is an approval in principle of a loan facility of £747,500 by 'Bridging Funding' dated 14 November 2017.[43] This indicates that a mortgage must have been granted after that date, which would be in contravention of the Freezing Order.
[43] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, annexure BD11.
Mrs Durolek also deposes as to the ownership of two vehicles with a total estimated value of $21,500, a balance of about $80,000 in Mr and Mrs Durolek's superannuation, bank accounts with small positive balances, an unknown amount of frozen funds in property management accounts and personal effects valued at approximately $20,000.[44]
[44] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 71 - 76.
Mrs Durolek says that:[45]
I fear that unless I am able to obtain a stay, my home and my parents' home may be sold before my appeal can be determined. This would not be of any significant advantage to [Pier] as there is virtually no equity in the properties in Western Australia. However, it would mean that my parents and I would lose our homes. I am not able to pay rent because of the freezing orders.
…
Unless the freezing orders are lifted, I am not even supposed to pay living expenses or the legal fees for my appeal.
[45] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 78, 80.
Pier relies on the affidavit of Kirk Anthony Dundo sworn on 13 September 2018, which annexes various documents in the primary proceedings.
General principles on a suspension order application
Section 15(1) of the Civil Judgments Enforcement Act 2004 (WA) provides for a person against whom a judgment is given to apply for an order suspending the enforcement of all or part of the judgment to the court that is dealing with an appeal against that judgment. Under s 15(3), on such an application, the court may only make such an order if there are 'special circumstances that justify doing so'. Section 15(4) provides that a suspension order may be made for any period and may be made on terms as to costs or otherwise.
The general principles governing the grant of a stay or suspension order by this court pending an appeal are not in dispute, and were summarised by the court in Eastland Technology Australia Pty Ltd v Whisson,[46] in the following terms:
• The successful litigant at first instance will ordinarily be entitled to enforce the judgment pending the determination of any appeal.
• It is for the applicant for a stay to move the court to a favourable exercise of its discretion.
• It will not do so unless special circumstances are shown justifying the departure from the ordinary rule.
• The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation, or where refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. It is often put shortly that it will first and foremost be necessary to establish that without the grant of a stay, the right of appeal, whether upon the grant of leave or special leave or not, will be rendered nugatory.
• If that can be demonstrated, the stay will generally still be refused unless it can be established that the appeal process, whether upon the grant of leave or special leave or not, has ultimately reasonable prospects of success so as to result in the grant of relief to the appellant.
• If that hurdle can be overcome, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant; where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted.
[46] Eastland Technology Australia Pty Ltd v Whisson [2003] WASCA 307; (2003) 28 WAR 308 [9].
Evidentiary matters
On its face, the evidence before this court indicates that Mrs Durolek has contravened the Freezing Order and ancillary orders by:
(1)Acquiring an interest in the West Sussex properties on 30 November 2016, in circumstances where they were acquired using the proceeds of the sale of the businesses, in contravention of the Freezing Order.
(2)Failing to disclose the existence of a Bankwest account or the overseas properties jointly owned by her and Mr Durolek in her affidavit of 20 February 2017, in contravention of the ancillary order made by the primary judge on 19 January 2017.
(3)Mortgaging the West Sussex properties on or after 14 November 2017 to Bridging Funding, in contravention of the Freezing Order.
(4)Mortgaging the West Sussex properties to Sigma 8 Ltd, a company incorporated in the Cayman Islands, in April 2018, in contravention of the Freezing Order.[47]
(5)Failing to surrender her passport, in contravention of the ancillary order made on 15 June 2017, and departing Australia from 20 June 2017 to 9 April 2018.
[47] Affidavit of Leith David Ayres affirmed 28 May 2018 in the primary proceedings (annexure KXD6 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal).
There are also inconsistencies between:
(1) Mrs Durolek's statement in her recent affidavits that she 'found out about the gold' only in August 2017,[48] and the statement in her affidavit of 24 April 2017 that she had read Mr Durolek's affidavit of 20 February 2017 which referred to the gold.[49]
(2)Mrs Durolek's statement in her recent affidavits that the Hillarys apartment is her parents' home and the statement in her affidavit of 24 April 2017 that rent from the Hillarys apartment was paid to her mother to 'service the Hillarys Mortgage'. The latter statement was itself inconsistent with the statement in her affidavits of 20 February 2017 and 16 August 2018 that she had made no repayment of the loan from her parents.
[48] Affidavit of Belinda Durolek sworn 16 August 2018 in the appeal, par 23; Affidavit of Belinda Durolek sworn 17 August 2018 in the appeal, par 23.
[49] Affidavit of Belinda Durolek sworn 24 April 2017 in the primary proceedings (annexure KXD5 to the affidavit of Kirk Anthony Dundo sworn 13 September 2018 in the appeal), par 5.
There are aspects of Mrs Durolek's financial position which remain unexplained. There is no explanation as to how interest payments have been made on the NAB facility. There is reference to a family trust, and to Mrs Durolek holding a beneficial interest in the assets of that trust, but no evidence as to its terms or assets. There is no explanation as to the sources of Mrs Durolek's income. Mrs Durolek did not disclose the mortgage to Sigma 8 Ltd in her affidavits in support of the application for a suspension order.
Disposition of suspension order application
I am not satisfied that the appeal will be rendered nugatory, in the usual sense in which that term is used, if a suspension order is not granted. None of the properties that I have referred to are the subject matter of the litigation. The refusal of a suspension order would not create any practical difficulties for the relief that might be granted on appeal. If Mrs Durolek is successful, the court could order that the judgment be set aside and any amounts of the judgment debt recovered by Pier be repaid to Mrs Durolek. There is no suggestion in the evidence or Mrs Durolek's submissions that Pier would not have the capacity to make any repayment required by such an order. An appeal is not ordinarily rendered nugatory merely by the prospect that the enforcement of a judgment debt might be by way of sale of the debtor's real property, the monetary value of which is ascertainable and can be the subject of a restitutionary order if the appeal succeeds. Some other feature is ordinarily required.[50]
[50] See, for example, Currie v Currie [2018] WASCA 30 [54].
The above would ordinarily be sufficient to dispose of the application. Further, the issues concerning Mrs Durolek's evidence, noted above, make it difficult to accept that Mrs Durolek has made full disclosure of her financial resources. There has been no disclosure of the financial resources of Mrs Durolek's parents, who in any event have a mortgage registered over Mrs Durolek's interest in the Hillarys apartment. In conjunction with Mrs Durolek's repeated contravention of orders made by the primary judge, this counts against this court's exercise of discretion in her favour.
However, there are unusual features of the Springing Order and the Freezing Order which, considered in combination, give rise to special circumstances which justify a suspension order that is limited to precluding the enforcement of the judgment debt against Mrs Durolek's interest in her Mandurah residence.
First, at this preliminary stage, it appears to me that the argument in favour of grounds 1(a) and (b), referred to at [33] above, is relatively strong. It is an unusual step to make a springing order in default of compliance with a freezing order or ancillary order, when that default does not impact on the court's capacity to fairly resolve the substantive dispute in the action.[51] It is more unusual to enter judgment against one person by reason of the default of another party whose actions the first person does not control. That was the effect of the Springing Order to the extent that it provided for judgment to be entered against Mrs Durolek if the other defendants did not comply with the order. Mrs Durolek's past failure to disclose the existence of a bank account, to which the primary judge referred, is not an obvious justification for such an order. It is reasonably arguable that if the primary judge erred in making the Springing Order, this would infect the subsequent final judgment entered after damages were assessed, and that it was not necessary for Mrs Durolek to lodge a separate appeal against the Springing Order.
[51] See Firmware [46].
Secondly, the Freezing Order, which continues to apply to Mrs Durolek until payment of the judgment debt, prevents her from paying her ordinary living expenses unless the unencumbered value of her assets exceeds $2 million. The evidence before the court indicates that the unencumbered value of Mrs Durolek's assets falls well below $2 million. Consequently, irrespective of her means, if Mrs Durolek is unable to remain in her Mandurah residence, she will be unable to lawfully pay for alternative accommodation. The Travel Restriction Orders require Mrs Durolek to remain in Australia, but the continued operation of the Freezing Order may mean that she has no place other than her Mandurah residence where she can lawfully live. If judgment is executed against Mrs Durolek's Mandurah residence, she may be required to leave that residence in circumstances where the Freezing Order deprives her of the capacity to lawfully pay for alternative accommodation. That prospect in turn gives rise to the risk that it will not be possible to restore Mrs Durolek to her former position if judgment is executed against her residence and the appeal succeeds.[52]
[52] See Hamersley Iron Pty Ltd v Lovell (No 2) (1998) 20 WAR 79, 89.
I also take into account that, based on the material before me, the combined value of the Mandurah and Kallaroo properties is unlikely to significantly exceed the outstanding balance of the NAB facility, against which those properties are secured. On the evidence, there is unlikely to be any practical prejudice to Pier if a limited suspension order is granted, as executing judgment against Mrs Durolek's residence seems unlikely to satisfy the judgment debt to any significant extent, given the evidence as to her limited equity in those properties.
In my view, the special circumstances described above, viewed in combination, justify a limited suspension of enforcement of the judgment debt in relation to Mrs Durolek's interest in her Mandurah residence. This is so notwithstanding the unsatisfactory features of the evidence presented by Mrs Durolek and her contraventions of the Freezing Order and ancillary orders.
For the above reasons I made the order referred to at [1] above. I was not otherwise satisfied that grounds for suspending enforcement of the judgment debt were established. In all the circumstances, I was not satisfied that any conditions should be imposed on the grant of that limited suspension order.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ET
RESEARCH ASSOCIATE/ORDERLY TO THE HONOURABLE JUSTICE MITCHELL23 OCTOBER 2018
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