Ettridge v Ozyjiwsky (No 2) - [2013] SADC 86

District Court of South Australia

(Civil)

ETTRIDGE v OZYJIWSKY (No 2)

[2013] SADC 86

Ruling of His Honour Judge Slattery (ex tempore)

20 September 2012

PROCEDURE - JUDGMENTS AND ORDERS

The plaintiff brought an interlocutory application against the defendant, seeking orders that the defendant withdraws the sum of $100,000 from a particular “trading account” and pay same into the Suitors’ Fund. The plaintiff also made an application that the defendant be restrained from using funds in the said “trading account” in relation to trading on a foreign exchange market.
The application came before a Judge of the Court on 6 June 2012 and an interim order was made restraining the defendant from using the said trading account until further order.
After further affidavits were filed by the plaintiff and his solicitor in the Court, the application again came before a Judge of the Court who ordered, inter alia, that the order for injunction (as to trading with the said account) continue until close of business 21 June 2012. There were subsequent appearances in this Court where the order with injunction in regards to the trading account was extended. An order was made for an early trial.
The matter came on for trial directions before a Master on 3 September 2012 when it was revealed that the defendant had, on 6 June 2012, emptied the said trading account and paid the funds to a secured creditor that held a registered mortgage over his home property.
Following a further interlocutory application made by the plaintiff dated 17 September 2012 that was heard by a Master of the Court on 18 September 2012, orders were made that, inter alia, the defendant pay $90,000 into the District Court Suitors’ Fund.
The defendant appellant appeals against the Orders of the Master entered on 18 September 2012.
Held: appeal dismissed.
District Court Civil Rules 2006 Rule 17 , referred to.
American Cyanamid v Ethicon (1975) AC 396 , applied.
McLean v the DID Piling Pty Ltd (2010) SASC 33; Beare v Light Regional Council (2008) SADC 72; ABC v O’Neill [2006] HCA 46 , considered.

ETTRIDGE v OZYJIWSKY (No 2)
[2013] SADC 86

HIS HONOUR: Appeal made pursuant to Rule 17 of the District Court Rules under which an appeal lies of right from a judgment of a Master of the Court.
The relevant principles in relation to the appeal before me are now well understood.
The appeal is by way of a rehearing on the documents considered at first instance and I have the power to receive further evidence which is to be considered in light of the material before the court at the time that it hears the appeal.
The appeal is a complete rehearing on the merits with a need to identify some error of the Master before I may allow the appeal.
I note the difference between the approach to the task before me that may be identified in the decision of Layton J in McLean v the DID Piling Pty Ltd (2010) SASC 33 and the decision of Judge Tilmouth of this Court in Beare v Light Regional Council (2008) SADC 72.
I will deal with this matter consistent with the approach set out by Justice Layton in her Honour’s decision in McLean v DID Piling Pty Ltd.
The background to the matter is as follows:
In a specially returnable interlocutory application dated 1 June 2012 [FDN4] brought by the plaintiff against the defendant, the plaintiff sought orders that the defendant withdraw the sum of $100,000 from a particular account called Velocity Trading Account ID:2010336 held by Velocity Trade Ltd and that this amount be paid into the suitors’ fund.
The alternative claim under the interlocutory application was that the defendant be restrained and an injunction be granted restraining the defendant from withdrawing funds held to his credit in that same account.
The application was supported by affidavits of David Warwick Fidler sworn 1 June 2012, solicitor and the plaintiff Trevor James Ettridge sworn 30 May 2012.
The gravamen of the plaintiff’s claim was that an arrangement was entered into between the plaintiff and the defendant in relation to foreign exchange trading. As a result of that arrangement a common fund was established to be used in the trading.
The terms of the fund and the ownership of the money in the fund is the subject of dispute. The plaintiff claims that the fund and the use of the fund is governed, insofar as the plaintiff has contributed to the fund, by a Private Loan Agreement which is Exhibit TJE3 to the affidavit of Mr Ettridge sworn 1 June 2012 FDN3.
The defendant’s position is that notwithstanding the existence of the document called the Private Loan Agreement, the arrangement between the parties is far more than merely a loan agreement; it is in the nature of a joint venture agreement and that the plaintiff carries the benefit and burden of the trading within the account using the funds provided by him to the defendant.
The matter came on for hearing of the interlocutory application before his Honour Judge Barrett on 6 June 2012. His Honour made the following interim orders:
“1. Until further order the defendant is restrained from continuing to undertake any form of trading using his account with the entity Velocity Trade, more particularly described as an account ID:2011066.”
His Honour reserved costs and adjourned the application for further hearing as to whether the interim order should be made interlocutory on 8 June 2012.
Although not specifically identified in the transcript, I have assumed that the plaintiff applicant gave the usual undertaking as to damages.
I have had regard to the transcript of the hearing before Judge Barrett on 6 June 2012. In particular, his Honour was informed by the defendant that if an order, in the nature of the actual order made, was brought into effect, then it would adversely affect the trading that he was doing in the account and that he would suffer detriment.
His Honour took all of those matters into account in making the interim order. The matter was then brought back before the court for further hearing as to whether the interim order should be made interlocutory on 8 June 2012.
A Mr Stathopoulos of counsel purported to appear as amicus curiae at that hearing. It is entirely unclear to me on what basis Mr Stathopoulos could appear amicus curiae without the invitation of the court, but it is not a matter that is pertinent. The issue is that on that occasion the plaintiff again pressed the court to make orders for the preservation of funds within the Velocity Trading Account by the prevention of any further trading on that account. On that occasion the defendant again informed the court that detriment would be suffered. It is implicit at least that the assumption was made by the court that the corpus of the fund was preserved in the Velocity Trading Account.
By that time the court had before it further affidavits of Trevor James Ettridge sworn 7 June 2012 FDN5 and David Warwick Fidler sworn 8 June 2012 FDN6.
I have read the transcript of the hearing before Judge Barrett on 8 June 2012.
His Honour was prepared to extend the injunction and made orders as follows:-
“1. The defendant file and serve any documents in reply as it is minded to do by the close of business on Friday, 15 June 2012.
2. Adjourn the hearing to 11.30 am on Thursday, 21 June 2012.
3. An order for the continuation of the injunction until close of business on 21 June 2012.”
The matter came before the court on 21 June 2012 before Judge Brebner.
On that occasion his Honour made orders for the continuation of the injunction and for the matter to proceed to an early hearing.
By that time Judge Brebner had before him all of the affidavit material that I have already identified as well as an affidavit of the defendant sworn 15 June 2012 FDN7.
On 21 June 2012 Judge Brebner heard further argument as to whether or not the orders of the injunction ought to be maintained. At that time the defendant was represented by Mr Stathopoulos.
At page 4 of the transcript from line 2, Mr Stathopoulos informed the court that the defendant would not oppose the continuation of the current interim injunction until the matter is listed for argument and heard and determined on an interlocutory basis.
The same arguments that I have already adumbrated about the defendant’s position were put by Mr Stathopoulos concerning the true nature of the so-called loan agreement. The matter was adjourned to 18 July 2012 for further argument and the interim orders were extended until that time.
On 18 July 2012 Mr Ozyjiwsky appeared again in person. His Honour Judge Brebner heard further argument in relation to the continuation of the injunction and his Honour, at page 4 of the transcript, decided that he would adjourn further consideration of submissions for a week and informed Mr Anderson of counsel for the plaintiff that he would make inquiries about when the matter might be listed for early trial. In particular, and I identify the following at lines 11, 12 and 13 of p.4 of the transcript, his Honour said this to Mr Ozyjiwsky: ‘In the meantime you understand that you are not allowed to trade on the Velocity Trading Account.’ The defendant responded at line 14: ‘I ceased doing that some time ago.’ At line 15 his Honour informed Mr Ozyjiwsky that if he did trade he would be in contempt of court and Mr Ozyjiwsky said that he understood that fully. On that basis his Honour adjourned the application for further consideration until 25 July 2012 at 2.15pm.
There was a short appearance before the court on 25 July 2012 at 2.15pm and the court made orders for the listing of the trial for 20 September 2012 and that the matter be placed in the Master’s list. There was no order made varying the injunction that had been earlier made by Judge Barrett. Therefore, the order of Judge Barrett, which had not been amended since 6 June 2012, was the extant order which was extended on an interlocutory basis.
By the time that those orders were made, the court had also received the affidavit of Nicola Dichiera sworn 28 June 2012, FDN9, and the affidavit of Trevor John Ettridge sworn 29 June 2012, FDN10.
For reasons which are not clear, the matter was not referred directly into the Master’s list on 25 July 2012 and, in fact, the matter did not come before the Master until 3 September 2012. At that time the court orders were still extant; that is, that the matter should be listed for trial today.
Although I do not have the transcript, it is plain that there was an appearance before Master Rice of this Court on 3 September 2012. The record of outcome before the Master on that day reads as follows:
“1. In this matter the FDN material before FDN 6 is not on the file, nor is the order made 6 June 2012 by Judge Barrett.
2. Judge Brebner on 26 July 2012 directed that this matter proceed to trial on 20 September 2012 for two to three days.
3. Today’s hearing date was set by the court following Judge Brebner’s direction. I do not know why the matter was not brought on urgently.
4. Plaintiff to file and serve statement of claim by Friday, 7 September 2012.
5. Defendant to file and serve a defence by Friday, 14 September 2012.
6. Mutual disclosure by Monday 17 September 2012.
7. Inspection to be completed by 18 September 2012.
8. Plaintiff to file and serve trial book by Monday, 17 September 2012.
9. In the circumstances, I cannot direct the parties to execute a certificate of readiness bearing in mind the orders made today.”
Two other orders were made which are not pertinent.
Notwithstanding the absence of any note made by the Master in the Record of Outcome, plainly there was an exchange between the Master and the parties concerning the state of the Velocity Trading Account.
By that time, that is by 3 September 2012, the true position was that the defendant had emptied the Velocity Trading Account of the relevant money, the subject of this action, and had paid it through his agent, Home Loans Ltd, to the secured creditor over his home, Perpetual Trustees Ltd, in reduction of a liability that was owed by the defendant, together with his wife, on a home equity loan arrangement with that financier. Mr Ozyjiwsky informed me today that the funds were removed from that account on about 6 June 2012, the date of the first hearing on the injunction application before Judge Barrett. Nothing of this was said to the court on any occasion that matter was before the court prior to today. That much is admitted to me today by Mr Ozyjiwsky.
The matter returned to the Master on 18 September 2012. At that time the Master had before him an interlocutory application brought by the plaintiff, together with an affidavit of Mr Fidler in support, being an affidavit sworn 17 September 2012, FDN13.
The interlocutory application sought the following orders:
“1. That this application be listed specially returnable.
2. That the funds held to the credit of the defendant in Velocity Trading Account ID 2010336 by Velocity Trade Ltd up to a maximum amount of $100,000 be withdrawn and this sum paid into the suitors fund.
3. That the defendant file and serve a defence, by the defendant’s solicitors, on or before Wednesday, 19 September 2012 at 4 pm
4. That the time for the filing of the trial book be extended to midday on 19 September 2012.”
Orders 5 and 6 are not pertinent here.

The affidavit of Mr Fidler of 17 September 2012 recited the history of the matter, including solicitors who may have acted for the defendant from time to time. The gravamen of the matter was as set out in paras.17 and following of the affidavit of Mr Fidler where he identified to the court that a statement of claim had been served upon the defendant but had been returned marked ‘Return to sender’.
The inference arising from the material in the affidavit of Mr Fidler filed in support of the application was that the defendant was deliberately refusing to comply with court orders. Whether that is so is not a matter that I need to decide here today.
The application was also supported by a further affidavit of Mr Fidler of 17 September 2012 which again identified for a second time the failure by the defendant to behave responsibly in relation to the material being sent to him that had been filed in this Court and which was being delivered pursuant to the court orders.
The interlocutory application FDN15 brought by the plaintiff was heard by Master Rice in the court on 18 September 2012.[1] By that time no defence had been filed by the defendant. Master Rice identified in para.2 of his reasons that the defendant had produced today (18 September 2012) a document called ‘Submissions’ (of the defendant) which the Master treated as a defence. It is marked FDN16.
[1] 6R 14(4); s20 District Court Act (s20(1)(b)); s8 District Court Act
The Master discloses that in his view it adequately tells the story which the defendant wishes to raise. That story is the question of whether or not the arrangements between the plaintiff and the defendant were a private loan agreement or, alternatively, were in the form of a joint venture where both participants were taking the risks of the burden, or benefit, of trading on the foreign exchange market. That is plainly the prima facie case which the plaintiff must establish and which the defendant refutes.
The Master then goes on to make some further directions in relation to the trial but at para.4 the Master reports as follows, and I quote:
“4. At the hearing on 3 September 2012 the defendant said to me that he had left $90,000 in the broker’s Velocity Trade Account; that is, it was still in that account. Now he says that is incorrect. That was the case some time ago but on 6 June 2012 Judge Barrett made an order restraining the defendant from undertaking any form of trade on the Velocity Trade Account.” (My emphasis).
The importance of this statement by the Master is that on 3 September 2012 the defendant informed the court of a fact which was incorrect. The $90,000 in the broker’s Velocity Trading Account was not in that account that day, nor had it been there since at least on or about 6 June 2012, the date upon which the matter was first heard by Judge Barrett.
The transcript of today will disclose, and this information I am able to accept into evidence under the relevant principles that I have enunciated in these reasons, that the defendant informed the court that immediately upon the order being made by Judge Barrett on 6 June 2012, the defendant withdrew the funds from the Velocity Trading Account and paid them through his broker, Home Loans limited, to Perpetual Trustees Ltd in reduction of the home equity debit under the mortgage over his home.
On 3 September 2012 the Master was not informed of the correct position, similar to Judge Barrett and Judge Brebner. It is not for me to decide whether or not there was a deliberate lie told to the court on 3 September 2012. All that is necessary for me to decide is that on that day, namely 3 September 2012, the defendant misrepresented the position to the court.
The Master goes on to record the fact that the defendant took the money out of the Velocity Trading Account and put it into his own account. (See para.5 of the Master’s reasons). Again, this is not correct. The money has not been put into an account belonging to the defendant; rather, the money has been paid into a debit account of the defendant with the financier. That is, the fund does not exist as a fund; rather, it exists only in the form of a credit to a trading account.
Later in the reasons (para.7) the Master addressed the question whether the funds which would be used to pay a judgment should be preserved and, if so, the best way of preserving them. The Master identified that he, like me, does not know the defendant’s account number. The Master reported he did not know the precise amount in the account, save that the defendant believes that there is an amount of about $120,000 in this particular bank account which he uses for ensuring that his mortgage over the Northfield property is paid (para.8 of the Master’s reasons). That is a further time that the defendant has not made a frank disclosure to the court of the position. The defendant has informed me today that there is no money in any particular bank account anywhere but rather the money that did exist was taken out of the Velocity Trading account, paid to the relevant bank and thereby he has obviated an interest liability upon the relevant debit in the equity trading account (being reduced so thereby reducing the interest amount).
There is nothing in the equity savings account which would approximate a fund of $120,000.
I am, therefore, able to identify that on a number of occasions the defendant has failed to inform the court of the true position in relation to the fund. I have asked the defendant today to identify to me the account number. He said that he did not know the account number, that he did not know the account name and all that he knew was a company called Home Loans Ltd. and Perpetual Trustees Ltd., being the financier, would have the details.
It is not necessary for me to make any decision about what has been put to me by the defendant in that respect. All that is necessary for me to do is to decide whether a prima facie case has been made out by the plaintiff for the purposes of making of the order that the Master has made and whether the balance of convenience falls in favour of the making or not of that order.
Bearing in mind this matter is by way of a rehearing, I approach the matter on the basis that it comes to me de novo in the context of whether or not I would grant an injunction on the application of the plaintiff in respect of these claims. That, of course, is to an extent a misnomer because there is only the capacity of the defendant to draw down on an account. I have questioned the defendant at length in relation to the matter and he has informed me that he has the capacity to draw down on the account. He says that he would need 48 hours to do so. I am satisfied that there is a credit available to the defendant to enable him to draw down if I am otherwise inclined to make the orders. He proffered no explanation about why he did not comply with the order of the Master.

In respect of the question of prima facie case, the matter is finely balanced. In my view, it will be for the plaintiff to convince me, in evidence, in relation to whether or not the arrangement that is proposed and reflected on the face of the so-called loan agreement, was in fact a loan arrangement or, as the defendant contends, some other arrangement.
Having regard to those comments, it is then necessary to look to the balance of convenience.
In my view, on the material that I have read and which I have described above, I have no doubt that a prima facie case is made out by the plaintiff. That derives from my reading of the affidavit material and the existence of as well as the actual terms of the agreement itself. In my view, it would not be until such time as all the evidence is heard in relation to the matter that a final decision can be made about that. However, in the context of the matter before me and the exercise of my discretion, and having regard to the relevant principles (ABC v O’Neill [2006] HCA 46 at [68]-[72]) I am satisfied that a prima facie case exists because the parties have committed their signatures to an agreement in writing that records a loan from the plaintiff to the defendant that is due and payable under its terms.
I then turn my attention to the question of the balance of convenience.
Notwithstanding the High Court’s decision in ABC v O’Neill, the relevant dictum of Lord Diplock in American Cyanamid v Ethicon (1975) AC 396 at 408-409 remains pertinent.
“As to that, the governing principle is that the court should first consider whether, if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction, he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff's undertaking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.
It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.
Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark upon a course of action which he has not previously found it necessary to undertake; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.
Save in the simplest cases, the decision to grant or to refuse an interlocutory injunction will cause to whichever party is unsuccessful on the application some disadvantages which his ultimate success at the trial may show he ought to have been spared and the disadvantages may be such that the recovery of damages to which he would then be entitled either in the action or under the plaintiff's undertaking would not be sufficient to compensate him fully for all of them. The extent to which the disadvantages to each party would be incapable of being compensated in damages in the event of his succeeding at the trial is always a significant factor in assessing where the balance of convenience lies, and if the extent of the uncompensatable disadvantage to each party would not differ widely, it may not be improper to take into account in tipping the balance the relative strength of each party's case as revealed by the affidavit evidence adduced on the hearing of the application. This, however, should be done only where it is apparent upon the facts disclosed by evidence as to which there is no credible dispute that the strength of one party's case is disproportionate to that of the other party. The court is not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the strength of either party's case.
I would reiterate that, in addition to those to which I have referred, there may be many other special factors to be taken into consideration in the particular circumstances of individual cases. The instant appeal affords one example of this.”
The question of the determination of the balance of convenience carries with it an assessment first of whether damages would be an adequate remedy. That question requires the court to address a two-fold issue (properly called ‘cross undertaking as to damages’). Such an assessment requires an answer to the question whether the defendant would be properly compensated in damages should the plaintiff give an undertaking to pay them or whether the plaintiff would be satisfied or would be properly protected by an undertaking as to damages, should the defendant give it.
For all of the reasons that I have given, in my view, the balance of convenience falls plainly in favour of the plaintiff. The reasons are as follows.
The defendant’s capacity is only to draw down on a credit allegedly held in a fund in a home equity loan arrangement. There is no fund that requires protection and, on one view, the whole of the substance of the proceedings has been dissipated.
The second is that the defendant complains about trading losses but there is no detail in relation to them and I have not received any suggestion from the defendant that he would not be protected by an undertaking as to damages from the plaintiff.
The third is that the material that has been disclosed to me today gives me significant pause as to whether or not full and proper disclosure has been made by the defendant to the court in relation to the matters that were the subject of the proceedings before the court. It is not necessary for me to decide anything more than that. I am satisfied that the defendant has not been completely frank in the description of what the position is having regard to the material filed before the court.
I have emphasised previously that on each occasion that the matter has been before the court, namely before Judge Barrett, Judge Brebner and the Master, it has identified to Mr Ozyjiwsky that he was prevented from trading in the account. The terms of the order made by Judge Barrett restrained the defendant from undertaking any form of trading.
The word ‘trading’ is a generic form of expression. A submission was put by Mr Anderson, with which I agree, that ‘trading’ will include taking money from the account for use for any purpose that is commercial or carries with it some commercial aspect. In my view, having regard to the questions before me, namely prima facie case and balance of convenience, the use by Mr Ozyjiwsky of the funds arguably forms a transaction which would be understood as ‘trading’. However, it is not necessary for me to decide that issue in this proceeding. I am required to decide where the balance of convenience falls, having found that there is a prima facie case made by the plaintiff.
My view about that is informed by all of the material that I have seen and all of the information that I have received this morning. That information indicates to me that in the current circumstances, the balance of convenience falls in favour of the plaintiff.
I have received information this morning from Mr Ozyjiwsky that he can draw down on his account with the Perpetual Trustees Ltd and that he will be able to provide the $90,000 within 48 hours. My order today is to ensure that that occurs and I am inclined to vary the order of the Master so that the $90,000 should be paid into the suitors fund of the court by no later than 4 pm on Tuesday next, 25 September 2012.
In those circumstances, it is my decision to dismiss the appeal of the defendant against the orders made by Master Rice on 18 September 2012. In my view, it is regrettable that the orders were not drawn up by the plaintiff’s advisors and sealed and that the matter proceeded without the drawing up of formal orders. In my view, the parties should remain fully informed in writing of the court orders and so that there can be no doubt as to the obligations upon the parties. Notwithstanding, I am satisfied, having regard to my perusal of the transcript on each of the occasions the matter was before the court, that the court went to great lengths to ensure that the defendant understood the obligations upon him.
Therefore, upon the continuation of the plaintiff’s undertaking as to damages, my formal orders today are:
1. I dismiss the defendant’s appeal;
2. I order costs of this appeal in favour of the plaintiff;
3. The plaintiff is to draw and have sealed and serve upon the defendant orders reflecting the orders of the court made today, including that the orders made by Master Rice on 18 September 2012 be varied so that the time within which the defendant is required to pay $90,000 into the District Court suitors fund is extended until 4:00pm on Tuesday 25 September 2012;
4.Liberty to any party to apply on short notice to the chambers of Judge Slattery.