PropertyShares Holdings Pty Ltd v Ujma
[2017] VCC 490
•2 May 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
BANKING AND FINANCE LIST
Case No. CI-16-05750
| PropertyShares Holdings Pty Ltd | Plaintiff |
| v Mateusz Bartlomiej Ujma & Ors | |
| Defendants |
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JUDGE: | His Honour Judge Cosgrave | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28 April 2017 | |
DATE OF RULING: | 2 May 2017 | |
CASE MAY BE CITED AS: | PropertyShares Holdings Pty Ltd v Ujma & Ors | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 490 | |
REASONS FOR RULING
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Subject:INJUNCTIONS
Catchwords: INJUNCTIONS – interlocutory injunctions – Mareva orders – principles applicable – sufficiency of evidence as to risk of dissipation – risk to be inferred from circumstances giving rise to cause of action – allegations of dishonesty and fraud in substantive claim – defendant disobeyed court order
Cases Cited:Myer Stores Pty Ltd v Conforto [2000] VSC 382; Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319; Pearce v Waterhouse [1986] VR 603; Victoria University of Technology v Wilson & Ors [2003] VSC 299
Ruling:
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Purton | Pelham Lawyers |
| For the Defendant | Mr B Skinner (solicitor) | Evans Ellis Lawyers |
HIS HONOUR:
Nature of Application
1 This hearing concerned the return of the plaintiff’s summons for a freezing order against the first defendant (“Ujma”) and the third defendant (“Consilium”). The plaintiff (“PropertyShares”) sought to maintain a freezing order which was initially granted in December 2016. Ujma and Consilium wanted the order varied so that it applied only to the property at 13 Skyline Drive Maribyrnong Victoria because it was the only asset of substance held by Ujma. He was the registered proprietor of this property with his wife (“Sochan”), the second defendant from whom he has separated. The defendants argued that the order should no longer apply to the defendants’ other property including bank accounts.
Procedural History
2 On 22 December 2016, this proceeding was commenced by generally indorsed writ. In it, PropertyShares sought damages against Ujma, Consilium and Sochan in connection with money advanced by PropertyShares.
3 On 22 December 2016, a summons was filed in the proceeding in which PropertyShares sought a freezing order against Ujma, Consilium and Benjamin Alan Henry Toll (trading as Ben’s Concrete) (“Toll”). The summons was supported by an affidavit of Anthony Wilkinson made on 22 December 2016 (“the First Wilkinson affidavit”).
4 On 22 December 2016, a freezing order was made against Ujma, Consilium and Toll on an ex-parte basis and the summons was adjourned to 5 January 2017.
5 The freezing order – along with the writ, summons and the First Wilkinson affidavit – was served on Ujma and Consilium by email on 23 December 2016 and in person on 27 December 2016.[1]
[1]Affidavit of Phey Shan Goh made on 29 December 2016.
6 On 5 January 2017, there was a further hearing of the summons in which the Court extended the freezing order until further order.
7 On 18 January 2017, Ujma filed an affidavit as to his asset position and the asset position of Consilium, as required by the freezing order (“the First Ujma affidavit”).
8 On 26 February 2017, there was a further hearing in which the summons was adjourned to 31 March 2017.
9 On 27 March 2017, PropertyShares filed a statement of claim in the proceeding.
10 On 31 March 2017, there was a further hearing of the summons at which Ujma and Consilium sought a timetable for the hearing of an application to set aside or vary the freezing order. The following orders were made:
(a) By 4pm on 10 April 2017 Ujma and Consilium file and serve any affidavit material in support of an application to set aside or vary the freezing order made initially on 22 December 2016 together with an outline of submissions.
(b) By 4pm on 24 April 2017 PropertyShares file and serve any affidavit material in opposition to the application by the first and third defendants together with an outline of submissions.
(c) By 4pm on 7 April 2017 Toll file and serve on the plaintiff an affidavit setting out his position.
11 On 3 April 2017, Toll filed and served an affidavit in the proceeding (“the Toll affidavit”).
12 On 12 April 2017, Ujma filed and served an affidavit in connection with the application by him and Consilium to set aside or vary the freezing order (“the Second Ujma affidavit”).
13 On 24 April 2017, the following affidavits were filed by PropertyShares in opposition to the application by Ujma and Consilium to set aside or vary the freezing order:
(a) an affidavit of Anthony Wilkinson made on 24 April 2017 (“the Second Wilkinson affidavit”);
(b) an affidavit of Brenton Wilkinson made on 24 April 2017 (“the Brenton Wilkinson affidavit”);
(c) an affidavit of Narelle Wilson made on 24 April 2017 (“the Narelle Wilson affidavit”).
14 On 24 April 2017, Ujma and Consilium filed submissions in support of their application to discharge or vary the freezing order.
Background
15 Ujma is a former partner of Jirsch Sutherland – a firm of specialist insolvency and business recovery accountants – and is the sole director of Consilium. According to Ujma, Consilium derives its income by way of commission for referring potential loan customers to financiers.[2] PropertyShares was one such financier.[3]
[2]Second Ujma affidavit at [28].
[3]First Wilkinson affidavit at [5]-[6].
16 In January 2016, Ujma and Consilium approached PropertyShares about a potential new deal. The new deal involved a group of companies under the control of Brenton and Narelle Wilson. Ujma and Consilium represented that the Wilsons wished to borrow $350,000 to be secured by second registrable mortgage over a series of properties.[4]
[4]Exhibit AW-3 to the First Wilkinson affidavit at pages 21-23.
17 In March 2016, PropertyShares accepted the proposal and advanced $348,936 in two tranches:
DateAmount
21 March 2016 $280,000
2 May 2016 $68,936
18 Of the $280,000 advanced on 21 March 2016, $245,090 was paid to BNAA Investments Pty Ltd (a company under the control of Brenton and Narelle Wilson).[5] The $68,936 advanced on 2 May 2016 was paid to Toll.[6]
[5]First Wilkinson affidavit at [23].
[6]First Wilkinson affidavit at [31].
19 On 12 December 2016, PropertyShares wrote to the Wilsons in connection with the third quarterly interest payment that was due to be paid on 23 December 2016.[7]
[7]Exhibit AW-12 to the First Wilkinson affidavit.
20 On 13 December 2016, Mr Wilson called Wilkinson to discuss the 12 December 2016 letter and said that:
(a) he had never heard of PropertyShares and had never signed any documents from PropertyShares;
(b) he knew Ujma and that Ujma had in fact borrowed $150,000 from him; and
(c) Ujma had repaid the $150,000 loan in around March with a payment of $245,090 (of which $95,090 was refunded by Mr Wilson to Ujma).[8]
[8]First Wilkinson affidavit at [43].
21 This proceeding was commenced shortly thereafter.
Legal Principles
22 Rule 37A.02(1) of the County Court Civil Procedure Rules 2008 provides that the Court may make a freezing order, upon or without notice to the respondent, for the purpose of preventing the frustration of the Court’s process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.
23 The purpose of a freezing order is to prevent the stultification of a judgment or abuse of the process of the Court, not to provide security to a plaintiff in respect of a potential future judgment or order.
24 The parties agreed that a party seeking a freezing order needs to establish two things. First, there must be a prima facie case against the defendant. Second, there must be a sufficient risk that the defendant will dissipate its assets so as to stultify or defeat any judgment of the court in favour of the plaintiff.
25 The parties further agreed that in this case, there was no doubt as to the existence of the prima facie case against the defendants. Accordingly, the main focus of the application related to the second factor.
26 PropertyShares placed significant emphasis upon the connection between the two factors and contended that the particular circumstances giving rise to the case against the defendants could provide a basis for and be relevant to a consideration of whether there was a sufficient risk of dissipation. This was especially so where the alleged wrongdoing involved matters such as fraud or dishonesty. The authorities make clear that the risk of dissipation can be inferred from the strength of the plaintiff’s case against the defendant. In Patterson v BTR Engineering (Aust) Limited.[9] Meagher JA said that:[10]
[9](1989) 18 NSWLR 319.
[10]Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at p 326. And see too Gleeson CJ at 325 with whom Rogers AJA agreed.
To obtain such an injunction a plaintiff must prove two ingredients: first, that he has a prima facie case against the defendant, and secondly, that there is some risk of dispersal by the defendant of his assets so as to defeat the value of the plaintiff’s victory if he ultimately wins. Normally proof of the first ingredient alone will not suffice; normally one cannot infer a risk of dissipation of assets from the mere fact that the plaintiff has a prima facie cause of action. In normal circumstances this is particularly so in cases like the present, where there is no evidence at all what the defendant’s assets are. However, in exceptional circumstances (of which the present is unfortunately not one) one can infer the existence of the latter ingredient partly or wholly from proof of the former. This may well be the situation in all cases where the plaintiff’s prima facie case against the defendant involves proof of gross dishonesty.
This approach was the same as that taken by Vincent J in the earlier Victorian decision of Pearce v Waterhouse.[11]
[11][1986] VR 603, 607.
27 Patterson v BTR Engineering has been followed in Victoria by Beach J in Myer Stores Pty Ltd v Conforto [2000] VSC 382 at [5]-[7] and by Redlich J in Victoria University of Technology v Wilson & Ors [2003] VSC 299 at [33].
Consideration of the principles
28 Ujma relied upon a number of factors in contending that the freezing order should be narrower and less restrictive than it is at present. Ujma’s solicitors drew attention to the book Freezing Orders and Search Orders: Mareva and Anton Pillar Orders by Biscoe at paragraph 6.33 and identified matters which he submitted ought be taken into account:
· There was no evidence to suggest that the defendants had sent or arranged to send assets out of the jurisdiction.
· There was no evidence of the defendants engaging in transactions on uncommercial terms or dealing with related parties.
· The defendants have disputed the claim against them and have made a counterclaim against the plaintiff.
· Ujma is a resident within the jurisdiction and has significant ties in the jurisdiction including his children and the business conducted by Consilium.
· The defendants’ assets are not easily converted to cash and removed from the jurisdiction. The principal asset is a property jointly owned by Ujma and his separated wife and there is said to be about $70,000 in frozen bank accounts.
· There has been ongoing contact between the parties’ solicitors about the litigation and the freezing order.
· The defendants deny that they have acted evasively or discreditably in response to the plaintiffs’ claim.
29 Ujma and Consilium submitted that they were unduly prejudiced by the freezing order in several ways. First, banks had refused to allow any withdrawals of money notwithstanding that the terms of the freezing order expressly permitted some withdrawals. Secondly, due to the restrictions on access of funds, Ujma and Consilium were unable to develop and expand the Consilium business as they wished. Ujma intimated that this affected his reputation in business. Thirdly, Ujma was unable to pay third party obligations such as his mortgage. Finally, Ujma was unable to fund his ordinary living expenses due to the difference between the amount he was allowed to spend, namely $4,000 and what he ordinarily spent, namely, $12,000.
30 In addition, Ujma’s solicitor said that Ujma had accumulated legal costs of about $10,000 to date and would incur a further $10,000 up to and including mediation.
31 PropertyShares submitted that it had a strong case against the defendants. PropertyShares said that there was evidence that the representations allegedly made by the defendants were false:
· Mr Wilson denied having signed any documents relating to a loan from the plaintiff or having received any loan funds from the plaintiff.
· Mr and Mrs Wilson swore affidavits in which they denied having engaged Toll or Ben’s Concrete to supply services to them. They denied that they signed any documents relating to finance from PropertyShares.
· The Queensland mortgage which was purportedly signed by Mr and Mrs Wilson was said to have been witnessed by a solicitor, Anthony Sica, of Portfolio Law. Sica denies that he signed the document or that the mortgage is his, and denied being at his office on the date when the document was signed.
· Mr and Mrs Wilson, rather than seeking to borrow money, actually lent Ujma $150,000. A copy loan agreement and mortgages were exhibited.
· Ujma also borrowed money from his friend Mr Toll.
· Toll swore in his affidavit that the tax invoice dated 3 April 2016 which the defendants relied upon to justify the payment of $68, 936 into his account was not an invoice which he rendered. He said also that when he operated Ben’s Concrete,[12] he hand wrote all invoices; he never did any work for Koala Childcare Warrnambool; before this case, he had never heard of either PropertyShares or of Koala Childcare Warrnambool.
· When Ujma repaid money which he had borrowed both from the Wilsons and Toll, in each case he repaid to them more than he owed and asked them to refund the difference to him.
[12]Toll said that he established the business in Western Australia known as “Ben’s Concrete” and operated it for about 12 months using an account at the Commonwealth Bank of Australia.
32 Having considered the material before me, in my view, a freezing order should remain in place. I say this for the following reasons.
33 First, the allegations against Ujma and Consilium involve dishonesty and probable fraud on their part. The evidence suggests that they have received about $95,090 from PropertyShares via Koala Childcare Warrnambool and $58,306 from PropertyShares via Toll. This was after they used funds from PropertyShares to repay $150,000 to the Wilsons and about $3,000 to Toll. Thus far, Ujma has not explained or contested these matters in his affidavit material. If the facts as presented by PropertyShares were incorrect in some way, I would have expected Ujma to challenge them.
34 Secondly, the affidavit material filed by Ujma was questionable in a number of respects:
· He provided no explanation of how moneys purportedly advanced to the Wilsons were transferred into Consilium’s bank account.
· Ujma said in his 18 January 2017 affidavit that the unit at 16/32 East Esplanade St Albans was valued at about $390,000 when the mortgagee, Westpac Banking Corporation, had already taken possession of the property and listed it for public sale on 10 December 2016. It appears that the property did not sell at that time and that the agent, Steven Spirovski of Raine & Horne St Albans has been instructed to list the property for sale at $269,000. Ujma provided none of these details in his material.
· Ujma does not claim or verify that he witnessed Mr and Mrs Wilson sign the loan financing documents including mortgages and guarantee and indemnity in relation to the finance allegedly provided by PropertyShares to them or their borrowing entity. Ujma does not descend into appropriate detail and explain matters on oath in the way one might expect a person in his position to do so when applying to limit the operation of a court order against him.
35 Thirdly, I am not satisfied that there is equity of about $650-700,000 in any property owned by Ujma. Ujma’s affidavit sworn 12 April 2017 is confusing and almost certainly incorrect when it says that “the Investment Property”[13] occurred well before he was put on notice of this proceeding and he confirms that there is $650-700,000 in the property. This suggests that, notwithstanding the property has been sold, somehow the equity remains. Ujma’s solicitor said that there was a mistake in the paragraph which he wanted to correct. However, I said that if his client wished to give a further explanation, an additional affidavit was necessary. It appears that Ujma has a somewhat casual approach to swearing affidavits.
[13]The identity and location of the “Investment Property” is not specified in the defendant’s affidavit material.
36 Fourthly, even if there is some equity in the Maribyrnong property, it is likely to be less than $650-700,000. In argument, Ujma’s solicitor said the value was at or a little above $600,000. The plaintiff assesses the equity of about $385,000. In any case, given that the property is jointly owned, and Ujma and his wife have separated, any equity may well have to be divided between them. From my limited understanding of family law, it is conceivable that, given that the couple have two children, the mother might receive a greater proportion of the equity.
37 Fifthly, Ujma did not explain satisfactorily how, but for the freezing order, he would finance personal expenditure of $12,000 per month when he left his work as a partner at Jirsch Sutherland, an accounting firm, earlier this year. I note that different dates are given in the material regarding Ujma’s termination date - Ujma ceased his employment in either February or March 2017. Either way, it was well after Ujma was aware of the freezing order which was served on him in December 2016. To that extent, Ujma took a calculated risk in leaving his employment to form a new business after the freezing order was made.
38 Unless Ujma explains this expenditure issue, it is hard to say that the order makes him worse off. Personal expenditure is at the stated rate of about $144,000 per year (exclusive of any income tax). In addition, Ujma says he has a mortgage of $3,000 per month and business expenses. Ujma gives no basis for thinking that he could have financed this level of expenditure in any event. I note that Ujma says he is $12,000 in credit on mortgage payments so that no money will be due for 4 months.
39 Sixthly, Ujma plainly ignored the effect of the court order made by Morrish J on 5 January 2017 when he withdrew $5,000 from the bank well knowing that this was in breach of the order. Such an attitude to obeying court orders is not encouraging.
40 While Ujma makes allegations about an alleged counterclaim and an entitlement arising therefrom, there is no evidence supporting the existence of the counterclaim. In those circumstances, it merits little or no weight. The plaintiff denies the substance of the allegation.
Conclusion
41 In the circumstances set out above, I consider that the freezing order should remain in effect pending trial or further order.
42 If the parties cannot agree upon orders giving effect to these reasons, I will hear them on the form of order and costs.
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