Zoro Holdings Pty Ltd v Feo
[2023] VCC 1689
•20 September 2023
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-18-02898
| ZORO HOLDINGS PTY LTD (ACN 160 506 203) | Plaintiff |
| v | |
| ZORICA FEO GIOVANNI FEO REGISTRAR OF TITLES VICTORIA | First Defendant Second Defendant Third Defendant |
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JUDGE: | His Honour Judge Rozen | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5 September 2023 | |
DATE OF JUDGMENT: | 20 September 2023 | |
CASE MAY BE CITED AS: | Zoro Holdings Pty Ltd v Feo & Ors | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 1689 | |
REASONS FOR JUDGMENT
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Subject:Application to Lift Temporary Stay – Application for Pre-Trial Cross-Examination
Catchwords: Specific enforcement of contract for sale of land – Protracted litigation – Stay of civil proceedings – Stay should be lifted – Matter should proceed to trial
Legislation Cited: County Court Civil Procedure Rules2018; Civil Procedure Act 2010 (Vic)
Cases Cited:Rozenblit v Vainer (2018) 262 CLR 475; Cox v Jorneaux (No 2) (1935) 52 CLR 713; UDP Holdings Pty Ltd v Ironshore Corporate Capital Ltd [2016] VSC 400; Yunhanns v Elfic Pty Ltd (2000) 1 VR 92; Mathews v SPI Electricity Pty Ltd (No 6) [2013] VSC 422; Tucker v State of Victoria [2023] VSCA 126
Judgment: Application Granted – Stay Lifted – Leave to Cross-Examine Refused
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. Rosewarne KC & Mr H. Forrester | Livaditis Lawyers |
| For the First Defendant | Mr J. Evans KC & Mr P. Miller | TLM Law |
HIS HONOUR:
1This is an application by the Plaintiff to:
(a) lift a temporary stay ordered on 8 April 2023; and
(b) for orders setting the matter down for trial.
2These orders are opposed by the first defendant which essentially asks the Court to make the stay permanent.
3The court also has an application by the first defendant under Rule 40.01 of the County Court Civil Procedure Rules2018 for leave to cross examine the deponent of an affidavit filed by the plaintiff in support of its application.
Background
4The plaintiff company filed its Writ in 2018. The matter has had a long and complex procedural history. There is no need to rehearse that in detail in these reasons.
5In very brief summary, in the proceeding the plaintiff seeks an order that the first defendant, Zorica Feo, specifically perform a contract of sale for a block of land in Rockbank, Victoria. The agreed purchase price was $5,900,000. The plaintiff has made partial payment of $2,360,000. The court was informed that this money is held in the first defendant’s solicitor’s trust account and is not earning interest.
6The plaintiff seeks from the second defendant an order for vacant possession of the property on payment of the remainder of the purchase price of $3,540,000. Other orders are sought.
7By her defence, Ms Feo places in issue the validity of the contract of sale. She disputes that the plaintiff properly executed the contract of sale.
8Ms Feo further claims, in the alternative, that she held the property pursuant to a constructive trust for the benefit of herself and her now late husband, the second defendant. She pleads that she lived at the property with him until 2008 when she left the property. Since that time he has been in possession of the property. She pleads that it follows that she does not have the power to complete the contract of sale without the consent of her late husband.
First Defendant’s Counterclaim
9Ms Feo also counterclaims that certain third parties associated with the plaintiff breached fiduciary duties they owed to her in relation to the sale of the property.
10For reasons that will be apparent it is necessary to describe Ms Feo’s counterclaim in further detail. It is pleaded on the alternative basis that the contract for sale of the property is valid.
11In summary, Ms Feo claims that she retained Lifestyle Developments (LD) as her agent to sell the property. She pleads that the company and its individual agents (Gavin Gill, the second third party, and Manpreet Singh Dandiwall (Dandiwall), the third third party) owed her fiduciary duties.
12Ms Feo also pleads that Rajash Kumar Narad (Narad) was also acting as her agent and owed her fiduciary duties.
13Ms Feo pleads that the property was sold for less than its market value to the benefit of her agents.
14Further, Ms Feo pleads that each of Narad and Dandiwal were associated with the plaintiff and that she was not informed of this. The allegation is that the agents were working for both sides of the transaction.
15In those circumstances, Ms Feo pleads that each of Narad, LD and Dandiwal breached their fiduciary duties to her and further, had she known of the association between them each of them and Zoro, she would not have entered into the contract of sale for the property. In the circumstances, she pleads that she is entitled to orders setting aside or rescinding the contract.
16In her submissions opposing the lifting of the stay, Ms Feo relies on an affidavit of Peter Pryles, her solicitor, in which Mr Pryles deposes to the purchase of a property at Beattys Road, Plumpton by a company called Luzon, a related entity of the plaintiff. The vendors of that property had also engaged LD as agents. Mr Pryles also refers to the sale of other properties in similar circumstances.
17In pursuit of evidentiary support for the allegations in her counterclaim, Ms Feo issued subpoenas to Luzon and Narad[1] in May 2021 ‘to obtain further documents in respect to the financial interest that Narad has in Zoro, Luzon and the sale of [the other properties]’.[2]
[1] Ms Feo withdrew a subpoena that she had issued to Zoro as it is a party and has discovery obligations.
[2] First Defendant’s Outline of Submissions dated 18 May 2023 at [24].
18The addressees of the subpoenas objected to them and this was ultimately the subject of a ruling upholding the subpoenas in part but limiting the categories of documents required to be produced.[3]
[3] [2022] VCC 2165. See that ruling for further detail about this aspect of the case.
19Finally, I note that the evidence before the court is that the value of the property in dispute is presently somewhere in the vicinity of $24,250,000.[4] As counsel for Ms Feo submitted, this is a very significant commercial dispute.
[4] Affidavit of George Livaditis sworn 31 August 2023 at [46].
Recent Procedural History
20On 26 May 2022, JR Muller set the case down for a hearing commencing on 17 April 2023. His Honour set a timetable for pre-trial preparation. Order 5 required the plaintiff to serve a proposed court book index on the defendants by 1 February 2023. All parties were required to file and serve their witness statements by 22 February 2023.
21On 16 March 2023, the first defendant applied for orders vacating the trial date, requiring Luzon and Narad to comply with Orders made by JR Muller on 9 December 2022 and listing the matter for a further directions hearing.[5]
[5] See proposed Orders annexed to the First Defendant’s Outline of Submissions dated 3 April 2023.
22The application was heard by His Honour JR Muller on 3 April 2023 and it was common ground that none of the pre-trial steps had been taken by any party.
23His Honour JR Muller ordered that the trial be vacated and that both the plaintiff’s claim and the first defendant’s counterclaim be stayed.
24His Honour JR Muller also ordered that, by 8 May 2023, ‘the plaintiff must make any application to lift the stay and seek leave to proceed with the matter’.
25On 8 May 2023, Livaditis lawyers filed an affidavit of Dr Deepak Jain sworn on 7 May 2023 in support of an application to lift the stay. The affidavit of Dr Jain provided a detailed explanation for the plaintiff’s failure to comply with the orders of the court and provided assurances that the plaintiff would comply with future orders.
26Later that day, his Honour informed the parties by email that he had read the affidavit of Dr Jain and proposed orders lifting the stay and re-fixing the trial for hearing on 23 October 2023.
27His Honour indicated that he proposed to order the plaintiff to pay the defendants’ costs thrown away by the vacation of the trial. The email asked if there was any opposition to such a course and, if so, the court should be informed of that opposition in writing by 15 May 2023.[6]
[6] Email dated 8 May 2023 from the chambers of Muller JR to the parties.
28The plaintiff’s lawyers wrote to the court on 9 May 2023 advising that the plaintiff was ‘agreeable with the orders’.
29On 10 May 2023, the first defendant’s solicitors wrote to the court objecting to the proposed orders being made. On 18 May 2023, the first defendant filed detailed written submissions in support of the continuance of the stay. It has filed further submissions dated 25 July 2023.
30The plaintiff has filed written submissions dated 29 May 2023 in support of the lifting of the stay.
31In her submissions, the first defendant effectively asks the court to order a permanent stay of the plaintiff’s claim.[7] As the plaintiff points out in its submissions, the first defendant maintains this position without ever having applied for such a draconian order.
[7] First Defendant’s Outline of Submissions dated18 May 2023 at [74]-[75].
32The matter was heard by me on 5 September 2023. The plaintiff and the first defendant were each represented by senior counsel.
Legal Principles
33The legal principles concerning stays of civil proceedings are clear. They were recently explained by the High Court of Australia in Rozenbilt v Vainer.[8] In that case, an Associate Justice of the Supreme Court of Victoria had ordered a proceeding be stayed in circumstances where the plaintiff was seeking to amend his statement of claim despite not having complied with costs orders made against him in favour of the defendant. Appeals to a single Judge and the Court of Appeal were unsuccessful. The High Court upheld an appeal from the decision of the Court of Appeal on the basis that there were less drastic orders that could have ben made to protect the interests of the defendant.
[8] (2018) 262 CLR 475 (‘Rozenbilt’).
34I consider that the following propositions emerge from the joint judgment of Kiefel CJ and Bell J in Rozenbilt:
(a) generally speaking, a person is entitled to submit a bona fide claim for determination by the courts and have it heard. Their Honours referred to this as the ‘basal principle’ articulated by Dixon J in Cox v Jorneaux.[9]
(b) A litigant is entitled to a determination of their case unless to allow the claim to proceed would amount to an abuse of process or would clearly inflict unnecessary injustice on a party seeking a stay.[10]
(c) The consequences of a stay, whether temporary or permanent, are to shut the person against whom the order is made out of court.[11]
(d) If a stay order is contemplated and its effect may be to bring the proceedings to an end it is necessary that all reasonable alternatives to such an order be investigated.[12]
(e) There must be ‘strong grounds’ for the making of such an order.[13]
[9] (1935) 52 CLR 713 at 720.
[10] (2018) 262 CLR 475 at [10].
[11] (2018) 262 CLR 475 at [13] and [72].
[12] (2018) 262 CLR 475 at [34].
[13] (2018) 262 CLR 475 at [13].
35Further, as Gordon and Edelman JJ explained, ‘the powers to stay a proceeding, or to dismiss a proceeding without trial, are both powers, which if exercised, in one way or another, ‘deny justice to the party affected and ought not to be employed unless it is the only fair way of protecting the interests of the party seeking such an order’’.[14]
[14] (2018) 262 CLR 475 at [66].
36Their Honours also observed that in making any order in a civil proceeding, a court is required to further the ‘overarching purpose’ of the Civil Procedure Act 2010 (Vic) which is to ‘facilitate the just, efficient, timely and cost-effective resolution of the real issue in dispute’. In particular, and relevantly to the present application, it is necessary to have regard to the following objects in s 9(1):
(a) The just determination of the proceeding;
(b) The efficient conduct of the business of the court;
(c) Minimising any delay between the commencement of a civil proceeding and its listing for trial; and
(d) The timely determination of the proceeding.
37Finally, I note that, in the case of UDP Holdings Pty Ltd v Ironshore Corporate Capital Ltd,[15] Hargrave J considered that ‘… where the relevant factors in the particular case, including the interests of justice, are evenly balanced the discretion should be exercised against granting a stay’.[16]
[15] [2016] VSC 400.
[16] [2016] VSC 400 at [41].
Evidence Relied Upon by the Parties
38The plaintiff relied on two affidavits:
(a) One sworn by its director, Dr Deepak Jain on 7 May 2023; and
(b) One sworn by its solicitor, Mr George Livaditis on 31 August 2023.
39The first defendant relied on:
(a) An affidavit of Peter Pryles sworn on 13 April 2021;
(b) An affidavit of Sarwar (Sazz) Nasimi affirmed 17 June 2021;
(c) An affidavit of Peter Pryles sworn on 16 March 2023;
(d) An affidavit of Jonathon Bloom sworn on 3 April 2023; and
(e) An affidavit of Peter Pryles sworn on 17 May 2023.
40The court received the following from solicitors for the second defendant, Giovanni Feo:
(a) An affidavit of John Vincent Sinisgalli sworn 18 May 2023; and
(b) An email from Mr Sinisgalli dated 29 August 2023.
41In his affidavit, Mr Sinisgalli informed the court that his firm has the care and conduct of the proceeding ‘on behalf of the Estate of the late Giovanni Feo’. He also deposes to preparing an application for Probate ‘of the informal will of the late Giovanni Feo’. He deposes that ‘it is intended by the proposed Executor, Jason Fransesco Feo, that the Defence of the Second Defendant will proceed once Probate has been granted’.[17]
[17] Affidavit of John Vincent Sinisgalli sworn 18 May 2023 at [8].
42In his more recent email to the Court, Mr Sinisgalli referred to the scheduled hearing of this application and informed the court that he intended ‘to attend as an observer before His Honour as the necessary Probate application may require a hearing at the Supreme Court given the tragic circumstances of the death of the late Mr Feo’. At the commencement of the hearing, Mr Sinisgalli announced an appearance and, while he remained in court throughout, took no active part in the hearing.
Cross-Examination of Dr Jain
43As noted earlier, in written submissions dated 25 July 2023, the first defendant sought leave to cross examine Dr Jain. This was opposed by Zoro.
44I ruled against the application in the course of the hearing on 5 September 2023. It is appropriate to summarise my reasons for doing so.
45There are no factual issues put in dispute by the first defendant’s affidavits. There is no question of fact that the court is called upon to resolve in this application that could be informed by the cross examination of Dr Jain.
46The topics that Ms Feo’s counsel wished to ask Dr Jain about were identified in the first defendant’s submissions dated 18 May 2023 at [17]. One topic was ‘Zoro’s and Luzon’s connection to Narad and Platinum’.
47The existence of such a relationship is central to Ms Feo’s counterclaim.[18] It goes to the core of the proceeding.
[18] Amended Defence and Counterclaim dated 28 April 2022 at [36](2) and (3).
48One discretionary reason for refusing leave to cross examine a witness in an interlocutory hearing is where the cross examination will be a ‘dress rehearsal’ for trial.[19] At least in relation to this topic, I consider that to be the case here. That is reason enough to reject the application.
[19] Yunhanns v Elfic Pty Ltd (2000) 1 VR 92 at 98; Mathews v SPI Electricity Pty Ltd (No 6) [2013] VSC 422 at [29](a).
49Finally, there is a practical matter. No arrangements were made to have Dr Jain at court on the day of the hearing. I was informed that he is in India and would require an interpreter. No arrangements have been made for a video link or an interpreter.
50It would therefore be necessary to adjourn the hearing if Dr Jain was to be cross examined.
51In light of the above matters, I ruled against the application.
Submissions of the Parties
52In his affidavit, Dr Deepak Jain explains the failure by the plaintiff to comply with pre-trial orders including orders requiring the filing of witness statements and a court book index. In summary, he deposes that he was involved in a protracted dispute with his previous lawyers during which he ‘lost faith’ in their ability to represent his company properly.[20]
[20] See affidavit of Deepak Jain sworn 7 May 2023 at [17]-[19] and [43]-[67].
53The plaintiff’s previous lawyers ceased to act for it on 16 March 2023.
54Dr Jain deposes to engaging new solicitors. He also deposes to having the funds needed to advance the litigation and produces proof of this.[21] Dr Jain claims that he is now willing to prepare the case for trial.
[21] Affidavit of Deepak Jain sworn 7 May 2023 at [69]-[73] and exhibit 1 at pp 242-245.
55The plaintiff’s claimed willingness to advance its case and comply with orders finds some support in an affidavit sworn by its current solicitor, Mr George Livaditis.[22] Mr Livaditis deposes to having performed considerable work on the plaintiff’s case since 17 May 2023. That work has included extensive attempts to ensure the plaintiff has discovered all relevant documents and inquiries about compliance with subpoenas by third parties associated with the plaintiff, especially Luzon. Large numbers of documents have been delivered to the court in recent days as a result of these efforts. Further, in July of this year Mr Livaditis engaged a land valuer to value the property in dispute and received a report on 7 August 2023.[23]
[22] Affidavit of George Livaditis sworn 31 August 2023.
[23] Affidavit of George Livaditis sworn 31 August 2023 at [46].
Should the Stay be Lifted?
56Ms Feo advances four reasons why the stay should not be lifted:
(a) A failure by the plaintiff to discover documents;
(b) The failure by various non-parties to comply with subpoenas to produce documents;
(c) The plaintiff’s failure to serve a court book index; and
(d) The plaintiff’s failure to serve witness statements.
57Ms Feo also submits, in the alternative, that the trial on 23 October 2023 should not proceed given Mr Feo’s death and the uncertainty about how the interests of his estate will be protected.
58Of the grounds relied upon, the bulk of the argument presented by Mr Evans KC appearing for Ms Feo focussed on the first and the second. In written submissions, Ms Feo’s counsel submitted that she is ‘in the invidious position’ of having to rely on inferences with respect to relationships and associations between Zoro on the one hand and Narad and Dandiwal on the other – ‘and then seek production from those against whom the allegations are made of documents which will provide additional evidence by which to prove her claim’.[24]
[24] First Defendant’s Outline of Submissions dated 18 May 2023 at [78].
59After setting out what is described as the inadequate compliance with the subpoenas by the addressees, Ms Feo submits, without pointing to any evidence, that ‘there is a real possibility that banking records that would otherwise have been available in 2021, are no longer available’.[25] I note in passing that such a claim, if made out, could provide a basis for a permanent stay. However, as matters stand it is purely speculative.
[25] First Defendant’s Outline of Submissions dated 18 May 2023 at [91].
60As I stated to Ms Feo’s counsel at the hearing, events have moved on since the submissions were filed. It is apparent to me that the plaintiff’s solicitor has been actively seeking to ensure that the plaintiff is complying with its ongoing discovery obligations,[26] as well as ensuring to the extent he can, that entities and people related to the plaintiff are complying with their obligations under the subpoenas.[27]
[26] Mr Jain has very recently sworn a second supplementary affidavit of documents.
[27] In his affidavit sworn on 31 August 2023, Mr Livaditis deals in some detail with compliance by Narad (see at [39]-[45]); Luzon (see at [22]-[38]).
61While there has been serious failure on the part of the plaintiff to comply with the court’s orders in the past, it is apparent that the plaintiff’s new lawyers are taking their obligations seriously. It is significant that Mr Livaditis deposes that ‘…if there are further specific documents that are alleged to be discoverable or otherwise relevant to the proceeding, I will endeavour to obtain them’.[28] The court expects the parties’ lawyers to continue in this co-operative manner to prepare the matter for trial.[29]
[28] Affidavit of George Livaditis sworn 31 August 2023 at [15].
[29] As they are obliged to do under ss 20 and 26 of the Civil Procedure Act 2010 (Vic).
62While the plaintiff contends, in reliance on its lawyer’s affidavit, that the court can be satisfied that the addressees have now complied with their obligations, there remains a dispute about this. It is not possible for the Court as presently constituted to resolve that dispute but I make two observations.
63First, the area of dispute is considerably narrower as a result of the efforts of Mr Livaditis. Secondly, as I observed to Mr Evans during the hearing, one explanation for the failure by Luzon to produce a document may be that the document simply does not exist.
64But even taking the first defendant’s argument in this regard at its highest, and assuming there remain documents which should be produced by one or more non-parties, that does not justify the draconian step of shutting the plaintiff out of court, even taken in combination with its past failures to comply with orders of the court. Such a course would be inconsistent with the High Court’s decision in Rozenblit. As the High Court there explained, a stay should only be imposed if there are no other less drastic remedies available to the aggrieved party.[30] The first defendant has other remedies available to it if it maintains that there is wilful non-compliance with a subpoena. In the first instance, it can take Mr Livaditis up on his offer by identifying specific documents, or categories of documents, it says should have been produced. The court’s Judicial Registrars are available to assist as needed. If all else fails, it can bring contempt proceedings.
[30] Rozenblit at [34]. See also Tucker v State of Victoria [2023] VSCA 126 at [67].
The Matter Should Proceed to Trial
65Even allowing for the delay occasioned by the pandemic, the matter has taken far too long to come to trial.
66As the first defendant herself acknowledges in her submissions, ‘with the passage of time, the recollections of the relevant witnesses will deteriorate’.[31] This is the very reason that, in fairness to all concerned (including Ms Feo), the matter should proceed to trial as soon as possible.
[31] First Defendant’s Outline of Submissions dated18 May 2023 at [89].
67While it is undoubtedly the case that the plaintiff has contributed to the inordinate delay in bringing this case to trial (as is conceded on its behalf by Dr Jain), it is also the case that the first defendant has contributed to the delay. For example, a hearing date in May 2021 was vacated to enable her to amend her defence. A trial date of 28 March 2022 was vacated by the court on 10 March 2022. A subsequent order of the court made on 13 May 2022 recorded that the trial could not be relisted until 2023 because senior counsel retained by the first defendant ‘will soon be going on extended leave until November 2022’.
68The short point is that nobody is entirely innocent and little is to be gained now in seeking to allocate blame.
69In summary, none of the matters raised on behalf of the first defendant is unsurmountable and certainly none of them justify shutting the plaintiff out of court.
The Proposed Trial Date of 23 October 2023
70In her submissions dated 18 May 2023, Ms Feo submits that, if the court is minded to lift the stay, ‘there is no real certainty that the trial can proceed on 23 October 2023’.[32] This was said to be because of the uncertainty about the second defendant and whether Jason Feo, if he is granted probate, will be substituted as the Second Defendant in the proceeding.
[32] Ibid at [95].
71In the event, the plaintiff has, not surprisingly, not sought to maintain the 23 October 2023 trial date.
72As I informed the parties at the hearing on 5 September 2023, the next earliest date on which the court could commence the hearing of the trial is 13 August 2024. The plaintiff’s proposed orders in the event that the stay is lifted set a timetable for trial preparation commencing with the service of a proposed court book index by the plaintiff on 2 October 2023. The plaintiff is to serve its witness statements by 27 November 2023.
73I consider that the plaintiff’s proposed timetable is practical and should allow enough time for the affairs of the late second defendant to be attended to and any application for substitution of the executor as the second defendant to be made.
74Alternatively, as the first defendant has pointed out, it is open to the plaintiff to seek a substitution order under r 9.09(2) of the County Court Civil Procedure Rules 2018. In the absence of such an order, it will be open to the Court to dismiss the proceeding so far as it concerns relief on the plaintiff’s cause of action against the second defendant.[33]
[33] See r 9.10(1).
Orders
75I am prepared to make Orders as set out in the plaintiff’s proposed orders:
(a) lifting the stay;
(b) requiring the plaintiff to pay the defendants’ costs thrown away by reason of the vacation of the trial, including the costs of the directions hearing on 3 April 2023; and
(c) programming the matter as set out in proposed orders 3-20.
76The court will entertain written submissions concerning the costs of this application noting that the orders the court is prepared to make are largely those proposed by His Honour JR Muller on 8 May 2023.
77Any submissions should be limited to 5 A4 pages and should be filed and served within 14 days of today’s date, being 5 October 2023.
78Unless the court considers that a further hearing will be desirable, the question of costs will be determined on the papers.
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Certificate
I certify that these 17 pages are a true copy of the ruling of His Honour Judge Rozen delivered on 20 September 2023.
Dated: 20 September 2023
Andrew Morrison
Associate to His Honour Judge Rozen
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