National Gallery of Australia v Beljan
[2018] ACTSC 78
•13 February 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | National Gallery of Australia v Beljan |
Citation: | [2018] ACTSC 78 |
Hearing Date: | 13 February 2018 |
DecisionDate: | 13 February 2018 |
Before: | Mossop J |
Decision: | See [44] |
Catchwords: | CIVIL LAW – JURISDICTION, PRACTICE AND PROCEDURE – Application for freezing order – failure to pay sum per settlement deed – party to obtain funds following settlement of other proceedings – risk of dissipation of funds – risk funds will be transferred overseas – party outside of jurisdiction – freezing order granted |
Legislation Cited: | Court Procedures Rules 2006 (ACT), rr 741, 743(1)(b), 6460, 6460(3) |
Cases Cited: | Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 |
Texts Cited: | Biscoe, Peter M., Freezing and search orders: Mareva and Anton Piller orders (LexisNexis Butterworths, 2nd ed, 2008) |
Parties: | National Gallery of Australia (Plaintiff) Branislav Beljan (First Defendant) Capital Lawyers (Second Defendant) Capital Lawyers Pty Ltd (Third Defendant) |
Representation: | Counsel S Whybrow (Plaintiff) J Iliopoulos (Defendents) |
| Solicitors Maddocks (Plaintiff) Capital Lawyers (Defendents) | |
File Number: | SC 37 of 2018 |
MOSSOP J:
Introduction
The National Gallery of Australia (National Gallery) has sought by Originating Application, filed 9 February 2018, a freezing order so as to secure funds said to be owed to it as a consequence of a settlement of personal injury proceedings. It has also sought an order in relation to substituted service on the first respondent.
The first respondent (Mr Beljan) was the plaintiff in personal injury proceedings. The second and third respondents (Capital Lawyers and Capital Lawyers Pty Ltd) are his solicitors. The second respondent is the partnership, the third respondent is a corporate entity through which the solicitors practice. The second and third respondents indicated that they submitted to any order of the Court save as to costs.
The parties should be identified as plaintiff and defendants respectively rather than applicant and respondents. I will make an order to that effect and will refer to them as such and the balance of these reasons.
The first defendent was the plaintiff in personal injury proceedings. In those proceedings, an application was made by him to join the National Gallery as a party to those proceedings. On 23 September 2016, I made an order requiring Mr Beljan to pay the costs of the National Gallery and the costs of another party that he had sought to join to the proceedings, Manteena Pty Ltd (Manteena).
Subsequently, in separate proceedings, an application for an extension of time to bring proceedings against the National Gallery was listed to be heard on 9 October 2017. Those proceedings, insofar as they involve the National Gallery, were settled on 6 October 2017 on the basis that Mr Beljan would discontinue the proceedings against the National Gallery with each party to bear its own costs but that Mr Beljan would pay the National Gallery’s costs of the joinder application previously made in the amount of $26,000. That settlement was to be the subject of a Settlement Deed including a suitable release in the National Gallery’s favour and requiring that the settlement sum be paid by 30 November 2017.
The Deed was prepared and executed by Mr Beljan on 24 October 2017 and on behalf of the National Gallery on 8 November 2017. The Deed required the payment of $26,000 by 30 November 2017 and made time of the essence.
The sum of $26,000 was not paid in the time required by the Deed. There was then correspondence from the solicitors who acted for the National Gallery and the solicitors who acted for Mr Beljan seeking payment of the amount due under the Deed. This involved the making of five demands for payment of the settlement sum prior to the making of this application. The terms of the correspondence between the parties is of some significance because it assists in characterising the approach of the defendants to the application and assessing the risk that the assets of the first defendant may be dissipated or transferred overseas so as to avoid his obligations under the Deed and, hence, frustrate any proceedings to enforce those obligations.
The first demand was made in an email from the National Gallery’s solicitors to Mr Beljan’s solicitors on 12 December 2017. It sought confirmation by 15 December 2017 that the required payment had been made. There was no response to this email. On 20 December 2017, a letter was sent formally demanding the payment of the settlement sum by no later than 22 December 2017.
On 22 December 2017, the solicitor for Mr Beljan responded by email saying:
I have forwarded your email and letter to Mr Beljan for instructions. Unfortunately, Mr Beljan is out of the country at the moment and I am not sure when he will see my email to him.
In the circumstances, I would be pleased if you could refrain from taking any recovery action until such time when I hear from Mr Beljan. I will endeavour to contact you as soon as I have the instructions.
On 8 January 2018, the National Gallery solicitors sent a further letter asking that the payment be made as soon as possible and, in any event, by no later than 10 January 2018.
On 9 January 2018 the solicitors for the National Gallery received an email in reply from the solicitors for the plaintiff saying:
We advise that our client is still currently overseas and he may have difficulty in accessing his emails while he is away as he has not responded to our email or letter as yet.
We also advise that our client’s mobile is currently out of service.
We will continue attempting to contact our client and advise you as soon as we have instructions.
Because they had heard nothing further, the solicitors for the National Gallery wrote again on 22 January 2018 noting that Mr Beljan had settled proceedings against Manteena and was awaiting the payment of the settlement sum which far exceeded the sum payable to the National Gallery. They therefore sought an undertaking that, inter alia, confirmed there was a settlement with Manteena, that the settlement sum would be paid into the trust account of Mr Beljan’s solicitors, and that payment of the settlement sum owed to the National Gallery would be made within three business days of receiving the judgment sum from Manteena. The letter indicated that if such undertakings were not given then freezing orders would be sought from the Court. The letter was drafted in such a manner that the undertakings were to be given by the partners of Mr Beljan’s solicitors rather than by Mr Beljan. It is difficult to see how such undertakings could be given unless they were consistent with the solicitor’s instructions from Mr Beljan.
On 29 January 2018, the solicitor for the National Gallery spoke to a solicitor acting for Manteena and learned that a consent judgment and terms of settlement had been executed between Manteena and Mr Beljan and that Manteena had agreed to pay to Mr Beljan the sum of $300,000 within 28 days of certain conditions precedent being satisfied. The solicitors for the National Gallery also received copies of the consent judgment and the terms of settlement. The consent judgment was entered on 15 January 2018.
On 30 January 2018, the solicitor for the National Gallery received a letter dated the previous day from the solicitor for Mr Beljan. That letter was in response to the National Gallery’s letter of 22 January 2018. The letter provided:
Although we have no instructions at the moment, apart from the fact that our client will be back in the jurisdiction in March, after recovery from his knee surgery which is planned for next month, we have no reason to believe that our client will not comply with his agreement with your client upon his return.
Accordingly your intention to proceed to seek “appropriate freezing orders” is akin to using a sledgehammer to crack a nut and will only involve unnecessary expenditure of costs upon a procedure which, at the moment seems to be a futile gesture and ultimately will prove to be unnecessary.
In the meantime we continue to seek our client’s instructions.
On 1 February 2018, the solicitors for Mr Beljan provided the Medicare notice of charge to the solicitors for Manteena. This was the final requirement before the obligation to pay the judgment sum within 28 days arose under the consent judgment that had been entered.
The response contained in the letter of 30 January 2018 provoked a letter from the solicitors for the National Gallery indicating that the National Gallery had no confidence that Mr Beljan would pay the settlement sum having regard to:
(a)The existing breach of the settlement deed and the absence of any explanation for the failure to pay.
(b)The failure to give any assurance or undertaking that Mr Beljan would direct the payment of the settlement sum from the monies to be received from Manteena.
(c)The fact that property searches in the ACT, Queensland and New South Wales, and a search of company directorships, were unable to identify any assets of Mr Beljan from which he might otherwise be able to pay the settlement sum.
(d)The inability to obtain instructions because Mr Beljan was overseas and not scheduled to return until well after receipt of the settlement sum from Manteena, was uncontactable and had no ascertainable assets in Australia, was consistent with him not intending to return to Australia or otherwise distribute the settlement sum before returning to Australia.
The letter therefore indicated that a freezing order would be sought for the amount of the settlement sum, the costs of making an application for a freezing order and the costs of proceedings against Mr Beljan in respect of breach of the settlement deed. The letter indicated that if the amount of the settlement sum was not paid or undertakings not given, then in addition to the settlement sum, costs would be sought.
On 5 February 2018, the solicitors for Mr Beljan responded as follows:
The evidence is that he has instructed us that he intends to return to Australia in March. There is no evidence to suggest otherwise. When he left Australia, as your researches have demonstrated, he had no money to pay your client. The only source, of which we are aware for the payment of your debt, is the settlement funds. At the time he left the country he had not received those funds because a condition precedent for their receipt: a satisfactory mutual deed had not been executed.
Our client will receive no funds until he has entered into a deed with Manteena. That deed has not been entered into and the form of it has not yet been agreed. You seek our undertakings and ascribe to their non-receipt unwillingness on our part. That slur, if that is what you intended is baseless: we have sought our client’s instructions and given him advice. We regard ourselves as bound by our instructions. Do you suggest that we are not? If you can offer a method to us which can resolve the present impasse we will gladly take them up. We are perfectly willing to co-operate to avoid unnecessary further expenditure provided always we can do so in accordance with our duty to our client. Do you suggest that our duty to our client to conform to his instructions may be peremptorily over-ridden by us? If so, we would be grateful to know any basis for doing so. As presently advised, we see none.
Our understanding of our client’s asset position accords with yours.
We have attempted by email to obtain appropriate instructions but thus far have received no response.
It is notable that the statement in the letter that a condition precedent for the receipt of funds from Manteena was the entry into a deed, and that the form of that deed has not yet been agreed, are statements that appear to be inconsistent with the actual terms of settlement reached between Mr Beljan and Manteena. There is no explanation as to why this incorrect and misleading statement was made in this letter.
On 6 February 2018, the solicitors for the National Gallery were notified that the solicitors for Manteena expected to forward the settlement cheque to Mr Beljan’s solicitors in the next couple of days.
On 7 February 2018, the solicitors for Mr Beljan wrote again saying:
As previously advised, we are still awaiting instructions in relation to the payment of $26,000 in costs.
We have now obtained advice from counsel and have consulted the Law Society about our obligations. In the absence of a court order, we will have no option but to abide by the instructions given to us at the time our client settled his claim with Manteena Pty Ltd.
No doubt our client will contact you in relation to the matter upon his return from his surgery overseas. This we expect will be sometime in March 2018.
It is notable that the letter makes clear that:
(a)no instructions in relation to the payment of the $26,000 had been received at this point;
(b)that the solicitors will act upon instructions given to them at the time that Mr Beljan settled the claim with Manteena (which by implication do not include the discharge of the obligation to pay $26,000 to the National Gallery);
(c)that he is likely to be unrepresented at the point when he returns from his surgery overseas (“our client will contact you”); and
(d)that the date cannot be identified with any greater precision than sometime in March 2018.
On 9 February 2018, the solicitors for the National Gallery wrote indicating that the judgment amount payable by Manteena was required to be paid on or before 26 February 2018. It also provided as follows:
I had a telephone conversation with [the solicitor for Mr Beljan] yesterday. [The solicitor for Mr Beljan] requested that I speak to my client about making an advance payment of the settlement funds because his client is in Germany and is booked to have surgery next week. [The solicitor for Mr Beljan] advised me that his client is ringing him daily and also sending emails chasing up the settlement money because if he is unable to pay for the surgery, it will be cancelled.
The first point to be noted about this evidence is that there appears to be a stark contrast in the approach of Mr Beljan to communicating with his lawyers in relation to recovery of the judgment amount from Manteena with the approach that he takes in relation to payment of the amount that he owes to the National Gallery. The second point is that there is no explanation in the evidence as to why Mr Beljan would be undergoing surgery in Germany if his intention was to return to Australia.
Other evidence that was put before the Court indicated that Mr Beljan ceased work in 2010, that as at the date of this application he was 67 years old, and as at 2016 he was in receipt of the age pension.
The first, second and third defendents put no evidence before the Court apart from some email communication which was in support of a possible application for an adjournment, which was not ultimately pressed.
Counsel for the National Gallery pointed to the following matters in support of the application for a freezing order:
(a)the fact that Mr Beljan is overseas and will remain overseas at the point where the judgment amount from Manteena is received;
(b)that the judgment amount has not in fact been paid, notwithstanding the obligation under the deed;
(c)the evidence that the only source of funds for the payment of the settlement sum is the amount to be received from Manteena;
(d)the evidence disclosing an absence of any real property or corporate assets within Australia;
(e)the evidence of Mr Beljan’s inconsistent approach to providing instructions in relation to the payment of liabilities as opposed to the recovery of assets; and
(f)the strength of the National Gallery’s claim for enforcement of the obligation to pay the settlement sum under the deed entered into with Mr Beljan.
He submitted that these factors were sufficient to warrant the making of a freezing order so as to prevent the frustration of proceedings by the National Gallery to enforce the obligations entered into under the settlement deed.
Counsel for the respondents made submissions on behalf of Mr Beljan:
(a)He submitted that the claim should have been brought against Manteena.
(b)He drew attention to the fact tha t the application was served less than two days prior to the hearing.
(c)He submitted that there was no real evidence that would support the making of an order and that to suggest that there was a real risk of assets being disposed of was, in the circumstances, “a long bow to draw”.
(d)He drew attention to Court Procedures Practice Note (Freezing Orders) 2008 (No 1) (NI 2008-74) which provided “The purpose of a freezing order is to prevent frustration or abuse of process of the Court, not to provide security in respect of a judgment or order.”
(e)He indicated that the instructions given by Mr Beljan to his solicitors were to pay the settlement amount from Manteena to him.
(f)He also submitted that the substantive proceedings to enforce the obligations needed to be on foot at the time any such order was made.
(g)Finally, he submitted that any freezing order should be limited to the principal sum of $26,000 and that, if an order was made, liberty to apply to have it varied should be given.
In general terms, in order to warrant the making of a freezing order it is necessary to establish:
(a)that the plaintiff has a vested and accrued cause of action against the defendant;
(b)that a danger exists that if the plaintiff is successful, it will not be able to have the judgment satisfied by reason of the defendant absconding, removing assets from the jurisdiction, disposing of them within the jurisdiction or otherwise dealing with them in a manner that puts them beyond reach; and
(c)the balance of convenience favoured the granting of relief.
It is clear that the plaintiff has a “good arguable … cause of action” for the purposes of the Court Procedures Rules 2006 (ACT), r 743(1)(b). Its cause of action to enforce payment of the settlement sum under the Settlement Deed appears to be a very strong one. That cause of action has vested and accrued.
The factors pointed to by the plaintiff demonstrate to me that there is a real risk of the asset, shortly to be acquired by Mr Beljan, being disposed of or dissipated overseas in a manner which will render the obligations under the settlement deed unenforceable and any proceedings based upon them nugatory. The risk of dissipation was made clear by the disclosure during the course of submissions of that which might have been implied from the evidence in any event, namely that the instructions of the solicitors for Mr Beljan were to pay the balance of the judgment sum to him. The case is one which does not simply involve a desire to secure the obligations under the Deed, but instead is one in which there is evidence sufficient to establish a danger that any judgment will not be able to be satisfied because Mr Beljan has removed his assets from the jurisdiction or otherwise dealt with them so as to put them beyond reach.
So far as the balance of convenience is concerned, this clearly favours the making of an order. There is the likely prospect that the money will be put beyond the jurisdiction of the Court if no order is made. On the other hand, there is no evidence of any harm that will occur if the money is detained for long enough to allow the determination of the claim to be made by the National Gallery. It is necessary to take into account the fact that the National Gallery has not yet commenced proceedings when it might have done so prior to now. However, in assessing what weight to give to that factor, it is necessary to take into account the relatively short period that has passed since the obligation to pay the money arose and the understandable desire to resolve the matter by obtaining an undertaking from Mr Beljan and his solicitors to pay the money from the judgment sum to be paid to him by Manteena.
I do not accept the submission made by the first defendant that Manteena or its solicitors were parties necessary to be joined for the proceedings to be properly constituted. No relief is sought against Manteena or its solicitors. It is up to the National Gallery to determine against whom it seeks relief and it has, not unreasonably, targeted the point immediately prior to when the assets are at risk of dissipation.
So far as short service is concerned, the proceedings could have been brought ex parte but were in fact served on the solicitors for Mr Beljan. That was appropriate having regard to the fact that Manteena had not yet paid money to Mr Beljan’s solicitors. An order of substituted service is sought in relation to service on Mr Beljan. Ultimately counsel for the defendants did not seek a further adjournment of the proceedings so as to obtain instructions or put on further evidence. As a consequence, the issue of short service does not preclude the making of an order or require an adjournment of the application.
I do not accept the submission made by the first defendant that the absence of substantive proceedings precludes the making of a freezing order. It is not uncommon that such orders are sought urgently prior to the commencement of substantive proceedings. Rule 741 of the Court Procedures Rules makes it clear that an order may be made against a party even if that party is not a party to an existing proceeding.
I do not accept the submission that the freezing order should be limited only to the principal sum of $26,000. It is correct to say that a court granting a freezing order should grant the minimum relief necessary to justice between the parties: Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 at [70]. As these proceedings are in substance, if not in form, interlocutory proceedings pending determination of the substantive proceedings, I consider that I should treat the costs of these proceedings as if they were costs in the substantive proceedings. The value of the assets restrained should not exceed the maximum amount of the applicant’s likely judgment (including interest) and costs: see Peter M Biscoe, Freezing and search orders: Mareva and Anton Piller orders (LexisNexis Butterworths, 2nd ed, 2008) at 6.50. The total sought to be restrained is $52,478, comprising $26,000 being the substantive obligation, costs of proceedings for breach of the Settlement Deed of $9500, costs of taxation of those costs of $4000, and $12,978 for the costs of the present application. The affidavit evidence in support of this estimate of costs was less than ideal having regard to the level of experience of the solicitor providing the estimate and the failure to identify whether what was estimated was indemnity or party-and-party costs. However, the evidence was not objected to and he was not cross-examined about his estimates.
In relation to whether or not costs on an indemnity basis might ultimately be recoverable, there is a limited entitlement to indemnity in the Settlement Deed which appears to assume that the only step necessary will be the commencement of proceedings and entry of judgment: see cl 2.2. It may be, however, that even if the clause does not apply to any broader proceedings that the National Gallery brings, the circumstances of the case will warrant a more generous than party-and-party costs order.
As to the extent of proceedings that might be necessary to enforce the Deed, the Settlement Deed itself appears to contemplate a process by which a consent judgment may be entered immediately. The cost estimate appears to contemplate a requirement for a default judgment. The latter course may be necessary if more than the principal amount is being sought in those proceedings.
In the circumstances it is not appropriate that I attempt to decide the entitlement to costs on an indemnity basis or determine what process will be required in order to enforce the obligation. Rather it is appropriate to make a freezing order on the basis that there is at least a reasonable prospect that the whole of the amounts identified in the plaintiff’s application will be incurred and will be recoverable. I am reinforced in that conclusion in that no particular difficulty has been identified by the first defendant arising from the restraint of a greater rather than lesser amount.
For these reasons, I consider that it is appropriate to make a freezing order in substantially the terms sought in the application.
Substituted service
Having regard to the evidence of communications between Mr Beljan and his solicitors, his absence from Australia and the urgency of the application, and being satisfied of the matters set out in r 6460(3) of the Court Procedures Rules, I consider it appropriate to make an order for substituted service of the application, affidavit in support and any order of the Court on Mr Beljan.
Cost of these proceedings
In relation to costs of these proceedings, they are proceedings ancillary to substantive proceedings to recover the settlement amount. They are in substance, if not form, interlocutory proceedings. Notwithstanding that I will permit the restraint of a sum sufficient to accommodate the costs of the present proceedings, it is appropriate, in my view, to defer the final resolution of the issue of costs until the substantive proceedings are resolved. If, for example, the plaintiff’s proceedings were unsuccessful, then that would put a different complexion upon this application than if those proceedings were wholly successful. Therefore it is appropriate that the costs of this application to date are reserved.
Orders
The orders of the Court are:
1. The parties to the proceedings be identified as the plaintiff, first defendant, second defendant and third defendant respectively, and be so identified in all documents subsequently filed in these proceedings.
2. Pursuant to Court Procedure Rules 2006 (ACT), r 6460, the requirement for personal service upon the first defendant is dispensed with and:
· the originating claim,
· the affidavits of Stephen Paul D’Arcy sworn 8 February 2018 and 9 February 2018, and
· any orders made by the Court in these proceedings,
shall be taken to have been or may be (as the case may be) served upon the first defendant if sent by sending them by email to the following email address: [email address set out].
3. Upon the plaintiff by its counsel giving:
· the usual undertaking as to damages, and
· an undertaking to commence within 14 days proceedings to enforce the first defendant’s obligation to make payment under the deed between the plaintiff and the first defendant (executed by the plaintiff on 24 October 2017),
the second and third defendants are prohibited from removing from Australia, or in any way disposing of, dealing with or diminishing the value of the assets in Australia that it holds, or comes to hold, on trust for the first defendant, up to the unencumbered value of $52,478.
4. Costs are reserved.
5. The defendants have liberty to apply for the variation or amendment of these orders.
6. Each party has liberty to apply in regards to costs.
| I certify that the preceding forty-four [44] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: 1 May 2018 |
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