Vartzokas Architects Pty Ltd v Nazero Group SA Pty Ltd
[2017] FCCA 849
•27 April 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| VARTZOKAS ARCHITECTS PTY LTD v NAZERO GROUP SA PTY LTD & ANOR | [2017] FCCA 849 |
| Catchwords: COPYRIGHT – PRACTICE & PROCEDURE – Application for Mareva injunction – application made on ex parte basis – principles to be applied – arguable case – is there evidence of real risk of asset dissipation – matters to be considered. |
| Legislation: Copyright Act 1968 (Cth), ss:115; 131D Federal Circuit Court Act 1999 (Cth), ss.14 & 15 Federal Circuit Court Rules 2000, r.5.01 |
| Cases cited: Mareva Compania Naviera SA v International Bulk Carriers SA [1975] 2 Lloyds Rep 509 Clout (Trustee) v Anscore Pty Ltd & Ors [2000]FCA 727 |
| Applicant: | VARTZOKAS ARCHITECTS PTY LTD |
| First Respondent: | NAZERO GROUP SA PTY LTD |
| Second Respondent: | WARDY YOUNAN |
| File Number: | ADG 150 of 2017 |
| Judgment of: | Judge Brown |
| Hearing date: | 27 April 2017 |
| Date of Last Submission: | 27 April 2017 |
| Delivered at: | Adelaide |
| Delivered on: | 27 April 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Jenner |
| Solicitors for the Applicant: | FBR Law |
| Counsel for the First Respondent: | no appearance |
| Counsel for the Second Respondent: | no appearance |
ORDERS
PENAL NOTICE
a)TO: Nazero Group SA Pty Ltd (ACN 606 643 172) and Wardy Younan
IF YOU (BEING THE PERSON BOUND BY THIS ORDER):
(A)REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR
(B)DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU NOT TO DO,
YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.
b)ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.
TO:Nazero Group SA Pty Ltd (ACN 606 643 172) and Wardy Younan
This is a ‘freezing order’ made against you on 27 April 2017 by his Honour Judge Brown at a hearing without notice to you after the Court was given the undertakings set out in Schedule A to this order and after the Court read the affidavit listed in Schedule B to this order.
THE COURT ORDERS:
INTRODUCTION
(a) The application for this order is made returnable immediately.
(b) The time for service of the application, supporting affidavits and originating process is abridged and service is to be effected by 4:00pm on 27 April 2017.
Subject to the next paragraph, this order has effect up to and including 9 May 2017 (the Return Date). On the Return Date at 2:15pm there will be a further hearing in respect of this order before Judge Brown.
Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified.
In this order:
(a)‘applicant’, if there is more than one applicant, includes all the applicants;
(b)‘you’, where there is more than one of you, includes all of you and includes you if you are a corporation;
(c)‘third party’ means a person other than you and the applicant;
(d)‘unencumbered value’ means value free of mortgages, charges, liens or other encumbrances.
(a) If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions.
(b) If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.
ASSET PRESERVATION ORDER
The First Respondent must pay into the Federal Circuit Court the net proceeds from the sale of the property at 227 Prospect Road, Prospect, South Australia 5082, being the whole of the land comprised in Certificate of Title Register Book Volume 5249 Folia 49, after payment to the National Australia Bank Ltd in discharge of registered mortgage number 12396862 and payment of the usual costs and expenses of associated with the settlement on the contract of sale.
PROVISION OF INFORMATION
Subject to paragraph 8, you must:
(a)at or before the further hearing on the Return Date (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing of the net proceeds.
(b)within 5 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information.
(a) This paragraph (8) applies if you are not a corporation and you wish to object to complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that you:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(b) This paragraph (8) also applies if you are a corporation and all of the persons who are able to comply with paragraph 7 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 7 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:
(i)have committed an offence against or arising under an Australian law or a law of a foreign country; or
(ii)are liable to a civil penalty.
(c) You must:
(i)disclose so much of the information required to be disclosed to which no objection is taken; and
(ii)prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and
(iii)file and serve on each other party a separate affidavit setting out the basis of the objection.
COSTS
The costs of this application are reserved to the Court hearing the application on the Return Date.
SCHEDULE A
UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT
The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order.
As soon as practicable, the applicant will file and serve upon the respondent copies of:
(a)this order;
(b)the application for this order for hearing on the return date;
(c)the following material in so far as it was relied on by the applicant at the hearing when the order was made:
(i)affidavits (or draft affidavits);
(ii)exhibits capable of being copied;
(iii)any written submission; and
(iv)any other document that was provided to the Court.
(d)a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court;
(e)the originating process, or, if none was filed, any draft originating process produced to the Court.
As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it.
The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent’s assets.
If this order ceases to have effect the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect.
The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding.
The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent’s assets.
SCHEDULE B
AFFIDAVITS RELIED ON
Name of deponent
Date affidavit made
(1) Affidavit of Anastasios Vartzokas
24 April 2017
(2) Affidavit of Zoe Vasiliki Papagiannis
27 April 2017
NAME AND ADDRESS OF APPLICANT'S LAWYERS
The applicant’s lawyers are:
Sean Ryan – FBR Law
123 Wright Street
ADELAIDE SA 5000
T: (08) 8272 3644
M: 0416 000 113
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 150 of 2017
| VARTZOKAS ARCHITECTS PTY LTD |
Applicant
And
| NAZERO GROUP SA PTY LTD |
First Respondent
And
| WARDY YOUNAN |
Second Respondent
REASONS FOR JUDGMENT
Introduction
The applicant in these proceedings, Anastasios Vartzokas, is an architect. He seeks what is commonly known as a Mareva injunction, which, if granted, will prevent the first respondent from dealing with the proceeds of a sale of a unit development, situated at 227 Prospect Road, Prospect, in the State of South Australia.
Settlement of the sale is scheduled to take place on 28 April 2017, which is tomorrow. As a consequence, there is a high degree of urgency, in respect of the matter, from Mr Vartzokas’ perspective. He contends that he provided significant intellectual property, in respect of the design of the unit development concerned, which has been misappropriated by the first and second respondents concerned.
As a consequence, Mr Vartzokas asserts that, if the injunction sought is not granted, he will be deprived of the opportunity to pursue his claim for breach of copyright, arising under the provisions of the Copyright Act 1968 (Cth) “the Act”, particularly he may be deprived of the opportunity of gaining damages, arising from the unauthorised use of the architectural drawings and designs, which were used or may be used to construct the units in question.
Given the urgency of the situation and the essential nature of a Mareva injunction, the application was heard on an ex-parte basis on 27 April 2017. I was disposed to grant the injunction in question and provided some brief oral reasons in support of that determination, immediately following the hearing. However, I indicated that I would prepare some more detailed written reasons overnight. These are those reasons.
Background
Mr Vartzokas practices as an architect under the aegis of a company Vartzokas Architects Pty Ltd. His practice is situated at Fullarton, a suburb of Adelaide. Mr Vartzokas is the sole director of the company.
In June of 2014, the applicant entered into an agreement with a company, Nazero Constructions Pty Ltd, to provide architectural services in relation to a proposed five-storey residential apartment development at 227 Prospect Road, Prospect.
Mr Vartzokas agreed to assess the site in question and sketch designs for various units; carpark spaces; stair wells; and other features; proposed to be built on the site, in respect of the development of the land in question. It was envisaged that he would liaise with the relevant planning authority and, in due course, provide necessary working documents to allow the building to be constructed.
On 30 June 2014, Vartzokas Architects Pty Ltd and Nazero Constructions Pty Ltd entered into a contract to this effect. This envisaged a five-stepped process of fees, said to be based on a fourteen month construction process. In due course, on the completion of the development, the agreement envisaged the applicant being paid a significant sum of money. The second respondent to these proceedings, Mr Wardy Younan signed this contract on behalf of Nazero Constructions Pty Ltd.
In these circumstances, it is Mr Vartzokas’ evidence that, between July 2014 and June 2015, he provided architectural services to Nazero Constructions Pty Ltd, during the provision of which, he principally dealt with Mr Younan. He deposes that, as at 22 June 2015, he was owed the sum of $48,100.00 by Nazero Constructions Pty Ltd for his services, which included the preparation of a plan of the units on the site.
In mid-2015, Mr Vartzokas asserts Mr Younan incorporated the first respondent company, in these proceedings, Nazero Group SA Pty Ltd. A title search, in respect of the Prospect Road land, indicates that the first respondent company became the registered proprietor of the subject land on 20 July 2015. The consideration for the transfer was $1,017,500.00. Shortly prior to this time, Nazero Constructions Pty Ltd had changed its name to Zeecat Constructions Pty Ltd. Mr Vartzokas was not aware of this change of name, at the time it was made. He is suspicious about the company’s change of nomenclature.
In August of 2015, Mr Vartzokas sent Mr Younan, an invoice seeking payment of his professional fees, in respect of the development of the Prospect Road property, in an amount of $48,100.00. Correspondence subsequently passed between Mr Vartzokas and Mr Younan, with the latter indicating that he would pay $15,000.00 of the outstanding fees due, with the balance shortly thereafter. Mr Vartzokas received $15,000.00 on 28 October 2015 and a further sum of $10,000.00 on 5 January 2016 from Mr Younan.
As a consequence of these payments, Mr Vartzokas sent a set of drawings to Mr Younan, on 12 January 2016.[1] With the drawings, Mr Vartzokas sent a further account indicating a balance due to the applicant of $23,100.00. An additional email, addressed to Mr Younan read as follows:
“When I have received all my amount due I will release full copyright and all drawings to you in regard to the Prospect project ….”
[1] See exhibit TV9 to the affidavit of Anastasios Vartzokas filed 26 April 2017
The drawings in question show a ground floor plan of car parking spots; a garbage bin enclosure; and bicycle racks. In addition, there is a floor plan indicting the configuration of various units on the first to third floor of the development. Another set of drawings provides a sketch of the development from each of the north, west, south and east elevations. Each drawing is endorsed with the name of Vartzokas Architects Pty Ltd and the following statement:
“These drawings are the copyright property of the architect and are not to be reproduced or copied without prior written license of the architect.”
Mr Vartzokas did not receive any further payment from either Nazero Constructions Pty Ltd; Zeecat Constructions Pty Ltd; or Mr Younan personally. In these circumstances, he instructed his solicitor to send a statutory demand to Nazero Constructions Pty Ltd, which was unsatisfied. This ultimately led to the company being wound up, on the motion of the applicant, by order of the Federal Court on 27 July 2016.
In mid-January 2017, Mr Vartzokas was contacted by Mr Ray Chen, who indicated that he represented a company Yi Hong Pty Ltd. Mr Chen indicated that Yi Hong Pty Ltd had entered a contract to purchase the Prospect land. As such, Yi Hong Pty Ltd was desirous of obtaining architectural services from Mr Vartzokas in respect of the land.
Subsequently Mr Chen provided Mr Vartzokas with a copy of a contract between Nazero Group SA Pty Ltd and Yi Hong Pty Ltd, in respect of the Prospect property, which indicated a sale price of $1,190,000.00. Mr Younan is the sole director of Nazero Group SA Pty Ltd, which is registered in New South Wales. He also holds each of its issued shares.
Mr Chen also provided Mr Vartzokas with copies of drawings in respect of the Prospect land, which Mr Vartzokas recognised as being identical to the drawings, which he had earlier provided to Mr Younan, in his capacity as the director of Nazero Constructions Pty Ltd, which company remains indebted to him. The drawings were entitled Construction Certificate 24 Residential Units –227 Prospect Road, Prospect. They are attributed to JB Archi-Build.
I have been provided with enlarged copies of each of these sets of drawings.[2] I accept that mine is not an educated eye for the nuances or subtleties of architectural drawing. However, the drawings in question seem to me to be essentially the same. In addition, the second set bears the notation that they were designed by Vartzokas Architects Pty Ltd. Certainly the address of the property is the same in the case of each set of drawing and the shape of the building’s outline and the configuration of the units within it, appear to be the same. As does the proposed landscaping and carpark design outside.
[2] See exhibit A & exhibit B
It is Mr Vartzokas’ evidence that he did not permit any person to have the use, license, right to communicate or reproduce, publish, sell or exchange his copyright in the drawings, which he had provided to Nazero Constructions Pty Ltd for the Prospect land. As such, he contends that his copyright in the drawings has been infringed by their apparent dissemination to either Mr Chen and/or Yi Hong Pty Ltd.
In addition, he is gravely suspicious about the following circumstances, which surrounded his release of the drawings in question to Nazero Constructions Pty Ltd and the subsequent lack of payment for the services provided, by him, the company:
·The change of name of Nazero Constructions Pty Ltd and Mr Younan’s resignation as its director;
·The clandestine manner in which Nazero Group SA Pty Ltd was incorporated, and the transfer of the ownership of the land at Prospect;
·The extensive but as yet unfruitful steps, which he has taken to secure his outstanding fees from Nazero Constructions Pty Ltd, which is now in liquidation.
It is Mr Vartzokas’ contention that Mr Younan is the common thread between these various occurrences.
The solicitors for the applicant have conducted a recent title search in respect of the Prospect land. It confirms that Nazero Group SA Pty Ltd remains the registered proprietor of the land in question. It is also subject to a mortgage in favour of the National Australia Bank, which was registered on 14 September 2015.
The legal principles applicable
Part V of the Copyright Act 1968 deals with remedies and offences arising in respect of infringements of copyright. As a consequence of section 131D the Federal Circuit Court is conferred with jurisdiction, in respect of civil actions, under Part V of the Act.
Pursuant to section 115(1) the owner of a copyright may bring an action for an infringement of that copyright. If such an infringement is established, the court may grant either damages or an account of profits. In addition, it is authorised to grant an injunction, subject to any terms, which it considers fit. In addition, pursuant to section 115(4) if the court is satisfied that any infringement of copyright is flagrant, in its nature, the court is authorised to award additional damages.
In its application for final orders, the applicant in these proceedings seeks a declaration that both respondents have infringed its copyright in respect of the architectural drawings prepared by it in relation to the Prospect property. As a consequence, it seeks either damages or an account of profits from the respondents, together with additional damages pursuant to section 115(4) of the Act.
Section 15 of the Federal Circuit Court of Australia Act 1999 (Cth) empowers the court to make whatever orders, including interlocutory orders, as it thinks appropriate. Section 14 directs the court to grant all remedies to which any of the parties before it appears to be entitled in respect of a legal or equitable claim properly brought forward…
Accordingly, I am satisfied that the court has a broad jurisdiction, including in the area of copyright, to make any necessary injunction it considers appropriate. A Mareva injunction is one which is granted to prevent a party from disposing of assets with the intention of frustrating the enforcement of a judgement.[3] It is a drastic remedy, which is not to be granted lightly.
[3] Mareva Compania Naviera SA v International Bulk Carriers SA [1975] 2 Lloyds Rep 509
Part 5 of the Federal Circuit Court Rules 2001 deals with urgent applications. Pursuant to this Part, the court is authorised to make interim orders on an ex-parte basis, in circumstances of urgency. The onus lies on the applicant, for any ex-parte, order to establish by affidavit the circumstances of urgency, which justify the making of such an order.
In the present case, I am satisfied that the applicant has established appropriate circumstances, which warrant the court proceeding to hear its injunction application, without formal notice to either respondent concerned pursuant to rule 5.01 of Federal Circuit Court Rules.
In particular, I am satisfied that there is an appreciable risk that the applicant will suffer harm, if the orders sought are not made. If the injunction sought is not made prior to the settlement of the Prospect property, I consider that there is a significant risk that the applicant will not be able to secure damages, in due course for the infringement of its copyright because the proceeds of sale will be diverted or concealed.
In order to be successful, in an application for a Mareva injunction, an applicant must firstly establish an arguable case for relief in the primary proceedings concerned. Secondly, the applicant must demonstrate, by real evidence, that a refusal to make the injunction sought would involve a real risk that any judgement, in the applicant’s favour, would remain unsatisfied because of the concealment is dissipation of assets. Thirdly, as with all injunctions, the balance of convenience must favour the making of such an order.
Given the ex-parte basis of Mareva injunctions, an adequate undertaking in damages is also necessary. This may extend to the protection of third parties, who may be affected by the making of any such injunction or who may incur expense in complying with it.
In Clout (Trustee) v Anscore Pty Ltd & Ors[4] Drummond J summarised the requirements, to be satisfied before a Mareva injunction should be granted as follows:
“… the requirements which must be satisfied before a Mareva order can be made against a party to an action, viz, that the applicant must establish by evidence a prima facie case, in the sense of an arguable case, that it will obtain a judgment against the particular party, that the applicant must demonstrate by evidence that there is a real risk that, unless restrained, the respondent will deal with its assets so as to frustrate enforcement of that judgment and, finally, that the Court, in granting any interlocutory relief, including a Mareva order, should generally grant the minimum relief necessary to do justice between the parties.”
[4] Clout (Trustee) v Anscore Pty Ltd & Ors [2000]FCA 727 at [6]
In this particular case, I am satisfied that the applicant has demonstrated that it has an arguable case that it will obtain judgement, for breach of its copyright, against one or both of the respondents. This follows because the applicant has established that, on a prima facie basis, its architectural drawings, in respect of which copyright has been clearly claimed, have come into the hands of a third party, without its authorisation.
I am also satisfied that the applicant has established a prima facie case that there is a real risk of assets being dissipated, if the relief sought is not granted. In my view, the significant evidence in this regard arises as a consequence of the change of name of Nazero Constructions Pty Ltd, which coincided with that entity not honouring the invoices submitted to it by the applicant. This failure to pay its debt, to the applicant, ultimately led to the winding up of the company concerned.
More significantly, after the company had been liquidated, Mr Younan incorporated an entity with a similar name and transferred the land at Prospect to it. At the same time, Mr Younan appears to have been intent on developing the land in a similar manner to that which envisaged the intellectual input of Mr Vartzokas, but without either payment or recognition to him.
In all these circumstances, I am satisfied that there is a significant risk that, if the injunction sought is not made, the proceeds of sale of the Prospect property will not be available to the applicant to either satisfy any award of damages to which he is entitled or to provide any accounting for the profits made on the sale of the land concerned, which, at least on a prima facie basis, seems to have included his architectural designs to be utilised on the property’s development.
The applicant has provided a comprehensive undertaking as to damages. At this juncture, the applicant does not seek to prevent the sale of the Prospect land taking place. As such, in my assessment, there is a limited prospect of the rights of third parties being adversely affected by the orders sought. In particular, the rights of the relevant mortgagee, the National Australia Bank will not be affected, as the applicant seeks only that the proceeds of sale, after the discharge of mortgage, be paid into court.
In all these circumstances, I am satisfied that the balance of convenience favours the making of the injunction concerned. As indicated earlier, the substantive proceedings will be adjourned until 9 May 2017 at 2:15pm. I will direct that the injunction and supporting material be served on the respondents by no later than 4:00pm this day.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Judge Brown
Date: 27 April 2017
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