Foottit v No Moo Pty Ltd
[2022] VSC 157
•30 March 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2021 02695
| WAYNE FOOTTIT | First plaintiff |
| ALIDA FOOTTIT | Second plaintiff |
| v | |
| NO MOO PTY LTD (ACN 623 955 831) | First defendant |
| NIKI FLOROPOULOS | Second defendant |
| BILL FLOROPOULOS | Third defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 February 2022 |
DATE OF JUDGMENT: | 30 March 2022 |
CASE MAY BE CITED AS: | Foottit & Anor v No Moo Pty Ltd & Ors |
MEDIUM NEUTRAL CITATION: | [2022] VSC 157 |
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PRACTICE AND PROCEDURE – Settlement of proceedings – Application for orders enforcing deed of settlement – Whether deed of settlement enforceable – Where settlement deed alleged to have been entered into under undue influence – Where Plaintiffs had no actual or constructive notice of the facts giving rise to the alleged undue influence – Deed of settlement enforceable.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Ms V Bell | Duxton Hill |
| For the First and Second defendants | Mr J Ribbands | Melbourne Legal Chambers |
| For the Third defendant | Mackay Chapman |
HER HONOUR:
Introduction
In around March 2021 the plaintiffs decided to invest their retirement savings in what appeared to be JP Morgan high yield fixed rate corporate bonds for a term of one year.
The plaintiffs subsequently established that the website advertising the investment opportunity was not a legitimate JP Morgan website. The two JP Morgan representatives that the plaintiffs spoke to were not from JP Morgan at all and the Commonwealth Bank of Australia (‘the CBA’) account they ultimately transferred $500,000 to was an account held by the first defendant (‘No Moo’) and not JPM Holdings Ltd as they had been told. Similarly, the bond certificate purportedly signed by the chief executive officer of JP Morgan that was sent by Mr Paul Uren on 29 March 2021 to the first plaintiff was false.
By writ filed 30 July 2021, the plaintiffs claim they were induced by fraudulent representations to transfer $500,000 to No Moo’s bank account. No Moo did not have any entitlement to retain the funds yet as soon as the funds were received they were transferred for its own use or to others. The plaintiffs sought recovery of $500,000 or any traceable proceeds against No Moo and the second defendant on the grounds of money had and received against No Moo, a claim in equity based on the constructive trust with which the funds were impressed in No Moo’s hands and a claim for accessory liability for knowing assistance against the second defendant.
By summons filed 30 July 2021 the plaintiff sought freezing orders against No Moo and the second defendant. On 30 July 2021 freezing orders were made against No Moo and the second defendant up to the unencumbered value of $550,000.
Settlement of the proceeding
On 3 September 2021, the parties, the second defendant’s husband, Mr Bill Floropoulos (‘Mr Floropoulos’) and the second defendant’s mother, Mrs Veloudo Dernikos (‘the defaulting parties’) entered into a deed of settlement pursuant to which the plaintiffs agreed to settle the proceeding for the sum of $500,000 (‘the settlement deed’).
The settlement deed included the following relevant clauses:
Clause 1.2(r):
any person signing this deed on behalf of a corporation, partnership, or other person warrants and represents that (s)he has full authority to enter into this deed on behalf of a corporation, partnership, or other person and acknowledges that the counter-parties to this deed are relying on this warranty and representation
Clause 1.2(s):
time is of the essence in respect of all payment obligations pursuant to this deed
Clause 3.1:
Without admission of liability for the allegations in the proceeding and the claim against [Mr Floropoulos], No Moo, [the second defendant], and [Mr Floropoulos] acknowledge that they are jointly and severably [sic] indebted to [the plaintiffs] in the sum of $500,000 (inclusive of interest and [the plaintiffs’] legal costs (settlement sum).
Clause 3.2 :
Payment of the settlement sum shall be made as follows:
(a)$25,000 forthwith;
(b)$100,000 on or before 1 December 2021;
(c)$100,000 on or before 1 March 2022; and
(d)$275,000 on or before 1 June 2022.
Clause 7.1
If No Moo, [the second defendant], and [Mr Floropoulos] fail to comply with their obligations under clause 3.2 of this Deed then [the plaintiffs] may commence proceedings in relation to the default.
Clause 7.2
If [the plaintiffs] commence proceedings under clause 7.1, No Moo, [the second defendant], and [Mr Floropoulos] unconditionally:
(a)agree they will not defend these proceedings and that [the plaintiffs]may enter default judgment against No Moo, [the second defendant] and [Mr Floropoulos] for the sum of $500,000 less any amounts already paid under this deed (‘Default Judgment Sum’);
(b)consent to judgment orders that No Moo, [the second defendant] and [Mr Floropoulos] pay the default judgment sum, interest at a rate of 10% per annum from the date of judgment until the date of full payment and costs on an indemnity basis; and
(c)acknowledge and agree that an affidavit sworn or affirmed on behalf of [the plaintiffs] in those proceedings deposing to No Moo, [the second defendant], and [Mr Floropoulos’] default is sufficient evidence of their failure to pay the Default Judgment Sum under this Deed.
On 16 September 2021, the defaulting parties paid the first payment of $25,000 in accordance with clause 3.2 of the settlement deed.
On 2 December 2021, at the request of the defaulting parties, the plaintiffs agreed to vary clause 3.2(b) of the settlement deed to allow until 6 December 2021 for payment of the second instalment.
On 9 December 2021, at the request of the defaulting parties, the plaintiffs agreed to further vary clause 3.2(b) of the settlement deed to the effect that:
(a) the second instalment was due and payable by 5pm on 9 December 2021; and
(b) an additional $5,000 was payable by 5pm on 13 December 2021 (‘the additional payment’).
On 9 December 2021, the second instalment was paid in accordance with the settlement deed as varied.
The additional payment was not received by 5pm on 13 December 2021 as required under the settlement deed as varied.
Plaintiffs’ application
By summons filed 21 December 2021 the plaintiffs seek, pursuant to r 9.02 of the Supreme Count (General Civil Procedure) Rules 2015, to join Mr Floropoulos as the third defendant to the proceeding, that No Moo, the second defendant and Mr Floropoulos pay the plaintiffs the sum of $380,000 plus interest at 10 per cent per annum from the date of the order and indemnity costs pursuant to clauses 3.2 and 7 of the settlement deed.
In support of their application, the plaintiffs rely on the affidavits of William Simon Heath sworn 20 December 2021 and Andrew Peter Tragardh sworn 22 February 2022.
Procedural history
The plaintiffs’ summons was returnable on 4 February 2022. Mr Mario Merlo, solicitor, of Melbourne Legal Chambers, was retained by No Moo and the second defendant. Prior to that date, they were represented by the firm of McDonald Milnes. Mr Floropoulos had also sought to be represented by Mr Merlo but due to a conflict of interest, he appeared on that day in person. Mr Floropoulos made no submissions, nor did he file an affidavit.
The summons was further adjourned to 8 February 2022 to allow the defendants and/or Mr Floropoulos to file and serve any affidavits and submissions. The defendants filed an affidavit sworn by the second defendant on 7 February 2022 (‘the first affidavit’). Mr Floropoulos filed an affidavit sworn 7 February 2022 and witnessed by Mr Merlo deposing that where the second defendant deposes in her first affidavit that he advised her, he confirms those matters are true and correct.
No further affidavits or submissions were filed by Mr Floropoulos.
On 14 February 2022 the second defendant filed a further affidavit sworn on 14 February 2022 (‘the second affidavit’).
By orders made 1 March 2022 Mr Floropoulos was added as a defendant and orders were made that he file any written submissions by no later than 4pm on 9 March 2022.
On 3 March 2022 Mr Floropoulos informed the Court that he would file submissions by the deadline. No submissions were filed by Mr Floropoulos on 9 March 2022.
By email dated 10 March 2022 Mr Dan Mackay of Mackay Chapman informed the Court that his firm had commenced acting for Mr Floropoulos. Mr Mackay sought an extension of time until 15 March 2022 to file any affidavits by Mr Floropoulos.
Mr Mackay’s email request to extend the date for the filing of affidavits by Mr Floropoulos was rejected as Mr Floropoulos had been on notice of the summons since 21 December 2021, was present on the return of the summons on 4 and 8 February 2022 and was well aware that extensions had already been given to him for the filing of affidavits and submissions.
At 5.52 pm on 10 March 2022, after the Court had communicated that the time to file and serve affidavit material would not be further extended, Mackay Chapman filed a Notice of Appearance on behalf of Mr Floropoulos.
Affidavits of second defendant
The first affidavit and the second affidavit filed by the second defendant cover a wide range of matters, much of which are repetitive, irrelevant or self-serving. The following is a summation of the issues that the second defendant seeks to rely on in response to the plaintiffs’ application.
At some stage in 2018 No Moo was incorporated for the purpose of establishing a business of importing and exporting vegan products from overseas. Mr Floropoulos was a director of No Moo. Due to Mr Floropoulos being involved in litigation, his accountant advised him to cease being a director of No Moo. In January 2019 the second defendant and her mother, Mrs Veloudo Dernikos (‘Veloudo’), were appointed as directors and shareholders of No Moo. Veloudo is aged 83 years, does not speak or understand English, other than at a basic level, and has early stage dementia. Mr Floropoulos is the manager of the business. The second defendant and Mr Floropoulos are the authorised signatories of No Moo’s bank account.
In January or February 2021 Mr Floropoulos told the second defendant that Mr Harry Taslikidis, a person that Mr Floropoulos has known for many years, suggested to him that No Moo enter into an agreement to act as an agent to purchase bitcoin on behalf of clients in return for which No Moo would be paid a commission of five per cent of the value of the purchase (‘the agreement’). Mr Floropoulos told the second defendant that Mr Taslikidis had been doing this for several months. The second defendant considered this to be a good opportunity, although she did not understand bitcoin or cryptocurrency but was aware that people made massive profits through bitcoin.
Sometime later, Mr Floropoulos told the second defendant that he signed the agreement on behalf of No Moo. The second defendant has not seen the agreement and Mr Floropoulos no longer has a copy of the agreement due to the Australian Federal Police executing a search warrant on behalf of the Australian Securities and Investment Commission on 12 November 2021 and seizing the computers and mobile telephones of Mr Floropoulos.
Plaintiffs’ investment
Mr Floropoulos told the second defendant that he had received written instructions from Mr Taslikidis via One Drive and text messages that the sum of $500,000 was being deposited in No Moo's bank account. Mr Floropoulos no longer has a copy of the instructions due to the execution of the search warrant. Mr Floropoulos told the second defendant that he was instructed to deduct his commission, to pay $50,000 to Mr Taslikidis as consulting fees and any fees to be charged by the bitcoin platform for the purchase of the bitcoin. Mr Floropoulos was to purchase bitcoin with the balance of the funds and deposit the bitcoin into a ‘wallet’ which he was told belonged to the plaintiffs. Mr Floropoulos told the second defendant that he did what he was instructed by Mr Taslikidis and that he had previously received similar instructions from Mr Taslikidis on behalf of other investors without any issue.
Mr Floropoulos told the second defendant that he paid $50,000 to Mr Taslikidis as instructed for consulting fees, paid the bitcoin exchange fees, transferred the balance of the money, less No Moo's commission, from No Moo's bank account to his personal account over four or five days and purchased the bitcoin in four or five separate transactions because No Moo’s account had a daily limit of $100,000. Mr Floropoulos then sent by text message to Mr Taslikidis a copy of the receipt confirming each purchase of bitcoin. Mr Floropoulos no longer has a copy of the text messages and receipts due to the execution of the search warrant.
In early August 2021 Mr Floropoulos told the second defendant that he could not access No Moo's bank account via internet banking. Mr Floropoulos and the second defendant went to see what was the problem. The staff at the Richmond branch of the CBA showed Mr Floropoulos and the second defendant a copy of the freezing order made on 30 July 2021. This was the first time that they became aware of any problem with the plaintiffs' bitcoin purchase.
In about August 2021 Mr Floropoulos told the second defendant that No Moo was being sued by the plaintiffs and that Mr James Podaridis and a Mr Daniel McDonald were assisting him to resolve the proceeding with offers were being made on the basis that Mr Taslikidis agreed to pay the money to the plaintiffs.
Mr Podaridis is a person that Mr Floropoulos has known for many years, is said to be a barrister, and has acted for Mr Floropoulos for a number of years. Mr Floropoulos told the second defendant that Mr Podaridis had introduced him to Mr McDonald of the firm McDonald Milnes and that Mr McDonald had acted for Mr Floropoulos in respect of other matters. The second defendant was content for Mr Floropoulos to instruct Mr McDonald on behalf of No Moo because Mr Floropoulos knew the details of the relevant transactions. Mr Floropoulos told the second defendant that he gave the instructions to Mr McDonald.
The second defendant deposes that she did not know until recently that Mr McDonald was acting for her and Veloudo. The second defendant deposes that she did not give instructions to Mr McDonald to agree to any orders. Mr McDonald did not contact the second defendant to tell her about the freezing order or to seek her instructions regarding the affidavits to be prepared. She did not receive any written communications from him and the only time that she has spoken to Mr McDonald was during two FaceTime calls on 6 and 10 August 2021 when Mr Floropoulos told her that the Court required her to file an affidavit setting out the assets of No Moo.
Mr Floropoulos told the second defendant that he provided the instructions to Mr McDonald for the affidavits which were emailed to Mr Floropoulos, who printed them and then called Mr McDonald on FaceTime so that he could witness the signing of them by the second defendant. During the FaceTime calls, Mr McDonald did not tell her she was a party to the proceeding or that he was acting for her. He read the affidavits to her and witnessed her signature on them. The second defendant’s current solicitor told her that Mr McDonald appeared on her behalf and for No Moo and agreed to certain orders in the proceeding.
Deed of settlement
In late August or early September 2021, Mr Floropoulos told the second defendant that the plaintiffs agreed to accept payment of $500,000 and that Mr Taslikidis had agreed to pay it. The second defendant deposes that Mr McDonald did not contact her to seek her agreement in relation to any offer or settlement or to explain to her the terms of any offer or settlement.
On 3 September 2021 Mr Floropoulos told the second defendant that Mr Podaridis was coming to their home on that day with a document that needed to be signed by the second defendant and her mother. The second defendant assumed this was because she and her mother are the directors of No Moo and she knew that No Moo was a party to the proceeding.
On that day Mr Podaridis produced a document which the second defendant now knows is the deed of settlement. Mr Podaridis was keen for the second defendant to sign the document. He did not explain the deed to her and did not give her an opportunity to read it. He simply pointed out where she was required to sign on the pages of the document. The process took only a few minutes and Mr Podaridis then witnessed her signature.
Mr Podaridis also told the second defendant that she needed to sign the document for her mother, who was not present. The second defendant told Mr Podaridis that she held a power of attorney for her mother and showed it to him. He then told her to sign her mother's name. The second defendant asked Mr Podaridis to clarify whether he wanted her to sign her own name or her mother's name. He confirmed that she should sign her mother's name which she then did and Mr Podaridis then witnessed the signature. Mr Podaridis repeatedly told the second defendant not to worry because Mr Taslikidis was paying the money. The second defendant signed the deed believing that she was signing for her mother and herself as directors of No Moo. The second defendant states that because Mr Podaridis did not explain the deed of settlement to her, her understanding that signing the deed was a mere formality was reinforced. The second defendant was not told by anyone and had no understanding that by signing the deed she was personally liable to the plaintiffs.
The second defendant was not told by anyone and had no understanding that by signing the deed on behalf of her mother she was potentially charging her mother's home as security for the payment to be made to the plaintiffs. The second defendant states that she would never have agreed to this and her mother had nothing to do with the matter. No one had ever discussed with her mother or with the second defendant whether her mother was prepared to provide her home as security for the payment.
Submissions of No Moo and the second defendant
In submissions dated 8 February 2022, No Moo and the second defendant submit that the deed of settlement was executed by them as a result of the undue influence of Mr Floropoulos and/or Mr Podaridis. They also submit that neither No Moo, the second defendant or Mr Floropoulos had any awareness that the plaintiffs had been deceived by others into making the transaction that led to the bitcoin purchase. They submit that the deed exposed No Moo, the second defendant and Veloudo to a liability they should never have borne and the same may be said of Mr Floropoulos. Critically neither No Moo nor the second defendant comprehended the transaction and the obligations they were undertaking under the deed of settlement.
They submit that Mr Podaridis was seemly involved in the fraud against the plaintiffs and he had a powerful motive to induce No Moo, the second defendant and Mr Floropoulos to execute the deed. Mr Podaridis in turn influenced Mr Floropoulos and the influence by Mr Podaridis and Mr Floropoulos exerted over No Moo and the second defendant is readily apparent and subverted the second defendant’s free will.
In further submissions dated 15 February 2022, No Moo and the second defendant accepted, for present purposes, that the plaintiffs did not have constructive notice of the potential for undue influence over the second defendant but contended that equity could nonetheless intervene to set aside the deed for undue influence. No Moo and the Second defendant submitted that the plaintiffs have not sustained loss and damage, and if the deed were set aside they would be restored to their original position, having the right to continue to pursue their claim. It was submitted that all the plaintiffs would have lost is time and interest would address that loss if they are successful at trial.
In reply submissions dated 24 February 2022, No Moo and the second defendant accepted the plaintiffs’ submission that insofar as No Moo is concerned, the plaintiffs can rely on the statutory assumptions in ss 128 and 129(2), (4) and (5) of the Corporations Act 2001 (Cth). Notwithstanding the statutory assumptions, they submit that No Moo is able to seek equitable relief on the basis that by signing the deed of settlement, the signatories to the deed were subject to the undue influence of others. This challenge is said to address the very capacity of No Moo to have exercised its free will and the fact that the second defendant’s will was overborne is reinforced by the fact that she deferred to others.
They submit that the plaintiffs have not been prejudiced by their entry into the deed and, in fact, their position was enhanced as it brought their litigation to a prompt conclusion. By undoing the deed, the plaintiffs are restored to the same position they were in prior to the deed, namely, protagonists in litigation with the right to pursue their case at trial. At worst, the plaintiffs may have an issue of costs thrown away. They submit that the status quo prior to the deed of settlement should be re-instated and judgment should not be entered against the defendants pursuant to clauses 3.2 and 7 of the settlement deed.
They submit they are innocent parties in the purchase of the bitcoin. No Moo received a commission of $25,000 for effecting a purchase of bitcoin which Mr Floropoulos believed was what the plaintiffs had sought. Neither Mr Floropoulos, No Moo or the second defendant were aware that the plaintiffs had been deceived by others into making the transaction which led to the bitcoin purchase.
They submit that the deed of settlement was an improvident transaction which exposed No Moo, the second defendant and Veloudo to a liability they should never have borne. Their acceptance of a responsibility to pay $500,000 when they received a relatively nominal commission of $25,000, and Veloudo received no benefit, was vastly disproportionate and neither No Moo nor the second defendant comprehended the transaction or the obligations they were undertaking in the deed of settlement.
In the context of this disproportionality, they have been subjected to the undue influence of Mr Floropoulos and Mr Podaridis and that while Mr Floropoulos may also have been an innocent party, he has nonetheless influenced the entry into the deed by No Moo and the second defendant.
In their original submissions, No Moo and the second defendant also submit that Mr Podaridis is seemingly involved in the fraud against the plaintiffs[1] and that clearly he had a powerful motive to induce No Moo, the second defendant and Mr Floropoulos into executing the deed. The influence that Mr Floropoulos and Mr Podaridis exerted over No Moo and the second defendant is readily apparent and they subverted her free will and, in turn, that Mr Podaridis influenced Mr Floropoulos. They submit there is a clear pathway to a successful defence for No Moo and the second defendant and, arguably, Mr Floropoulos. This pathway gives rise to a real, as opposed to fanciful, chance of success and judgment should not be entered against No Moo and the second defendant and leave should be granted for them to defend the plaintiffs’ claim.
[1]Referring to the first affidavit, [37] in which the second defendant deposed that ‘I understand that the media has reported that [Mr Podaridis] is allegedly involved in an international criminal syndicate running a fraudulent bond scam’.
No Moo and the second defendant submit that if the evidence of the second defendant is accepted, then No Moo and the second defendant are innocent victims. It is contended that if a defendant shows that there are facts which, if true, would constitute a defence to a claim, then leave to defend should be given, the question is whether ‘there is a fair or reasonable probability of the defendants having a real or bona fide defence’.
Consideration
The plaintiffs are innocent parties who have been deprived of their retirement savings as a result a fraudulent scheme in which the defendants and Mr Floropoulos were involved. No Moo and the second defendant seek to expand the scope of this proceeding to pursue claims against the persons they allege were involved in the preparation and execution of the settlement deed. While the defendants now submit this would restore the plaintiffs to their original position, for the following reasons the plaintiffs should not be involved in any further litigation that seeks to deal with the allegations now raised by the defendants.
The settlement deed is enforceable against No Moo
The settlement deed was negotiated between the respective solicitors for the plaintiffs and No Moo. The second defendant was content for Mr Floropoulos to instruct Mr Daniel on behalf of No Moo. No Moo and the second defendant accept that insofar as No Moo is concerned, the plaintiffs are able to rely on the statutory assumptions in ss 128 and 129(2), (4) and (5) of the Corporations Act 2001 (Cth). For the purposes of s 128 of the Act, the plaintiffs’ solicitors were engaging with a person with authority to negotiate on behalf of No Moo, such that there was ‘a dealing with the company’.
Clause 3.1 of the settlement deed provides that liability for payment of the settlement sum under clause 3.2 is a joint and several obligation of the defaulting parties. Regardless of the arguments raised in relation to the second defendant, the orders sought by the plaintiffs can be made against No Moo. Further, any alleged undue influence exerted on the second defendant cannot affect the position of No Moo in circumstances where the second defendant’s evidence is that she was not the directing mind and will of the first defendant. In any event, as discussed below, the plaintiffs did not have actual or constructive notice of the facts giving rise to the alleged undue influence on the second defendant and, as such, the deed could not be rendered unenforceable against the second defendant let alone No Moo.
The settlement deed is enforceable against the second defendant regardless of whether she was affected by any undue influence
A relationship between husband and wife does not automatically give rise to a presumption of undue influence.[2] The vast majority of undue influence cases involve the giving of security by a wife over assets in her name to secure obligations owed solely by the husband. In this case, the settlement deed directly benefitted the second defendant, rather than Mr Floropoulos. At the time the settlement deed was executed, Mr Floropoulos was not a party to the proceeding. The second defendant was a party to the proceeding.
[2]G E Dal Pont, Equity and Trusts in Australia (Lawbook Co, 7th ed, 2019) [7.90].
Further, the plaintiffs cannot be construed as volunteers. By entering into the settlement deed, they gave up their right to immediately pursue the claims made against the defendants. In addition, the settlement sum was limited to the amount of money actually lost by the plaintiffs and they forwent their entitlement to recover any legal costs incurred or any entitlement to interest.
In order to establish the existence of undue influence, the second defendant must demonstrate that Mr Floropoulos occupied a ‘position of ascendency or influence’ and that she was in a corresponding position of ‘dependency or trust’.[3]
[3]Thorne v Kennedy (2017) 263 CLR 85, 101–2 [34] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).
The second defendant is a director of No Moo. Her evidence as to whom she relied on to guide her in that capacity is inconsistent. In her first affidavit, her evidence was that she relied on the advice of ‘our accountant to ensure that my responsibilities as director of [No Moo]’ were complied with and that Mr Floropoulos was ‘engaged as the manager of [No Moo] and carries out its day to day activities …’.
In her second affidavit, she said that she leaves ‘all business matters to [Mr Floropoulos] as it is not something that I know much about … I deferred to [Mr Floropoulos] in executing the deed as [Mr Floropoulos] said to me that Mr Tsakilidis was going to pay the money and that I needed to sign the deed for No Moo’.
In addition, she deposed in her first affidavit that ‘[Mr Podaridis] told me that I needed to sign the Deed for my mother’ and ‘[Mr Podaridis] repeatedly told me not to worry because Mr Taslikidis was paying the money’. ‘[Mr Podaridis] told me that I needed to sign the Deed for my mother’ and ‘[Mr Podaridis] repeatedly told me not to worry because Mr Taslikidis was paying the money’ thereby suggesting that Mr Podaridis influenced her to sign the settlement deed.
There is no suggestion in the affidavits of the second defendant that Mr Floropoulos influenced her in relation to the settlement deed at all. The second defendant’s evidence in relation to Mr Floropoulos is that he told her ‘that [Mr Podaridis] was coming to our home on that day with a document which my mother and I needed to sign’.
Insofar as Mr Podaridis may have exerted undue influence over the second defendant, there is no suggestion that the plaintiffs had any knowledge of his involvement beyond his signature appearing on the deed as the witness for No Moo, the second defendant and Veloudo.
The settlement deed is enforceable by the plaintiffs. Even if the Court is willing to find that undue influence has been established on the evidence, this alone does not make the settlement deed unenforceable as against the second defendant. While transactions vitiated by undue influence may be set aside against innocent third parties, for a transaction to be unenforceable as against a third party who is not a volunteer, the third party must have actual or constructive notice of the facts giving rise to the undue influence.[4] The defendants accept that the plaintiffs do not have constructive notice of the potential for undue influence over the second defendant. Despite this, the defendants submit that it would now be unconscionable for the plaintiffs to enforce the deed, regardless of the fact that they had no knowledge of the alleged undue influence at the time they entered into it. Such a proposition is not recognised by the law and, as the plaintiffs submitted, would result in significant commercial uncertainty.
[4]Bank of New South Wales v Rogers (1941) 65 CLR 42, 51–2 (Starke J), 60–1 (McTiernan J), 85 (Williams J); Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773, 802 [40] (Lord Nicholls); Permanent Mortgages Pty Ltd v Vandenbergh (2010) 41 WAR 353, 390 [180] (Murphy J). See also Yerkey v Jones (1939) 63 CLR 649, 677 (Dixon J); Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, 464 (Mason J); Garcia v National Australia Bank Ltd (1998) 194 CLR 395, 407–9 [27]–[31] (Gaudron, McHugh, Gummow and Hayne JJ).
They also suggest the plaintiffs ‘have not sustained loss and damage’ and that they ‘can be restored to their original position’. In circumstances where the proceeding has now been delayed by at least six months as a result of the settlement, both such suggestions are obviously baseless.
This is not a case where the third party, that is the plaintiffs, ought to be fixed with the consequences of any undue influence. As the plaintiffs submitted, this is a case akin to the transfer of property to a third party for value without notice.
The settlement deed is enforceable against Mr Floropoulos
Insofar as Mr Floropoulos is concerned, there is no evidence suggesting that he was the subject of any undue influence. Clause 3.1 of the settlement deed makes clear that liability for payment of the settlement sum under clause 3.2 is a joint and several obligation of the defaulting parties.
Whilst not strictly relevant to this application, the defendants suggest in their written submissions that they do not know the reasons why Mr Floropoulos was made party to the settlement deed. The plaintiffs simply observe that it is clear from recital E to the settlement deed that Mr Floropoulos was made a party on the basis that the plaintiffs were otherwise intending to join him as a defendant to the proceeding in order to prosecute a knowing assistance/receipt claim against him in respect of his involvement in No Moo’s breach of trust.
Orders
1. The Court orders that the first, second and third defendants pay the plaintiffs the sum of $380,000 plus interest at 10 per cent per annum from the date of the order and indemnity costs pursuant to clauses 3.2 and 7 of the settlement deed.
2. If the parties are unable to agree on the costs of the proceeding, written submissions be filed on or before 13 April 2022.
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