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Supreme Court of New South Wales - Court of Appeal |
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Supreme Court of New South Wales - Court of AppealLast Updated: 25 February 2011
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Decision:
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Notice of Motion dismissed with costs.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] |
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Cases Cited:
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Australian Broadcasting Corporation v O'Neill [2006]
HCA 46; (2006) 227 CLR 57
Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618 Jesasu Pty Ltd v Minister for Special Resources (1987) 11 NSWLR 110 Varma v Varma [2010] NSWCA 358 Varma v Varma [2010] NSWSC 785 |
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Ex tempore
1 McColl JA : By notice of motion filed on 23 December 2010, Parveen Varma seeks orders that Gautam Varma and Arjun Varma, the first and second respondents, be restrained from dealing with monies held in the Estate of the late Sah Dev Varma (the "Estate") pending the outcome of these appeal proceedings or with the written consent of the appellant or with the leave of the court.
2 The notice of motion also sought orders relating to an accounting and a repatriation of monies to the Estate, but those paragraphs of the motion are no longer pressed.
3 The application is said to have been prompted by events which transpired during a hearing before me on 6 December 2010 in which, in substance, Gautam and Arjun and the Estate sought orders permitting Taj Food Sales Pty Ltd ("TFS") to declare a dividend in their favour. The background appears in my judgment in which I acceded to the application: Varma v Varma [2010] NSWCA 358 (the "2010 judgment"). As I said in the 2010 judgment (at [3]), without any disrespect to the individuals who are parties to the principal proceedings or the late Sah Dev Varma (the "deceased"), for ease of identification, I propose to refer to them by their first names where appropriate.
4 Relevantly for the purposes of the present application it should be noted, as appears from [17] of the 2010 judgment, that consequent upon consent undertakings given in August 2010, TFS declared a dividend in the sum of $300,000 payable as to $100,000 each to the first, second and fourth respondents. The effect of the 2010 judgment was to permit TFS to declare and pay a further dividend to Gautam, Arjun and the Estate in accordance with their respective shareholding rights, a sum not exceeding in total $240,000. 5 In the course of the 2010 judgment I said:
"24 A dispute arose during the hearing as to whether Gautam and Arjun had, despite Parveen's objection, disbursed dividends of $160,000 which had been paid to the Estate. To resolve that dispute, the applicants tendered a copy of the Estate's bank account statement showing a credit balance of $151,682.35 as at the end of September 2010. The only amounts which have been withdrawn from the account since the August undertakings are the two sums earlier referred to to pay the costs of obtaining probate and to reimburse Mr Bray. I am satisfied that Gautam and Arjun have not otherwise disposed of the Estate's funds. They have, in effect, acceded to Parveen's objection to them having recourse to Estate funds for the purpose of the Estate paying its costs of resisting the appeal.
...
37 Nevertheless, it cannot be gainsaid that the issue on appeal is whether the applicants are entitled to retain the shareholdings which are the source of TFS's power to declare dividends in their favour. Gautam and Arjun do not offer security for repayment of the dividend they seek now to have declared in their favour. The position is less concerning insofar as the Estate is concerned because Gautam and Arjun have as earlier explained, not disbursed the dividends otherwise paid to it and, as I understand, in the event that a dividend is declared, do not propose to disburse that part of the dividend which the Estate would receive...."
6 The hearing of the motion which led to the 2010 judgment took place on 6 December 2010. Judgment was delivered on 16 December 2010.
7 On 7 December 2010, Hall Partners, Parveen's solicitors, wrote to Hunt & Hunt, Gautam, Arjun and the Estate's solicitors, seeking confirmation that in the light of statements they said Mr Peterson, Gautam, Arjun and the Estate's counsel, had made in the course of the hearing on 6 December, the monies in the Estate's bank account referred to in the bank statement tendered before me "will not be dissipated pending the outcome of the appeal proceedings or leave of the Court".
8 Gautam and Arjun oppose the order sought. They say they are entitled to and now wish to apply funds held by the Estate to the payment of the Estate's debts.
Background
9 On 13 December 2010 Hall Partners wrote to Hunt & Hunt advising that if no communication was received by 5pm that day that the "monies in the Estate will not be dissipated without leave of the Court or further order pending the outcome of these proceeding..." and that the author would contact my Associate at 6pm.
10 On 14 December 2010, Hunt & Hunt wrote to Hall Partners enclosing a copy of a statement of claim filed (apparently in November - December 2010) by a Mr Czinner, a solicitor who had acted for the deceased during his lifetime in litigation initiated by Parveen. The letter advised that Mr Czinner's entitlement to payment for his professional services represented "a just debt of the Estate, and a matter that our clients as executors of Sah Dev Varma's Estate are bound to deal with". The letter also advised that the executors proposed to pay the debt after the expiry of five days from the date of the letter.
11 As far as the evidence reveals, Hall Partners received no advice other than that contained in the letter of 14 December 2010. There was no communication, so far as I am aware, with my Associate. As I have said, judgment was delivered on 16 December 2010.
12 On 20 December 2010, Hunt & Hunt wrote to Hall Partners confirming that no monies had been dispersed from the Estate monies apart from amounts paid pursuant to orders made by Ward J: see 2010 judgment at [14], [18]. The letter enclosed a copy of the transaction history for the Estate's bank account dated 16 December 2010. That history showed a credit balance as at that date of $152,234.81.
13 The letter also advised that Hunt & Hunt were taking instructions concerning Mr Czinner's statement of claim and would advise their clients' position regarding the Estate funds shortly.
14 On 20 December 2010, $80,000 was deposited into the Estate bank account. This was the Estate's one-third entitlement to the dividend of $240,000 that the 2010 judgment permitted to be declared. That deposit and interest of $615.62 brought the account's balance to $232,564.43 as at 29 December 2010.
15 On 21 December 2010, Hall Partners wrote to Hunt & Hunt. Relevantly the letter expressed concern that the latter had "not provided a [sic, an] unequivocal statement about the non-use of the estate monies in light of the judgment of the Court of Appeal". The letter added that the author had written "in relation to Mr Czinner's account and the extracts of the judgment from the Court below". That correspondence, as far as I am aware, has not been produced. The letter again threatened to have the matter relisted if an unequivocal undertaking was not received by 3pm that day.
16 On 22 December 2010, Hall Partners wrote to Hunt & Hunt advising that in light of their clients' not giving an unequivocal undertaking the Estate proposed to proceed on a notice of motion seeking an order that their clients be restrained from dealing with Estate monies until 31 January 2011.
17 It appears that on 23 December 2010 the parties executed Short Minutes of Consent Orders pursuant to which, subject to Parveen giving the usual undertakings as to damages, the Court noted that until and including 31 January 2011 and on a "without admission basis" the first, second and fourth respondents undertook to the Court "not to disburse, distribute or otherwise dissipate any estate assets (including monies held in any bank accounts) without the prior leave of the Court or the prior written consent of the Appellants [sic, the Appellant]." The Short Minutes were filed on 13 January 2011.
Applicant's evidence
18 The applicant relies on an affidavit of Ms Andrea Lee sworn 27 January 2011 in support of the application. That affidavit annexes the transcript of the proceedings before me on 6 December 2010, the bank statement tendered in the course of that hearing, a copy of the 2010 judgment and the two communications dated 7 December and 13 December 2010 to which I have referred.
19 It is regrettable that Ms Lee's affidavit did not disclose fully the correspondence which had passed between the parties concerning whether or not the undertakings should be given. When this matter was called on as a referral on 31 January 2011, it appeared from the affidavit that two requests had been made seeking in substance the relief sought in paragraph 3 of the notice of motion but that there had been no response to those requests. Members of the profession should be astute to ensure the Court is fully apprised of material germane to an application for interlocutory relief, not least to secure compliance with s 56 of the C ivil Procedure Act 2005 (NSW).
Respondents' evidence
20 The first, second and fourth respondents relied on an affidavit sworn by Ms Anthea Tronson on 28 January 2011. The affidavit contains an extensive review of the history of the litigation, including the three proceedings commenced by Parveen, but later resolved or discontinued: 2010 judgment (at [13] -[15]).
21 The following matters emerged from Ms Tronson's affidavit.
22 It is apparent from the transcript of the hearing of the principal proceedings of 15 March 2010 before Ward J, that Mr Rayment of Queens Counsel, who appeared for Parveen with Mr W Washington, submitted that the Estate should "have live representation" and that it would be appropriate for Gautam and Arjun as executors of the deceased's will to undertake that role. Thereafter Hunt & Hunt represented the Estate as well as Gautam and Arjun in the principal proceedings.
23 It is also relevant to note for present purposes the circumstances in which the tutor suit was resolved as discussed by Ward J in Varma v Varma [2010] NSWSC 785. As is apparent from her Honour's reasons, in the course of the tutor suit (which was commenced while the deceased was still alive) an application was brought in the deceased's name by Mr Czinner, challenging the retainer of Parveen's solicitors. That application came before Ward J for hearing in October 2008 but was not completed by the time the deceased died on 25 November 2008. Thereafter, as her Honour recorded (at [4]):
"... an administrator ad litem was appointed to Sid's estate for the purpose of determining whether to prosecute the claims the subject of the tutor proceedings (whether in these or other proceedings). That appointment was on 14 May 2009. The administrator obtained legal advice and subsequently (though asserting his belief that there was a cause of action available to the estate) informed the court that he had decided not to continue the proceedings brought in Sid's name."
24 Ultimately her Honour ordered Parveen to pay the defendants' costs of the tutor suit from the date of commencement of the proceedings up to and including 14 May 2009 on a party/party basis and thereafter (that is to say after the administrator ad litem was appointed) each was bear their own costs of the proceedings.
25 In late 2010 Mr Czinner commenced the proceedings to which I have referred in the Local Court at Ryde against Gautam and Arjun seeking recovery of the costs he incurred in acting for the deceased. The statement of claim is listed on 25 February 2011 for directions. According to Ms Tronson's affidavit, the plaintiff intends to amend the statement of claim to name Gautam and Arjun as defendants as executors for the late Sah Dev Varma.
26 Ms Tronson also deposed that in the course of the application in the tutor suit that Mr Czinner conducted on the deceased's behalf, medico-legal fees and court costs were incurred which Gautam and Arjun have paid.
27 Ms Tronson also deposes that the outstanding professional costs which Gautam and Arjun owe to Hunt & Hunt are approximately $186,313.84 and that the Estate is liable for a proportion of that amount, although she has not yet calculated the proportion.
28 Next, Ms Tronson deposes that the Estate has received cash payments from the Australian Tax Office by way of a tax refund in an amount of $1331.00, three amounts by way of dividends, two of those amounts permitted by way of the August undertakings and the 2010 judgment respectively and a third declared in November 2009, on each of which the Estate will be liable to pay income tax and that the account has been augmented to some extent by interest on the bank deposits.
29 In summary, according to Ms Tronson's affidavit, the Estate is, or will be, subject to liabilities including tax liabilities on the dividends to which I have referred, Mr Czinner's claim for payment in the sum of $44,629 for his professional services, the Estate's share of legal costs and disbursements owed to Hunt & Hunt arising in the present proceedings, including costs in the present appeal to date, and the professional costs of the deceased's accountant for preparing income tax returns on behalf of the Estate for three financial years.
30 Ms Tronson says she is instructed by Gautam and Arjun that they wish to apply funds held by the Estate to payment of the Estate's debts, including professional fees claimed by Mr Czinner and its legal costs in these proceedings.
Submissions
31 Mr W Washington, who appeared for Parveen, submitted that the order sought should be granted in substance because in the event that the appeal is successful then the Estate is "going to be unwound". In such an event the shares, which entitled the Estate to be the beneficiary of the dividends currently held in the Estate's banks accounts, will not have devolved to its benefit because they will have never been in the hands of the deceased as at his death. He contended that it was not until the bank statement was tendered on 6 December 2010 that Parveen became aware of the Estate's cash assets.
32 Mr Washington does not dispute the executors' right to administer the Estate according to the general law and applicable legislation. He contends, however, that what is at issue is the question of the preservation of the funds now held in the Estate bank account pending appeal, and what is said to be the need to seek judicial clarity as to the effect of the 2010 judgment, referring to those paragraphs of my judgment set out above (at [5]). He submits that the orders of 16 December 2010 were made on the basis that Estate funds had not been dealt with.
33 Mr Washington's written submissions drew attention to observations Ward J made about Mr Czinner in the judgment under appeal: Varma v Varma [2010] NSWSC 786 (at [186], [359]) (the "primary judgment"). Those passages were, he explained today, drawn to my attention by way of background to Parveen's contention that the executors should not in effect assent meekly to Mr Czinner's claim, but rather should stay the court proceedings and seek an assessment of his costs pursuant to section 355 of the Legal Profession Act 2004 (NSW).
34 Mr E Peterson who appeared for the first, second and fourth respondents submitted, again in substance, that I should permit the executors to administer the Estate according to the general law subject to appropriate Court supervision. He argues that in so doing the executors should be permitted to pay the debts to which Ms Tronson referred in her affidavit.
35 Mr Peterson referred to Uniform Civil Procedure Rules 2005 ("UCPR") 42.25 as reflecting the general law:
"(1) Subject to subrule (2), a person who is or has been a party to any proceedings in the capacity of trustee or mortgagee is entitled to be paid his or her costs in the proceedings, in so far as they are not paid by any other person, out of the fund held by the trustee or out of the mortgaged property, as the case may be.
(2) The court may order that the person's costs not be so paid if:
(a) the trustee or mortgagee has acted unreasonably, or
(b) in the case of a trustee, the trustee has in substance acted for his or her own benefit rather than for the benefit of the fund."
36 Mr Petersen also submitted that the Estate and the executors currently have the benefit of a judgment in their favour. Insofar as the executors are concerned, he relies on authority setting out the general rule expressed in UCPR 42.25 to which I have referred.
37 Next Mr Petersen contended that in considering the application, the Court should take into account the following matters:
The Estate (and the
executors) did not instigate the proceedings, and in any case they were
successful. Similarly, he points out,
they did not instigate the present appeal;
The executors have been sued in their personal capacity on three occasions
and have incurred substantial legal costs for which costs
orders have been made
in their favour and in respect of which they have yet to receive any funds; and
The payments sought to be made by the executors will not have a substantial
bearing on the trust in the sense that the sum of money
is a small proportion of
the value of the trust and the shares of TFS will be preserved until the
conclusion of the appeal.
38 The latter submission was made by reference to [25] of the 2010 judgment:
• "25 Gautam has annexed draft financial statements to his affidavit for TFS for the financial year ending 30 June 2010. According to those draft accounts, TFS's profit before income tax ("PBIT") for that financial year is $793,145.33. TFS's retained earnings for that financial year, according to the draft statements, are $4,264,260.40."
39 Mr Peterson submits the motion should be dismissed with costs.
Consideration
40 In order to obtain the interlocutory injunctive relief she seeks the applicant must demonstrate a "prima facie case in the sense that if the evidence remains as it is there is a probability that at the trial or in this case relevantly the appeal she will be held entitled to relief". The Court must next determine "whether the inconvenience or injury which she would be likely to suffer if the application for an injunction is refused, outweighs or is outweighed by the injuries which the respondents would suffer if it were granted". It should be noted that the phrase "prima facie case" in that context means it is enough for the applicant to show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial, in this case pending the appeal: Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618; Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 (at [65] per Gummow and Hayne JJ, with whom Gleeson CJ and Crennan J agreed); see also Jesasu Pty Ltd v Minister for Special Resources (1987) 11 NSWLR 110 (at 117) per Kirby P.
41 In the 2010 judgment I referred (at [34]) to the prima facie principle that a successful party is entitled to the benefit of the judgment he or she has obtained. Insofar as I considered that the effect of Parveen's opposition to the application by Gautam and Arjun to permit TFS to declare a further dividend was that she was asking the court to stay the judgment below, I had to consider her prospects of success on appeal. I concluded (at [42]) that it was not possible for me to say there was no serious question for determination on appeal, but in that context I had to give weight to the fact that the primary judgment was in the then applicants' (the respondents to this application) favour.
42 Mr Petersen submits that once an application for an interlocutory injunction is made by an applicant who has been unsuccessful at trial, the onus to satisfy the court of a prima facie case, in the sense which I have explained, must be "higher". Mr Washington did not challenge that proposition. As will be apparent from the reasons which follow, it is unnecessary to express any opinion about it.
43 Whether or not there is a prima facie case to justify the preservation of the status quo in relation to the Estate's bank accounts is a difficult question to resolve. There was a lengthy trial before Ward J who delivered a detailed judgment, ultimately deciding the case in the respondents' favour on the basis that her Honour was not satisfied that Parveen had established her contentions that the deceased had made the alleged promises or representations to the effect that all the shares in the TFS would belong to her as from his death: primary judgment (at [17(i)]). That finding was fatal to Parveen's claims.
44 Ward J also made a number of other findings, one of which to which Mr Washington referred, was of undue influence apparently by Gautam and Arjun in relation to share transfers (primary judgment at ([17(vii)]). Mr Washington ultimately accepted that finding had no significance in her Honour's final disposition of the case. To the extent that it was made, I would note that, whatever its force, it has not influenced Parveen to seek to displace the situation that the executors represent the Estate in the proceedings which has continued since at least March 2010. I do not, in saying that, intend in any way to encourage any other application in respect of that issue.
45 It is difficult for me to conclude at this stage that Parveen has shown a prima facie (or "arguable": Jesasu (at 117)) case in the sense to which I have referred. That test, in my view, differs from that which I was required to apply in the 2010 judgment, namely, whether there was a serious question for determination on appeal. However, even if I was satisfied that Parveen had established an arguable appeal it does not seem to me that, in the circumstances, it would be appropriate to grant the relief sought, having regard to the practical consequences or prejudice which would flow from it and the balance of convenience.
46 The effect of restraining the executors from dealing with the moneys held in the Estate would be to prevent them from discharging their duties as executors. In the discharge of those duties they are bound, as is accepted in Mr Peterson's submissions, only to pay debts properly incurred. I should make it plain that in saying that it would not be appropriate in my view to prevent them from discharging those duties, I should not be seen in any way as endorsing any payment the executors may make consequent upon these reasons. There are procedures for taking judicial advice to sanction executors' conduct. This is not the appropriate place for those issues to be resolved.
47 Returning to Mr Washington's submissions, in my view it is significant, subject to what I have already said, that even if the appeal was to be successful and he is correct that the Estate would have to be, in effect, "unwound", that the amount in the Estate's bank account is a comparatively minor proportion of that amount which would, in effect, flow in Parveen's favour accepting, as I earlier said, the reference in the 2010 draft financial statements to TFS' retained earnings as approximately $4.2 million.
48 I would also take into account as a matter of discretion that the first time any antennae appear to have been raised on Parveen's part in relation to the moneys in the Estate bank account was when the bank account statement was tendered. This was so even though it must have been apparent from the earlier declaration of dividends, in particular that permitted by way of the August undertakings, that moneys would flow to the benefit of the Estate.
49 Taking into account all of those considerations I am of the view that the notice of motion should be dismissed.
50 Mr Washington submits that the appropriate costs order is that costs of the motion be costs in the appeal having regard to the fact that the relief sought relates inextricably to the subject matter of the appeal, the entitlement of the Estate to the funds in the bank account. While that is the case, Gautam and Arjun's "right" to deal with that money at present flows not only from their success in the principal proceedings but also from the fact that they act in their capacity as executors. In so doing they have to take into account and deal with claims made by third parties which, as would be apparent from these reasons, are extant and pressing. They have successfully sought to assert, in response to the motion, their entitlement to continue to discharge those duties as executors although the moneys to which they would be able to have recourse, subject to any appropriate decision as to whether or not such debts are properly incurred, may deplete that Estate bank account.
51 In my view the Court should have regard to the fact that the respondents are discharging their executorial duties in considering the proper order as to costs. I am also conscious in this context of the fact that they continue to act in that role, as I earlier said, at Parveen's urging.
52 The notice of motion should be dismissed with costs and I so order.
• **********
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