JB Asset Management v LBA Capital Pty Ltd - [2020] VSC 629

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

S ECI 2019 03875

JB ASSET MANAGEMENT & ANOR	Plaintiff
v
LBA CAPITAL PTY LTD & ORS	Defendant

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JUDGE:	McDonald J
WHERE HELD:	Melbourne
DATE OF HEARING:	24 July 2020
DATE OF JUDGMENT:	28 September 2020
CASE MAY BE CITED AS:	JB Asset Management & Anor v LBA Capital Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2020] VSC 629

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PRACTICE AND PROCEDURE – Application for stay of proceedings – Allegations of forgery and misrepresentation – Admission that $40 million advanced by plaintiffs to defendants not accounted for – Criminal charges on the cards – Plaintiffs’ legitimate interest in tracing $40 million – Risk of prejudice if fifth defendant required to give evidence – Appropriate for interlocutory steps to be completed prior to stay of proceedings – Application dismissed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Ms C Harris QC with Mr T Warner	Allens
For the First to Fifth Defendants	Mr D J Williams QC	GPZ Legal
For the Sixth Defendant	Dr T Alexander	Macpherson Kelley
For the Seventh Defendant	No appearance	No appearance
For the Eighth Defendant	Mr N Kaskani	Frenkel Partners

HIS HONOUR:

This proceeding was commenced on 23 August 2019 by an urgent ex parte application for freezing and ancillary orders. The basis of the application was the plaintiffs’ contention that they had been the subject of a sophisticated fraud worth almost $400 million.[1] A freezing order was made on 23 August 2019. The respondents to the order were the first and second defendants. Subsequently, on 20 December 2019 the freezing order was amended by adding the fifth defendant as a respondent.
[1]Plaintiffs’ written submissions on the stay application filed 22 July 2020 (Plaintiffs’ written submissions) at [9].

The first plaintiff is a Korean registered company which acts as a collective investment scheme manager investing funds in both Korea and overseas. Between March and June 2019 the plaintiffs entered into eight separate commercial loan agreements pursuant to which the second plaintiff advanced funds to the first defendant totalling $394,740,000 (the advanced funds).[2] The plaintiffs allege that the funds were advanced on condition that they would be invested only in specified properties which were to be leased to eligible tenants registered under the National Disability Insurance Scheme.[3]
[2] Amended Statement of Claim filed 28 February 2020 (Statement of Claim) at [16].
[3]Statement of Claim at [13].

The plaintiffs allege that the first, second and fifth defendants forged or procured the forging of numerous documents: insurance certificates, contracts of sale, title documents, legal advises and other documents and provided the forgeries to the plaintiffs in purported compliance with the terms of the commercial loan agreements.[4]
[4]Statement of Claim at [17](a).

The plaintiffs allege that the first, second and fifth defendants did not use the advanced funds for the acquisition of the NDIS properties, but rather expended the funds for unauthorised purposes, including:

(a) the acquisition of other properties which…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] VSC 629
Decision Date: 28 September 2020

CaseChat Overview and Summary

The plaintiffs in the case, JB Asset Management, sought to stay proceedings against the defendants, LBA Capital Pty Ltd and others, due to allegations of forgery and misrepresentation. The matter was heard in the Supreme Court of New South Wales. The plaintiffs claimed that $40 million advanced to the defendants had not been accounted for and there was a risk of prejudice if a particular defendant was required to give evidence in the proceedings.

The primary legal issue the court needed to determine was whether an interlocutory stay of proceedings was appropriate in the circumstances. The court considered the plaintiffs' legitimate interest in tracing the $40 million, the risk of prejudice if the proceedings were not stayed, and the need for certain interlocutory steps to be completed prior to any stay. The court also considered the potential for criminal charges arising from the alleged forgery and misrepresentation.

The court found that an interlocutory stay was not warranted in these circumstances. The plaintiffs had not demonstrated that they had a legitimate interest in staying the proceedings, nor had they shown that the defendants would be prejudiced if the proceedings continued. Additionally, the court noted that the plaintiffs had not taken the necessary steps to protect their interests, such as tracing the missing funds. The court concluded that it was appropriate for the interlocutory steps to be completed before any stay of proceedings could be considered. As a result, the application for a stay of proceedings was dismissed.

No further orders were made by the court in this instance. The proceedings will continue as scheduled, allowing the parties to pursue their claims and defences in the appropriate forum.

Orders