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) AND ORS (According to the schedule attached)	Plaintiffs
v
JAN EMIL TALACKO AND ORS (According to the schedule attached)	Defendants

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JUDGE:	McDONALD J
WHERE HELD:	Melbourne
DATES OF HEARING:	2, 3, 5, 6, 9, 10, 11, 12, 13, 25, 26, 27 March 2015
DATE OF JUDGMENT:	7 August 2015
CASE MAY BE CITED AS:	Talacko v Talacko
MEDIUM NEUTRAL CITATION:	[2015] VSC 287

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CONSIPRACY TO INJURE —defendants did not have sole or dominant purpose of harming the plaintiffs — defendants’ primary motivation was self-interest to preserve ownership of properties which had been restituted to the first defendant within first defendant’s immediate family

UNLAWFUL MEANS CONSPIRACY —transfer of assets from first defendant to second and third defendants constituted an equitable fraud — first to fourth defendants were parties to an agreement to injure the plaintiffs — any loss as a result of agreement to transfer properties from first defendant to second and third defendants contingent upon outcome of ongoing legal proceedings in Czech Republic.

INDUCING BREACH OF CONTRACT — second to fourth defendants provided advice and encouragement to the first defendant prior to his breach of terms of settlement — conduct not actionable as inducing breach of contract.

TRUSTS — Barnes v Addy (1874) 9 Ch App 244 — No express or implied trust created by terms of settlement.

Section 172 Property Law Act 1958 (Vic) — transfer of property from first to fourth defendant shortly after commencement of legal proceedings against first defendant — transfer not for valuable consideration — transfer voidable; transfer of property from fifth defendant to sixth defendant — none of plaintiffs’ claims against fifth defendant successful — plaintiffs not persons prejudiced by transfer.

Property Law Act 1958 (Vic) s 172; Evidence (Miscellaneous Provisions) Act 1958 s 42E; Civil Procedure Act 2010 (Vic) s 56; Supreme Court (General Civil Procedure) Rules 2005 (Vic) rr 2.04(1), 7.02(1), 7.04, 9.09(2), 16.03, 66.10(3), 77.06; Administration and Probate Act 1958 (Vic) s 9; Foreign Judgments Act 1991 (Cth) s 15; Bankruptcy Act 1966 (Cth) s 58(3).

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APPEARANCES:

Counsel

Solicitors

For the First Plaintiff

For the Second to Fifth Plaintiffs

In person

Mr S Howells
with Dr M Sharpe

Tolhurst, Druce & Emmerson

For the First, Second and Third Defendants

For the Fourth Defendant

For the Fifth and Sixth Defendants

Seventh Defendant

No appearance

Mr L Glick QC
with Mr J Masters

Mr P Crutchfield QC
with Ms F Bentley

No appearance

Strongman & Crouch

SBA Lawyers

TABLE OF CONTENTS

SUMMARY OF FINDINGS................................................................................................. 1

(i)......... Conspiracy to injure.......................................................................................... 1
(ii)........ Unlawful means conspiracy............................................................................. 1
(iii)...... Barnes v Addy claims.......................................................................................... 1
(iv)....... Inducing breach of contract.............................................................................. 2
(v)........ Section 172 Property Law Act: 312 Glenferrie Road, Malvern..................... 2
(vi)....... Section 172 Property Law Act: 23 Ethel Street, Malvern............................... 2

Introduction............................................................................................................................ 2

The first defendant’s breach of the 2001 terms of settlement........................................ 5

May 2009 Donation Agreement........................................................................................... 7

The failure of the second and third defendants to enter an appearance.................. 11

The failure of the fourth defendant to give evidence................................................... 12

Are the defendants liable to the plaintiffs for lawful means conspiracy?................ 16

Unlawful means conspiracy............................................................................................... 18

An agreement between the first to fifth defendants?................................................... 19

The agreement between the first, second and third defendants................................ 20

The agreement between the fourth defendant and the first to third defendants... 23

Did the fifth defendant have a common purpose with the first to fourth defendants of taking property out of the reach of the plaintiffs?..................................................................... 39

The Donation Agreement constitutes an equitable fraud........................................... 51

Have the plaintiffs established that they suffered pecuniary loss as a consequence of the Donation Agreement?......................................................................................................... 52

(i)......... Were the plaintiffs prevented from obtaining the benefit of the terms of settlement because the Czech properties were transferred from the first defendant to the second and third defendants?..................................................................................... 53
(ii)........ Were the plaintiffs prevented from recovering the 11 December 2009 judgment debt because the properties were transferred?.................................................... 53
(iii)...... Did the plaintiffs lose the amount of €10,073,818 together with accruing interest and indemnity costs because of the transfer of the properties?....................... 55
(iv)....... Have the plaintiffs incurred costs and expenses of the current proceeding, including incidental and consequential costs?............................................................. 55
(v)........ Have the plaintiffs incurred costs and losses in seeking to enforce the December 2009 judgment debt in the Czech Republic?........................................................ 55
(vi)....... Have the plaintiffs incurred the costs and expenses of seeking to ascertain the steps taken by the first, second and third defendants and obtaining advice about the consequences of the May 2009 transfers?..................................................... 61

Barnes v Addy claims.......................................................................................................... 64

Did the terms of settlement create an implied trust?..................................................... 69

Knowing receipt by the fourth defendant...................................................................... 71

Knowing assistance by the fifth defendant.................................................................... 73

Inducing breach of contract............................................................................................... 73

Section 172 Property Law Act: 312 Glenferrie Road, Malvern................................... 77

Section 172 Property Law Act: 23 Ethel Street, Malvern............................................. 80

Conclusion............................................................................................................................ 81

HIS HONOUR:

SUMMARY OF FINDINGS
(i) Conspiracy to injure

The plaintiffs’ cause of action of conspiracy to injure is not made out. The plaintiffs have not established that the sole or dominant purpose of the alleged conspiracy was to harm the plaintiffs. Rather, the defendants’ primary motivation was to advance their own interests by preserving the properties which had been restituted to the first defendant.

(ii) Unlawful means conspiracy

The May 2009 Donation Agreement pursuant to which the first defendant transferred assets to the second and third defendants, constituted an equitable fraud. Each of the first to fourth defendants was a party to an agreement to injure the plaintiffs by means of the first defendant divesting himself of the assets the subject of the agreement against which a judgment debt could attach. The fifth defendant was not party to this agreement. However, as at the date of this judgment, the plaintiffs have not suffered any pecuniary loss as a result of the conduct of the first to fourth defendants. Any pecuniary loss is contingent upon the outcome of the proceedings in the Czech Republic. The cause of action of unlawful means conspiracy is therefore not made out.

(iii)Barnes v Addy claims

The plaintiffs’ claims of knowing receipt of trust property and knowing assistance in breach of trust are not made out. Contrary to the plaintiffs’ contention, the terms of settlement executed by the first defendant on 23 February 2001 did not create either an express or implied trust. The terms of settlement created contractual obligations which do not support the claims based on either limb of Barnes v Addy.[1]

(iv) Inducing breach of contract

[1](1874) 9 Ch App 244.

The plaintiffs’ claim that the second to fifth defendants induced the first defendant to breach the terms of settlement are not made out. The second to fourth defendants did provide advice and encouragement prior to his breach of the terms of settlement. However, this conduct falls short of that which is actionable. The claim against the fourth and fifth defendant based on the mortgage of 312 Glenferrie Road, Malvern is misconceived. It relies upon their conduct in the first half of 2000 which could not have induced a breach of the terms of settlement executed in February 2001.

(v) Section 172 Property Law Act: 312 Glenferrie Road, Malvern

The plaintiffs’ claim that the October 1998 transfer of the first defendant’s interest in 312 Glenferrie Road, Malvern to the fourth defendant is voidable pursuant to s 172 of the Property Law Act is made out.

(vi) Section 172 Property Law Act: 23 Ethel Street, Malvern

The plaintiffs’ claim that the transfer of the fifth defendant’s interest in a property at 23 Ethel Street, Malvern to the sixth defendant is voidable pursuant to s 172 Property Law Act is not made out. As all of the claims against the fifth defendant have failed, the plaintiffs are not persons who are prejudiced by the transfer.

Introduction

Prior to World War II, the first defendant’s parents owned five substantial properties in the centre of Prague: land in Kbely (a suburb of Prague); horticultural land in Repy (on the outskirts of Prague); a forest in the North East of what is now the Slovak Republic; and an apartment building and adjacent land in Dresden, Germany.

In the aftermath of World War II these properties were seized by communist regimes in Czechoslovakia and East Germany. About this time, the first defendant’s parents, Alois and Anna Talacko, left Europe and settled in Australia.

Following the Velvet Revolution of November 1989, communist regimes were replaced by governments prepared to undertake restitution of private property which had been taken by the State. Alois and Anna Talacko had died prior to 1989. However, the first defendant, together with his brother Peter and sister Helena were interested in reclaiming their parents’ property.

What agreement, if any, was reached between the siblings in respect of the restitution of the properties underpins the litigation in this court which was commenced by writ filed 2 October 1998 (‘the 1998 Proceedings’). Peter and Helena contended that in March 1991 they concluded an agreement with the first defendant to pursue and share equally the restitution of their parents’ properties. The plaintiffs in the 1998 Proceedings alleged that Helena, Peter and the first defendant exchanged powers of attorney, declarations and testamentary documentation to give effect to this agreement. In August 1991, the first defendant prepared documents setting out details of his parents’ assets and gave these to Peter and Helena.

A claim for restitution could only be made by a person who was both a resident and a citizen of the Czech Republic. By September 1991, the first defendant satisfied these requirements and made an application for restitution of the Prague properties. Peter was subsequently granted residency rights but only after the cut-off date for making a restitution claim.

In March 1992, the properties in central Prague were restituted to the first defendant either wholly or in part. Thereafter, the other properties in Repy and Slovakia were either restituted to the first defendant or purchased by him.

Disputation quickly ensued as to whether Peter and Helena were each entitled to a one-third share of the properties which had been restituted. Peter Talacko died in November 1995. The 1998 Proceedings were commenced by Peter’s widow, Margaret, as his executor, and his children: Alexander, Martin and Rowena. Helena sued by her litigation guardian, her son, also named Jan. The 1998 Proceedings claimed an equitable interest in the properties held by the first defendant and sought relief for alleged breaches of agreement, breach of trust and breach of fiduciary obligations. The trial commenced on 21 February 2001. The plaintiffs opened their case on that day and the opening continued on 22 February 2001. The proceedings were then adjourned to 26 February 2001 to allow the parties an opportunity to participate in a mediation on 23 February 2001.

On 23 February 2001, the proceedings were settled on the following terms (‘terms of settlement’):

1.The defendant to transfer all the right, title and interest that he has or shall have, to such person or entity as shall be nominated by the plaintiffs, in respect of the following:
(a)Kiefernstrasse 19 and Kiefernstrasse 19b, Dresden, Germany;
(b)17.4473 hectares of land in Repy, as defined in the particulars under paragraph 6 in the amended statement of claim herein;
(c)approximately 0.8 hectares of land in Kbely, as defined in the particulars under paragraph 6 in the amended statement of claim herein;
(d)approximately 364 hectares of land in Sucha, as defined in the particulars under paragraph 6 of the amended statement of claim hereto.

This clause does not apply to any interest in land purchased by the defendant as from this date.
2.To give effect to paragraph 1, the defendant will sign all necessary documents and give all necessary documents and attend at any place as required by law in respect of the signing of such documents.
3.If by reason of applicable law, or some other cause, paragraph 1, or any part thereof, cannot be given effect to within 12 months of the date of these terms in respect of a particular property or properties, the defendant shall at the direction of the plaintiffs and at their cost, take all reasonable steps to sell such property or properties at best market value and shall pay the net proceeds of such sale, after the deduction of all expenses, to the plaintiffs or at their direction.
4.The plaintiffs to be responsible for and pay in the first instance all transfer costs, expenses, taxes, duties, levies and charges in any way payable in respect of the transfer or sale of the properties.
5.The defendant to pay to the solicitor for the plaintiffs the sum of $150,000 in part payment of the plaintiffs’ costs on or before 23 June 2001.
6.In the event that the defendant breaches any term, condition or warranty in this agreement, then the plaintiffs shall be entitled to enter judgment for an order that the defendant pay equitable compensation for breach of fiduciary duty in respect of each of the Properties and interests in the Properties (as defined in the amended statement of claim) recovered or obtained by him, together with the costs of entering such judgment, and the production of these terms of settlement shall be conclusive evidence of the defendant’s irrevocable consent to the entry of such judgment.

7. The parties shall forthwith consent to orders of the Court that the proceeding be struck out with no order as to costs, together with a right of reinstatement for the purpose of enforcing these terms.
8. The parties agree to release each other from all actions, suits, demands, liabilities and costs arising out of or in any way related to the subject matter of the proceeding.
9. The defendant warrants that:
(i) he has not reduced his right, title and interest in the properties the subject of these terms since the commencement of the proceeding;
(ii) the properties the subject of these terms, or any of them, are not encumbered;
(iii) that he shall not deal with the properties the subject of these terms otherwise than in accordance with these terms; and
(iv) that until transfer or sale he will pay costs, taxes and expenses associated with each property the subject of these terms.

The first defendant’s breach of the 2001 terms of settlement

Subsequent to 23 February 2001, none of the properties referred to in cl 1 of the terms of settlement were transferred to the plaintiffs. In October 2003, German lawyers acting for the plaintiffs prepared transfer documentation with respect to the first defendant’s interests in the Dresden properties referred to in cl 1(a) of the terms of settlement. The documents were forwarded to the first defendant under the cover of a letter dated 3 October 2003. By letter dated 29 November 2003, the first defendant advised the plaintiffs’ lawyer that he would not execute the transfer document.[2]
[2]Talacko v Talacko [2008] VSC 128, [112]-[126].

In November 2005, the 1998 Proceedings were reinstated. The plaintiffs claimed for breach of an agreement constituted by the terms of settlement. In November 2007, the trial was heard by Osborn J (as his Honour then was) confined to issues of liability. His Honour delivered judgment on 24 April 2008.

Osborn J concluded that the first defendant’s failure to execute the transfer in respect of the Dresden properties constituted a breach of cl 1 of the terms of settlement. This finding, together with the finding of breach of cl 9(iv) of the terms of settlement, enlivened cl 6 of the terms of settlement. This entitled the plaintiffs to enter judgment for an order that the first defendant pay the plaintiffs equitable compensation for breaches of the fiduciary duties alleged in the amended statement of claim in the 1998 Proceedings in respect of each of the properties referred to therein, which had been recovered by the first defendant. The class of properties covered by cl 6 of the terms of settlement was considerably broader than those referred to in cl 1. In particular, it included the properties in central Prague.

The proceedings in respect of the assessment of equitable compensation were heard by Kyrou J (as his Honour then was) in October 2009 with judgment being delivered on 24 November 2009.[3] His Honour concluded that the plaintiffs were entitled to equitable compensation in the sum of €10,073,818.[4]
[3]Talacko v Talacko [2009] VSC 533.
[4]Talacko v Talacko [2009] VSC 579, [72].

The first defendant appealed the judgments of Osborn and Kyrou JJ. These appeals were heard on 23 November 2010. Judgment dismissing the appeals was delivered by the Court of Appeal on 18 March 2011.[5]
[5]Talacko v Talacko [2011] VSCA 71.

The first defendant did not pay the plaintiffs the amount of equitable compensation ordered by Kyrou J. On 7 November 2011, a sequestration order was made against the estate of the first defendant by the Federal Court of Australia on the application of the plaintiffs. Mr Brian Silvia of BRI Ferrier (NSW) was appointed trustee of the first defendant’s estate. Mr Silvia lodged a notice of objection to discharge the first defendant’s estate from bankruptcy with the Official Receiver of the Australian Financial Security Authority by letter dated 5 November 2014.[6]
[6]Court Book, 5409.

May 2009 Donation Agreement

On 12 May 2009, the first defendant and his Prague-based sons, David and Paul (second and third defendants in the current proceedings), executed a donation agreement[7] (‘Donation Agreement’) and applications for registration. This transferred from the first defendant to David and Paul by way of a gift, all of the first defendant’s interests in the Czech properties and other properties which were in issue in the then pending equitable compensation proceedings before Kyrou J. In his subsequent judgment, Kyrou J concluded that the properties which were transferred had a value in October 2009 of at least €14 million.[8]
[7]Exhibit P5: Affidavit of Joseph Hlavicka, sworn 9 July 2009, Exhibit JH-2.
[8]Talacko v Talacko [2009] VSC 533, [25].

The plaintiffs learned of the Donation Agreement and applications for registration on 10 June 2009 when their Prague-based lawyer, Mr Hlavićka, made inquiries of the real estate registry (also known as the Cadastral Registry) in Prague.[9] On 11 June 2009, the plaintiffs sought and were granted Mareva orders restraining the first defendant from taking any further steps of selling, transferring or donating or otherwise dealing with the Czech properties until 4.15pm on 23 June 2009, or until further order. The first defendant was also ordered to immediately take all such steps available to withdraw any applications for transfer that had been lodged with the real estate registry.[10]
[9]Talacko v Talacko [2009] VSC 349, [57].
[10]Ibid [60].

Shortly after obtaining the orders on 11 June 2009, the plaintiffs filed a proposed amended statement of claim in the 1998 Proceedings alleging new causes of action against Jan, David and Paul Talacko in relation to the Donation Agreement and the applications for registration of the property transfers.

On 23 June 2009, Kyrou J made further orders extending the orders which had been made on 11 June 2009 until 16 July 2009. On 13 July 2009, the plaintiffs filed a summons seeking orders that the first defendant be dealt with for contempt on the grounds of non-compliance with Kyrou J’s orders of 11 June 2009 and 23 June 2009. Bongiorno J issued a warrant for the first defendant’s arrest.[11]
[11]Ibid [72].

At approximately 1.30pm on 13 July 2009, the first defendant was observed — by a private investigator acting for the plaintiffs — leaving the family home in Malvern. He travelled by taxi to Melbourne Airport where he was observed talking to staff at the Qantas International departures desk, and presenting what appeared to be travel documents. He subsequently left the airport by taxi.[12]
[12]Ibid [71].

On the evening of 13 July 2009, the first defendant appeared before Bongiorno J. He was remanded in custody to appear before Byrne J the following day. Byrne J dismissed the summons for contempt because the order of 11 June 2009 did not contain an endorsement complying with r 66.10(3) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (‘the Rules’). However, Byrne J did grant an injunction preventing the first defendant from leaving Victoria, attending any point of international departure or applying for any other passport until the conclusion of the contempt proceedings. An application for discharge of this injunction was refused by Kyrou J.[13]
[13]Talacko v Talacko [2009] VSC 348, [42].

On 2 October 2009, Habersberger J made orders in the 1998 Proceedings restraining the defendant from leaving Victoria until 5pm on the day of the judgment unless the first defendant paid into court the sum of $2.3 million. As events transpired, the first defendant never left Australia between 15 July 2009 and his death on 3 November 2014.

At a directions hearing on 16 July 2009, discussion took place between Kyrou J and counsel for the plaintiffs regarding the plaintiffs’ application to join David and Paul Talacko as defendants in the 1998 Proceedings. Kyrou J expressed concerns about whether the 1998 Proceeding would be ready to be heard by the scheduled date of 5 October 2009 if David and Paul Talacko were joined as defendants. His Honour raised the possibility of the new causes of action being pleaded in a new proceeding.

On 17 July 2009, the plaintiffs commenced the current proceedings. The five plaintiffs in the current proceedings correspond with the five plaintiffs in the 1998 Proceedings. At the time of the commencement of the current proceedings, there were four defendants: Jan Talacko, his sons David and Paul, and his wife Judith Talacko.

On 24 July 2009, Kyrou J made Mareva-type orders against David and Paul Talacko requiring them to take steps to undo the registration of the transfer of the Czech properties which had been the subject of the Donation Agreement.

On 10 August 2009, Kyrou J extended the Mareva-type orders against David and Paul Talacko. He also made an order for substituted service based upon his satisfaction that David and Paul Talacko had been avoiding service.[14] On 17 December 2009, Kyrou J issued arrest warrants for David and Paul Talacko pending contempt proceedings in respect of non-compliance with the Mareva-type orders which his Honour had previously made. His Honour also made orders that the evidence filed in the 1998 Proceeding would stand as evidence in the current proceeding.
[14]Talacko v Talacko [2009] VSC 349, [90].

Following the Court of Appeal’s dismissal of the appeals from the judgments of Osborn and Kyrou JJ, the current proceeding progressed slowly. On 25 May 2013, the proceeding was listed for trial to commence on 8 October 2013. On 5 September 2013, a subpoena for production of documents was issued by the plaintiffs directed to Peter Talacko, the first defendant’s third son. This subpoena was the catalyst for a raft of interlocutory proceedings which are summarised in a judgment of Zammit AsJ (as her Honour then was) delivered on 24 September 2014.[15]
[15]Talacko v Talacko [2014] VSC 470.

On 24 September 2014, Zammit AsJ joined Peter Talacko and his wife Amanda Fisher as the fifth and sixth defendants to the current proceedings and granted the plaintiffs leave to file and serve a third further amended statement of claim pleading causes of action against the fifth and sixth defendants. These orders were the subject of an appeal pursuant to r 77.06 of the Rules. In the first instance, the hearing of the appeal was adjourned by reason of prejudice to the plaintiffs occasioned by the failure of the fifth and sixth defendants to have complied with the discovery orders made by Zammit AsJ. Ultimately, the fifth and sixth defendants did not press their appeal despite having been afforded an opportunity to do so within a timeframe which would have allowed for the determination of the appeal prior to the commencement of the trial before me on 2 March 2015.

The first defendant died intestate on 3 November 2014. By virtue of s 19 of the Administration and Probate Act 1958 (Vic), his estate vested in State Trustees Ltd. On 13 March 2015, I made an order pursuant to r 9.09(2) of the Rules joining State Trustees Ltd as the seventh defendant nunc pro tunc from 3 November 2014. State Trustees Ltd played no active role in the proceedings.[16]
[16]Mr David Findlay made an application pursuant to r 16.03 of the Rules to be appointed as a representative of the first defendant’s estate. On 13 March 2015, I dismissed this application.

In addition to the history of proceedings set out above, it is also necessary to refer to proceedings in the Czech Republic. Since 2008 until the present date, the plaintiffs have conducted two sets of proceedings in the Czech Republic. First, proceedings directed at over-turning the May 2009 disposition of the Czech properties from the first defendant to the second and third defendants. Second, proceedings seeking recognition and enforcement of Kyrou J’s equitable compensation judgment in the Czech Republic. To date, the plaintiffs have not succeeded in either obtaining recognition of the equitable compensation judgment, or in setting aside the Donation Agreement. However, as at the date of this judgment, proceedings remain on foot which may result in the setting aside of the Donation Agreement and the recognition and enforcement of Kyrou J’s equitable compensation judgment.

At the time of this judgment there are proceedings on foot in this court in which representatives of the first defendant have challenged the validity of the certificate issued by the Prothonotary of the Supreme Court of Victoria (‘the certificate’) pursuant to the Foreign Judgments Act 1991 (Cth) (‘Foreign Judgments Act’). A valid certificate under the Foreign JudgmentsAct is an essential pre-condition to the recognition and enforcement of Kyrou J’s judgment in the Czech Republic. I shall return to the significance of the plaintiffs’ attempts to enforce the judgment of Kyrou J in the Czech Republic, and to the attempt to challenge the validity of the certificate under the Foreign Judgments Act later in this judgment. I will do so when considering the issue of whether the plaintiffs have established pecuniary loss for the purposes of their cause of action in conspiracy.

The failure of the second and third defendants to enter an appearance

The trial commenced on 2 March 2015. As at that date, neither the second nor third defendants had entered an appearance. On 26 March 2015, I granted the plaintiffs leave, pursuant to r 7.04 of the Rules, to proceed against the second and third defendants nunc pro tunc from the date of the commencement of the current proceedings. On the same date, I made an order pursuant to r 2.04(1) of the Rules that the requirement that the originating process contain an endorsement in accordance with r 7.02(1) of the Rules at the time of service out of Australia be dispensed with nunc pro tunc.

I am satisfied that the writ and the second amended statement of claim were served on the second and third defendants in compliance with the Hague Convention.[17] There is no doubt that since the Mareva orders were made against the second and third defendants by Kyrou J in June 2009, the second and third defendants have been fully aware of the existence of the current proceedings. Indeed, an email from Paul Talacko to his mother on 12 June 2009, in reference to the Mareva orders, stated:

I’d just like to say that we have to be very careful with this, as this seems like a trick to drag us into this case.
If Tato [the first defendant] says anything that indicates that we’ve said or done anything, then it could be taken to mean that we are aware of the Australian case and submit to its jurisdiction.
Anything must be sufficiently vague.[18]

[17]Court Book, 5491: Request for service abroad of judicial documents and certificate bearing the stamp of the relevant judicial authority in the Czech Republic.

[18]Exhibit P69: Email from third defendant to fourth defendant sent on 12 June 2009 at 6:46am.

I have no hesitation in concluding that the second and third defendants have at all material times been fully aware of the current proceedings. They have been placed squarely on notice of the claims against them and the material which the plaintiffs rely upon in support of the allegations against them. They have deliberately and consciously refrained from participating in the current proceedings. Given that they are subject to extant arrest warrants, this is not entirely surprising. On 6 March 2015, I made an order for substituted service of the fourth amended statement of claim, together with other pleadings and affidavits relied upon by the plaintiffs.

The failure of the fourth defendant to give evidence

Judith Talacko did not give evidence in the current proceedings. Mr Glick QC, who appeared with Mr Masters for Mrs Talacko, opened his case on the basis that the allegations made against Mrs Talacko did not give rise to any need for her to respond. He submitted:

Why should my client get in the witness box when the case was so weak? In a fraud case. You can’t draw an inference against my client because my client’s view is the case is particularly weak and there is nothing to answer.[19]

[19]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 2 March 2015) T112 LL15–19.

On the morning of 3 March 2015, the second day of hearing, Mr Howells, who appeared with Dr Sharpe for the second to fifth plaintiffs, advised the court that his clients intended to seek leave to amend the third amended statement of claim. He foreshadowed that most of these amendments would relate to particulars arising from emails which had only recently been provided to the plaintiffs. In response, Mr Glick submitted, quite reasonably, that in light of the foreshadowed amendment, the fourth defendant may be called to give evidence.[20] In response, I advised Mr Glick that if he intended to call Mrs Talacko my expectation was that she would attend court to give evidence on 10 March 2015.[21] I informed Mr Glick that if I permitted the amendment to the statement of claim he would have an opportunity, as a matter of procedural fairness, to consider the amendments and to confer with Mrs Talacko as he saw fit.[22]
[20]Ibid, T155 LL1-5.
[21]Ibid, T179 LL14-27.
[22]Ibid, T211 LL5-10.

At the conclusion of the second day of hearing, proceedings were adjourned to Thursday 5 March 2015 to allow for the foreshadowed amendment to the statement of claim to be completed and for the defendants to have an opportunity to consider it and take instructions prior to the resumption of proceedings. As events unfolded, the matter was relisted for a mention on the morning of 4 March 2015 to consider a foreshadowed application on behalf of the fourth defendant pursuant to s 42E of the Evidence (Miscellaneous Provisions) Act 1958 (Vic) (‘Evidence Act’) allowing the fourth defendant to give evidence via video link rather than in person.

At the mention on 4 March 2015, I was informed by Mr Glick that the basis of the fourth defendant’s application to give evidence via video link was her apprehension that if she returned to Victoria she may be subject to orders restraining her from leaving the jurisdiction. The solicitors acting for Mrs Talacko had sought an undertaking from the plaintiffs’ solicitors that if Mrs Talacko did return to Victoria, no application would be made seeking to restrain her from leaving the jurisdiction. This undertaking had not been forthcoming.

As to the fourth defendant’s solicitor’s request for an undertaking from the plaintiffs’ solicitors, I stated as follows:

Mr Glick, I am deeply troubled by the correspondence which your instructing solicitor has sent to the plaintiffs’ solicitors. I am deeply troubled that an officer of the court would seek an open-ended undertaking from another officer of the court not to commence proceedings, no matter what justification there may be for doing so, including whether that might involve a contempt of court.[23]

[23]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, Kyrou J, 4 March 2015) T7 LL20–7.

Ultimately, Mr Glick apologised to the court for the contents of the letter his instructing solicitors had sent to the plaintiffs’ solicitors.[24]
[24]Ibid, T13 L25.

Objectively viewed, the fourth defendant’s concerns as to being prevented from leaving the jurisdiction if she returned to give evidence in the current proceedings provides no justification for her refusal to return from overseas to give evidence. Any order restraining the fourth defendant from leaving the jurisdiction could only be made by the court upon proper material and in the proper exercise of the court’s power. Needless to say, any order restraining an individual’s liberty of movement would not be made lightly.

At the commencement of the fifth day of proceedings, Mr Glick informed the court that he had instructions that his client ‘was presently disposed to’ give video evidence from Hong Kong. Mr Glick stated that he wished to press his application pursuant to s 42E of the Evidence Act[25] (‘s 42E Application’). Mr Glick proposed bringing the application on ‘separate material’ than that which was before the court on 4 March 2015. He stated that he would not rely upon the letter from his instructing solicitor seeking an undertaking from the plaintiffs’ solicitors to refrain from making any application to restrain the fourth defendant from leaving the jurisdiction. However, Mr Glick did confirm that the substantive basis for the application was the same: the fourth defendant’s apprehension that if she returned to Australia she might be subject to an application to restrain her from leaving.[26]
[25]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 4 March 2015) T371 L13.
[26]Ibid, T371 L28—T372 L3.

I asked Mr Glick to file a fresh affidavit in support of the s 42E Application. I indicated that if Mr Howells made an application that the plaintiff’s legal representatives be present in Hong Kong, I would be minded to grant that application given that Mr Glick had foreshadowed that his junior and his instructing solicitor would be present in Hong Kong at the time such evidence was given.[27]
[27]Ibid, T373 LL10-18.

Thereafter there followed discussions of timetabling issues in respect of the timing of the fourth defendant’s evidence via video link.[28]
[28]Ibid, T377 L12—T380 L28.

Mr Howells submitted that the second to fifth plaintiffs opposed the giving of evidence by the fourth defendant via video link but if the court was minded to make an order of its own motion that the fourth defendant’s evidence were to be given via video link, the plaintiffs would co-operate. He also submitted that by 10 March 2015, the plaintiffs wished to provide the court with a list of perceived shortcomings in the first and fourth defendant’s discovery.[29] He submitted that the plaintiffs would seek an assurance from the fourth defendant that no point would subsequently be taken by the fourth defendant regarding the effectiveness of the administration of the oath.[30] He also submitted that both he and his instructing solicitor would wish to be present in Hong Kong to conduct the cross-examination of the fourth defendant and that the cost of this should be borne by the fourth defendant.[31] He requested the court to defer ruling on the s 42E Application to allow the second to fifth plaintiffs to put further material before the court in relation to the issues that had been raised.[32]
[29]Ibid, T383 LL3–38.
[30]Ibid, T385 L23—T386 L20.
[31]Ibid, T386 L14—T387 L22.
[32]Ibid, T391 LL17–30.

Having heard Mr Howells’ submissions, Mr Glick submitted that he was no longer making the s 42E Application for the fourth defendant to give evidence via video link.[33] Thereafter, the following exchange took place between myself and Mr Glick:
[33]Ibid, T395 L13.

His Honour: But I simply make this observation to you, Mr Glick that you were to seek to advance the proposition that here is the explanation for my client not giving evidence, that is her apprehension about coming back into the jurisdiction.

Mr Glick: Yes, Your Honour.
His Honour: I have indicated to you that I am mindful to grant an application for evidence to be given by video link. And on the basis of that indication, you should assume that little or no weight would be given to any submission, if you were minded to advance it, that no Jones v Dunkel inference was available because of there being a valid explanation for the witness giving evidence.

Mr Glick: I accept that.[34]

[34]Ibid T399 LL16–30.

Consistent with the position set out above, the fourth defendant did not give evidence in the proceedings. The inferences, if any, to be drawn from her failure to do so are dealt with subsequently in this judgment.

Are the defendants liable to the plaintiffs for lawful means conspiracy?

The second to fifth plaintiffs’ fifth amended statement of claim alleges that the first to fifth defendants are liable for conspiracy. The plaintiffs allege both lawful means conspiracy and unlawful means conspiracy. As to the former, liability requires the existence of an agreement between two or more persons to commit a lawful act with the predominant purpose of injuring or damaging the plaintiff, and that the act is carried out, and the purpose is achieved.[35]
[35]Hamod v State of NSW (No. 12) [2009] NSWSC 242, [182] (‘Hamod’) (citations omitted)

In order to establish a lawful means conspiracy, the plaintiffs must establish that the defendants’ desire to harm the plaintiffs is ‘the sole, the true … the dominating or the main purpose of the conspiracy’.[36] It will be fatal to a claim for lawful means conspiracy if it can be shown that the defendants were acting for the advancement, protection or defence of their own interests.[37]
[36]McKernan v Fraser [1931] 46 CLR 343, 362 (Dixon J), 398-9 (Evatt J).
[37]Ibid 362 (Dixon J), 400 (Evatt J); Cox v Journeaux (1935) 52 CLR 713, 718 (Dixon J).

Mr Howells submitted that if damage to the plaintiffs is an inevitable consequence of action taken by the plaintiffs to protect their own interests, this will suffice for the purposes of establishing intent to injure for lawful means conspiracy. He relied upon the judgment of Lord Sumner in Sorrell v Smith:[38]

When the whole object of the defendants’ actions is to capture the plaintiff’s business, their gain must be his loss. How stands the matter then? The difference disappears. The defendants’ success is the plaintiff’s extinction, and they cannot seek the one without ensuing the other. I trust that what has been said on this occasion will not be taken as conclusive of these questions should they ever arise.[39]

[38][1925] AC 700.

[39]Ibid 742.

It is plain from the final sentence of the passage set out that Lord Sumner was not stating a principle of general application. In any event, the passage is not reconcilable with the weight of Australian authority. As Harrison J stated in Hamod, in order to establish a lawful means conspiracy, the alleged conspirators must ‘have acted in order that, not with the result that, the plaintiffs should have suffered damage’.[40]
[40]Hamod [188]. See also Dresna Pty Ltd v Misu Nominees Pty Ltd [2004] FCAFC 169, [12] (‘Dresna’); Australian Wool Innovation Ltd v Newkirk [2005] FCA 290, [64].

Accepting for the sake of argument that an inevitable consequence of the Donation Agreement was damage to the plaintiffs, this is not sufficient to make good the cause of action in lawful means conspiracy. The plaintiffs must establish that the Donation Agreement was executed in order that, not with the result that, the plaintiffs should suffer damage.[41]
[41]Hamod [188].

I have no hesitation in concluding that the predominant purpose of the first to third defendants in executing the Donation Agreement was to advance the defendants’ own interests by preserving the relevant properties within the Talacko family. The timing of the transactions in May 2009 strongly support this conclusion. At that time the hearing before Kyrou J was only five months away. Osborn J had already made a finding that the first defendant had breached the terms of settlement, thereby enlivening the plaintiffs’ entitlement to equitable compensation. Further, his Honour concluded that the reason for the failure of the first defendant to execute the transfer of the Dresden properties ‘was simply that he did not accept the plaintiffs were entitled, as a matter of fairness, to a transfer of the properties the subject of the terms.’[42] The Donation Agreement was underpinned by the same motivation.
[42]Talacko v Talacko [2008] VSC 128, [134].

On 30 April 2008, within days of Osborn J delivering judgment, Paul Talacko emailed Martin Hrodek, a Prague-based lawyer, including the following:

We have come to the conclusion that my cousin, Jan Talacko (formerly Travnicek) will never cease to seek new and innovative ways to initiate court proceedings against us. In order to protect ourselves from these incessant suits, we are considering the possibility of transferring some or all of my father’s properties into a company limited by shares (Vćeśtiné, Akclova Spolecnost). We are considering the A.S. rather than an S.R.O., because of the added flexibility. In order to give ourselves extra protection, we have also considered the idea of having another company, possibly an offshore company owning the shares of the A.S. The purpose of this would not primarily be to minimise taxation, but rather to hide who has ownership and control of the properties.[43]

[43] Exhibit P69: Email from the third defendant to Martin Hrdodek on 30 April 2008 at 12:57am.

This email articulates a purpose of the mooted transaction ‘being to protect ourselves from these incessant suits’. As events transpired, the assets were not transferred to a holding company. Rather, they were transferred from the first defendant to the second and third defendants. In spite of this, the motivation was the same: to preserve the properties within the Talacko family.

For the reasons set out above, and without considering whether other elements of lawful means conspiracy claim are made out, the plaintiffs’ claim that the defendants are liable for lawful means conspiracy must fail.

Unlawful means conspiracy

The plaintiffs allege that the first to fifth defendants are liable for unlawful means conspiracy. An unlawful means conspiracy is an agreement or combination between two or more persons to commit an unlawful act with an intention to injure the plaintiff, and the act is carried out, and the intention is achieved.[44] There is a difference between lawful means conspiracy and unlawful means conspiracy in relation to the degree of intention required to establish the tort. In relation to both types of conspiracy, intention to injure or damage is an essential requirement.[45] However, for unlawful means conspiracy to be actionable, it is not necessary for the plaintiffs to establish that the sole purpose of the conspiracy is to injure the plaintiffs. It is sufficient that one of the purposes of the conspiracy is to injure the plaintiffs.[46] This requirement will be satisfied if it can be shown that the conspiracy and unlawful means were directed at the plaintiffs.[47]
[44]Williams v Hursey (1959) 103 CLR 30, 78 and 122.
[45]Northern Territory v Mengel (1995) 185 CLR 307, 342 [9].
[46]Fatimi Pty Ltd v Bryant (2004) 59 NSWLR 678, [13] and [83] (Handley JA, McColl JA agreeing) (‘Fatimi’).
[47]Fatimi [13]; Dresna at [9] and [12] (Kiefel and Jacobson JJ); Lonhro Plc v Al-Fayed [1992] 1 AC 448, 467
(Lord Bridge).

Mr Howells submitted that the ‘overarching motivation’ of the defendants was to deny the plaintiffs any access to property that would satisfy their claims, including claims reflected in a judgment of the Supreme Court of Victoria.[48] Mr Howells contended that the plaintiffs’ claims in both lawful and unlawful means conspiracy were underpinned by the Donation Agreement: ‘we were about to get an assessment of what our fair compensation was, what the damages ought to have been for the breach of those terms of settlement, and at the eleventh hour before we got that assessment there was a fraudulent divestment of property aimed to deny us.’[49] Mr Howells submitted that in order to understand the defendants’ motivation for the Donation Agreement it was necessary for the court to have regard to events which occurred prior to the signing of the terms of settlement in February 2001.[50]
[48]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 25 March 2015) T933 L23—T934 L4.
[49]Ibid, T952 LL16-26.
[50]Ibid, T953 LL5-22.

The Donation Agreement lies at the heart of the plaintiffs’ claim for unlawful means conspiracy. In order for that Agreement to support a finding that the first to fifth defendants committed the tort of unlawful means conspiracy, I must find:

(i)an agreement or combination between the first defendant to the fifth defendant;

(ii)      to commit an unlawful act;
(iii)     with an intention to injure the plaintiffs; and
(iv)     resulting in pecuniary loss to the plaintiffs.
An agreement between the first to fifth defendants?

An allegation that an individual is a party to a conspiracy to injure another by unlawful means is a very serious matter. If the plaintiffs are to succeed they must establish their case on the balance of probabilities. In determining that, the court may take into account the gravity of the matters alleged.[51] Mr Howells submitted that the conduct of the defendants denied the plaintiffs the fruits of the Kyrou J judgment and constituted an equitable fraud.[52] It is well established that clear, cogent or strict proof is necessary where so serious a matter as fraud is to be found. A court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct.[53] I have approached the task of making findings of fact in respect of the serious matters alleged, taking account of these principles.
[51]Evidence Act 2008 (Vic) s 142(c).
[52]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 25 March 2015) T977 LL3-5.
[53]Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 449-450.

The allegation against the first to fifth defendants is that each was a party to an agreement. For the reasons which follow, I have concluded that as at May 2009, the first to the fourth defendant were parties to an agreement to deny the plaintiffs access to property which the plaintiffs could seek to encumber to satisfy a judgment debt or costs arising out of litigation. Such property was comprised of the assets in the Czech Republic, Slovakia and Germany which had been restituted to the first defendant. In addition, the property included the matrimonial home at 312 Glenferrie Road, Malvern (‘the Glenferrie Road property’).

I have concluded that the fifth defendant was a party to an agreement with the first to fourth defendants to deny the plaintiffs access to the Glenferrie Road property in 2000. At this time, the fifth defendant acted as a guarantor on a mortgage taken out by his mother over that property. He was also a party to such an agreement in January 2009 when he recommended that his father take out a mortgage over that property. However, in May 2009, at the time of the Donation Agreement, the fifth defendant was not a party to any agreement to deny the plaintiffs access to the properties which were the subject of the Donation Agreement.

The agreement between the first, second and third defendants

The first to third defendants were parties to an agreement in May 2009 to deny the plaintiffs access to properties which had been restituted to the first defendant and which could satisfy a judgment debt costs orders arising out of litigation in the Supreme Court of Victoria. The evidence in support of this conclusion is overwhelming. First, there is the Donation Agreement itself. The entry into the agreement by the first, second and third defendants was an overt act which had the effect of transferring out of the hands of the first defendant, assets which could have satisfied a judgment debt arising out of the proceedings before Kyrou J. Second, the timing of the disposition of the assets — some five months prior to the commencement of the trial before Kyrou J — is significant. In April 2008, Osborn J concluded that the first defendant’s breach of the 23 February 2001 terms of settlement enlivened an entitlement to equitable compensation. The primary focus of the proceedings before Kyrou J was the determination of the quantum of that compensation. Third, within two days of Osborn J’s judgment, the third defendant sought advice from a Prague-based lawyer, Martin Hrodek, to which reference has already been made. Although the Donation Agreement did not involve the transfer of properties to a company, it plainly had the same purpose as the mooted disposition of the properties to a holding company: to take the assets out of the reach of the plaintiffs and to preserve the wealth embedded in those properties within the immediate family of the first defendant.

On 11 May 2009, Pavel Vrany, a lawyer with Baker & McKenzie in Prague, provided the following advice to the first defendant regarding the transfer of properties owned by him in Germany and Slovakia:

As regards to the potential exposure to criminal liability, we are not convinced that your comments would entirely eliminate the remaining risk. The existence of a pending law suit which may result in a judgment that could be enforced in Germany suffices within the meaning of sec. 288 of the German Criminal Code (‘St GB’). From the prospective of the German Criminal Code, it is immaterial where the law suit is pending and whether the property in question is the subject-matter of the proceedings. As regards to the Slovak Criminal Code, the existence or non-existence of a pending litigation is not relevant as well – the question is whether your creditors had a claim vis-à-vis you and the satisfaction of their claim was threatened or frustrated. You may of course argue that you did not act with the intent of obstructing the satisfaction of your creditors but we would certainly recommend documenting the intentions and background of the transaction to minimise the risk of potential criminal liability.[54]

[54]Exhibit P88: Email of the First Defendant to Pavel Vrany sent on 16 May 2009 at 1:16pm GMT.

Notwithstanding this advice, the first defendant entered into the Donation Agreement the very next day. That Donation Agreement included the purported transfer of properties in Slovakia. The potential for criminal liability under the Slovak Criminal Code was a matter expressly canvassed in the legal advice.

Further, the Donation Agreement constituted a disposition of assets of the first defendant which was inconsistent with assurances given by the first defendant’s counsel and by way of affidavit, that there was no risk that the first defendant would take any steps to dispose of the properties. The disposition of the properties and the receipt thereof by the second and third defendants was in brazen disregard of these assurances.

On 20 June 2008, Mr Berglund QC, appearing for the first defendant, submitted to Osborn J that the first defendant had ‘no intention of disposing of the (Czech) assets’.[55]
[55]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 1998 7393, Osborn J, 20 June 2008) T1070 LL25–8.

On 13 June 2008 in the 1998 Proceedings, the first defendant filed an affidavit in which he stated:

I am also advised by my Czech lawyers and believe that if I did not appeal the injunction order — which was an order made ex parte and solely on material filed by the plaintiffs, then those injunctions would remain for the duration of the Czech proceedings which may be for a term of several years. Although I have absolutely no intention of selling or encumbering any of the properties, on the advice of my Czech lawyers and for reasons set out in the appeal document I gave instructions for the ex parte order to be appealed.[56]

[56]Exhibit P44: Affidavit of Jan Emil Talacko sworn 13/06/08 in Supreme Court of Victoria Proceeding Number 7393 of 1998, [2a].

On 9 September 2008 in the 1998 Proceedings, the first defendant filed an affidavit which included the following statement:

My sole intention with respect to the properties is to continue to rehabilitate and modernise them to a comparable state to which they were prior to them being forcibly taken from my parents. 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.[57]

[57]Exhibit P1: Affidavit of Alexandra Anne Bennett, sworn 2 July 2010, Exhibit AAB26.

Dr Alexandra Bennett is the second plaintiff. She gave evidence that on 14 August 2008 the plaintiffs made an application in the 1998 Proceedings seeking a freezing order over the first defendant’s assets, including the Czech properties, the Sucha land and the Dresden properties. Dr Bennett gave unchallenged evidence that she, along with the other plaintiffs, refrained from proceeding with their application for Mareva relief at the time because of the representations made by the first defendant to the court that he had no intention to sell or dispose of the Czech properties, the Sucha land or the Dresden properties.

Given is the weight of evidence, it is unnecessary for me to have recourse to the principle in Jones v Dunkel[58] to support the finding that I have made that the first, second and third defendants conspired to deny the plaintiffs access to the properties restituted to the first defendant, and they did so with an intention to injure the plaintiffs. Nevertheless, I have no hesitation in concluding that had the second and third defendants given evidence in the current proceedings, such evidence would not have assisted their defence of the allegations against them.
[58](1959) 101 CLR 298 (‘Jones v Dunkel’).

The agreement between the fourth defendant and the first to third defendants

The fourth defendant married the first defendant in 1963. In approximately 1968, they purchased the Glenferrie Road property as joint tenants. In or about September/October 1998, the first defendant transferred his interest in the Glenferrie Road property to the fourth defendant for love and affection. The plaintiffs seek to set aside this disposition pursuant to s 172 of the Property Law Act 1958 (Vic) (‘Property Law Act’). I shall deal with that application subsequently in this judgment.

From the early 1990s until mid-2009, the first defendant spent significant periods of time residing in Prague. In the first instance this was for the purpose of satisfying the necessary residence and citizenship requirements for obtaining restitution of the properties which had been seized by the State.

Consistent with the extended periods of time they were separated, there are many emails between the first and fourth defendants and other members of the Talacko family. Many of these emails involve lengthy discourses on matters of no relevance to the issues which fall for determination by me. However, there are emails which are highly relevant to the question of whether the fourth defendant was a party to the alleged conspiracy with her husband and three sons.

Mr Glick opened his defence on behalf of the fourth defendant by submitting that the high point of the evidentiary case against her was that she had ‘acquiesced’ in an agreement between the first, second and third defendants to transfer ownership of the first defendant’s assets in the Czech Republic by way of the Donation Agreement. Mr Glick submitted that acquiescence is insufficient to sustain a finding that the fourth defendant was a party to the alleged conspiracy with the first to third defendants.[59] However, during final submissions, Mr Glick conceded that the evidence in respect to the fourth defendant ‘probably’ went beyond acquiescence.[60] Nevertheless, he submitted that the highest that could be put against the fourth defendant was that she ‘assisted the conspiracy without being a party to the conspiracy.’[61] Mr Glick submitted that the fourth defendant’s assistance was limited to her role in ‘ministerially’ forwarding correspondence to other family members.[62]
[59]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 2 March 2015) T124 L27—T125 L18.
[60]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 27 March 2015) T1197 L1.
[61]Ibid T1194 LL18-20.
[62]Ibid T1197 L7.

Mr Glick conceded that the evidence supported a finding that subsequent to 1997, the fourth defendant had consistently supported the course of keeping assets out of the reach of the plaintiffs.[63] Mr Glick submitted that whilst the fourth defendant may have been ‘clapping’, there was no evidence to support a finding that she participated in the agreement for the first to third defendants to enter into the Donation Agreement.[64]
[63]Ibid T1198 L22—T1199 L11.
[64]Ibid T1199 LL8-30.

In April 2009, the fourth defendant organised a Skype conference call, involving herself and the first, second, third and fifth defendants. The only direct evidence regarding this Skype call was given by the fifth defendant. His evidence was that the purpose of the call was to discuss the possibility of the first defendant transferring his Czech properties to the second and third defendants.[65] I shall set out my findings in relation to this Skype call in detail in the section of this judgment relating to the allegations against the fifth and sixth defendants. For present purposes, it is sufficient to record my finding that although the fourth defendant organised and initiated the Skype call, there is no evidence that she made any contribution to the discussion between the first, second, third and fifth defendants regarding the mooted Donation Agreement.
[65]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 12 March 2015) T721 LL10-18.

Mr Glick placed considerable weight upon the absence of any evidence of the fourth defendant having participated in the Skype call. He submitted that there was no evidence before the court which could sustain a finding or permit an inference to be drawn that the fourth defendant was a party to a combination with one or more of the defendants, the purpose of which was to thwart the legitimate claims of the plaintiffs. He further submitted that in the absence of direct evidence of the fourth defendant having been a party to such a combination, no adverse inference could be drawn that had the fourth defendant given evidence, such evidence would not have assisted her defence.

In advancing this submission, Mr Glick correctly submitted that the rule in Jones v Dunkel cannot be employed to fill gaps in the evidence, or to convert conjecture and suspicion into inference.[66] No inference can be drawn unless evidence is given of facts ‘requiring an answer’.[67]
[66]Ibid 308, 312, 320-321.
[67]Ibid 322.

Contrary to Mr Glick’s submission, there is direct evidence which supports the conclusion that the fourth defendant was a party to an agreement with the first to third defendants that the first defendant would transfer ownership of his Czech properties to the second and third defendants by the vehicle of the Donation Agreement. That agreement was executed on 12 May 2009. However, the registration of the property transfers did not occur until late July 2009. On 17 June 2009, Michael Witt, the first defendant’s solicitor in the equitable compensation proceedings, sent an email to the first and fourth defendants in the following terms:

Dear Jan and Judy,
Further to our phone call this morning, attached are some extracts from the Czech Civil Code which, although they do not go as far as you thought, do support what you are saying. I have provided a copy of these to Russell and Daryl and asked them to consider whether they feel that Jan should sign an affidavit stating that he was gifting the properties to the boys in order to avoid Czech inheritance law.[68]

[68]Exhibit P89: Email of the Fourth Defendant to the Second, Third and Fifth Defendants and Nicole Talacko sent on 17 June 2009 at 1:59 pm.

The reference to ‘Russell and Daryl’ is a reference to Russell Berglund QC and Daryl Williams, the counsel who were representing the first defendant in the equitable compensation proceedings which were due to be heard by Kyrou J in October 2009.

This email is direct evidence that the first and fourth defendants proposed to Mr Witt that an affidavit be prepared giving a false explanation for the Donation Agreement, deposing that the first defendant was gifting the properties to the second and third defendants in order to avoid Czech inheritance laws. This is not a case of the fourth defendant merely acquiescing in a course of action undertaken by the first defendant. Rather, the email supports a finding that both the first and fourth defendants had jointly proposed a false explanation for the Donation Agreement. Whilst the email post-dates the Donation Agreement by approximately one month, it is contemporaneous with that transaction. Further, the email pre-dates the transfer which was completed in late July 2009.

The email of 17 June 2009 constitutes direct evidence of common purpose. It is therefore unnecessary to have recourse to the principles in Jones v Dunkel for the purpose of drawing an adverse inference against the fourth defendant arising from her failure to have given evidence in the proceeding. Nevertheless, the email is properly characterised as evidence of facts ‘requiring an answer.’ In circumstances where the fourth defendant has failed to give evidence without providing a satisfactory explanation for doing so, I infer that had the fourth defendant given evidence regarding the email of 17 June 2009, such evidence would not have assisted her defence.

As noted earlier in this judgment, Mr Howells contended that the conspiracy alleged by the plaintiffs arose out of the first defendant’s breach of the February 2001 terms of settlement. Nevertheless, Mr Howells submitted that the conduct of the defendants prior to February 2001 was relevant to the question of whether they had a common purpose of depriving the plaintiffs of access to any property within the Talacko family, which could be used to satisfy a judgment debt arising out of the equitable compensation proceedings.[69] I accept this submission.
[69]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 25 March 2015) T952 L9 —T953 L25.

During the proceedings before me, a considerable amount of evidence was led regarding a $400,000 loan taken out by the fourth defendant in May 2000 and secured by a mortgage over the Glenferrie Road property (‘2000 mortgage’). The fifth defendant was the guarantor of the loan. The third amended statement of claim was filed and served by the plaintiffs on 30 September 2014. Paragraph 15A thereof pleads:

Further to paragraph 15 hereof from at least March 2000 the first to fifth defendants communicated amongst themselves discussing ways in which they might defeat the claims of the Plaintiffs by encumbering 312 Glenferrie Road Malvern and by transferring the Properties to entities or persons beyond the jurisdiction of this Court and by concealing the manner in which this was to be done and the reasons for which it was being done.

Paragraph 16E pleads:

In pursuit and furtherance of the conspiracy pleaded in sub-paragraph 16D hereof the First and Fourth Defendants did the following overt acts
….
(h)in or about 2000 the fourth defendant took steps to encumber 312 Glenferrie Road Malvern.

Mr Glick accepted[70] that from the receipt of the third amended statement of claim on 30 September 2014, the fourth defendant was subject to an obligation to discover bank statements and taxation records to the extent that such statements disclosed details of the repayment of the principal of $400,000 of the 2000 mortgage and the source of that payment. No such documents were discovered. I shall deal with the consequences of the fourth defendant’s failure to meet her discovery obligation below. However, in the first instance it is necessary to set out in some detail the relevant exchanges between the fourth defendant and other defendants relating to the 2000 mortgage and the guarantee thereof by the fifth defendant.
[70]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 27 March 2015) T1184 L22.

On 29 March 2000, the fourth defendant sent an email to the first, second, third and fifth defendants in the following terms:

Dearest Tato and Angels,
Just spoken to David F. re. taking a mortgage again. He is really adamant about doing it ASAP so that you can easily be declared bankrupt and should we lose then there is no worry about them getting anything. David said it can’t be traced as gratuity because the house is in my name now anyway and I am fee (sic) to do with the money what I like. So I can take a mortgage to pay off debts elsewhere. He says they can touch nothing if it is that way. He wants to have a chat with Pete and me about this during the week. I shall try to get Pete to give us a moment even if it might be at midnight but David said that is fine… His feelings about the mortgage are that if it goes foul and the chips fall the wrong way then we don’t have to care at all. I guess he has a point.[71]

[71]Exhibits P68: Email from fourth defendant to first defendant dated 29 March 2000 at 4:49pm.

The reference to ‘Tato’ is a reference to the first defendant. The reference to ‘David F’ is a reference to David Findlay, the solicitor acting for the first defendant in the 1998 Proceedings which were scheduled to commence in February 2001.

On 5 April 2000, the first defendant sent an email to the fourth defendant, copied to the second, third and fifth defendants which included the following:

Dearest Dodo,
I am in favour of that mortgage. It is very difficult to get good interest rates here on foreign currency as I would be holding them as a Czech citizen. To illustrate, I only get 1.5% for the US dollars I hold here with Peter (?).
I think the best bet would be to send it to Nicky’s account and she should be able to park it on the Isle of whatever as we would get a much better interest there.
Also if possible the mortgage should only be for a short period, say three years, with option of early repayment.
If necessary I will get a sterling or U.S. dollar account here and then return the money to the Island anyhow as I would not want it to be here for a long time.[72]

[72]Ibid Email from the first defendant to fourth defendant dated 5 April 2000 at 5:58am.

It is not in dispute that the reference to ‘Dodo’ is a reference to the fourth defendant. The reference to ‘Nicky’ is a reference to Nicole Talacko, the daughter of the first and fourth defendant who is not a party to the current proceedings

On 6 April 2000, the first defendant sent an email to the fourth defendant, copied to the second, third and fifth defendants. The email included the following:

Dearest Dodo,
I visited my friendly bankers and ascertained that I can have an account here in Australian dollars. I will open one tomorrow or on Friday. I will give you a number when I get one, and the Bank of Melbourne can send the money straight to that account.
I will then transfer the sum received to a term account. The interest rate for Australian dollars are at present as follows:
1 month 4.47%, 3 months 4.74%, 6 months 5.02%, 12 months 5.45%.
This is I realized for amounts under $10 000. Over $50 000 the interest rates are as follows:
1 month 4.86%, 3 months 5.13%, 6 months 5.41%, 12 months 5.84%.
It will thus remain in Australian dollars. It is possible to transfer your signature to this new account, as I’ve found out, so you will have access to this account as well.
I think that this is a wonderful solution as we will not have any risks as far as foreign exchange rate is concerned. I will naturally arrange for interest to be paid for you one way or the other.
What amount to (sic) we want to raise as mortgage ? I thought $350 000 should be plenty as there is restrictive ownership as you are the owner of the rest anyhow.[73]

[73]Exhibit P69: Email from first defendant to fourth defendant dated 6 April 2000 at 4:55am.

On 7 April 2000, the first defendant sent an email to the fourth defendant copied to the second, third and fifth defendants. It included the following:

Dearest Dodo and the young adults,
I have gone to the bank today and opened two AUD accounts.
One is a current account and that one can accept transactions. This one has no interest but incurs monthly charges. I have given you that number already. The other one is a term account. It now has a small sum in, about $2000 renewable monthly term. This is so that the money can be invested as soon as possible when received (time required would be under 30 days) and we can decide for how long when we want to invest it.
This was relatively painless. Now as far as the amount of the mortgage is concerned there is no need to overdo it. Perhaps 300 or 325 should be enough as you are buying from your husband, but better check with Peter.[74]

[74]Ibid Email from first defendant to fourth defendant dated 7 April 2000 at 4:38am.

On 17 April 2000, the fourth defendant sent an email to the first defendant copied to the second, third and fifth defendants. It included the following:

Dearest Tato and Genii,
...To the other matter of the loan. The house has been valued at $950 000, this valuation is usually 20% below the market price so that gives you an idea of its worth. I have spoken to my mate Craig at Bank of Melbourne and all is ready for the papers to be signed etc. I just need to confirm with you the exact sum. In view of the valuation and to make things look correct and in order I think we should stick to the suggested $400 000. I am to confirm this first thing tomorrow so I need a reply tonight PLEASE. The transfer should be ready to go through during next week sometime. We do have Easter in between.[75]

[75]Exhibit P68: Email from fourth defendant to first defendant dated 17 April 2000 at 7:52pm.

On 5 May 2000, the fourth defendant sent an email to the first defendant. This email was the subject of a claim for legal professional privilege which was upheld. Most of the email has been redacted. However, an unredacted part of the email includes the following:

PS Pete’s comments about payments of the loan are right too. What do you think of the idea of getting it paid into Findlay Trust Account? Should I ask David about it on Monday?[76]

[76]Exhibit P69: Email from fourth defendant to first defendant dated 5 May 2000 at 21:00.

On 10 May 2000, the fourth defendant sent an email to the first defendant, copied to the second, third and fifth defendants. Again, this email was the subject of a successful application for redaction based on legal professional privilege. The unredacted component of the email is in the following terms:

I also talked about the interest payment coming to OZ. He said they will talk about it and work out what is best. Paying it to their Trust account is fine but getting it to me from there may need some organising. I told him otherwise I may end up in prison and then we shall have a new problem on our hands. He thought that was very funny. I get on quite well with Michael now and I usually end up having him in hysterics. No point in being miserable about all this idiotic rot that we have been forced to go through.[77]

[77]Exhibit P68: Email from fourth defendant to first defendant dated 10 May 2000 at 7:37pm.

The reference to ‘Michael’ is a reference to Michael Witt, a solicitor employed by Findlay Arthur Phillips, the firm of solicitors acting for the first defendant in the 1998 Proceedings.

On 16 May 2000, the fourth defendant sent an email to the first defendant copied to the second, third and fifth defendants. It included the following:

Dearest Tato and Angels,
You will be pleased to hear that the loan has been approved today and the appropriate papers couriered to Pete and then on to me tomorrow. The transfer should be through by the end of the week. Pete is concerned that he is indebted from now on. I said ‘yes but someone else will pay his interest for him’. The interest rate is not crash hot because, as luck would have it, they have just gone up. I shall be paying 7.2% which is horrific. Hope that the invested money at the Prague end can get something close to this. Let’s hope this nonsense need not be for too long. I really don’t like this borrowing at all.[78]

[78]Ibid Email from fourth defendant to first defendant dated 16 May 2000 at 7:05pm.

On 17 May 2000, the first defendant emailed the fourth defendant, copied to the second third and fifth defendants. It included the following:

Good news about the loan that it has been processed. One cannot expect to get more in interest here than one has to pay in OZ. This is the penally (sic) and reality of the case.[79]

[79]Exhibit P69: Email from first defendant to fourth defendant dated 17 May 2000 at 7:04am.

On 17 May 2000, the fourth defendant sent an email to the first defendant, copied to the second, third and fifth defendants which included the following:

Dearest Tato and Genii,
… It’s utter madness and I hate everything about this loan (so does Pete, he never believed he would be reduced to this position) and now this, which is the LAST STRAW. All this money to be chucked down the drain. Vermin are really scum…
Finally, the documents are signed the interest rate is a little better than I quoted yesterday 7.05%. Hopefully we won’t have to suffer this for too long. I handed over the Title and so Vermin will now have to take on the bank if they want this property or compensation because you don’t own it anymore.[80]

[80]Exhibit P68: Email from fourth defendant to first defendant dated 17 May 2000 at 8:22pm.

The reference to ‘Vermin’ is a reference to the plaintiffs in the 1998 Proceedings, who are also the plaintiffs in the current proceedings.

On 13 July 2001, the fourth defendant sent an email to the first defendant, copied to the second, third and fifth defendants which included the following:

Dearest Tart and Family,
…Artistry rang and they have finally contacted the client for the big paintings. They are to be collected and go for review on Monday. I shall be pleased to have them out of the way. Fingers crossed that he will be a happy chappy. Then I can look forward to some income to cover my mortgage payments as the funds are running low and income sparse.[81]

[81]Ibid Email from fourth defendant to first defendant dated 13 July 2001 at 7:09pm.

The contents of the emails referred to above support the following findings of fact:

(i)the Glenferrie Road property was mortgaged by the fourth defendant in May 2000 as security for a loan of $400,000 with an interest rate of 7.05% per annum;
(ii)the timing of the mortgage coincided with the lead up to the proceedings which were subsequently heard by Ashley J in February 2001;
(iii)David Findlay, the lawyer acting for the first defendant in the 1998 Proceedings, advised the fourth defendant that a mortgage should be taken out over the Glenferrie Road property so that the first defendant could be easily declared bankrupt. He also advised that the plaintiffs would not be able to access any funds raised by way of a mortgage;
(iv)the $400,000 secured by the mortgage was transferred to an interest bearing bank account established by the first defendant in Prague;
(v)the first defendant assured the fourth defendant that he would arrange for interest to be paid for the fourth defendant ‘one way or the other’;
(vi)the first and fourth defendants gave consideration to paying the interest payments on the loan from the moneys deposited in the Prague account into the trust account of Findlay Arthur Phillips, and for the moneys to then be forwarded onto the fourth defendant; and
(vii)throughout 2000 and 2001 the fourth defendant had limited income such that it would be unlikely that she would have had the capacity to repay the $400,000 loan by early 2002. In this regard, it is to be noted that the sixth defendant gave evidence that she was advised by the fifth defendant in January 2002 that the loan had been repaid.[82]

The terms of settlement do not enliven the preconditions necessary for finding an implied/resulting trust. The plaintiffs never had legal title to any of the cl 6 properties. The plaintiffs did not transfer legal title in the cl 6 properties to the first defendant without consideration. If the plaintiffs had made a financial contribution to assist the first defendant in recovering the expropriated properties, the plaintiffs could have contended that such financial contribution provided the foundation for the existence of an implied/resulting trust. However, any such trust would arise by virtue of that contribution, not as a result of the terms of settlement executed in February 2001. Mr Howells expressly disavowed reliance upon any events which preceded the execution of the terms of settlement.

The terms of settlement do not create either an express or implied trust. Nor was the first defendant to act as a fiduciary in discharging his obligations under cl 1 and 2 of the terms of settlement. Accordingly, the terms of settlement do not provide any foundation for the plaintiffs’ Barnes v Addy claims against the defendants.

Knowing receipt by the fourth defendant

If, contrary to the findings set out above, the terms of settlement created either an express or an implied trust, or a fiduciary relationship in respect of cl 1 properties, I would nevertheless conclude that the claims of knowing receipt and knowing assistance are not made out against the fourth and fifth defendants.

The plaintiffs allege ‘knowing receipt’ by the fourth defendant as a consequence of her receiving money generated by cl 6 properties in order to make payments on the Glenferrie Road property mortgage post May 2000. The plaintiffs allege that the fourth defendant knowingly or wilfully shut her eyes to the fact that the first defendant was transferring the funds to enable the fourth defendant to make the interest payments in breach of his fiduciary obligations to the plaintiffs.[171]
[171]Second to fifth plaintiff’s outline of closing submissions, 23 March 2015 at pp.17-18.

I have set out earlier in this judgment my findings relating to the 2000 mortgage. The $400,000 raised by the mortgage was transferred by the fourth defendant to the first defendant who deposited that money in an interest bearing bank account in Prague. The principal on the loan was repaid by January 2002. The receipt of funds by the fourth defendant, whatever their source, prior to 23 February 2001 could not constitute knowing receipt of trust property because the plaintiffs disavow any reliance upon events which pre-date the execution of the terms of settlement. As to the period between 23 February 2001 and early 2002 when the loan was repaid, there is no evidence to support the plaintiffs’ contention that the source of the interest payments on the loan was generated by cl 6 properties. This contention is contradicted by the email exchanges set out earlier in this judgment which establish that the $400,000 was deposited in an interest bearing account in Prague for the purpose of generating funds which could be used to pay the interest on the mortgage over the Glenferrie Road property. The Glenferrie Road property is not alleged to be trust property by reason of the terms of settlement executed in February 2001. Accordingly, the receipt by the fourth defendant of funds generated by the deposit of the $400,000 raised by way of mortgage over the Glenferrie Road property cannot constitute knowing receipt of trust property.

Earlier in this judgment I have taken account of the failure of the fourth defendant to give evidence and make discovery of her bank records relating to the $400,000 loan secured by the mortgage over the Glenferrie Road property. Neither of these circumstances justifies findings being made which are inconsistent with the evidence before the court. This is particularly so in circumstances where the Barnes v Addy claims pleaded against the fourth defendant in [16] (c), (e) of the fifth amended statement of claim is confined to alleged breaches of trust pleaded in paragraphs [11] and [12] of the fifth amended statement of claim. None of the alleged breaches pleaded in [11] and [12] refer to the 2000 mortgage or its repayment.

The plaintiffs also contend that, although there is no evidence that Hastalska 12 has been transferred to the fourth defendant, it is reasonable to infer that like the first defendant she has a life estate in this property. The first defendant died on 3 November 2014. Assuming that there has been a transfer of a life estate in Hastalska 12 to the fourth defendant in December 2014, this could only have occurred after the first defendant’s death. Any transfer of the first defendant’s life estate to the fourth defendant could not constitute a breach of trust or fiduciary duty by the first defendant. Any life estate in Hastalska 12 could only have been conferred upon the fourth defendant by the second and third defendants who obtained ownership of the property pursuant to the Donation Agreement. The conferral of any life estate upon the fourth defendant by the second and third defendants post the first defendant’s death cannot constitute a breach of trust or fiduciary duty by the first defendant.

The ‘knowing receipt’ claims against the fourth defendant in the fifth amended statement of claim are based solely upon the alleged breaches of trust and fiduciary duties by the first defendant as pleaded in paragraphs [11] and [12]. Unsurprisingly, no allegation is made in the fifth amended statement of claim that the conferral upon the fourth defendant of a life estate in Hastalska 12 by the second and third defendants constitutes a breach of trust of the fiduciary duty by the first defendant. The ‘knowing receipt’ claims against the fourth defendant fail.

Although [16](c) of the fifth amended statement of claim includes a pleading that the fourth defendant knowingly assisted in breaches of trust and fiduciary duty by the first defendant, this allegation was not pressed by the plaintiffs. The only Barnes v Addy claims pressed against the first defendant were claims of ‘knowing receipt’ of trust property.

Knowing assistance by the fifth defendant

The plaintiffs contend that the fifth defendant assisted the first defendant’s breach of trust by acting as a guarantor for the fourth defendant’s mortgage over the Glenferrie Road property in the first half of 2000. The plaintiff expressly disavowed any reliance upon events pre-dating the execution of the terms of settlement for the purposes of their Barnes v Addy claims. As pleaded, the breaches of trust and fiduciary duties underpinning the Barnes v Addy claims arise from the terms of settlement executed on 23 February 2001. Accordingly, the conduct of the fifth defendant in guaranteeing the 2000 mortgage cannot constitute knowing assistance of a breach of trust or fiduciary duty by the first defendant.

Inducing breach of contract

The plaintiffs contend that each of the second to fifth defendants induced the first defendant to breach the terms of settlement. The six elements of the tort of inducing breach of contract are well-established. In Donaldson v Natural Springs Australia Ltd, Beach J enumerated them as follows:

First, there must be a contract. Second, the defendant must know that such a contract exists. Third, the defendant must know that if one of the contracting parties does or fails to do a particular act, that conduct would be a breach of contract. Fourth, the defendant must intend to induce or procure that contracting party to breach the contract by doing or failing to do that particular act. Fifth, the breach must cause a loss or damage to the plaintiff. Sixth, no defence of justification should be applicable.[172]

[172][2015] FCA 498, [206]. See also Bodycorp Repairers Pty Ltd v Australian Associated Motor Insurers Ltd & Anor [2015] VSCA 59, [51]-[56]; Network Ten Pty Ltd v Seven Network (Operations) Ltd [2014] NSWSC 692, [190]-[197].

A distinction must be drawn between ‘advising’ a party to a contract as to how the contract may be breached and inducing/procuring the breach. Only the latter will be actionable. The dividing line between conduct which is actionable and that which is not, is that to induce a breach of contract requires conduct which creates the reason for breaking an extant contract.[173] Thus, where A has entered a contract to provide services to B, an offer of a contract to A by C, which can only be fulfilled if A terminates the contract with B, creates the reason for the breach of the contract with B.[174]
[173]Donaldson v Natural Springs Ltd [2015] FCA 498, [208]; Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Corke Instrument Engineering (Australia) Pty Ltd (2005) 223 ALR 480, [19].
[174] Lumley v Gye (1853) 2 E & B 216.

Therefore, in order to establish that the second to fifth defendants are liable for inducing the first defendant to breach the terms of settlement, the plaintiffs must establish that one or more of the defendants created the reason for the breach, as opposed to merely providing advice for the first defendant as to the availability of an extant reason for breaching the terms of settlement. This distinction is significant, especially in light of the findings of Osborn J in his April 2008 judgment in respect of the breach by the first defendant of the terms of settlement. His Honour considered that the failure of the first defendant to execute a transfer of the Dresden properties referred to in cl 1 of the terms of settlement constituted a breach thereof. As to the first defendant’s motivation for having failed to comply with the terms of settlement, Osborn J stated:

The reasons offered for the defendant’s failure to execute the documentation were variously described in evidence by the defendant, but I am satisfied that the fundamental reason was simply that he did not accept the plaintiffs were entitled, as a matter of fairness, to a transfer of the properties the subject of the terms. In turn, he wished to evade compliance with his obligations to execute the transfer documentation. Thus, he variously stated concerning his obligations with respect to the terms:
·it was his job to recover the property and he had to correct the evils of the past;
·you don’t offer a bunch of flowers to someone who attacks you;
·he did all the work;
·he spent a lot of money by way of incidental costs in pursuing recovery of the land;
·Helena did nothing by way of comparable effort;
·Peter visited the country couldn’t bear it and didn’t want to come back;
·I know I spent a lot of time, a lot of expenses and I could not see that somebody could come along and get the benefit of all my work without moving a finger and I think on reflection if that was the case I would do the same thing again because that’s how I felt at the time.[175]

[175]Talacko v Talacko [2008] VSC 128, [134].

The plaintiffs pointed to the emails which were circulated amongst the defendants ‘in which they shared information and ideas in counselling D1 in ways in which the TOS could be breached. Further D4 and D5, in arranging for a mortgage to be taken out over the Glenferrie Road property encouraged D1 to breach the TOS by creating the circumstances in which he could do so safely without an order being made by [sic] Australian court that could be enforced against him in Australia’[176]
[176]Second to fifth plaintiffs’ outline of closing submissions, 23 March 2015 [70]-[71].

The sharing of information and ideas counselling the first defendant as to ways in which the terms of settlement could be breached falls squarely into the category of conduct which is not actionable as inducing a breach of contract.

The high point of the evidence is an email which was forwarded to the first defendant by the third defendant on 14 October 2003. In early October 2003, lawyers acting for the plaintiffs had forwarded to the first defendant transfer documentation to be executed in respect of the cl 1 properties in Dresden. On 14 October 2003, referring to this correspondence, the third defendant stated in an email to the first defendant:

As far as I can make it out clause 3 of the draft transfer contract says Tato transfer all the German property inherited from Alois Talacko including the property in Kiefernstrasse. The fact there might be no other German property is neither here nor there, some might turn up in the future and be discovered in some, as yet unknown document. If my interpretation is right it means that it is yet another attempt as extending the terms of settlement which mentioned only Kiefernstrasse 19 and 19a.
Under clause 3 of the settlement, Vermin are out of time.
Also, I’ve been thinking, it’s arguable but that because of the stupid letter that Head Vermin sent, they might have repudiated the settlement.[177]

[177]Exhibit P69: Email from third defendant to Nicole Talacko and first, second, fourth and fifth defendants on 14 October 2003 at 10:27am.

Subsequently, the first defendant acted consistently with the advice he received from the third defendant in the email referred to above. On 29 November 2003, the first defendant wrote to Dammholz in the following terms:

I have received your letter of October 3, 2003.
The contract is in German and I cannot understand it.
Moreover, your request appears to be outside the terms of settlement.
In any case, your client’s actions in the Czech Republic and elsewhere since April 2001 can only amount to a repudiation of the settlement.[178]

[178]Talacko v Talacko [2008] VSC 128, [126].

Plainly, the first defendant did follow the third defendant’s advice when articulating the grounds for refusing to execute the Dresden property transfer. However, the third defendant did not create the reasons which were articulated. Rather, he simply advised the first defendant of their availability. This does not constitute conduct which is actionable as inducing a breach of contract.

The plaintiffs also rely upon the conduct of the fourth and fifth defendant in arranging for a mortgage to be taken out over the Glenferrie Road property. This occurred in the first half of 2000. The fourth and fifth defendants could only be liable for inducing breach of contract if they knew of the contract and its terms sufficiently to have intended to induce or procure the first defendant to breach the contract. On no view could conduct which occurred in the first half of 2000 constituted a breach of the terms of settlement which were executed by the first defendant on 23 February 2001.

The plaintiffs’ counsel also submitted[179] that the fifth defendant induced the first defendant’s breach of the terms of settlement by sending an email on 13 January 2009 that stated, inter alia:

Ma, I have thought of two ideas in relation to Glenferrie Road they are a little drastic:
(a)Pa takes out a very large mortgage over the property (be careful of this because it implies that he owns a chunk).
(b)If we think you are going to lose the fight for 50% of the house, we argue that it is because of really bad legal advice, and you sue (or join to the action) Findlay Arthur Philips.[180]

[179]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 26 March 2015) T1101—T1102.

[180]Exhibit D5A: Email from fifth defendant to fourth defendant dated 13 January 2009 at 9:21am

The advice in the email set out above was not followed by the first defendant. As such, it could not have induced any action by the first defendant, let alone a breach of the terms of settlement. Further, the advice relates to the Glenferrie Road property which is not included in either cl 1 or cl 6 of the terms of settlement. Even if the advice had been followed, this would not have constituted a breach of the terms of settlement.

The claims against the second to fifth defendants for inducing a breach of the terms of settlement are not made out.

Section 172 Property Law Act: 312 Glenferrie Road, Malvern

As at 2 October 1998 being the commencement date of the 1998 Proceedings, the first defendant and the fourth defendant jointly owned and were registered as joint proprietors of the Glenferrie Road property.

On or about 16 October 1998 a transfer from the first defendant to the fourth defendant of the first defendant’s interest in the Glenferrie Road property was registered. This was shortly after the writ and statement of claim in the 1998 proceedings had been served on the first defendant. The plaintiffs allege that the circumstances of the transfer of the first defendant’s interest to the fourth defendant enliven the operation of s 172 of the Property Law Act. The plaintiffs contend that the transfer is voidable at their option.

Section 172(1) of the Property Law Act provides:

Save as provided in this section, every alienation of property made, whether before or after the commencement of this Act, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

An applicant under s 172 of the Property Law Act does not need to be a creditor, merely a person prejudiced by the alienation. An intention to defeat future creditors is sufficient to enliven the operation of s 172.[181] The requisite intention can be established by an intention to defeat, delay or hinder.[182] The intent to defeat, delay or hinder need not be the sole or predominant intent.[183] It may co-exist with a good faith intention to dispose of the property. In ascertaining intent, it is the mind of the transferor rather than the transferee which is critical.[184]
[181]Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370, 374.
[182]Marcolongo v Chen & Anor (2011) 242 CLR 546, 554 [19] and 558 [32] (‘Marcolongo’); Deputy Commissioner of Taxation v Haritos [2014] VSC 379, [218]-[222].
[183]Marcolongo [57[; Haritos [223].
[184]Marcolongo [64].

Where the disposition is not for valuable consideration and the result of the alienation is to defeat or delay creditors, the inference of intent to defraud may be drawn more readily.[185]
[185]Ibid [25].

By her defence to the fourth amended statement of claim, the fourth defendant admits:

· the allegation that the first defendant purported to transfer his interest in the Glenferrie Road Property to the fourth defendant by a Transfer of Land relating to the Glenferrie Road Property, which document was registered on 16 October 1998;

· that the Proceeding was served on the first defendant on 12 October 1998 and that the Transfer of Land in relation to the Glenferrie Road Property was not registered until four days after that service being 16 October 1998;

· that the consideration recited in the Transfer was said to be ‘of the marriage’ and for no other consideration.

Mr Glick submitted that the fourth defendant did not oppose the making of an order the effect of which would be to set aside the October 1998 transfer of the first defendant’s interest in the Glenferrie Road property to the fourth defendant.[186] Mr Glick submitted that, in light of evidence which had been given by the first defendant in the proceedings before Osborn J, there was evidence before the court which could support a finding that the first defendant had the proscribed intent at the time of the transfer for the purposes of s 172 of the Property Law Act.[187]
[186]Transcript of Proceedings, Talacko v Talacko (Supreme Court Victoria, S CI 2009 7819, McDonald J, 10 March 2015) T490, LL21-28.
[187]Ibid T494, L1-L24.

The evidence of the first defendant in the proceedings before Osborn J to which Mr Glick referred was given by the first defendant on 19 December 2007. The evidence was read into the transcript by Mr Glick on 10 March 2015. During the course of cross-examination, the first defendant was asked about the timing of the transfer of his interest in the matrimonial home to his wife. It was put to him that the transfer had taken place just after the 1998 proceeding had been issued against him. His response was: ‘I’m sure it wasn’t before, yes.’ It was then put to him: ‘It wasn’t after wasn’t it?’ The first defendant replied: ‘That’s what I’m saying, it was not before the proceedings were.’ [188]
[188]Ibid, T496 L15 — T497, L5.

The transfer of land pursuant to which the first defendant transferred his 50% interest in the matrimonial home to the fourth defendant is dated 23 September 1998, signed by both the first and fourth defendants and is witnessed. The date of the transfer precedes 2 October 1998 when the 1998 proceedings were commended. The transfer was not registered until 16 October 1998.

The first defendant’s evidence before Osborn J was that he was ‘sure’ that his interest in the Glenferrie Road property was transferred to the fourth defendant after the commencement of the 1998 proceedings. This evidence, coupled with the fact that the transfer was not registered until 16 October 1998, raises the question of whether the transfer of land was backdated to 23 September 1998. The first defendant’s evidence before Osborn J was unequivocal. That evidence combined with the fact that the transferred interest in the property was not for valuable consideration, satisfies me that at least one of the purposes of the transaction was to defeat the interests of the plaintiffs, as potential judgment creditors in the 1998 proceedings.

Absent the evidence of the first defendant in the proceedings before Osborn J, I would have come to the same conclusion. The proceedings which were commenced on 2 October 1998 were preceded by a long history of acrimonious disagreement between the first defendant and his siblings. It is unnecessary to repeat that history. Suffice it to say that the first and fourth defendants were squarely on notice well in advance of 2 October 1998 that the plaintiffs would commence proceedings to claim their share of the restituted Talacko properties. Accordingly, if, contrary to the evidence of the first defendant before Osborn J, the disposition of his interest in the Glenferrie Road property had occurred shortly prior to the commencement of the 1998 proceedings, such disposition would still have been proscribed by s 172 of the Property Law Act.

The court will make a declaration that the purported transfer of the first defendant’s interest in the Glenferrie Road property which was registered on 16 October 1998 is void. I shall direct the legal representatives of the plaintiffs and the fourth defendant to confer with a view to submitting the terms of a declaration to give effect to this part of the judgment.

Section 172 Property Law Act: 23 Ethel Street, Malvern

The plaintiffs also submitted that a transfer of land dated 18 September 2013 by the fifth defendant to the sixth defendant of his interest in their matrimonial property at 23 Ethel Street, Malvern was voidable pursuant to s 172 of the Property Law Act. The claim under s 172 of the Property Law Act must fail. None of the plaintiffs’ claims against the fifth defendant have succeeded. Accordingly, the plaintiffs are not persons prejudiced by the transfer of the fifth defendant’s interest.

Conclusion

The plaintiffs are entitled to a declaration that the transfer from the first defendant to the fourth defendant of the first defendant’s interest in the Glenferrie Road property is void. I direct the legal representative of the plaintiff and the fourth defendant to submit the terms of the declaration within seven days. Save for this declaration the plaintiffs are not entitled to any other relief.

I shall provide the parties with an opportunity to file submissions, which are not to exceed 20 pages in length, on the question of costs. I propose to deal not only with the costs of the present proceeding but also the costs of the appeal by the fifth and sixth defendants from the decision of Zammit AsJ of September 2014 joining the fifth and sixth defendants to the proceeding and granting leave to the plaintiffs to file and serve an amended statement of claim. As I have noted in my judgment, that appeal was listed for hearing within a timeframe which would have allowed for it to be heard and determined prior to the commencement of the current proceedings on 2 March 2015.

As to the fourth defendant, I wish to receive submissions on the following matters:

(iii) What proportion of the plaintiffs’ costs should be paid by the fourth defendant as a consequence of my upholding the plaintiffs’ claim in respect of the Glenferrie Road property under s 172 of the Property Law Act?

(iv)Are there any cost consequences flowing from the failure of the fourth defendant to comply with her discovery obligations?

(v) Is there any basis for the Court to make a finding that the fourth defendant has breached the overarching obligations prescribed by ss 20 and 26 of the Civil Procedure Act?

(vi)If there is a basis for the Court to conclude that the fourth defendant has breached one or more of the overarching obligations under the Civil Procedure Act, what, if any, costs consequences flow from any such breach?

(vii) Should any allowance be made in favour of the plaintiffs on the assessment of costs by reason of the Court’s finding that the plaintiffs made out 3 of the 4 elements of the cause of action in unlawful means conspiracy?

SCHEDULE OF PARTIES

No S CI 2009 7819

BETWEEN:

JAN TALACKO (AS EXECUTOR OF THE ESTATE
OF HELENA MARIE TALACKO) & ORS

First Plaintiff

ALEXANDRA BENNET

Second Plaintiff

MARTIN TALACKO

Third Plaintiff

ROWENA TALACKO

Fourth Plaintiff

ALEXANDRA BENNET AND DAVID ADAMS
(AS EXECUTORS OF THE ESTATE OF 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

PETER ANDREW NOEL TALACKO

Fifth Defendant

AMANDA MAREE FISCHER

Sixth Defendant

STATE TRUSTEES LTD

Seventh Defendant

62-65 [301]-[311] (citations omitted); and Denis SK Ong, Trusts Law in Australia (4^th ed, The Federation
Press, 2012) 3.

[2015] VSC 287

7 August 2015