Talacko v Talacko

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

S CI 2009 7819

JAN TALACKO (as Executor of the Estate of Helena Marie Talacko) & ORS (according to the Schedule attached)	Plaintiffs
v
JAN EMIL TALACKO & ORS (according to the Schedule attached)	Defendants

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JUDGE:	McDonald J
WHERE HELD:	Melbourne
DATE OF HEARING:	24, 25, 26 and 31 July, 1 August and 17 August 2018
DATE OF JUDGMENT:	7 December 2018
CASE MAY BE CITED AS:	Talacko v Talacko
MEDIUM NEUTRAL CITATION:	[2018] VSC 751

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DAMAGES – Unlawful means conspiracy – Agreement between first defendant and second and third defendants to transfer ownership of properties in Czech Republic prior to anticipated substantial equitable compensation judgment – Plaintiffs lost opportunity to enforce judgment debt against first defendant’s trustee in bankruptcy by resort to the transferred properties – Plaintiffs incurred costs and expenses in litigation in the Czech Republic seeking to set aside donation agreement – Damages to be assessed as at 30 September 2013 when, absent the donation agreement, the proceeds from sale of properties would have been available for distribution to the plaintiffs – Bankruptcy Act 1966 (Cth) ss 50(1), 58(3), 77(1)(a), 77(1)(e) – Foreign Judgments Act 1991 (Cth) ss 15(1), (2) – Supreme Court Act 1986 s 60(3) – Act No. 97 of 1963 of the Czech Republic ss 63, 64 – Act No. 91 of 2012 of the Czech Republic ss 14, 15 – Act No. 40 of 1964 of the Czech Republic s 42a.

AGGRAVATED DAMAGES – Defendants’ conspiracy actuated by malice and desire to hurt plaintiffs – Conduct of second and third defendants objectively worse than fourth defendant – Differential award of aggravated damages against joint tortfeasors.

EXEMPLARY DAMAGES – Conscious wrongdoing by defendants in contumelious disregard of plaintiffs’ rights – Exemplary damages not recoverable for benefit of estate of first and fifth plaintiffs – Administration and Probate Act 1958 s 29(2)(a).

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APPEARANCES:	Counsel	Solicitors
For the first plaintiff	Mr M Hooper	Grindal & Patrick
For the second to fifth plaintiffs	Mr P Solomon QC and Mr O M Ciolek	Brand Partners
For the fourth defendant	Mr D G Collins QC and Mr J B Masters	Strongman & Crouch

HIS HONOUR:

The background to the current proceeding is set out in detail in the liability judgment delivered on 7 August 2015,[1] and the Court of Appeal’s judgment on 27 June 2017.[2] I do not repeat that background. Annexure A to this judgment is a chronology prepared by the second to fifth plaintiffs, which helpfully summarises the long history of the litigation which precedes this judgment.
[1]Talacko v Talacko [2015] VSC 287.
[2]Bennett v Talacko [2017] VSCA 163.

For present purposes, it is sufficient to refer to four aspects of the history of the proceeding:

(i) On 23 February 2001, proceeding S CI 7393 of 1998 was settled by terms of settlement executed by the first defendant.

(ii) On 24 April 2008, Osborne J (as his Honour then was) delivered a judgment in which the first defendant was found liable for breaching the terms of settlement.[3] As a result, the first defendant was held liable to pay the plaintiffs equitable compensation.
[3]Talacko v Talacko [2008] VSC 128.

(iii) On 12 May 2009, the first defendant and his Prague-based sons, David and Paul (the second and third defendants to the current proceeding), executed a donation agreement (‘Donation Agreement’) and applications for registration. This transferred from the first defendant to David and Paul, by way of gift, all of the first defendant’s interests in the Czech properties (‘the Properties’) which were in issue in the then pending equitable compensation proceeding before Kyrou J (as his Honour then was). In his subsequent judgment, Kyrou J concluded that the Properties had a value in October 2009 of at least €14 million.[4]
[4]Talacko v Talacko [2009] VSC 533 [25].

The proceeding to assess equitable compensation was heard by Kyrou J in October 2009. His Honour delivered judgment on 24 November 2009. On 11 December 2009, his Honour ordered the first defendant to pay the plaintiffs equitable compensation and interest in the sum of €10,073,818.[5]
[5]Talacko v Talacko [2009] VSC 579.

(iv)On 17 July 2009, the plaintiffs commenced the current proceeding. The plaintiffs’ claims included a claim for damages for unlawful means conspiracy. The plaintiffs alleged that:

(a) the Donation Agreement was an equitable fraud; and

(b) the first, second and third defendants (who entered the Donation Agreement), as well as the fourth defendant, conspired to injure the plaintiffs by means of the first defendant divesting himself of the Properties via the Donation Agreement, against which a judgment debt from the pending equitable compensation proceeding could have otherwise attached.

In the liability judgment, I accepted these submissions. However, I concluded that the cause of action in unlawful means conspiracy was not made out because, when the liability judgment was delivered on 7 August 2015, the plaintiffs had not established any pecuniary loss flowing from the Donation Agreement. This finding was overturned on appeal. The Court of Appeal held that the plaintiffs had established pecuniary loss as a result of the Donation Agreement:

111.In our view, upon the entry into the donation agreement there was an immediate loss of opportunity to recover the amount of the anticipated equitable compensation judgment. The measure of that loss of opportunity depended upon estimating the significance of events that had not then occurred, and to which reference has now been made. The plaintiffs’ loss occurred when the donation agreement was entered into and the prospect of enforcement of the money judgment, yet to be entered, was impeded by the transfer of the Czech properties from Jan Emil to David and Paul. While it was always going to be necessary to have the Victorian judgment recognised in the Czech Republic, the donation agreement created an additional barrier to enforcement which was from the outset going to cost the plaintiffs money to overcome.
112.It follows that the possibility that the donation agreement made no difference to the plaintiffs’ position, because they might have been unable to recover against Jan Emil in the Czech Republic in any event, is a matter that goes not to the existence of loss, but to its quantification. However difficult it might already have been to recover against Jan Emil, the donation agreement was calculated to make it harder, as the parties to the conspiracy plainly intended. The additional impediment to recovery was both the loss of an opportunity to recover the fruits of the anticipated judgment and the occasion for pecuniary loss consisting of expenses incurred in seeking to undo the donation agreement. As far as the former head of loss is concerned, the value of the opportunity the plaintiffs had enjoyed, and the extent of the impact of the donation agreement on that opportunity, are matters for assessment of damages.
113.For these reasons, we would hold that the plaintiffs have established pecuniary loss in relation to expenses incurred in seeking to set aside the donation agreement, as well as the loss of opportunity for which they contended at trial to execute the equitable compensation judgment against the Czech properties.
114.The plaintiffs put their loss of opportunity case in a second way, by reference to the loss of opportunity to receive a dividend in a future bankruptcy of Jan Emil. Since the fourth element of the tort of unlawful means conspiracy has been established in the manner set out above, the tort is perfected and it is not necessary to say more about that aspect of the case. Damages are then at large and the plaintiffs are entitled to claim and prove any loss or damage forming part of their case.
115.However, for the avoidance of doubt, we should make it clear that we consider that our reasoning regarding the loss of opportunity to recover against the Czech properties applies equally to the loss of opportunity to recover in any bankruptcy of Jan Emil. Upon the making of the donation agreement the plaintiffs immediately lost the opportunity of recovering their judgment debt against Jan Emil’s future trustee in bankruptcy by resort to the Czech properties. At that point, the prospect of recovery of the anticipated judgment was impeded by the transfer of the Czech properties. Again, the value of the chance of recovery which the plaintiffs had before the donation agreement, compared to what they had after it, is a question for assessment of damages.

The orders made by the Court of Appeal on 27 June 2017 included an order remitting the proceeding to the Trial Division for the determination of the quantum of damages to be awarded to the plaintiffs in respect of their claim for unlawful means conspiracy.

Principles to be applied in the assessment of damages for loss of opportunity

In Sellars v Adelaide Petroleum NL the plurality stated:

Notwithstanding the observations of this Court in Norwest, we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s. 52(1), should be ascertained by reference to the court’s assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.
On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant’s case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable. [6]

[6](1994) 179 CLR 332, 355 (‘Sellars’) (emphasis in original).

It is implicit in the Court of Appeal’s reasoning at paragraphs [111] to [115] that the Court accepted that the plaintiffs’ loss of opportunity to recover the amount of the anticipated equitable compensation judgment, by resort to the Properties as a consequence of the Donation Agreement, was the ‘loss of a commercial opportunity which had some value (not being a negligible value).’[7]
[7]Ibid.

The Court of Appeal’s reasoning requires the loss of the plaintiffs’ opportunity to recover the judgment debt and costs orders by resort to the Properties to be measured in accordance with the value of the reduction in that opportunity subsequent to the Donation Agreement. Prior to the execution of the Donation Agreement on 12 May 2009, the plaintiffs’ opportunity to recover the anticipated equitable compensation judgment (whether by enforcement proceedings in the Czech Republic or by receiving a distribution in the first defendant’s bankruptcy, or by a combination of both) had a value. After the Donation Agreement, that value was diminished because the Donation Agreement constituted an additional impediment to the recovery of the fruits of the anticipated judgment.[8]
[8]Bennett v Talacko [2017] VSCA 163 [112].

In his opening submissions, Mr Collins QC, who appeared with Mr Masters for the fourth defendant, submitted that the Court of Appeal’s reasoning left open a potential finding that the value of the plaintiffs’ lost opportunity to recover the anticipated judgment debt in the equitable compensation proceeding was zero.[9] I reject this submission. It is not open to me to conclude, based on an evaluation of the probabilities and possibilities which existed as at 12 May 2009, that the loss of the plaintiffs’ opportunity to have resort to the Properties was of negligible value. Such a conclusion would be tantamount to a finding that the Donation Agreement did not entail a loss of opportunity, and would be inconsistent with the Court of Appeal’s judgment.
[9]Transcript of proceedings (24 July 2018) 85.25–87.17.

At paragraphs [111] to [115], the Court of Appeal identified two discrete limbs of the plaintiffs’ loss of opportunity to recover the amount of the anticipated equitable compensation judgment:

(v) the prospect of enforcement of the judgment being impeded by the transfer of the Properties from the first defendant to the second and third defendants; and

(vi)the loss of opportunity to recover a dividend in a future bankruptcy of the first defendant.

The plaintiffs accept that they are not entitled to damages for the loss of both opportunities. They concede that, if this was to occur, they would receive double compensation. The plaintiffs submit that, if the Court concludes that the first defendant would have been bankrupted, damages should be assessed solely by reference to the loss of opportunity to recover the judgment debt by proving in his bankruptcy by resort to the Properties. The plaintiffs submit that only in the event that the Court concludes that the first defendant would not have been bankrupted should damages reflect the plaintiffs’ loss of opportunity to recover the anticipated equitable compensation judgment by way of recognition of the orders of Kyrou J in the Czech Republic, and enforcement against the Properties.

The fourth defendant submits that the binary approach contended for by the plaintiffs is misconceived. The fourth defendant submits that, if a sequestration order had been obtained in circumstances where the first defendant retained ownership of the Properties, the plaintiffs may have sought to recover the judgment debt through enforcement proceedings commenced in the Czech Republic, as well as via the bankruptcy of the first defendant. The fourth defendant points to the fact that this is what in fact occurred, with proceedings in the Czech Republic having been commenced within a few days of a sequestration order made on 7 November 2011. The fourth defendant submits:

If the donation agreement had not been entered into, the plaintiffs would only have been capable of recovering the amount of the judgment debt once, whether that recovery occurred through enforcement, through bankruptcy, or through a combination of the two. For these reasons, the Court should assess for the loss of a single opportunity, being the opportunity to recover the judgment debt.[10]

[10]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [19].

I accept this submission. However, I also accept the plaintiffs’ submission that, if the first defendant had been bankrupted whilst residing in Australia, the simplest, quickest and most cost effective means of recovering the judgment debt would have been for the trustee in bankruptcy, having secured a transfer of title from the first defendant, to sell the Properties and distribute the proceeds of sale to the plaintiffs.

If the first defendant had retained ownership of the Properties, the plaintiffs, properly advised, would not have sought recovery of the judgment debt via recognition and enforcement of Kyrou J’s judgment in the Czech Republic. The fact that the plaintiffs commenced recognition and enforcement proceedings in the Czech Republic in November 2011 is not a sound guide as to what would have occurred if the Donation Agreement had not been entered into. If the trustee in bankruptcy could have obtained title to the Properties, there was no utility in the plaintiffs commencing recognition and enforcement proceedings in the Czech Republic.

I also accept the fourth defendant’s submission, that it is necessary in assessing the value of the plaintiffs’ loss of opportunity to receive a dividend in a future bankruptcy of the first defendant to have regard to the plaintiffs’ prospects of success in the proceedings which are currently on foot in the Czech Republic seeking recognition and enforcement of the Kyrou J orders. If I was to conclude that the plaintiffs had very good prospects of:

(a) setting aside the Donation Agreement, and

(b) enforcing the judgment debt against the second and third defendants,

this would be a matter to be taken into account in the assessment of the value of the lost opportunity to receive a dividend in a future bankruptcy. The plaintiffs’ prospects of successfully enforcing the orders of Kyrou J are to be taken into account in accordance with the principles in Sellars. In ascertaining the value of the plaintiffs’ lost opportunity to recover the judgment debt by resort to the Properties prior to 12 May 2009, it is necessary to take account of the possibility of recovering the judgment debt by resort to the Properties after 12 May 2009.
The date of assessment of the loss of opportunity

The general rule is that damages for a tort or breach of contract are assessed as at the date when the cause of action arises.[11] However, this general rule may be departed from:

it must give way in particular cases to solutions best adapted to giving an injured plaintiff that amount in damages which will most fairly compensate him for the wrong he has suffered.[12]

[11]Johnson v Perez (1988) 166 CLR 351, 355–6.

[12]Ibid.

If the general rule was to apply in the present proceeding, the value of the plaintiffs’ lost opportunity would be assessed as at 12 May 2009, being the date on which the Donation Agreement was entered into.

Kyrou J delivered judgment on 24 November 2009 awarding the first plaintiff and the second to fifth plaintiffs €5,036,909, a total of €10,073,818. Costs of the proceeding were not awarded until 16 September 2013 when Kyrou J ordered the first defendant to pay the plaintiffs $2,680,239 in costs. None of the parties submitted that I should assess damages as at 12 May 2009. The plaintiffs submitted that:

the value of the benefits that they stood to obtain should be assessed by reference to the amounts which Kyrou J in fact ordered Jan Emil Talacko to pay them, as ultimately quantified, on 11 December 2009 and 16 September 2013, respectively.[13]

[13]Second to fifth plaintiffs, ‘Outline of closing submissions of the second to fifth plaintiffs’, 6 August 2018 [8]; First plaintiff, ‘First plaintiff’s written closing submissions’, 8 August 2018 [11].

The fourth defendant submitted that:

had the donation agreement not been entered into, the plaintiffs would not have been able to recover the judgment debt until well after that time. Therefore, application of the general rule would not give effect to the compensatory principle by placing the plaintiffs in the position that they would have been in had the donation agreement not been entered into.
To most fairly compensate the plaintiffs, the Court should assess damages for their loss of opportunity as at the date on which they would most likely have recovered the judgment debt had the donation agreement not been entered into.[14]

[14]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [12]–[13].

The plaintiffs are entitled by way of an award of damages to be placed in the same position that they would have been in had the tort of unlawful means conspiracy not been committed by the defendants. In Rosa v Galbally & O’Bryan,[15] the appellant sued a firm of solicitors for negligently advising her to settle a personal injury claim against her employer for far less than it was worth. At trial she had been awarded damages of $56,750 for loss of a chance to pursue her claim. The Court of Appeal overturned this award of damages and replaced it with a much higher award, which included a figure for lost earning capacity. Damages and interest were calculated as at the notional date of trial.[16] Tate JA quoted Haines v Bendall:

[t]he settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, as far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed … Compensation is the cardinal concept. It is the “one principle that is absolutely firm, and which must control all else” …Cognate with this concept is the rule … that a plaintiff cannot recover more than he or she has lost.[17]

[15](2013) 42 VR 382.

[16]Ibid 420 [14], 425 [34].

[17]Ibid 413 [131], quoting Haines v Bendall (1991) 172 CLR 60, 63.

When the Donation Agreement was signed on 12 May 2009, many of the events which impact on the assessment of damages had not taken place and were unlikely to do so for a number of years. The plaintiffs’ loss of opportunity to recover the judgment debt against the first defendant’s trustee in bankruptcy by resort to the Properties was preconditioned upon, inter alia:

(a) the making of a sequestration order (which was unlikely to occur until the first defendant had exhausted all rights of appeal from Kyrou J’s anticipated equitable compensation judgment);

(b) the making of orders under s 77(1)(e) of the Bankruptcy Act 1966 (Cth) (‘Bankruptcy Act’) requiring the transfer of title in the Properties from the first defendant to the trustee in bankruptcy;

(c) the exercise by the first defendant of rights of appeal in respect of any order made under s 77(1)(e) of the Bankruptcy Act;

(d) the trustee in bankruptcy obtaining registration of title to the Properties in his name; and

(e) the trustee selling the Properties, and then recovering and distributing the proceeds of sale to the plaintiffs.

Assessing the value of the plaintiffs’ lost opportunity to recover the anticipated judgment debt by resort to the Properties immediately prior to the execution of the Donation Agreement is divorced from reality. Based upon the matters set out above, it is unlikely that Mr Silvia, who was appointed the first defendant’s trustee in bankruptcy on 7 November 2011, would have received the proceeds of sale from the Properties before 1 July 2013. It is likely that the proceeds would have been received by Mr Silvia, and then distributed to the plaintiffs by 30 September 2013.

Assessing the plaintiffs’ lost opportunity as at 30 September 2013 does not visit any unfairness upon the plaintiffs. To the contrary, if the value of the opportunity to recover the judgment debt against the trustee in bankruptcy had been assessed as at May 2009, the value of that opportunity would be significantly discounted to reflect the fact that at that time, only Czech citizens or permanent residents could be the registered owners of Czech property. Foreign ownership laws were relaxed from mid-2011.[18] By late 2012/early 2013 when, absent the Donation Agreement, Mr Silvia would have been seeking to be registered as the owner of the first defendant’s Czech properties, foreign ownership restrictions had been removed.
[18]Transcript of proceedings (31 July 2018) 292.10–292.20.

I accept the fourth defendant’s submission that damages for loss of opportunity should be assessed from the time when Mr Silvia would have actually been in receipt of the proceeds of sale from the Properties. I have concluded that the proceeds of sale from the Properties would have been distributed to the plaintiffs by 30 September 2013. I have concluded, as discussed below, that interest on the damages for the loss of opportunity to recover the judgment debt by resort to the Properties should be assessed from 30 September 2013.

If the first to third defendants had not entered into the Donation Agreement the plaintiffs would have bankrupted the first defendant

One of the few matters upon which the parties agree in the current proceeding is that, absent the Donation Agreement, the first defendant would have been bankrupted. However, the parties disagree as to:

(a) who would have initiated the bankruptcy;

(b) whether the first defendant would have been in Australia at the time of the bankruptcy; and

(c) whether the first defendant would have complied with court orders requiring him to transfer ownership of the Properties to the trustee in bankruptcy.

The question of whether the plaintiffs would have bankrupted the first defendant absent the Donation Agreement is to be determined on the balance of probabilities, as it depends upon the plaintiffs’ hypothetical conduct.[19] The question of whether, as contended by the fourth defendant, the first defendant would have bankrupted himself whilst outside of Australia is to be assessed by reference to the degree of probabilities and possibilities.[20]
[19]Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 353.
[20]Ibid 355−356.

The first defendant’s bankruptcy in the counterfactual world, in which no Donation Agreement had been executed, was a primary focus of the parties’ submissions. If the first defendant had been bankrupted and his trustee in bankruptcy secured a transfer of title to the Properties, the trustee would have been able to sell the Properties. The proceeds of sale could have then been distributed to the plaintiffs without the necessity of obtaining recognition and enforcement in the Czech Republic of the equitable compensation judgment. For the reasons set out below, I have no hesitation in concluding that recovery of the judgment debt by means of the trustee securing a transfer of title of the Properties was a much more effective and efficient means of recovery, compared to seeking recognition and enforcement of the equitable compensation judgment in the Czech Republic.

On 11 December 2009, Kyrou J made orders quantifying the amount of equitable compensation to be paid to the plaintiffs. On 1 March 2010, Helena Talacko and the second to fifth plaintiffs issued bankruptcy notices against the first defendant, each for a total debt of $7,569,428.50.[21] The notices were served on the first defendant on 3 March 2010.[22] A sequestration order was not made until 7 November 2011, shortly after the High Court dismissed an application for special leave to appeal from orders of the Court of Appeal on 18 March 2011, dismissing an appeal from Kyrou J’s judgment.
[21]Talacko v Talacko [2010] FCA 193 [7].
[22]Ibid [8].

Absent the Donation Agreement, the plaintiffs would have bankrupted the first defendant. The first defendant had no assets in Australia in December 2009. The service of bankruptcy notices in early 2010 would have enlivened the Federal Court’s powers under s 50 of the Bankruptcy Act to order delivery up of the first defendant’s passport. This is what occurred in March 2010 when the plaintiffs made an application to the Federal Court for orders preventing the first defendant from leaving Australia.

Dodds-Streeton J ordered that the first defendant’s passport be delivered to the Court or his solicitor, subject to the giving of appropriate undertakings.[23] It is highly likely that the plaintiffs would have taken the same steps if the first defendant had retained ownership of the Properties. Court orders preventing the first defendant from leaving Australia would have enabled the trustee to obtain orders requiring the first defendant to transfer title to the Properties. In the counterfactual world, in which the first defendant was a judgment debtor for in excess of €10 million and retained ownership of the Properties, the plaintiffs would have obtained advice as to the best course available to them to secure recovery of the judgment debt. Properly advised, they would have served bankruptcy notices on the first defendant, secured his ongoing presence in Australia and obtained orders requiring transfer of title to the Properties to the trustee in bankruptcy.
[23]Ibid [52].

Dr Tomáš Richter gave expert evidence in relation to Czech law. Dr Richter’s evidence supports a finding that, absent the first defendant transferring title in the Properties to the trustee in bankruptcy, it is unlikely that the trustee would have been able to realise the Properties through the bankruptcy whilst the first defendant remained owner of the Properties. Dr Richter gave the following evidence:

(a) From late 2009 to 31 December 2013 (described by him as ‘Period I’), there were ‘probably not’, and most probably not in a commercially helpful way, any legal processes on which an Australian trustee in bankruptcy could have relied to seek and obtain the liquidation of real property of an Australian bankrupt, being property located in the Czech Republic, and the distribution of proceeds to the bankrupt’s creditors, including judgment creditors.[24]

(b) After 1 January 2014 (described by him as ‘Period II’), although there was a process upon which an Australian trustee in bankruptcy could have relied to achieve the recognition of a sequestration order in the Czech Republic, that recognition might have brought few practical results in the circumstances of the present case. In particular, it is not clear at all whether Czech courts would actually be of any meaningful assistance to the Australian trustee in bankruptcy with respect to an attempt on his or her part to liquidate the Properties and distribute the proceeds thereof to the bankrupt’s creditors abroad.[25]

[24]Expert report of Tomáš Richter filed 30 April 2018, 7 [5.1.1(a)].

[25]Ibid, 9–13 [5.1.1(b)].

This evidence reinforces the conclusion that, properly advised, the plaintiffs would have sought an order pursuant to s 77(1)(e) of the Bankruptcy Act requiring the first defendant to transfer title in the Properties to the trustee in bankruptcy.

The fourth defendant submits that, in assessing the value of the plaintiffs’ opportunity to recover the judgment debt prior to the Donation Agreement being entered into, the Court should have regard to the likelihood that the first defendant would have returned to the Czech Republic prior to an order being made requiring him to transfer title in the Properties to his trustee in bankruptcy. The fourth defendant submits that it is likely that the first defendant would have returned to the Czech Republic at some point in 2009, 2010 or 2011 and would not have returned to Australia.[26] The fourth defendant submits that, having returned to the Czech Republic, the first defendant would have taken steps to bankrupt himself.
[26]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [38]–[39].

For many years prior to 2009, the first defendant had spent approximately six months in Australia and six months in the Czech Republic each year. The fourth defendant submits that, if a Donation Agreement had not been entered into, the orders made by the Supreme Court of Victoria in 2009,[27] depriving the first defendant of his passport, would not have been made.
[27]See paragraph [35] below.

It is correct that the Donation Agreement was part of the factual matrix underpinning the orders made by the Supreme Court of Victoria which placed restrictions on the first defendant’s ability to leave Australia. However, it does not follow that if he had continued to own the Properties the plaintiffs would not have been able to restrict his ability to leave Australia.

From 14 July 2009 until 5 March 2010, the first defendant was prevented from leaving Australia by a series of orders made by Justices of the Supreme Court of Victoria. On 13 July 2009, Bongiorno J issued an arrest warrant against the first defendant, pending a contempt hearing, upon evidence of the first defendant’s intention to leave Australia. The first defendant was briefly taken into custody. On 14 July 2009, Byrne J, upon the first defendant delivering his passport to his solicitor and being ordered not to leave the State of Victoria, ordered that the first defendant be released from custody. In October 2009, Habersberger J ordered that the travel restrictions on the first defendant be extended. On 13 October 2009, his Honour ordered that, unless the first defendant paid $2.1 million into Court as security for compliance with Kyrou J’s freezing orders, the travel restrictions be continued. On 17 December 2009, Kyrou J extended the travel restrictions until 5.00 pm on Friday, 5 March 2010. An application to Beach J for an extension of the travel restrictions was dismissed on 4 March 2010.[28]
[28]Talacko v Talacko [2010] FCA 193 [13]–[19].

On 5 March 2010, Dodds-Streeton J heard an application pursuant to s 50 of the Bankruptcy Act for orders to restrain the first defendant from leaving Australia. In opposing the application, the first defendant relied upon an affidavit of his solicitor, Mr Witt. He deposed that Beach J, when refusing to extend the orders restricting the first defendant’s right to travel outside of Australia, had concluded that the plaintiffs had demonstrated no more than a possibility that the first defendant’s continued presence in Australia might assist in enforcing the equitable compensation judgment.[29]
[29]Ibid [28].

In opposing the application before Dodds-Streeton J for travel restraint orders, the first defendant submitted that the plaintiffs were ‘forum shopping’ and were seeking the same relief which had been refused by Beach J.[30] Dodds-Streeton J made orders pursuant to s 50(1) of the Bankruptcy Act requiring the first defendant to deliver his passport to the Court or his solicitor, upon the provision of appropriate undertakings.
[30]Ibid [35].

Section 50(1) of the Bankruptcy Act provides:

At any time after a bankruptcy notice is issued, or a creditor’s petition is presented, in relation to a debtor, but before the debtor becomes a bankrupt, the Court may:
(a)direct the Official Trustee or a specified registered trustee to take control of the debtor’s property; and

(b) make any other orders in relation to the property.

Dodds-Streeton J concluded that s 50 of the Bankruptcy Act was a source of power for the Federal Court of Australia to make orders requiring the first defendant to deliver up his passport:

Section 50 of the Act is aimed at facilitating the preservation and protection of the debtor’s property, so that in the event of sequestration, it will be available for equitable distribution to creditors. The considerations relevant to making an order thereunder differ from those relevant to the enforcement of a judgment and the present application differs from those recently made before the Supreme Court of Victoria.[31]

[31]Ibid [49].

Dodds-Streeton J made orders, the practical effect of which was to prevent the first defendant leaving Australia. This occurred notwithstanding that the first defendant had transferred title in the Properties to the second and third defendants. In the counterfactual world where the Properties remained in the first defendant’s name, the objective of preserving the first defendant’s property to be available for his creditors would weigh heavily in favour of an order requiring him to surrender his passport.

The fourth defendant submits that the first defendant would have had ample opportunity to leave Australia prior to an application having been made by his trustee in bankruptcy requiring the surrender of his passport.[32] This submission assumes an application made by the trustee under s 77(1)(a)(ii) of the Bankruptcy Act after the making of a sequestration order. However, the orders made by Dodds-Streeton J requiring the first defendant to surrender his passport were made 20 months prior to the sequestration order of 7 November 2011. I consider it highly likely that, absent the Donation Agreement, the plaintiffs would have succeeded in an application to the Federal Court for orders for delivery up of the first defendant’s passport within a few months of Kyrou J’s 11 December 2009 order. Thus, it is highly likely that the first defendant would have been in Australia when a sequestration order was made, and that this order would have been made in November 2011. Absent the Donation Agreement, the first defendant would still have exhausted all of his appeal rights in respect of the orders made by Kyrou J on 11 December 2009. Absent the Donation Agreement, the first defendant’s avenues of appeal would not have been exhausted until late October 2011. A sequestration order would have been made shortly thereafter.
[32]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [39].

I consider it highly unlikely that, absent the Donation Agreement, the first defendant would have been able to leave Australia and take steps to bankrupt himself.

Would the first defendant’s trustee in bankruptcy have obtained a transfer of title to the Properties?

I accept the fourth defendant’s submission that it is extremely likely that the first defendant would have refused to comply with the request to transfer title to the Properties to his trustee in bankruptcy. The fourth defendant submits that, in circumstances where the first defendant refused to voluntarily transfer title in the Properties, it is likely that the trustee would not have applied for or obtained a court order compelling the first defendant to transfer the Properties, or pursued contempt proceedings if an order was obtained but not complied with.

The fourth defendant placed weight upon Mr Silvia’s evidence that, although he was aware that a trustee in bankruptcy could request a bankrupt to transfer property located overseas to the trustee (as Mr Silvia did in respect of the first defendant’s land in Suchá, Slovakia), he was not aware of any process under Australian law by which the bankrupt could be compelled to effect such a transfer. He gave evidence that, if a bankrupt did not sign a transfer, he could be frustrated in his efforts to secure such a transfer.[33]
[33]Transcript of proceedings (25 July 2018) 181.10–182.1.

Mr Silvia gave evidence that the question of trying to get the first defendant to sign a transfer of land which he owned in Suchá became ‘somewhat academic’ because the first defendant died a few months after he had refused to sign a transfer.[34] Mr Silvia’s evidence was that, if the first defendant had not died in November 2014, he would have sought legal advice as to how to obtain a transfer of the Suchá land.[35] He noted that, in November 2014, the action available to him was somewhat limited because the administration of the estate in bankruptcy was unfunded to the extent of hundreds of thousands of dollars of costs which had been incurred.[36]
[34]Ibid.
[35]Ibid 183.1–183.5.
[36]Ibid 183.6–183.9.

The fourth defendant submits that it is unrealistic for the plaintiffs now to suggest that the prospect of obtaining an order requiring the first defendant to execute a transfer of the Properties would have been raised in legal advice obtained by Mr Silvia in the counterfactual scenario.[37] The fourth defendant submits that the notion that Mr Silvia:

might have deployed s 77 of the Bankruptcy Act to effect a transfer of the Czech properties to him is completely new; it was not raised by any of the parties during nine years of litigation in this proceeding until it was outlined by the second to fifth plaintiffs’ junior counsel at the hearing in the week before the quantum trial commenced.[38]

[37]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [47].

[38]Ibid.

It is correct that the plaintiffs made no reference during the liability trial to the potential for Mr Silvia to have obtained an order pursuant to s 77(1)(e) of the Bankruptcy Act requiring the first defendant to transfer the Properties to him. However, the manner in which the liability trial was conducted does not support a conclusion that, if Mr Silvia had sought legal advice in the counterfactual world in which the first defendant retained ownership of the Properties, such advice would not have canvassed the potential for Mr Silvia to have obtained an order under s 77(1)(e) of the Bankruptcy Act. Absent the Donation Agreement, the first defendant would have been the owner of very valuable real estate in Prague whilst simultaneously being indebted to the plaintiffs for in excess of €10 million. Properly advised, Mr Silvia would have been informed of the potential to obtain an order pursuant to s 77(1)(e) of the Bankruptcy Act. Further, the plaintiffs would have had significant self-interest in providing Mr Silvia with sufficient funds to pursue recovery of the Properties via an order under s 77(1)(e) of the Bankruptcy Act, registering title to the Properties, and securing their sale.

The fourth defendant submits that, even if Mr Silvia had obtained an order pursuant to s 77(1)(e), he would not have pursued contempt proceedings to force compliance with the order. The fourth defendant points to an internal email of BRI Ferrier on 10 October 2012 which noted that Mr Silvia’s lawyer, Mr Sawyer, ‘agrees that there is little direct benefit from Australian court action’, and that ‘[e]ven if there is an order to Talacko to do something, it is likely to be flouted and contempt proceedings are unlikely to be persuasive of action.’[39] I do not place significant weight upon this evidence. Absent the Donation Agreement, the first defendant would have been the owner of very valuable real estate in Prague whilst simultaneously being indebted to the plaintiffs for in excess of €10 million. In these circumstances Mr Silvia would have explored all avenues for recovery of the judgment debt against the Properties. This would have included the option of obtaining and enforcing an order under s 77(1)(e) of the Bankruptcy Act.
[39]‘Email from Peter Sheppard of BRI Ferrier to Andrew Cummins’ (CB 8233).

The fourth defendant’s submission assumes that it is legitimate, when assessing the value of a lost opportunity, to have regard to the possibility that a defendant will refuse to comply with a court order. I was not directed to any relevant authority by the parties. My own research has not identified any authority which has directly considered this question. Nevertheless, there is a substantial body of authority which supports the conclusion that, when assessing damages for a lost opportunity, the Court should not have regard to a contingency which involves a party refusing to comply with a court order. In particular, it is a well-established principle that a party is not permitted to take advantage of their own wrongdoing (‘the wrongdoer principle’).[40]
[40]Gnych v Polish Club Ltd (2015) 255 CLR 414, 426−7 [45]; Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215, 228−30; Gollan v Nugent (1988) 166 CLR 18, 46.

In submitting that the first defendant would have refused to comply with an order made pursuant to s 77(1)(e) of the Bankruptcy Act, the fourth defendant does not rely upon her own wrongdoing, but that of the first defendant. The fourth defendant points to the prospect of the first defendant refusing to comply with a court order made pursuant to s 77(1)(e) of the Bankruptcy Act as a matter to be taken into account in her favour in the assessment of her liability to pay damages. Nothing turns upon the fact that it is the conduct of the first defendant, rather than the fourth defendant, which is relied upon. I have previously concluded that the first defendant and the fourth defendant were co-conspirators in respect of the entry by the first, second and third defendants into the Donation Agreement. This Agreement constituted an equitable fraud. It is not permissible for the fourth defendant to rely upon unlawful conduct of a co-conspirator, the first defendant, in aid of a submission that her liability for damages should be reduced.

The fourth defendant submits that the Court should have regard to the possibility that the first defendant would not only have refused to comply with an order under s 77(1)(e) of the Bankruptcy Act, but would have accepted a term of imprisonment rather than comply with such an order. I place no weight on this submission. It is an attempt by the fourth defendant to rely upon the first defendant being imprisoned for contempt. I reject it for the reasons set out above. However, even if I could have regard to the possibility of the first defendant refusing to comply with a court order and exposing himself to a potential term of imprisonment, it is highly likely that the first defendant would have transferred his interest in the Properties to Mr Silvia under threat of imprisonment.

On 13 July 2009, the first defendant was remanded in custody to appear before Byrne J on 14 July 2009 on contempt charges. During the liability trial, evidence was given by the first defendant’s solicitor, Mr Witt, that the first defendant ‘for a period after he spent the night in gaol, he was very shaken up’[41] and ‘after he’d been sent to prison for the night he really wasn’t in much of a state to provide a lot of instructions.’[42] Based on this evidence, it is highly likely that the prospect of a term of imprisonment would have induced the first defendant to sign a transfer of the Properties to Mr Silvia.
[41]Transcript of proceedings (11 March 2015) 567.1–567.2.
[42]Ibid 568.8–568.10.

The fourth defendant also submits that, if the first defendant had not transferred the Properties to the second and third defendants, he would have transferred the Properties to some other person. I do not place any weight on this submission. The transfer of the Properties to someone other than the second and third defendants would have constituted an equitable fraud for the same reason that the Donation Agreement constituted an equitable fraud. That is, any such transfer would be in bad faith in respect of the plaintiffs who would be adversely affected by the transfer of the Properties.[43]

Conclusion regarding recovery of judgment debt against trustee in bankruptcy by resort to the Properties, absent the Donation Agreement

[43]Talacko v Talacko [2015] VSC 287 [158].

Prior to the Donation Agreement, the plaintiffs had a 75 per cent chance of recovering their judgment debt against the first defendant’s future trustee in bankruptcy by resort to the Properties. It is highly likely that absent the Donation Agreement:

(vii) The plaintiffs would have served bankruptcy notices on the first defendant within the first three months of 2010.

(viii) Shortly thereafter, an application would have been successfully made to the Federal Court for an order pursuant to s 50 of the Bankruptcy Act requiring the first defendant to surrender his passport.

(ix) A sequestration order would have been made in November 2011, appointing Mr Silvia as the first defendant’s trustee in bankruptcy.

(x) The first defendant would have refused to comply with a request to voluntarily transfer title to the Properties to Mr Silvia.

(xi) Mr Silvia would have obtained legal advice regarding the options available to him to compel the first defendant to transfer the Properties. He would have been advised regarding the option of obtaining an order under s 77(1)(e) of the Bankruptcy Act.

(xii) The Federal Court would have made an order requiring the first defendant to transfer title to the Properties to Mr Silvia.

(xiii) Having exhausted all rights of appeal in respect of an order under s 77(1)(e) of the Bankruptcy Act, the first defendant would have transferred title to the Properties to Mr Silvia.

(xiv) Mr Silvia would have been registered as owner of the Properties. Registration would have been effective approximately 30 days after it was lodged.[44]

(xv) The Properties would have been sold during the second quarter of 2013. Taking into account a settlement period of 2 months, the proceeds of sale would have been distributed to the plaintiffs by 30 September 2013.

The value of the plaintiffs’ opportunity, after the Donation Agreement, to recover the judgment debt against the first defendant’s future trustee in bankruptcy by resort to the Properties

[44]Transcript of proceedings (31 July 2018) 291.18–291.27.

After the Donation Agreement, the first defendant was no longer the owner of the Properties. As such, there was no prospect of Mr Silvia securing a transfer of title from the first defendant and then selling the Properties. Once the transfer of the Properties from the first defendant to the second and third defendants was registered, it was not open under Czech law for the first defendant to reverse the donations unilaterally.[45] Accordingly, a future trustee in bankruptcy could not successfully direct the first defendant to take any steps to transfer the Properties to the trustee. Further, absent a transfer of the first defendant’s title in the Properties to the trustee, it is unlikely that a trustee in bankruptcy would have succeeded in securing a transfer of title by way of formal recognition of Australian insolvency proceedings in the Czech Republic.[46] Even if the plaintiffs are successful in setting aside the Donation Agreement, this will not result in the second and third defendants’ interests in the Properties vesting in the estate of the first defendant. If the plaintiffs succeed in setting aside the Donation Agreement, the second and third defendants will retain title to the Properties. However, the plaintiffs would have standing to seek to enforce the equitable compensation judgment directly against the second and third defendants.[47]
[45]Ibid 264.29–265.3.
[46]Expert report of Tomáš Richter filed 30 April 2018, 14–15 [5.1.3].
[47]Transcript of proceedings (31 July 2018) 266.8–266.19.

In light of the matters set out above, I accept the plaintiffs’ submission that, after the Donation Agreement, there was no prospect of the trustee in bankruptcy getting in and realising the Properties. Therefore, the possibility, after the Donation Agreement, of the plaintiffs recovering the judgment debt against the first defendant’s future trustee in bankruptcy by resort to the Properties is not a matter to be taken into account by way of a reduction of the value of the chance to recover against the trustee in bankruptcy by resort to the Properties prior to the Donation Agreement. However, the plaintiffs’ prospects of successfully pursuing legal proceedings, currently on foot in the Czech Republic, is a matter to be taken into account in assessing the value of the opportunity prior to the Donation Agreement to recover the judgment debt against the trustee in bankruptcy by resort to the Properties.

On 4 November 2011 the second to fifth plaintiffs commenced two proceedings in the District Court of Prague 1:

(xvi) A proceeding against the first defendant, seeking to have the Wood AsJ costs order and the Kyrou J order in the equitable compensation proceeding recognised in the Czech Republic for the purposes of enforcement (‘Enforcement Proceeding’);

(xvii) A proceeding against the second and third defendants seeking to set aside the Donation Agreement (‘Donation Proceeding’).

On 20 April 2012, the first plaintiff commenced a proceeding against the second and third defendants seeking to set aside the Donation Agreement (‘Donation Proceeding’). On 14 February 2012, the first plaintiff commenced a proceeding for the recognition and enforcement of the Wood AsJ costs order and the Kyrou J equitable compensation order against the first defendant (‘Enforcement Proceeding’). This latter proceeding has been dismissed because of a failure of the first plaintiff to comply with a court order for the filing of evidence.

Mr Hlavička has acted for all of the plaintiffs in both of the Donation Proceedings and Enforcement Proceedings from their commencement until the present time. Save for the first plaintiff’s Enforcement Proceeding, the other three proceedings are still on foot.

If the Donation Proceedings are successful, the Donation Agreement will be set aside but the Properties will remain registered in the name of the second and third defendants. However, the plaintiffs would have the right to enforce the equitable compensation judgment against the Properties by way of a separate proceeding.[48] The Donation Proceedings have been on foot for six and a half years. Many procedural objections have been taken by the second and third defendants. For example, there was two years of litigation before the question of Margaret Talacko’s successor in the litigation was resolved in favour of the second to fifth plaintiffs.[49] There have also been substantial delays associated with the arguments regarding reciprocity between the Czech courts and Australian courts, the impact of the first defendant’s insolvency and the finality and enforceability of Kyrou J’s judgment.[50]
[48]Ibid 266.15–266.23.
[49]Ibid 270.1–270.13.
[50]Ibid 270.29– 271.5.

Mr Hlavička expects a delay of at least one to two years before the Donation Proceedings are concluded, followed by two years, at a minimum, to resolve any appeals.[51] If the plaintiffs are successful in setting aside the Donation Agreement, they would then have to institute a separate enforcement proceeding. Mr Hlavička stated that it was difficult to anticipate the length of that proceeding, but he considers that it would be at least four, five, even six years,[52] a total of up to ten years to conclude the litigation.
[51]Ibid 271.15–271.22.
[52]Ibid 271.26–272.1, 274.28–275.6.

The defendant in the Enforcement Proceeding is the first defendant in the current proceeding. The purpose of the proceeding is to enforce and recover moneys based upon Kyrou J’s order and the costs order of Wood AsJ.[53] In January 2012, the District Court endorsed the execution of the Kyrou J judgment.[54] This judgment was subject to an appeal to the Municipal Court which upheld the judgment of the District Court.[55] Following the judgment of the Municipal Court, there was enforcement of the Kyrou J judgment against bank accounts in the name of the first defendant. This resulted in the recovery of CZK 293,274.[56]
[53]Ibid 277.6–277.9.
[54]‘Resolution of the District Court in Prague 1, 49 EXE 2108/2011-73 (English translation)’ (CB 7609–7612.6).
[55]‘Resolution of the Municipal Court in Prague, 64Co 142/2012 – 160 (English translation)’ (CB 7693–7698.6).
[56]Transcript of proceedings (31 July 2018) 279.13.

The judgment of the Municipal Court was appealed by the first defendant to the Supreme Court. The Supreme Court overturned the decision of the Municipal Court and remitted the proceeding for further hearing. The decision of the Supreme Court was based on its opinion that the first defendant had not been given an opportunity to comment on a letter received by the Municipal Court from the Commonwealth Attorney-General on the question of reciprocity.[57] However, the Supreme Court upheld all other aspects of the Municipal Court’s judgment including on the questions of reciprocity and the finality of Kyrou J’s judgment.[58]
[57]Ibid 280.26–281.7.
[58]Ibid 281.7–281.12.

As a result of the first defendant’s death in November 2014, the Enforcement Proceeding cannot go forward against him. It is necessary for someone to be appointed to represent his estate. To date, nobody has accepted an inheritance from the first defendant so there is no representative of the estate. The proceeding is currently suspended. It is very likely that the proceeding will be terminated.[59]
[59]Ibid 282.1–282.7.

The fourth defendant submits that it is likely that the plaintiffs will succeed in the Donation Proceedings and will recover the amount of the judgment debt through future enforcement proceedings against the second and third defendants.[60] In the Donation Proceedings, the plaintiffs seek orders pursuant to s 42a of Act No 40 of 1964 of the Czech Republic (the Czech Civil Code) that the Donation Agreement is legally ineffective in relation to them. Section 42a(2) prescribes three preconditions:

(i)the legal act was done in the last three years;
(ii)the legal act was done by the debtor ‘on purpose of curtailing his creditors’; and
(iii)the other party to the legal act must have known of this purpose.

[60]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [123].

It is likely that these three elements of s 42a(2) will be satisfied in the Donation Proceedings. However, Mr Hlavička gave unchallenged evidence that, in order for the Donation Proceedings to advance to the next stage of proceedings, the plaintiffs must provide proof of finality and enforceability of the Kyrou J judgment. Assuming in the fourth defendant’s favour that the Donation Agreement is set aside, the plaintiffs would then have to enforce the judgment debt directly against the second and third defendants in a separate proceeding. Such enforcement proceedings would fall squarely within the terms of s 15(1) of the Foreign Judgments Act 1991 (Cth) (‘Foreign Judgments Act’):

Where an application is duly made by a judgment creditor who wishes to enforce in a country a judgment that has been given in an Australian court.

Section 15(2) provides that such an application may not be made until the expiration of any stay of enforcement of the judgment in question. The first defendant’s sequestration order has been extended until November 2019. Whilst this order remains in place, s 15 of the Foreign Judgments Act is a significant obstacle to the plaintiffs obtaining a certificate of finality and enforceability for the purposes of any enforcement proceedings.

Mr Hlavička identified three ‘material obstacles’ to the plaintiffs succeeding in the Donation Proceedings:

(xviii) the need to establish reciprocity between the Australian courts and courts in the Czech Republic;

(xix) the ongoing insolvency of the first defendant in Australia; and

(xx) the lack of a certificate/confirmation of finality and enforceability of the Kyrou J judgment.[61]

[61]Transcript of proceedings (31 July 2018) 267.6−267.20.

Mr Hlavička gave evidence that, in the Donation Proceedings, the plaintiffs need to establish material reciprocity between Australia and the Czech Republic as regards the enforcement of a judgment debt, such as the Kyrou J orders.[62]
[62]Ibid 269.9–269.22.

Dr Richter gave evidence regarding the requirement to establish reciprocity. He referred to the resolution of the Supreme Court of the Czech Republic dated 18 December 2014, in order no. 30 Cdo 3753/2012 (in the second to fifth plaintiffs’ Enforcement Proceeding). He noted that ‘the Supreme Court expressly rejected the defendant’s second appellate argument, being an argument that reciprocity between the Czech Republic and Australia had not been established.’[63] He concluded that resolution ‘gives solid grounds to expect Czech courts to find that reciprocity of recognition and enforcement of civil judgments between the Czech Republic and Australia has been assured during Period I.’[64] He also stated ‘I know of no reason why this would have changed with respect to Period II.’[65] The fourth defendant submits that, on the basis of this evidence, the Court should conclude that it is highly likely that the plaintiffs will establish the requirements of reciprocity between Australia and the Czech Republic in their Donation Proceedings.
[63]Expert report of Tomáš Richter filed 30 April 2018, 22–23 [5.2.2].
[64]Ibid, 23 [5.2.2].
[65]Ibid.

On the other hand, Mr Hlavička’s evidence is that, in the Donation Proceedings, the Presiding Judge has reopened the question of reciprocity. The Judge does not consider the question of reciprocity to have been finally determined by the Supreme Court.[66] Further, the judgment of Nettle J in Talacko v Bennett calls into question whether a judgment debt which has been stayed by operation of s 58(3) of the Bankruptcy Act will satisfy the requirement of reciprocity. His Honour stated:

Consistently with the established approach of this Court to statutory construction, the meaning of s 15(2) of the Foreign Judgments Act is to be derived from its text, context and purpose. As has been observed, the text is equivocal. The context is, however, more instructive. Although Pt 3 of the Foreign Judgments Act, in which s 15 appears, is entitled "Miscellaneous", and although s 15 deals with the enforcement in foreign jurisdictions of judgments of Australian courts, the provisions of Pt 3 are principally concerned with conditions that a foreign judgment must satisfy in order to be enforceable in Australia by registration under Pt 2 or by action at common law. Importantly for present purposes, the application of Pt 2 is also restricted by the requirement, the result of s 6(6), that the foreign judgment be enforceable in the country of the original court. Correspondingly, s 15 provides for the conditions that must be satisfied in relation to a judgment given in this country before a certificate to facilitate enforcement of that judgment in a foreign country will be issued. And importantly, those conditions include the requirement, the result of s 15(2), that the judgment not be the subject of a stay of enforcement.
Viewed in context, the purpose of s 15(2) appears thus to be one of achieving the kind of reciprocity that, by reason of s 5, applies to the enforcement of foreign judgments by registration under Pt 2, and, by operation of s 13, is sought to be achieved in relation to the enforcement of foreign judgments at common law under Pt 3. That is to say, a foreign judgment should not be enforceable in this country unless it is enforceable according to the laws of the country of the original court, and, reciprocally, a certificate should not issue under s 15 to facilitate enforcement of a judgment of an Australian court in a foreign jurisdiction unless the judgment is enforceable according to the laws of this country.
As Santamaria JA observed, if a foreign country had enacted a law like s 58(3) of the Bankruptcy Act, a judgment of a court of that country would not be enforceable in that country and, perforce of s 6(6) of the Foreign Judgments Act, could not be enforced in this country by registration under Pt 2. Likewise, it would not be a "final and conclusive judgment" according to the common law of this country, and consequently it could not be sued upon in this country.[67]

[66]Transcript of proceedings (31 July 2018) 323.12–323.21, 324.17–324.20.

[67]Talacko v Bennett (2017) 260 CLR 124, 149 [82] – 150 [84] (citations omitted).

Nettle J’s reasoning supports a finding that the question of whether a judgment is final and conclusive is bound up with whether the judgment satisfies the requirement of reciprocity. It is arguable, based on his Honour’s reasoning, that a judgment debt which has been stayed by operation of s 58(3) of the Bankruptcy Act is not a reciprocal judgment for the purposes of Czech law.

The third obstacle to the success of the Donation Proceedings (and any subsequent enforcement against the second and third defendants) identified by Mr Hlavička is the absence of a certificate of finality and enforceability of the Kyrou J judgment. He described this as the ‘most important or the most critical’[68] obstacle to success. It is linked to the second obstacle, so I shall deal with both obstacles concurrently.
[68]Transcript of proceedings (31 July 2018) 295.21–295.24.

The judgment of the High Court in Talacko v Bennett,[69] delivered on 3 May 2017, is relevant to consideration of the second and third obstacles. The issue for determination by the High Court was whether s 15(2) of the Foreign Judgments Act prevents a judgment creditor of a bankrupt from obtaining a certificate under that Act to facilitate the enforcement of the judgment in a foreign jurisdiction. In particular, whether a ‘stay of enforcement’ of a judgment within the meaning of s 15(2) of the Act is brought about by s 58(3) of the Bankruptcy Act. The High Court overturned a judgment of the Court of Appeal of the Supreme Court of Victoria which held, by majority, that s 15(2) did not prevent the issue of the certificate, even though the judgment in question could not be enforced by execution by reason of s 58(3) of the Bankruptcy Act.
[69](2017) 260 CLR 124.

On 4 July 2012 upon the request of the plaintiffs, the Prothonotary of the Supreme Court of Victoria issued a document entitled ‘Certificate of Finality of Judgments and Orders’ (‘first certificate’) in reliance on s 15 of the Foreign Judgments Act. On 23 February 2015, the Prothonotary issued a second certificate which stated that it was an amendment and replaced in its entirety the first certificate. On 8 May 2015, the fourth defendant filed a summons by which she sought to have both the first and second certificates declared invalid and/or set aside. That application was heard by Sloss J. Her Honour concluded that the certificates were invalid because s 58(3) of the Bankruptcy Act operates so as to impose a ‘stay of enforcement of the judgment’ within the meaning of s 15(2) of the Foreign Judgments Act.[70] This conclusion was upheld by the plurality in the High Court:

To exclude the operation of s 58(3) from the reach of s 15(2) of the Foreign Judgments Act would be to undermine an ‘essential feature’ of the Bankruptcy Act — it would enable a judgment creditor to take individual action for the purpose of obtaining a payment of a debt due to them, thus obtaining an unfair advantage over other creditors.[71]

[70]Talacko v Talacko (2015) 305 FLR 353, 385 [89].

[71]Talacko v Bennett (2017) 260 CLR 124, 147 [72].

The first defendant’s bankruptcy was extended in November 2014 to operate until 22 November 2019.[72] The first defendant’s ongoing bankruptcy prevents the plaintiffs from obtaining a certificate of finality under s 15 of the Foreign Judgments Act. Notwithstanding the judgment of the High Court in Talacko v Bennett, there was considerable debate in the current proceedings as to whether the inability of the plaintiffs to obtain a certificate under s 15 of the Foreign Judgments Act is an obstacle to their success in the Donation Proceedings. Mr Collins submitted that Mr Hlavička’s evidence as to the obstacle posed by the lack of a certificate/confirmation of finality and enforceability, is misconceived. He submitted that the rules governing recognition and enforcement of foreign judgments in ss 63–64 of Act No 97 of 1963 of the Czech Republic (‘1963 Act’) have been superseded by ss 14–15 of Act No 91 of 2012 of the Czech Republic (‘2012 Act’). Mr Collins submitted that the evidence of Dr Richter supports a finding that there is no requirement under s 14 of the 2012 Act for confirmation that a judgment has become enforceable. Rather, the requirement is for certification that the judgment has become ‘final and unappealable’.[73] Mr Collins submitted that, to the extent that Mr Hlavička referred to a requirement of ‘finality and enforceability’, the evidence of Dr Richter should be preferred.
[72]Bennett v Talacko (2016) 312 FLR 159, 162 [5].
[73]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [103].

Mr Hlavička was clear in his evidence that the certification requirement is one of ‘finality and enforceability’. Mr Collins did not challenge this evidence. Dr Richter, on the other hand, acknowledged that the phrase ‘rávni moci’ in ss 63–64 of the 1963 Act, when translated into English:

would tend to use the term that I’ve used: “final and unappealable” … Having said that, legally effective is probably a … legitimate way of trying to translate the term ‘rávni moci’. I believe, however, that the words final and unappealable render that meaning of the concept better. That’s why I’ve used it.[74]

[74]Transcript of proceedings (1 August 2018) 360.20–360.28.

Dr Richter’s evidence raises the possibility that, in the Donation Proceedings and any subsequent enforcement proceedings against the second and third defendants, a Czech court will accept that the judgment of Kyrou J is final and unappealable (as distinct from being final and enforceable).

Mr Collins submitted that the Supreme Court of the Czech Republic has already decided that s 58(3) of the Bankruptcy Act is not an impediment to the finality of Kyrou J’s judgment in the Enforcement Proceeding brought by the second to fifth plaintiffs. The fourth defendant submits:

Given that the final court of appeal in the Czech Republic has, in the Sydney plaintiffs’ enforcement proceedings, deemed ‘correct’ a statement by the Municipal Court in Prague, also in the Sydney plaintiffs’ enforcement proceedings, that the commencement of bankruptcy proceedings against J E Talacko in Australia ‘may not have a relevant effect on the execution proceedings conducted in the Czech Republic’, the court should conclude that the plaintiffs’ donation proceedings are highly unlikely to fail on the basis of the second ‘obstacle’ identified by Mr Hlavička. That is, it is highly unlikely that the plaintiffs’ donation proceedings will fail on the basis that the plaintiffs do not have an ‘enforceable claim’ for the purposes of s 42a(1) of the Czech Civil Code because of the Australian bankruptcy of J E Talacko precludes enforcement against the property of J E Talacko under Australian law.[75]

[75]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [91].

There are three responses to the submissions set out above. First, Mr Hlavička gave evidence that there is no system of binding precedent in the Czech Republic.[76] The Court currently hearing the Donation Proceedings is not bound to follow the previous decision of the Municipal Court or the Supreme Court regarding the operation of s 58(3) of the Bankruptcy Act. Second, the decision of the Municipal Court and the Supreme Court preceded the decision of the High Court in Talacko v Bennett. Third, there is currently no valid certificate of finality, as the two certificates previously issued by the Prothonotary of the Supreme Court of Victoria have been set aside. It is highly unlikely the Prothonotary of the Supreme Court of Victoria will issue a fresh certificate whilst the sequestration order remains in place.
[76]Transcript of proceedings (31 July 2018) 322.9–322.10.

Whatever the outcome of this issue in the Czech courts, the judgment of Kyrou J cannot be enforced unless a certificate is provided ‘by a relevant public authority of the foreign State’ as required by s 14 of the 2012 Act. The two certificates issued by the Prothonotary of the Supreme Court of Victoria have been set aside. The fourth defendant submits that:

the plaintiff will not necessarily require a certificate issued under the Foreign Judgments Act in order to satisfy the requirements of s 14 of the 2012 Act. Indeed, having regard to the terms of s 14, it is apparent that any official communication from this Court (such as a letter from the Prothonotary to the District Court for Prague 1) which confirmed that the judgments and orders of Kyrou J are “final and unappealable” is very likely to be sufficient to meet those requirements.[77]

[77]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [112] (citation omitted).

The submission set out above assumes that, notwithstanding the operation of s 58(3) of the Bankruptcy Act, the judgment of Kyrou J is a final judgment for the purposes of s 14 of the 2012 Act. That assumption is highly questionable. In Talacko v Bennett, Nettle J stated:

[a]s Santamaria JA observed, if a foreign country had enacted a law like s 58(3) of the Bankruptcy Act, a judgment of a court of that country would not be enforceable in that country and, perforce of s 6(6) of the Foreign Judgments Act, could not be enforced in this country by registration under Pt 2. Likewise, it would not be a ‘final and conclusive judgment’ according to the common law of this country, and consequently it could not be sued upon in this country.[78]

[78]Talacko v Bennett (2017) 260 CLR 124, 150 [84], and the cases cited therein (emphasis added).

The observations set out above, support the proposition that a judgment which has been stayed pursuant to s 58(3) of the Bankruptcy Act is not a final judgment according to the common law of Australia. Contrary to the fourth defendant’s submission, the fact that Kyrou J’s judgment has been stayed by operation of s 58(3) is a significant obstacle to confirmation being provided by the Supreme Court of Victoria that the judgment is ‘final and unappealable’.

Mr Hlavička gave evidence that the Donation Proceedings cannot proceed to the next stage of hearing unless the plaintiffs obtain a certificate of finality from the Prothonotary of the Supreme Court of Victoria.[79] It is unlikely that the plaintiffs will be able to obtain such a certificate. Whilst the first defendant’s bankruptcy continues, the High Court’s judgment in Talacko v Bennett is an insurmountable barrier to provision of a certificate under s 15 of the Foreign Judgments Act. Further, any letter sought by the plaintiffs from the Prothonotary of the Supreme Court confirming the ‘finality’ (as distinct from enforceability) of Kyrou J’s judgment would be deployed for the purpose of enforcing the judgment debt at the same time that judgment has been stayed by virtue of s 58(3). The provision of such a letter would undermine the very purpose of s 15 of the Foreign Judgments Act, which is to guard against the dissipation of a bankrupt’s assets to the prejudice of other creditors.[80] Having regard to this purpose of s 15 of the Foreign Judgments Act, it is highly unlikely that the Prothonotary of the Supreme Court of Victoria would provide any form of confirmation to the plaintiffs as to the finality of the Kyrou J judgment, whilst that judgment is stayed by operation of s 58(3) of the Bankruptcy Act.
[79]Transcript of proceedings (31 July 2018) 335.24–355.31.
[80]Talacko v Bennett (2017) 260 CLR 124, 147 [74].

There are two practical considerations which bear on the likelihood of the plaintiffs establishing that the Kyrou J judgment is ‘final and unappealable’ and/or ‘final and enforceable’. First, the High Court judgment in Talacko v Bennett was delivered in May 2017. The current proceeding was heard in July and August 2018. If, as contended by the fourth defendant, it is a simple matter for the plaintiffs to obtain evidence of finality, there has been ample opportunity for them to do so. The fact of the matter is, the plaintiffs have not been able to obtain proof of finality. Second, it is inevitable that the second and third defendants will deploy both this judgment and the observations of Nettle J set out above, in aid of a submission in the Donation Proceedings that the judgment of Kyrou J is not a final judgment for the purposes of s 14 of the 2012 Act.

In addition to the matters set out above, I have had regard to the absence of any legal obstacle to the second and third defendants transferring the Properties prior to the conclusion of the Donation Proceedings. The second and third defendants have already alienated part of the Properties the subject of the Donation Agreement since May 2009.[81] The second to fifth plaintiffs’ legal representatives are able to monitor the Cadastral Register so as to be in a position to make an application for an injunction to prevent a transfer. Any injunction which might be sought by the plaintiffs has no certainty of success.[82]
[81]Transcript of proceedings (31 July 2018) 263.29–263.31.
[82]Ibid 272.18–272.24, 273.5–273.31, 274.19–274.26.

Conclusion on the Enforcement Proceeding and Donation Proceedings

The Enforcement Proceeding brought by the second to fifth plaintiffs in which the first defendant is the respondent is likely to be terminated because nobody will come forward to represent the estate. This is a direct consequence of the Donation Agreement, which was an inter vivos disposition of highly valuable real estate owned by the first defendant. When the first defendant died, the Properties did not form part of his estate. It is therefore unsurprising that no one has come forward to represent the estate in the Enforcement Proceeding. The plaintiffs’ chance of successfully recovering the judgment debt against the first defendant in the Enforcement Proceeding is worthless.

It is likely that the plaintiffs will be able to establish that the requirements prescribed by s 42a of the Czech Civil Code to set aside the Donation Agreement are satisfied. It is also possible that, notwithstanding the High Court judgment in Talacko v Bennett, the Court hearing the Donation Proceedings will conclude that the Kyrou J judgment is ‘final and unappealable’ (as opposed to ‘final and enforceable’). It is possible that the Court will conclude that there is reciprocity between Australia and the Czech Republic as regards the enforcement of a judgment debt such as the Kyrou J orders. It is possible, but highly unlikely, that the plaintiffs will obtain certification from the Prothonotary of the Supreme Court of Victoria that the Kyrou J judgment is final and unappealable.

It is highly likely that the further conduct of the Donation Proceedings and any subsequent enforcement proceedings against the second and third defendants will be characterised by very lengthy delays. The second and third defendants are highly likely to pursue any procedural arguments and appeal rights which are available to them. I accept Mr Hlavička’s estimate of up to ten years before the Donation Proceedings can be concluded.[83] It is also possible that irrespective of the outcome of the Donation Proceedings the second and third defendants will succeed in transferring the Properties to a third party.
[83]Ibid 271.21–272.1.

I have concluded that the value of the plaintiffs’ opportunity prior to the Donation Agreement to enforce the judgment debt against the Properties represents 75 per cent of the Kyrou J judgment and the plaintiffs’ respective share of the costs order made in September 2013. I assess the plaintiffs’ chance of successfully pursuing the Donation Proceedings and any subsequent enforcement proceedings against the second and third defendants at 20 per cent. The respective share of the first plaintiff, and the second to fifth plaintiffs of the costs order is assessed at 50 per cent: $1,340,119. After making allowance for the 20 per cent chance of successfully pursuing the Donation Proceedings, the value of the plaintiffs’ chance to enforce the judgment debt against the Properties which was lost by reason of the Donation Agreement is 55 per cent. I accept the plaintiffs’ submission that the amount received by way of mitigation should be subtracted from the value of the lost opportunity before applying the 20 per cent discount.

The first plaintiff and the second to fifth plaintiffs have received $843,171.22 from the trustee in bankruptcy. The second to fifth plaintiffs received an additional amount of CZK 293,274 at the end of 2012.[84] CZK 293,274 as at 31 December 2012 equates to $14,834.29.[85] The plaintiffs submit that the amounts that they have received from the trustee in bankruptcy should be deducted from the value of the lost opportunity before the Sellars discount is applied. The fourth defendant does not dispute this approach.[86] In McGregor on Damages, Justice Edelman stated:

Exemplary damages

The first plaintiff does not claim exemplary damages against the fourth defendant. He does claim exemplary damages against the second and third defendants. However, pursuant to s 29(2)(a) of the Administration and Probate Act 1958, neither the first or fifth plaintiff is able to recover exemplary damages. The second to fourth plaintiffs claim exemplary damages against the second to fourth defendants. Pursuant to s 60(3) of the Supreme Court Act 1986 interest cannot be awarded on exemplary damages.

Exemplary damages are intended to punish the defendant for ‘conscious wrongdoing in contumelious disregard of another’s rights.’[109] In addition to punishment, an award of exemplary damages may demonstrate the Court’s disapproval of the conduct and act as a deterrent to the defendant and others from engaging in similar behaviour.[110] Courts have often stated that, in determining the amount of exemplary damages which is appropriate, a Court should exercise restraint.[111] The quantum of compensatory damages should also be taken into account in the assessment of exemplary damages. A risk of double counting arises because it has been recognised that there can be an element of punishment in aggravated damages.[112] Courts have warned of the dangers of an excessive award of exemplary damages in circumstances where aggravated damages are also awarded.[113]
[109]Whitfeld v De Lauret & Co Ltd (1920) 29 CLR 71, 77.
[110]Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118, 158; New South Wales v Ibbett [2005] NSWCA 445.
[111]XL Petroleum (NSW) Pty Ltd v Caltex Oil (Aust) Pty Ltd (1985) 155 CLR 448, 463; Backwell v AAA [1997] 1 VR 182, 191, 205–6.
[112]De Reus v Gray (2003) 9 VR 432, 452 [28].
[113]New South Wales v Ibbett (2006) 229 CLR 638, 648 [36]; Carter v Walker (2010) 32 VR 1, 58 [311]; Backwell v AAA [1997] 1 VR 182, 186, 207–9.

The conduct of the second, third and fourth defendants justifies an award of exemplary damages to punish them for conscious wrongdoing in contumelious disregard of the rights of the second to fourth plaintiffs. Mr Collins submitted that:

on the assumption that substantial damages will be awarded against the fourth defendant, including an amount in respect of aggravated damages, and having regard to her comparatively limited role in the donation agreement, it is submitted that no award of exemplary damages should be made against her.[114]
[114]Fourth defendant, ‘Outline of closing submissions of the fourth defendant’, 13 August 2018 [159].

I do not accept this submission. At paragraphs [77]–[124] of the liability judgment, I set out the basis for the conclusion that the fourth defendant was a party to an agreement during the period from 2000 to at least May 2009 to take the Talacko family properties out of the reach of the plaintiffs. In reaching this conclusion I had regard to the following matters:

(i)the emails forwarded by the fourth defendant to other family members openly express her contempt for the plaintiffs and their legitimate aspirations to obtain a share of the Properties in accordance with the February 2001 terms of settlement;
(ii)the steps which were taken by the fourth defendant in April 2000 to mortgage the Glenferrie Road property, in particular her express statement that she handed the title over to the bank ‘so Vermin will now have to take on the bank if they want this property or compensation because you don’t own it now’; and
(iii)the direct evidence of the fourth defendant and the first defendant jointly proposing an explanation to Mr Witt for the Donation Agreement of May 2009, which was false.[115]

[115]Talacko v Talacko [2015] VSC 287 [124].

As set out earlier in this judgment, the conduct of the second and third defendants is worse than that of the fourth defendant. By entering into the Donation Agreement and refusing to comply with orders of the Supreme Court of Victoria to undo that agreement, the second and third defendants facilitated the disposition of the Properties. Their conduct was at the very heart of the unlawful means conspiracy.

I take into account the need for restraint in the assessment of exemplary damages. Nevertheless, the conduct of the second to fourth defendants, as recorded in the liability judgment, has been egregious, particularly so in the case of the second and third defendants. I shall order that the second and third defendants pay the second to fourth plaintiffs a total sum of $375,000 by way of exemplary damages. I shall order the fourth defendant to pay the second to fourth plaintiffs a total sum of $150,000 by way of exemplary damages.

Interest

The plaintiffs claim, as an alternative to statutory interest, interest in the Court’s equitable jurisdiction, on a compounding basis at the maximum rate permitted under the Penalty Interest Rates Act 1983. I reject this claim. The plaintiffs’ claims for damages are for common law damages in tort, not equitable compensation. This characterisation of the plaintiffs’ claims is not altered by the Court’s conclusion that the Donation Agreement constituted an equitable fraud. Further, I accept Mr Collins’ submission that the plaintiffs should not be permitted to maintain a claim for interest in the Court’s equitable jurisdiction given the clear terms of the further and better particulars of loss and damage (which claim only interest pursuant to statute), and the outline of opening submissions of the second to fifth plaintiffs, which claimed interest pursuant to statute.

The function of statutory interest is to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period. Unless good cause is shown to the contrary, s 60 of the Supreme Court Act 1986 requires interest to be calculated from the commencement of the proceeding to the date of judgment.

There are good reasons for awarding interest from 30 September 2013 rather than the date this proceeding was commenced in July 2009. The plaintiffs are entitled to damages for loss of opportunity to resort to the Properties in recovering the judgment debt and costs order. For the reasons set out in this judgment, the plaintiffs would not have received a distribution from Mr Silvia from the proceeds of sale of the Properties prior to 30 September 2013. This is the date from which interest shall be calculated. As regards the first plaintiff, interest is to be calculated on the sum of $5,900,227.92. As regards the second to fifth plaintiffs, interest is to be calculated on the sum of $5,892,069.06.

Conclusion

I shall provide the parties with an opportunity to make submissions on the costs of the liability trial as well as the costs of the current proceeding. The parties are directed to file a draft order giving effect to these reasons for judgment.

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ANNEXURE A

Date	Event	Reference
Before the donation of the Properties
1948	Anna Talacko and Alois Talacko leave Czechoslovakia and settle in Australia with their children, Helena, Peter and Jan Emil. Anna and Alois’ central European properties seized by Communist regimes in Czechoslovakia and East Germany.	Bennett v Talacko [2017] VSCA 163 at [9] (Court of Appeal Reasons)
from March 1992	Series of properties within central Prague restituted to Jan Emil Talacko, either solely or in part. Thereafter, other properties and interests in properties formerly owned by the plaintiffs’ grandparents were restituted to Jan Emil Talacko and, in some cases, to him and Helena Talacko jointly.	Talacko v Talacko [2015] VSC 287 at [12] (Liability Trial Reasons) Court of Appeal Reasons at [12]
November 1995	Peter Talacko (father of the second to fourth plaintiffs and husband of the fifth plaintiff) dies.	Liability Trial Reasons at [13]
2 October 1998	Writ filed in proceeding S CI 7393 of 1998 (the 1998 Proceeding).	Liability Trial Reasons at [10]
21 February 2001	Trial of 1998 Proceeding commences before Ashley J.	Liability Trial Reasons at [13], [108]
23 February 2001	Settlement of the 1998 Proceeding by terms of settlement.	Liability Trial Reasons at [14]
4 July 2005	Plaintiffs in 1998 Proceeding apply for the proceeding to be reinstated and that the plaintiffs have leave to enter judgment against Jan Emil Talacko for equitable compensation pursuant to the terms of settlement.	Court of Appeal Reasons at [19]
November 2005	1998 Proceeding reinstated.	Liability Trial Reasons at [16]
November 2007	Trial of the reinstated 1998 Proceeding heard by Osborn J.	Liability Trial Reasons at [16]
24 April 2008	Osborn J delivers judgment in the 1998 Proceeding, finding that Jan Emil Talacko had breached the Terms of Settlement — Talacko v Talacko [2008] VSC 128.	Liability Trial Reasons at [16]
30 April 2008	Paul Talacko discusses with lawyer putting the Properties beyond the reach of the plaintiffs by transferring them to a Czech company, with a second company, possibly an “offshore company”, owning the shares in the first company, to “hide who has ownership and control” of the Properties.	Liability Trial Reasons at [59]
13 June 2008	Jan Emil Talacko files affidavit in 1998 Proceeding in which he deposes to having “absolutely no intention of selling or encumbering any of the [P]roperties”.	Liability Trial Reasons at [73]
20 June 2008	Russell Berglund QC, appearing for Jan Emil Talacko, submits to Osborn J that Jan Emil Talacko has “no intention of disposing of the [Properties]”.	Liability Trial Reasons at [72]
22 August 2008	Osborn J makes order in the 1998 Proceeding, inter alia, requiring Jan Emil Talacko to pay the plaintiffs’ costs of and incidental to the hearing of the preliminary issues in respect of which his Honour gave judgment on 24 April 2008, and making other procedural orders directed to the valuation of the plaintiffs’ entitlement to an order for equitable compensation.	CB5805
9 September 2008	Jan Emil Talacko files an affidavit which includes the statement: “I have no intention of selling, disposing, encumbering or in any other way dealing with the [Properties] other than in the normal course of letting some of them out on normal commercial terms where that is permitted.”	Liability Trial Reasons at [74]
12 May 2009	Jan Emil Talacko executes various donation agreements and applications for registration, by which he transfers to Paul Talacko and David Talacko his interests in Czech properties (the Properties).	Liability Trial Reasons at [21]
After the donation of the Properties
14 May 2009	Applications to transfer ownership of the Properties from Jan Emil Talacko to Paul Talacko and David Talacko are filed at the City of Prague Cadastral Office.	Court of Appeal Reasons at [22]
10 June 2009	Plaintiffs learn of the donation agreements and applications for registration from their Czech lawyer, Josef Hlavička.	Liability Trial Reasons at [22]
11 June 2009	Supreme Court grants orders in the nature of Mareva orders: (i) restraining Jan Emil Talacko from taking any further steps of selling, transferring, donating or otherwise dealing with the Czech properties until 4.15 pm on 23 June 2009, or until further order; (ii) requiring Jan Emil Talacko immediately to take all steps available to withdraw any applications for transfer that had been lodged with the Cadastral Registry.	Liability Trial Reasons at [22]
circa 17 June 2009	Jan Emil Talacko and Judith Talacko jointly propose to their lawyer, Michael Witt, that an affidavit for the Supreme Court be prepared giving a “palpably false” explanation for the donation agreements, deposing that Jan Emil Talacko was gifting the properties in order to avoid Czech inheritance laws.	Court of Appeal Reasons at [64] Liability Trial Reasons at [87]
23 June 2009	Kyrou J makes orders extending the orders made on 11 June 2009 until 16 July 2009.	Liability Trial Reasons at [24]
13 July 2009	Plaintiffs file summons seeking that Jan Emil Talacko be dealt with for contempt on the ground of non-compliance with Kyrou J’s orders of 11 June 2009 and 23 June 2009. Arrest warrant issued for Jan Emil Talacko’s arrest. Jan Emil Talacko observed leaving matrimonial home at Glenferrie Road, travelling by taxi to Melbourne Airport, talking to staff at Qantas International departures desk and presenting what appeared to be travel documents. He subsequently leaves by taxi. First defendant appears before Bongiorno J and remanded in custody to appear before Byrne J on 14 July 2009.	Liability Trial Reasons at [24]–[26]
14 July 2009	Byrne J: (i) dismisses the summons for contempt due to formal defect of the order; (ii) grants an injunction preventing Jan Emil Talacko from leaving Victoria, attending any point of international departure or applying for any other passport until the conclusion of the contempt proceedings.	Liability Trial Reasons at [26]
17 July 2009	Plaintiffs commence proceeding S CI 7819 of 2009 (the 2009 Proceeding).	Liability Trial Reasons at [29]
24 July 2009	Kyrou J makes Mareva-type orders against Paul Talacko and David Talacko, requiring them to take steps to undo the registration of the transfer of the Properties.	Liability Trial Reasons at [30]
10 August 2009	Kyrou J: (i) extends the Mareva-type orders against Paul Talacko and David Talacko; (ii) makes an order for substituted service.	Liability Trial Reasons at [31]
21 August 2009	Kyrou J refuses an application by Jan Emil Talacko for a discharge of the Byrne J injunction.	Liability Trial Reasons at [26]
27 September 2009	Special Referee in 1998 Proceeding provides his first valuation report to the Court.	CB6437
2 October 2009	Habersberger J makes orders restraining Jan Emil Talacko from leaving Victoria until 5.00 pm on the day of the judgment in the 1998 Proceeding unless he first pays into court the sum of $2.3 million.	Liability Trial Reasons at [27]
October 2009	Trial of reinstated 1998 Proceeding, on question of quantum of equitable compensation, heard by Kyrou J.	Liability Trial Reasons at [18]
27 October 2009	Special Referee in 1998 Proceeding provides supplementary valuation report to the Court.	CB7173
28 October 2009	Wood AsJ makes interim costs order in 1998 Proceeding.	CB5809
29 October 2009	Special Referee in 1998 Proceeding provides supplementary letter to the valuation report to the Court.	CB7179
24 November 2009	Kyrou J delivers judgment in 1998 Proceeding — Talacko v Talacko [2009] VSC 533.	Liability Trial Reasons at [18]
11 December 2009	Orders made by Kyrou J quantifying the amount of equitable compensation to be paid to the plaintiffs by Jan Emil Talacko.	Exhibit P54 (CB5811)
17 December 2009	Kyrou J issues arrest warrants for Paul Talacko and David Talacko pending contempt proceedings in respect of non-compliance with the Mareva-type orders which Kyrou J first made on 24 July 2009. Kyrou J makes order that evidence in 1998 Proceeding will stand as evidence in the 2009 Proceeding.	Liability Trial Reasons at [31]
5 March 2010	Dodds-Streeton J makes orders in VID142 of 2010, inter alia, that Jan Emil Talacko be restrained from taking any further steps for the purpose of or in furtherance of selling, donating or otherwise dealing with his properties at Suchá, Slovakia and Dresden, Germany, that a registered trustee take control of Jan Emil Talacko’s property until further order and that Jan Emil Talacko deliver up his passports — Talacko v Talacko [2010] FCA 193.	CB5851
25 March 2010	Plaintiffs commence proceeding VID201 of 2010 seeking final orders under ss 30 and 40 of the Bankruptcy Act 1966 (Cth) against Jan Emil Talacko. Goldberg J makes interim orders restraining Jan Emil Talacko until further order from, relevantly, taking the passports presently in the possession of his solicitor, Mr Witt; attending any point of international departure from Australia; taking any further step in furtherance of selling, transferring, donating or otherwise dealing with the property at Suchá, Slovakia and Dresden, Germany, or disposing of, destroying or otherwise alienating any of his property.	CB5867
30 August 2010	North J makes orders that, inter alia, Jan Emil Talacko be restrained from taking any further steps for the purpose of or in furtherance of selling, transferring, donating or otherwise dealing with the properties in Suchá, Slovakia or Dresden, Germany, save for the purpose of satisfying the orders made against him in the 1998 Proceeding.	CB5871
18 March 2011	Court of Appeal dismisses appeal from orders of Osborn J and Kyrou J – Talacko v Talacko [2011] VSCA 71.	Liability Trial Reasons at [19]
28 October 2011	High Court of Australia dismisses application for special leave to appeal from the orders of the Court of Appeal delivered on 18 March 2011.	Court of Appeal Reasons at [28]
4 November 2011	Plaintiffs lodge two petition proceedings in the District Court of Prague 1: 1. Against Jan Emil Talacko, seeking to have the Wood AsJ order and the Kyrou J order in the 1998 Proceeding recognised in the Czech Republic for the purposes of enforcement. 2. Against Paul Talacko and David Talacko, concerning the validity of the donation agreements.	Court of Appeal Reasons at [26]
7 November 2011	North J makes a sequestration order against the estate of Jan Emil Talacko. Brian Silvia appointed as trustee in bankruptcy of Jan Emil Talacko. North J makes further orders, inter alia, that the control of the property of Jan Emil Talacko by the Official Trustee in Bankruptcy end forthwith; that Jan Emil Talacko’s passports be delivered to Mr Brian Silvia of BRI Ferrier; and that the order made on 30 August 2010 continue until 7 May 2012.	CB5893 CB5889 Liability Trial Reasons at [20]
22 November 2011	Brian Silvia receives a letter dated 18 November 2011 from Madisons Lawyers, the solicitors for Jan Emil Talacko, enclosing an “up to date version” of Jan Emil Talacko’s statement of affairs.	Exhibit P8 (CB5301)
3 January 2012	District Court for the City of Prague 1 approves the Kyrou J orders for recognition and enforcement.	Court of Appeal Reasons at [29]
10 May 2012	Helena Talacko dies.	Court of Appeal Reasons at [30]
4 July 2012	Prothonotary invalidly issues certificate on behalf of the plaintiffs under the Foreign Judgments Act 1991 (Cth) certifying that the Kyrou J orders are final, conclusive and binding.	Court of Appeal Reasons at [31]
4 October 2012	Municipal Court for the City of Prague confirms the resolution of the District Court for the City of Prague 1.	Court of Appeal Reasons at [31]
10 December 2012	North J makes various orders concerning the conduct of litigation by the plaintiffs in Australia and in the Czech Republic.	CB5895
23 December 2012	Brian Silvia receives a facsimile from Madisons Lawyers, attaching a statement of affairs signed by Jan Emil Talacko and dated 16 March 2010.	Exhibit P9 (CB5325)
31 December 2012	Jan Emil Talacko lodges an extraordinary appeal against the 4 October 2012 decision of the Municipal Court of Appeal for the City of Prague.	Court of Appeal Reasons at [34]
16 September 2013	Kyrou J makes an order in the 1998 Proceeding, quantifying his Honour’s order that Jan Emil Talacko pay the plaintiffs’ costs of the 1998 Proceeding on an indemnity basis.	CB5813
30 September 2013	Margaret Talacko, the wife of Peter Talacko, dies.	Court of Appeal Reasons at [35]
8 September 2014	Brian Silvia sends a letter to Jan Emil Talacko, in which he states that he requires Jan Emil Talacko to execute certain documents as part of the process of transferring properties in Slovakia to him as the trustee in bankruptcy.	Exhibit P10 (CB5353)
9 September 2014	Brian Silvia sends a letter to Jan Emil Talacko’s solicitor, Joseph Guss, which is in similar terms to the letter to Jan Emil Talacko of 8 September 2014.	CB5408
23 September 2014	Brian Silvia receives a letter from Joseph Guss in response to Mr Silvia’s letter of 9 September 2014.	CB7233
3 November 2014	Jan Emil Talacko dies intestate.	Liability Trial Reasons at [27]
18 December 2014	Supreme Court of the Czech Republic delivers a resolution repealing the 4 October 2012 resolution of the Municipal Court of Appeal for the City of Prague, and returns the case to the Municipal Court of Appeal for the City of Prague for further proceedings.	Court of Appeal Reasons at [36]
23 February 2015	Prothonotary invalidly issues an amended certificate on behalf of the plaintiffs, certifying that the Kyrou J orders are final, conclusive and binding.	Court of Appeal Reasons at [37]

SCHEDULE OF PARTIES

S CI 2009 7819

BETWEEN:

JAN TALACKO
(as Executor of the Estate of Helena Marie Talacko) First plaintiff

ALEXANDRA ANN BENNETT Second plaintiff

MARTIN TALACKO Third plaintiff

ROWENA TALACKO Fourth plaintiff

MARGARET HELEN BEATRICE TALACKO Fifth plaintiff

and

JAN EMIL TALACKO First defendant

DAVID TALACKO Second defendant

PAUL ANTHONY TALACKO Third defendant

JUDITH GAIL TALACKO Fourth defendant

STATE TRUSTEES LTDSeventh defendant

[2018] VSC 751

7 December 2018