OzCrop Pty Limited v Eliahu Kaufman
[2015] NSWSC 1802
•27 November 2015
Supreme Court
New South Wales
Medium Neutral Citation: OzCrop Pty Limited v Eliahu Kaufman [2015] NSWSC 1802 Hearing dates: 27 November 2015 Decision date: 27 November 2015 Jurisdiction: Equity - Commercial List Before: McDougall J Decision: Judgment for plaintiff in the sum of $4,513,835.28 with costs.
Catchwords: REMEDIES – summary judgment – where defendant sole director of plaintiff company for nearly three years – where role included responsibility for management of financial affairs – claim by plaintiff that defendant misappropriated funds – where evidence of plaintiff’s finances and defendant’s credit card accounts supports that allegation – where no apparent defence – result that plaintiff is entitled to amount diverted, plus interest Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Category: Principal judgment Parties: OzCrop Pty Ltd (Plaintiff)
Eliahu Kaufman (Defendant)Representation: Counsel:
Solicitors:
D Klineberg (Plaintiff)
Norton Rose Fullbright (Plaintiff)
File Number(s): 2015/281067
Judgment - (ex tempore – revised 27 november 2015)
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HIS HONOUR: The plaintiff (OzCrop) is company incorporated to supply herbicides, fungicides and insecticides in Australia. It was incorporated on about 8 October 2012. From that date until 27 August 2015, the defendant (Mr Kaufman) was the sole director of OzCrop. The principal shareholders in OzCrop are citizens of the People's Republic of China.
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Whilst Mr Kaufman was the sole director of OzCrop, he had the responsibility for managing its financial affairs, including the payment of all expenses. The company maintained five bank accounts: four with ANZ Banking Group and one with National Australia Bank. Mr Kaufman controlled payments into and out of those accounts.
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Mr Kaufman reported to the shareholders through spreadsheets sent to them monthly, setting out the state of the company's financial affairs. Those spreadsheets showed income received and payments made. The information that Mr Kaufman provided to the principal shareholders did not include the underlying bank records.
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Mr Kaufman was removed from office on 27 August 2015, apparently because the majority shareholders were dissatisfied with his management of the affairs of the company. Two persons, Wei Zhang and Bo Zhang (not related) were appointed as directors in his place.
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The new directors, in conjunction with the company's general manager Mr Shiel, obtained copies of the company's bank statements from the two banks to which I have referred. They caused the bank statements to be compared to the spreadsheets that Mr Kaufman had from time to time sent. They discovered that the spreadsheets did not reveal a large number of payments, totaling almost $1.6 million.
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The researches undertaken showed also that Mr Kaufman had caused the company to open two credit card accounts. They showed that very substantial payments had been made to the credit of those accounts. It would seem that many of the credits made to those accounts were used for the purpose of making payment to online gaming establishments.
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In addition, Mr Kaufman had at least two credit card accounts in his own name. The researches that were undertaken showed that very substantial amounts of the company's funds had been diverted to the credit of the credit cards accounts in Mr Kaufman's name. Again, it would seem, many of the payments out were made for the purpose of online gambling.
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The total paid out to the four credit card accounts to which I have referred is almost $2.8 million.
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The evidence satisfies me that none of the payments in question (they are particularised in Annexure A to OzCrop's commercial list statement filed on 8 October 2015) was made for a legitimate purpose of OzCrop. I am so satisfied both by the positive evidence given in support of the application for summary judgment and by the obvious inference available from the fact that none of the payments, either by way of withdrawals from the accounts or by way of credit to the various credit card accounts, was disclosed in the spreadsheets that Mr Kaufman from time to time sent to the shareholders in OzCrop. One would have thought that if any of the payments were for legitimate purposes of OzCrop, they would have been disclosed.
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Mr Kaufman filed a notice of appearance. However, in breach of the Court's directions, he did not file a commercial list response. He did file what purported to be an affidavit of assets and liabilities. I do not think that there can be any reliance placed on that affidavit, since (among other things) it discloses only one of the two credit card accounts in his name to which I have referred.
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The company moves today for summary judgment pursuant to UCPR r 13.1. I am satisfied that the notice of motion and affidavit in support were served on the solicitor who filed the notice of appearance for Mr Kaufman. I am satisfied also that a correcting affidavit, affirmed by Ashika Raj Binodan, was so served.
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Mr Kaufman was called both outside the court of the List Judge (where the motion was mentioned) and outside my courtroom. He has not appeared.
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The comprehensive evidence contained in the three exhibits tendered today shows how each of the withdrawals was made. It enables the payments in respect of the credit card accounts to be traced out of OzCrop’s bank accounts, and into one or other of the credit card accounts. As I have said, I am satisfied both positively and circumstantially that the payments were not made for the purposes of OzCrop's legitimate business requirements.
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In those circumstances I am satisfied that each of the facts needed to be proved, as articulated in OzCrop's commercial list statement, has been made good.
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OzCrop seeks judgment for $4,513,835.28. That comprises $4,454,523 in principal, as the total of the various payments particularised in the commercial list statement. It includes also interest in the sum of $59,312.28. That interest has been calculated not from the date when each of the payments was made, but, rather, from what appears to be the last date that any of the payments were made. I am satisfied that interest has been calculated in a way that is arithmetically correct. I am satisfied, further, that by reason of the methodology adopted, it substantially understates the amount of interest that might be claimable if a more rigorous calculation had been carried out.
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For those reasons I am satisfied that OzCrop has made good its claim to the relief sought by its notice of motion.
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I direct entry of judgment for the plaintiff against the defendant in the sum of $4,513,835.28, including interest to today's date. I order the defendant to pay the plaintiff's costs. I direct that the exhibits be handed out.
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Decision last updated: 01 December 2015
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