Pier (WA) Pty Ltd as trustee for Isandi Trust v Jean Maurice Pty Ltd [No 3] - [2018] WASC 24

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: PIER (WA) PTY LTD AS TRUSTEE FOR ISANDI TRUST -v- JEAN MAURICE PTY LTD [No 3] [2018] WASC 24

CORAM: KENNETH MARTIN J

HEARD: 16 JANUARY 2018

DELIVERED : 16 JANUARY 2018

PUBLISHED : 25 JANUARY 2018

FILE NO/S: CIV 2935 of 2016

BETWEEN: PIER (WA) PTY LTD AS TRUSTEE FOR ISANDI TRUST
Plaintiff
AND
JEAN MAURICE PTY LTD
First Defendant
SANCHO BAKERY PTY LTD
Second Defendant
FRANK DUROLEK
Third Defendant
BELINDA DUROLEK
Fourth Defendant

Catchwords:

Practice and procedure - Application to set aside freezing orders - Application to set aside freezing orders - Orders take effect - Jurisdiction - Judgment for damages to be assessed - Compliance not foreshadowed - No explanation of past evidence about 29 gold ingots - Application refused

Legislation:

Nil

Result:

Application refused

Category: B

Representation:

Counsel:

Plaintiff:     Mr G R Ritter QC
First Defendant              :     Mr G M McIntyre SC & Mr C Williamson
Second Defendant         :     Mr G M McIntyre SC & Mr C Williamson
Third Defendant            :     Mr G M McIntyre SC & Mr C Williamson
Fourth Defendant           :     Mr G M McIntyre SC & Mr C Williamson

Solicitors:

Plaintiff:     HopgoodGanim
First Defendant              :     ABMS Lawyers
Second Defendant         :     ABMS Lawyers
Third Defendant            :     ABMS Lawyers
Fourth Defendant           :     ABMS Lawyers

Case(s) referred to in judgment(s):

Aon Risk Services v Australian National University (2009) 239 CLR 175
Davis v Davis [No 2] [2012] WASC 374
FAI General Insurance Company Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268
MTQ Holdings Pty Ltd v Lynch [2007] WASC 49
Pier (WA) Pty Ltd as Trustee for Isandi Trust v Jean Maurice Pty Ltd [2018] WASC 22
Pier (WA) Pty Ltd as Trustee for Isandi Trust v Jean Maurice Pty Ltd [No 2] [2018] WASC 23
Ward v Keet [No 4] [2010] WASC 268
KENNETH MARTIN J:
(This judgment was delivered extemporaneously on 16 January 2018 and has been edited from the transcript.)

I previously pronounced ex tempore reasons (see Pier (WA) Pty Ltd as Trustee for Isandi Trust v Jean Maurice Pty Ltd [2018] WASC 22 and Pier (WA) Pty Ltd as Trustee for Isandi Trust v Jean Maurice Pty Ltd[No 2] [2018] WASC 23.
My ex tempore reasons of 7 September 2017 led to my making of the orders for a payment into court of AUD$1.6 million on 7 September 2017 or, alternatively, for a delivery of 29 ingots of gold to court.
The timeframe that I indicated under those first orders was by 26 September 2017. They were not, as made, springing orders on 7 September 2017.
That order was not complied with. There followed a further directions hearing on 28 September 2017. In the wake of the non‑compliance with my orders of 7 September, there followed an application by the plaintiff for a springing order to be made that day.
I heard argument on 28 September 2017. I gave further ex tempore reasons (which I have now revised and are today published) for an issuing of the springing orders.
My springing orders extended to all the defendants. That followed in circumstances where there was evidence before me at 28 September 2017 through Ms Pendlebury's affidavit of a bank account of Belinda Durolek which should have been disclosed, but which had not been disclosed in accord with prior asset disclosure orders that I had made against all defendants.
My springing orders of 28 September 2017 had issued in circumstances where this matter had a very long history - dating back to the ex parte freezing orders I initially issued at the behest of the plaintiff as long ago as 14 November 2016 against all defendants. After that and over time, I have extended the freezing orders until trial - in circumstances where the plaintiff proposed various timetables for the usual exchange of pleadings, discovery, witness statements, and the like.
From 28 November 2016 to 7 July 2017 the defendants were locally represented by Hardies Lawyers of West Perth, a local firm of solicitors. There came a point on 15 June 2017 where I issued orders in relation to Mr Durolek and Mrs Durolek, the third and fourth defendants respectively, to surrender their passports. That was done on the basis of their passports being provided to and held by the defendants' solicitor of record, Mr Hardie, in circumstances where he would be undertaking to the court effectively to hold the passports of his clients in accord with orders I made.
That all led to Mr Hardie applying to get off the record, as he did. It also led to me upgrading the status of the orders concerning the third and fourth defendant's passports to absolute orders that they be surrendered. That order was not complied with. The third and fourth defendants' passports were not surrendered as ordered.
As matters came to pass, it seems accepted that Mr Durolek and his wife, via Thailand, left the country, ultimately for France. They remain out of Australia at this time.
New solicitors then got on the record for the defendants at 18 July 2017. That was Patrick Legal. Mr O'Brien then appeared for the defendants at directions hearings, or sometimes it was Mr Smith, a solicitor from his office.
It came to pass that, on 11 July 2017, I made more freezing orders at the behest of the plaintiff effectively in regard to securing the rents payable in respect of the Australian properties in Perth, Western Australia, owned by the third and fourth defendant.
That arose in circumstances where a communication had been received from a banking institution in France via its lawyers communicated to the plaintiff's lawyers, then put before me in Ms Pendlebury's affidavit of 7 July 2017, indicating a bank's certificate for 29 ingots of gold owned by the third defendant, which had been subject of my previous orders, was a false document. That was in circumstances where a certificate for 29 gold ingots (lingots) was provided to the Principal Registrar of this court, effectively as this matter proceeded to trial. The certificate, in fact, was likely a forgery and a highly misleading false document.
That was most concerning to me in circumstances where in February 2017 the third defendant, Mr Frank Durolek, in an affidavit that was filed and was read, had said at pars 13 and 14:
I own 29 ingots of 1 kilogram of gold, which was purchased on or about 30 November 2016 for €1,066,825.10.
Mr Durolek then annexed to his affidavit FD7 a document which was said to be by him a true copy of a purchase receipt issued to him for that gold. That document looks to be a false document as well.
Mr Frank Durolek had said this gold was stored at Crédit Agricole to Allée Roger, Salengro, 34800 Clermont-l'Hérault, France. He continued:
I estimate the value of the gold to be approximately the same as the price paid for the gold at the time of purchase, ie, €1,066,825.10.
Mr Durolek continued within that February 2017 affidavit at pars 26 and onwards to deal with the subject matter of the proceeds of the purchase price of the sale of the businesses to the plaintiff in 2016, by indicating that at the settlement - and I am referring to par 30 of that affidavit - the net sale proceeds of both businesses were in the sum of AUD$1,604,731.26. These net sale proceeds, he said, were paid into the second defendant's Bank of Queensland everyday business account.
Mr Durolek gave a BSB and the account number for a Bank of Queensland account. He annexed to his affidavit, marked as FD15, a true copy of a settlement statement for the sale of the businesses. He also annexed to his affidavit, marked as FD16, a document he called a true copy of a bank statement for the Bank of Queensland account - for the period to 30 August and which he said showed the receipt of net proceeds of sale by the second defendant. He said at par 31:
On or about 30 August 2016, the second defendant transferred the net sale proceeds -
and the additional amount, that he identified -
to [his] personal bank account held at Crédit Agricole in France.
Mr Durolek then annexed to his affidavit, as he said, marked FD17, a true copy of the bank statement for that account for a period ended 30 November 2016 and which he said:
[S]how my receipt of the funds transfer on or about 2 September 2016, and the purchase of the gold for that amount on or about 30 November 2016.
Mr Durolek's affidavit then said at 32:
Except for the transfer of the net sale proceeds from the Bank of Queensland account referred to in paragraph 31 of this affidavit, particulars of all other payments made by the second defendant since 26 August 2016 are set out in the transaction history reports for the second defendants' NAB bank accounts, true copies of which are annexed to this affidavit marked as FD18.
The clear purport of what was sworn to in that February 2017 affidavit at FD17 in the above words that I have just read out, along with the Bank of Queensland statement of FD16, and a so-called Crédit Agricole du Languedoc purchase of gold certificate, for periods between 2 September and 30 November 2016, was that the purchase price funds received by the second defendant from the plaintiff had effectively left Australia. That event happened, I observe, notwithstanding the freezing orders made on 14 November 2016. The funds were said to have manifested in Mr Durolek's bank account with a French bank, and from there had been the subject of his use for an acquisition of the 29 gold ingots (or, to use the French term, 'lingots') and which were held for him at that bank in France.
A consequence was that, at the time, I issued orders on 8 March 2017 over that gold. First, there was my ex parte order of 8 March 2017 - to the effect that Mr Durolek was restrained both personally and by his servants or agents from removing any gold ingots from a storage facility at Crédit Agricole du Languedoc in France or in any way moving, dealing with, disposing of, or encumbering any of the gold.
On 6 April 2017, when the defendants were represented by Mr Hardie, I extended my freezing orders over that gold. I issued an order that, by 4.00 pm on Monday, 10 April 2017, Mr Durolek as third defendant deliver up to the Principal Registrar of the Supreme Court of Western Australia for safekeeping until further order all certificates of ownership in respect of the ingots (lingots) described in Mr Pendlebury's affidavit of 7 March 2017 as 29 gold lingots of one kilogram stored at Crédit Agricole in Clermont-l'Hérault in France estimated to be in the euros amount equivalent to AUD$1,460,000.
It had been assumed, as of 6 April 2017, that the gold was held at the French bank. My orders required that the certificates of ownership for all that gold be delivered. In due course, a certificate of ownership was received by the Principal Registrar of this court. It was received under cover of a letter from Mr Hardie to that effect on 12 April 2017.
Matters proceed from that point. But there was another affidavit of Ms Pendlebury filed for the plaintiff of 6 July of 2017 attaching just received correspondence from the lawyers for representatives of a French bank basically saying that the gold certificate (a copy of which had obviously been provided to them by the plaintiff's solicitors) appeared to be a forgery. Likewise, it said that the bank statement appended to Mr Durolek's affidavit of 20 February 2017 (at FD17) in terms of showing an acquisition of 29 gold ingots was equally false.
They were extraordinary circumstances. They were highly deceitful and misleading circumstances I have not previously encountered in all my time on this court. They were grave in terms of the overall landscape which bore upon the programmed progression of this matter towards a trial by an exchange of statements and discovery which had been proceeding and was almost complete at July 2017.
In light of extraordinary developments I cancelled the daily allowances to the defendants as an exception to the scope of the original freezing order. I also issued orders, in effect, attaching rents that were being received by the third and fourth defendants' West Australian properties.
There had been an application made for a Receiver to be appointed in respect of those rents. I declined that application on 11 July 2017. I instead issued orders over the receipt of rents to the third and fourth defendants' agents as I identified by my orders of 11 July 2017.
Mr Durolek swore an affidavit effectively opposing the grant of further security. That was on 13 June 2017. At par 14 he said, and I am quoting in part:
The only significant asset of the defendants, being the gold, as that term is defined in the first affidavit –
Referring back to his February 2017 affidavit he said:
Is already secured with the original certificate of ownership having been delivered up to the principle registrar of the Supreme Court by the defendant's solicitor on or about 12 April 2017.
And he said:
If we had any intention of permanently leaving the jurisdiction, clearly, we would have done so before delivering up the certificate of ownership of the gold, an asset worth approximately $1.6 million, to the court.
Nevertheless, Emily Grace Pendlebury's affidavit filed for the plaintiff of 6 July 2017 at EGP7 contains a letter which has been translated from the French in which it was written to English. The English translation commenced at page 38 of her affidavit and extended to pages 39 and 40. Dealing with the gold certificate those solicitors, Grappin Adde-Soubra, advised at page 39:
moreover, the documents attached to your letter (gold property certificate and bank statement for Mr Durolek) are false documents and were never issued by the CRCA M du Languedoc.
Similarly, on page 29:
from the above mention it can be deduced that the document entitled Property Certificate 06277 was not issued by the bank and can only be a forged document (one may add that the seal of the bank branch in Lodève is oval shaped and has no resemblance to the seal appearing on the so-called certificate).
They continued at page 40 of Ms Pendlebury's affidavit:
as far as the bank statement is concerned, it cannot possibly have been issued to an address unknown to the bank for the reasons explained above, and it's very likely a photo montage constructed from the 3 September 2009 statement.
They concluded:
I also advise you that my client intends to bring its case to the public prosecutor of the Tribunal de Grande Instance de Montpellier in relation to these documents.
…
The present letter has no confidential character and is absolutely official.
Those circumstances are truly extraordinary, as is recognised in the reasons which I pronounced on 7 September 2017.
The orders made on 7 September 2017 were not complied with.
There followed the further application by the plaintiff again made inter partes in the wake of default which I heard on 27 September 2017.
I again pronounced ex tempore reasons at that time (and which I publish today as revised): see Pier (WA) Pty Ltd as Trustee for Isandi Trust v Jean Maurice Pty Ltd [2018] WASC 22 and Pier (WA) Pty Ltd as Trustee for Isandi Trust v Jean Maurice Pty Ltd[No 2] [2018] WASC 23. It was then that I issued the springing orders in the terms that all defendants, defences and counterclaims be automatically struck out at 4.00 pm on 5 October 2017 upon there still being default at a time which was in the circumstances an extended time - given that I originally made those orders back on 7 September. I further said:
In the event of the strikeout events coming to pass there shall be judgment automatically entered for the plaintiff against the defendants for damages and for statutory compensation in amounts to be assessed under subsequent directions of the court.
Again those orders were not complied with by 5 October at 4.00 pm in 2017 or at all.
Judgment was then extracted by the plaintiff for damages to be assessed by the plaintiff's solicitors at 10 October 2017. Whilst expressed in terms of it being a judgment that day, as it was in terms of its formal extraction, strictly, the judgment was self-executing and took effect from just after 4.00 pm on 5 October 2017 in the face of the default.
It also took effect deliberately not only against the first, second and third defendants but also against the fourth defendant.
That was by a reason of further events I related in the reasons of 28 September concerning the fourth defendant's non-compliance with my earlier asset disclosure orders concerning an undisclosed bank account of hers but which came to light.
In due course then, a second set of solicitors for the defendants, Patrick Legal, removed themselves from the record for the defendants. They were the defendants' solicitors of record only between 18 July and 13 October.
The defendants' current (and third set of) lawyers are ABMS Lawyers. They went on the record on 17 October 2017.
ABMS Lawyers then filed an application for the defendants to set aside the judgment that took effect pursuant to my springing orders of 28 September 2017. A chamber summons outcome was filed on 28 October 2017. It came before me for first directions on 31 October 2017. There were then further directions made on 11 December 2017.
I issued directions at that time by way of a programming for the matter to come before me today - in circumstances where there was doubt about whether I held any ability to set aside a judgment which had not only fully sprung but which had also been extracted by the plaintiff. The plaintiff had argued that, in fact, notwithstanding a strong line of authority based on the decision in FAI General Insurance Company Ltd v Southern Cross Exploration NL [1988] HCA 13; (1988) 165 CLR 268 a decision of the High Court - in fact, the equivalent Rules of the Supreme Court 1971 (WA) (RSCWA) O 3, r 5(1) and (2), was different to the New South Wales 1970 rules which justices of the High Court had pronounced upon in the FAI v Southern Cross decision.
Hence followed directions that I issued on 11 December 2017 for the parties to exchange submissions about jurisdiction and supplementary orders to that effect.
Since then, the defendants have altered the basis of their proposed application, moving away from how it was originally framed under their chamber summons of 26 October 2017.
No doubt, following discourse with counsel that day, the defendants now seek leave, in effect, to file a substituted chamber summons that is framed in terms of it being an application to support an extension of time for compliance with my previous orders - made pursuant to O 3, r 5 of the rules of this court and to vary or substitute orders and as well to set aside judgment.
That is effectively the application the defendants move now through senior counsel today and under a submitted minute of proposed orders on 22 December 2017. (I should say the substituted chambers summons is dated 22 December last year, as is their minute of proposed orders.)
The main question to be addressed, from a jurisdictional perspective, is whether, in fact, I hold power or jurisdiction to actually make orders which are now sought on the amended application of the defendants.
I should say that I do give leave to the defendants to proceed today in accord with their as substituted chambers summons of 22 December 2017. It is plain to me that the original relief they sought, namely, to merely set aside the judgment for damages to be assessed and which has been passed, entered and extracted in argument in October 2017, is misconceived.
By the FAI v Southern Cross decision and, indeed, under the terms of RSCWA O 3 r 5(1) and (2), the power that the court holds to extend and abridge time within which a person is required or authorised by the rules or by any judgment, by any order or by any direction, needs to be engaged first - before any judgment might be set aside.
For the plaintiff, Mr Ritter QC, both by written submissions and then verbally today, submitted that the RSCWA O 3 r 5 rule is materially different to the New South Wales rule considered by the High Court in FAI v Southern Cross. He points to extra words in the Western Australian rule and says that the position in Western Australia is different. As a judgment has been entered, he submits that now the defendants' only route is to pursue an appeal.

That is the plaintiff's submission, albeit first instance judges, including Master Newnes in MTQ Holdings Pty Ltd v Lynch [2007] WASC 49 (as he then was) applied in this State in apparently unqualified fashion the FAI v Southern Cross line of authority. Master Newnes appears to have proceeded on the basis that the FAI Pty Ltd v Southern Cross position would apply as equally in this court as it did in New South Wales.
So also would several other justices, including Allanson J in Ward v Keet [No 4] [2010] WASC 268, delivered 6 October 2010, who observed at [53] that:
It is common ground that the court has power to extend time under a springing order which has sprung ‑
referring to the FAI v Southern Cross decision. To the same effect is Master Sanderson's decision in Davis v Davis [No 2] [2012] WASC 374, where the learned Master then said:
There is no doubt the court has power to enlarge the time of the compliance with the springing order.
The learned Master referred to what Master Newnes had said in MTQ at [51] and [54].
Today it is not necessary for me to finally decide the point that has been taken by Mr Ritter QC in terms of a suggested lack of power in this court by way of the distinguishing FAI v Southern Cross once a judgment has been entered after it has sprung.
I am content to approach today's application on the hypothetical basis that I do hold full power to extend time for a compliance with previous orders I made via RSCWA O 3, r 5(1) or (2) and therefore set aside any judgment that has sprung and has been entered. Nevertheless, it is quite clear that the power given under the local rule is my power to extend time 'for compliance' (ie, compliance with the order that sprang here on 28 September 2017).
That would be a compliance with the order that I made back on 7 September 2017 and then, when it was not met, by the enforcement order as I issued the springing order of 28 September, as regards a non‑compliance with the 7 September 2017 original order as made.
As I pointed out in dialogue with senior counsel for the defendants, if, today, the defendants had, say, been approaching the court on a basis of proffering either AUD$1.6 million, or a proffering of 29 legitimate gold ingots, the subject of previous affidavits of Mr Durolek, then it would be the case that I could then proceed to consider whether or not to exercise a discretion I hold to enlarge time for a compliance with the unmet orders as previously made. But that is clearly not the case. It is not what the defendants now seek even on their as amended application.
It is plain from all the materials I have identified at the commencement of today's hearing (the defendants rely upon the affidavit of Frank Durolek sworn 23 November 2017, filed 28 November 2017; the supplementary affidavit of Frank Durolek sworn 21 December 2017, filed 22 December 2017; the affidavit of Frank Durolek sworn 21 December 2017, filed 22 December 2017; and the affidavit of Frank Durolek sworn 8 December 2017, filed 8 December 2017, they being the affidavits A through D, as indicated) that what is sought, in effect, is not in the nature of any proposed compliance post an extension of time at all.
What is truly being sought as of now is to vary the previous orders I made and to try to set up by replacement retrospectively some sort of substituted regime of residual equity position by regard to various real properties of the defendants, including over lands and houses in England, Australia and in France.
But nothing specific is offered. Certainly no amount of money is offered to the extent of AUD$1.6 million. Nor is any gold proffered.
Worse than that, however, is that, across all the relied upon materials that have been filed by Mr Durolek from November 2017, by now his third firm of local legal practitioners representing him, that across all those affidavits (of which there are now four) that there is no mention by Mr Durolek about the whereabouts of the sale proceeds as the purchase price received from the plaintiff following settlement in November 2016. There is no mention at all of gold ingots once said to be purchased using these funds as transferred and held for Mr Durolek at a bank in France. I earlier referred to what he has said about all that in the past, in terms of those funds and the purchased gold.
The closest Mr Durolek comes to addressing these no doubt embarrassing issues is in two paragraphs within the affidavit of 23 November 2017 that I discussed with senior counsel for the plaintiff, Mr Ritter QC - in Mr Durolek's affidavit of 23 November, filed 28 November 2017. Mr Durolek says, at par 8 on page 12:
Much to my shame, I was untruthful in fully disclosing my assets.
Be that as it may, the position today remains unsatisfactory. The evidence is still uncontradicted that a wholly false certificate for 29 ingots of gold purchased for €1,066,825.10 was knowingly provided to this court once said by Mr Durolek (affidavit of Frank Durolek sworn 20 February 2017, filed 27 February 2017) to have been purchased by him with the proceeds of the sale of the first and second defendants' business to the plaintiff. The overall position for the defendants is untenable and unsatisfactory.
Mr Durolek has not been frank with the court. Today I say no more than that, since there may be other proceedings tied to all these events. But the question of me possibly contemplating extending time for the defendants for compliance with my previous orders would only become live for consideration in circumstances where a proper basis was provided for that: see Aon Risk Services v Australian National University (2009) 239 CLR 175.An explanation for what has happened is required at minimum. But there is only a spectacular silence in regard to this court being actively misled about a gold certificate issued from a French bank and provided by Mr Durolek's then lawyer at the time. All that remains wholly unaddressed.
This is completely unacceptable.
Even if I had found that I had the power to extend time for compliance, compliance is not being sought. Even then, if I was contemplating extending time for compliance, were that sought, I could not even begin to approach an exercise of my discretion to that end in circumstances where the unexplained underlying position over 29 gold ingots and a false certificate from a French bank is not addressed for these defendants.
In all those circumstances, on a jurisdictional basis, the amended application is conceptually deficient and must be dismissed. I dismiss it now and with indemnity costs ordered against all the defendants.