Marco v Markopoulus
[2020] WASCA 105
•29 JUNE 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: MARCO -v- MARKOPOULUS [2020] WASCA 105
CORAM: MITCHELL JA
VAUGHAN JA
HEARD: 26 JUNE 2020
DELIVERED : 26 JUNE 2020
PUBLISHED : 29 JUNE 2020
FILE NO/S: CACV 39 of 2020
BETWEEN: CHRIS MARCO
Appellant
AND
PATRICIA MAREE MARKOPOULUS
First Respondent
TONPOSE PTY LTD (ACN 008 850 057) as trustee for MARKS AUTO SUPERANNUATION FUND (ABN 57 478 468 113)
Second Respondent
ANN-MAREE LOCKETT formerly known as ANN-MAREE WILLIAMS
Third Respondent
BRADLEY DAVID RUNDIN WILLIAMS
Fourth Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: TOTTLE J
Citation: MARKOPOULUS -v- MARCO [2020] WASC 79
File Number : CIV 1431 of 2019
Catchwords:
Appeal - Practice and procedure - Whether further extension of time to file an appellant's case should be granted - Whether appeal should be dismissed for failure to file an appellant's case - Where Federal Court has appointed interim receivers to the appellant's property - Impact of appointment of interim receivers on the capacity of the appellant to prosecute the appeal
Legislation:
Nil
Result:
Extension of time to file an appellant's case granted, subject to a springing order
Category: B
Representation:
Counsel:
| Appellant | : | L A Margaretic |
| First Respondent | : | P G Donovan |
| Second Respondent | : | P G Donovan |
| Third Respondent | : | P G Donovan |
| Fourth Respondent | : | P G Donovan |
Solicitors:
| Appellant | : | MGM O'Connor Lawyers |
| First Respondent | : | MDS Legal |
| Second Respondent | : | MDS Legal |
| Third Respondent | : | MDS Legal |
| Fourth Respondent | : | MDS Legal |
Case(s) referred to in decision(s):
ASIC v Marco [No 3] [2020] FCA 719
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Cummings v Claremont Petroleum NL (1996) 185 CLR 124
Durolek v Pier (WA) Pty Ltd [No 2] [2019] WASCA 138
Firmware Technologies Inc v Asia Platinum Group Ltd [2016] WASCA 179; (2016) 50 WAR 453
Krishell Pty Ltd v Nilant [2006] WASCA 223; (2006) 32 WAR 540
Sethi v Bhavsar [2020] WASCA 52
Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)
REASONS OF THE COURT:
On 26 June 2020, the court considered the following applications:
(1)The respondents' application in an appeal filed on 8 June 2020, seeking dismissal of the appeal for failure to file an appellant's case.
(2)The appellant's application in an appeal filed on 11 June 2020, seeking a stay of the appeal until interim receivers appointed to his assets have complied with orders of the Federal Court of Australia requiring the preparation of a report on his assets.
At the conclusion of the hearing we made the following orders:
(1)By 4.00 pm on 3 July 2020, the appellant shall file and serve an amended appeal notice which identifies the specific paragraphs or subparagraphs of the orders made by the primary judge on 13 March 2020 which are the subject of the appeal.
(2)The time for the appellant to file his appellant's case is extended to 4.00 pm on 14 August 2020.
(3)Unless the appellant files an appellant's case which complies with the Supreme Court (Court of Appeal) Rules 2005 (WA) by 4.00 pm on 14 August 2020, the appeal is dismissed and the appellant shall pay the respondents' costs of the appeal on the basis that the respondents be paid all the costs incurred by them except insofar as they are of an unreasonable amount or have been unreasonably incurred so that, subject to those exceptions, the respondents be completely indemnified for their costs.
(4)The applications in an appeal filed on 8 and 11 June 2020 are otherwise dismissed.
(5)Subject to order 3, the costs of the applications in an appeal filed on 8 and 11 June 2020 are reserved.
We said that we would publish reasons for making these orders at a later date. These are our reasons for making those orders.
Primary proceedings
This appeal is against summary judgment given to the respondents against the appellant on 12 March 2020. The primary judge ordered that judgment be entered in favour of the respondents in various sums totalling $5,914,621 plus interest. The primary judge declared that monies deposited by the respondents with the appellant were at all times held on trust by the appellant. The primary judge also ordered that the appellant provide the respondents with an account.
Summary judgment was awarded on the basis that:
(1)There was no dispute that funds were made available to the appellant in the amounts alleged by the respondents, that those sums were not repaid on the agreed dates and that the agreed interest has not been paid.[1] At the hearing of the respondents' summary judgment application, counsel for the appellant conceded that there was no triable issue in respect of the respondents' money claims.[2]
(2)The funds were advanced pursuant to 'Declarations of Trust' that manifested a clear intention to create an express trust,[3] or invested on the same terms as the funds advanced pursuant to the Declarations of Trust.[4] The only 'conduct' relied on by the appellant as evidencing an objective intention not to create a trust was his own subjective understanding of the nature of the agreement.[5] Without more, the appellant's subjective understanding did not give rise to a triable issue as, for the reasons given in Byrnes v Kendle,[6] his subjective understanding of the Declarations of Trust was irrelevant.[7]
(3)The appellant's failure to account for and repay the trust monies was a wilful default of his obligations as trustee. The respondents had not been repaid their monies and did not know what had become of them. The respondents were entitled to a full and proper accounting from the appellant on the basis of wilful default.[8]
[1] Primary decision [3], [29].
[2] Primary decision [5], [30].
[3] Primary decision [49] - [52].
[4] Primary decision [58].
[5] Primary decision [47].
[6] Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253.
[7] Primary decision [48].
[8] Primary decision [67] - [68].
Federal Court proceedings
The appellant is also the first defendant in proceedings (WAD 481 of 2018) brought in the Federal Court by the Australian Securities and Investments Commission (ASIC). In those proceedings the ASIC alleges that the appellant operated an unregistered managed investment scheme contrary to s 601ED of the Corporations Act 2001 (Cth). It also alleges that the appellant has carried out a financial services business without holding an Australian Financial Services Licence (AFSL) and not being exempt from the requirement, contrary to s 911A of the Corporations Act.[9]
[9] See ASIC v Marco [No 3] [2020] FCA 719 [9] - [11].
On 1 November 2018, the ASIC obtained asset preservation orders over the appellant's assets.[10]
[10] ASICv Marco [No 3] [6].
On 27 May 2020, the Federal Court made orders appointing the interim receivers as receivers or trustees of the appellant's 'property (as defined in the Corporations Act)' (Individual Property), with the power to:[11]
[D]o all things necessary or convenient to be done for or in connection with, or as incidental to, the identification, preservation and securing of all of the Individual Property for the benefit of potential creditors.
[11] ASIC v Marco [No 3], order 3(a).
The interim receivers were required, within 60 days of the date of the Federal Court's order, to provide to that court and the parties a report as to receivership of the appellant, including:[12]
(a)the identification of the assets and liabilities of the [appellant];
(b)an opinion as to the solvency of the [appellant];
(c)the likely return to creditors, including investors, in the event that any scheme operated by the [appellant] were to be wound up; and
(d)any other information necessary to enable the financial position of the [appellant] to be assessed.
[12] ASIC v Marco [No 3], order 5.
In making the receivership orders against the appellant, McKerracher J observed:[13]
On the evidence produced by ASIC, there is no doubt that [the appellant] has operated, and may continue to operate an investment scheme whereby he applied the contributions of investors in order to generate a financial return. The net result of these activities to date is that [the appellant] may be indebted to as many as 132 investors, possibly in an amount exceeding $240 million. Investment contributions were made to [the appellant], in most cases, by the execution of the Trust Document which purported to specify a rate of financial return on each investment. (reference omitted)
[13] ASIC v Marco [No 3] [113].
McKerracher J found that the evidence before him tended to suggest:[14]
[14] ASIC v Marco [No 3] [162].
(a)there is a potentially $200 million shortfall;
(b)there are no material returns to date;
(c)there is a real question of whether there will be any returns for investors in the future, despite repeated assurances by [the appellant];
(d)there is an apparently quite incomplete record of current investor entitlements;
(e)there is quite inadequate record keeping generally;
(f)there is uncertainty as to the extent of the assets available to satisfy investors' entitlements;
(g)there is unsatisfactory use of investors' funds for the benefit of related parties and the acquisition of unconventional 'investments', such as motor vehicles;
(h)[the appellant] is still holding himself out as operating a financial services business in his assurance to his investors, yet is doing so without an AFSL and is doing so notwithstanding the asset freezing orders;
(i)there is an absence of any objective reporting to investors at an individual level as to their current position and what prospect they have to recover a return on their respective investments.
McKerracher J also observed that:[15]
The fundamental purpose of the appointment of interim receivers and the provision of their report on fiscal and property matters to the Court is that it will provide the Court and investors with an independent assessment of the nature, description, value and location of assets held by the defendants that would be potentially available to investors, including assets acquired with funds provided by investors, that may be held in the name of related family members and acquaintances. They will also be able to assess the position of offshore investments as well as the potential for recovery, reconciliation of the amounts owed to investors, and an opinion as to solvency and the likely returns to investors.
That there is a strong need for this independent assessment is apparent from the highly uncertain nature of the investment activities undertaken by [the appellant] and what appears to be a repeated failure over a lengthy period of time to generate material returns for most investors. There is also a serious concern, based on ASIC's evidence, that the pooling of investor funds without adequate record keeping has meant that payment of some 'returns' to investors have come from contributions made by subsequent investors such that there now appears to be a shortfall in excess of $200 million between assets held by the defendants and amounts stated to be owed to investors. Despite this significant deficit and the freezing orders in place since 1 November 2018, [the appellant] continues to provide assurances to investors as disclosed in his investor updates and ongoing communications which, on the face of the current evidence, appear to be very dubious.
[15] ASIC v Marco [No 3] [167] - [168].
His Honour concluded that the only inference open on the evidence then before the Federal Court was that there is likely to be a substantial shortfall between promises made by the appellant and funds available to meet those promises.[16]
[16] ASIC v Marco [No 3] [174] - [175].
McKerracher J emphasised that a significant factor in his decision to appoint interim receivers was the fact that the costs of the interim receivers would be met by the ASIC.[17]
[17] ASIC v Marco [No 3] [184].
The appeal to this court
The appeal against the primary judge's orders was commenced on 2 April 2020.
On 7 May 2020, the appellant applied for an order extending the time for filing his appellant's case to 25 June 2020. In support of that application, the appellant deposed that, on 31 March 2020, he lodged an interlocutory application in the Federal Court seeking a variation of asset preservation orders to permit him to pay for legal expenses incurred in the primary proceedings and in this appeal.[18] He anticipated that a decision on the Federal Court application would be made by 11 June 2020, and proposed orders that would allow a further two weeks to prepare and lodge an appellant's case following that decision. He said that his capacity to proceed with the appeal was contingent on the Federal Court's ruling on his interlocutory application.[19] He deposed that the respondents served him with a bankruptcy notice on 21 April 2020, but had not otherwise sought to enforce the judgment.[20] The appellant's affidavit deposing as to these matters was sworn on 7 May 2020, prior to the order appointing interim receivers to his assets.
[18] Appellant's affidavit sworn 7 May 2020, par 6.
[19] Appellant's affidavit sworn 7 May 2020, pars 9 - 11.
[20] Appellant's affidavit sworn 7 May 2020, par 12.
Although the respondents opposed the application, on 18 May 2020 the Court of Appeal Registrar extended the time for filing the appellant's case to 2 June 2020. This time had not expired when the order for the appointment of interim receivers was made on 27 May 2020.
On 8 June 2020, the respondents filed an application for the appeal to be dismissed as a consequence of the appellant's failure to file the appellant's case within the extended time.
On 11 June 2020, the appellant filed an application for an order staying the appeal until interim receivers of his assets have complied with the Federal Court's orders for the preparation of a report.
The appellant's solicitor has deposed that, given the appointment of interim receivers, the solicitors are required to take instructions in the matter from the interim receivers.[21] He has attached the instructions of the interim receivers asking the solicitors to provide this court with copies of the Federal Court's orders of 27 May 2020, and advise it that:[22]
(1)Until the reports required by the interim receivers have been completed, the interim receivers are not in a position to instruct the solicitors to actively progress the appeal, have formed no view about the merits of the appeal and whether it should continue and request that the appeal be adjourned until after their reports are completed and provided to the Federal Court.
(2)Those previously instructing the solicitors no longer have access to or control of assets from which to meet the solicitor's fees and disbursements, and the solicitors are not in a position to undertake any further work on the matter as they have no instructions to do so.
[21] Affidavit of Luka Margaretic sworn 9 June 2020, par 7.
[22] Affidavit of Luka Margaretic sworn 9 June 2020, annexure LM 2.
In oral submissions, counsel for the appellant clarified that the appellant was not challenging the orders awarding monetary judgments to the respondents. He indicated that the appeal was against orders declaring that monies deposited by the respondents were held on trust, and the orders for the taking of an account. He indicated that the appellant would contend that the evidence before the primary court was not sufficient for the primary judge to have concluded that there was no triable issue as to the existence of a trust or any wilful default. Therefore, it is submitted, declarations of trust and an order for an account should not have been made on a summary judgment application. The appellant also submits that the respondents will not be prejudiced by the temporary stay of proceedings sought by the appellant. He submits that the appeal should be stayed until such time as the interim receivers complete their reports to the Federal Court.[23] The appellant submits that he is not able to comply with the programming orders due to the appointment of interim receivers over all his assets, and that he acted promptly to notify the court of his inability and seek a stay.[24]
[23] Appellant's submissions filed 18 June 2020, par 7.
[24] Appellant's submissions filed 18 June 2020, pars 8 - 11.
The respondents submit that no sufficient basis has been provided by the appellant to warrant ordering the stay of the appeal or any further extension of time to file his appellant's case.[25] The respondents' contend that the appellant has not identified any proper basis for challenging the primary judge's decision. They submit that the appellant provides no update on the progress of his application to vary asset preservation orders to allow for the payment of legal costs. They also submit that the interim receivers are not subrogated to the appellant's rights and, while the control of the appellant's assets shifts to the interim receivers, his rights to conduct this litigation do not. They note that the interim receivers have not sworn an affidavit verifying the matters set out in their email providing instructions to the appellant's solicitors. The respondents also point to the appellant's obstructive approach in the primary proceedings and the detriment which they suffer as a result of the appeal remaining on foot.[26]
[25] Respondents' submissions filed 23 June 2020, par 6.
[26] Respondents' submissions filed 23 June 2020, pars 9 - 14.
Disposition of applications
Factors against the grant of a stay or an further extension of time to file an appellant's case are that:
(1)The appellant has not provided the court with any draft grounds of appeal specifically explaining the basis on which the primary orders are challenged. Further, on a provisional basis, the declaratory relief would appear to follow from the manner in which the appellant's defence of the summary judgment application was conducted in the primary proceedings. It appears that the primary judge correctly identified the only basis on which the appellant contended in the primary proceedings that monies were not held on trust, namely the appellant's subjective understanding of the arrangements.[27] The basis on which the appeal might have reasonable prospects of success is not apparent on the material before the court at this stage.
(2)The appellant appears to have sought to use the ASIC proceedings to delay the progress of the primary proceedings, by contending that the asset preservation orders in those proceedings prevented him from repaying money owed to the respondents before ultimately conceding at the hearing of the summary judgment application that the asset preservation orders did not provide a defence to the monetary claim.
(3)The first respondent is 71 years old, has been forced to sell her home, and has suffered stress and health conditions which are negatively affected by stress.[28] There is a general prejudice to the respondents, particularly the first respondent, in leaving the appeals unresolved.
(4)The apparent complexity of the appellant's financial affairs, as disclosed by McKerracher J's reasons, means that there must be some prospect that the receiver's report will be delayed beyond the current reporting date of 26 July 2020.
[27] See primary ts 109 - 112.
[28] Affidavit of first respondent sworn 22 June 2020.
Against these considerations, the appointment of the interim receivers to all of the appellant's assets means that he genuinely lacks the capacity to prosecute this appeal. There was limited debate before us as to whether the appellant's right of appeal to this court was part of the 'Individual Property' of the appellant of which the interim receivers were appointed receivers or trustees by the Federal Court's orders.[29] It is unnecessary for us to resolve that debate at this stage. Nor is it necessary to determine whether the appellant retains a sufficient interest in the subject matter of the primary proceedings to enable him to prosecute the appeal independently of the interim receivers, or whether the receivers have power to prosecute the appeal independently of the appellant. As a matter of practicality, the appointment of receivers over the assets of the appellant from which he might fund the preparation of an appellant's case means that he is deprived of the financial capacity to prosecute this appeal. If the appeal is to be prosecuted then it will be through funds provided by the ASIC or released by the receivers for that purpose.
[29] Cf Cummings v Claremont Petroleum NL (1996) 185 CLR 124; Krishell Pty Ltd v Nilant [2006] WASCA 223; (2006) 32 WAR 540 [39] - [40] (Wheeler JA), [59] - [69] (McLure JA), [108] - [110], [122] - [128] (Buss JA).
In short, the appointment of interim receivers would appear to have removed any practical impact of the application for a variation to the asset preservation orders on this appeal. If the appeal is to be prosecuted, it appears likely that it will be funded by or through the interim receivers. Thus, in practical terms, the progress of the appeal is in the hands of the interim receivers.
It is reasonable for the interim receivers to have some time to ascertain the appellant's assets and for the receivers and/or the ASIC to determine whether they wish to release or provide funds for the prosecution of the appeal. It is to be expected that, in considering this issue, the interim receivers will have regard to the interests of the appellant's creditors as a whole. If, on investigation, there are grounds of appeal with sufficient prospects of success to justify an appeal, funding might be forthcoming. It may be considered in the interests of creditors generally to reduce the creditor pool. If, however, the interim receivers' consideration does not identify grounds of appeal that have reasonable prospects of success, it is to be expected that no funding will be provided and the appeal will not proceed.
The existence of the appeal does not operate as a stay of the primary orders or enforcement thereof. The appeal has been on foot for less than 3 months and the appellant has sought extensions of time for the filing of his appellant's case. While the ongoing appeal no doubt causes stress to the respondents, it does not prevent them from executing the judgment they have obtained in the primary proceedings. Further, the appeal does not challenge the orders made by the primary judge requiring the appellant to pay specific monetary sums to the respondents.
There will be occasions where it will be appropriate for this court to dismiss an appeal where the grant of an extension of time to file an appellant's case can be seen to be futile.[30] However, we are not presently satisfied that this is such a case, despite the absence of any basis apparent to us on the material currently before the court for doubting the correctness of the Primary Decision. Given that an appellant's case has not been filed, and the receivers have not yet considered the position, this court cannot safely conclude that the appeal is necessarily doomed to fail at this stage.
[30] Sethi v Bhavsar [2020] WASCA 52 [19] - [20].
On balance, we considered it to be in the interests of justice to grant a further extension of time for the filing of an appellant's case, but to make that extension subject to a springing order.
This court has addressed the circumstances in which a springing order will be appropriate in two recent cases.[31] A springing order is appropriate in the present case because, recognising the burden the unresolved appeal places on the respondents and the opportunities already provided to the appellant, the appeal should not be able to linger on indefinitely while the Federal Court proceedings remain on foot. We note that the interim receivers are funded by the ASIC. If the ASIC or the interim receivers wish to prosecute the appeal then they should commit to doing so within a reasonable time. Whoever is going to prosecute the appeal should be required to make a decision about whether they will do so within a defined period.
[31] Firmware Technologies Inc v Asia Platinum Group Ltd [2016] WASCA 179; (2016) 50 WAR 453 [5], [41] - [48]; Durolek v Pier (WA) Pty Ltd [No 2] [2019] WASCA 138 [107] - [113], [133].
We considered it appropriate to extend time to 14 August 2020 (being about 3 weeks after the receiver's report to the Federal Court is currently due) but make a springing order for the appeal to be dismissed if an appellant's case is not filed within that time. Irrespective of whether or not the interim receivers' report is actually completed by the current due date, an extension to 14 August 2020 will give those who are going to prosecute or fund the prosecution of the appeal a reasonable time to consider their position and for an appellant's case to be prepared if a decision is made to prosecute this appeal. A springing order will bring the appeal to an end if, having been given that opportunity, those who might prosecute or fund the prosecution of the appeal do not, for whatever reason, cause an appellant's case to be filed by 14 August 2020. At the hearing, counsel for the appellant accepted that, if an order for an extension of time was made, he could not argue against the condition that it be subject to a springing order.
Given the apparent lack of merit in the appeal on the material currently before the court, we considered it appropriate that, if an appellant's case is not filed within the time required by the springing order, the appellants be ordered to pay the respondents' costs of the appeal on an indemnity basis.[32]
[32] As to which, see Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10].
Irrespective of whether or not an appellant's case was filed, we considered it appropriate to require the appellant to regularise his appeal notice, by amending it to identify which of the specific orders made by the primary judge is the subject of the appeal.
For these reasons, we made the orders set out at [2] above.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ZMM
Associate to the Honourable Justice Mitchell29 JUNE 2020
0
9
1