Supreme Court New South Wales Medium Neutral Citation: Rolfe v George Zakharia Group Pty Ltd (No. 2) [2020] NSWSC 438 Hearing dates: 21, 22, 23 & 24 April 2020 Date of orders: 23 April 2020 Decision date: 27 April 2020 Jurisdiction: Equity - Duty List Before: Slattery J Decision: Interlocutory orders made for the third and fourth defendants to release portions of the disputed equipment for transportation by the plaintiffs back to the plaintiffs' premises. Orders made for the first defendant to meet the costs of the transportation of the equipment back to the plaintiffs' premises and, in default of payment by the first defendant, for the plaintiffs on a without prejudice basis to pay the fourth defendant's invoice and to secure to the third defendant the payment of part of its invoices. Costs reserved. Catchwords: CIVIL PROCEDURE – injunctions – interlocutory injunction – first defendant engages second defendant to remove plaintiffs' equipment from rural premises – equipment transported a long distance for storage and will be expensive to return– the first defendant's claim of right to the equipment is disputed – injunctions granted on 9 April 2020 for first defendant to return the income earning part of the equipment taken and to retain the other part of the equipment – further facts emerge showing that the second, third, fourth and fifth defendants played roles in the removal of the equipment – but the evidence does not support an inference that the second to fifth defendants were aware that the first defendant's claim of right to the equipment was disputed – all the equipment is incurring storage charges to the third defendant at its present location – the first defendant has no present use for the equipment – change of circumstances – what variations should be made to the Court's original orders to accommodate the balance of convenience, as it now appears from these additional facts. Cases Cited: Amalgamated Television Services v Marsden [1999] NSWCA 313 Brimaud v Honeysett Instant Print Limited (1988) 217 ALR 44 Harrison Partners Construction Pty Ltd v Jevena Pty Ltd (2005) 225 ALR 369 Rolfe v George Zakharia Group Pty Ltd [2020] NSWSC 391 Category: Consequential orders Parties: First Plaintiff: Michael Rolfe Second Plaintiff: M H Engineering Solutions Pty Ltd First Defendant: George Zakharia Group Pty Ltd Second Defendant: AS Investigations Pty Ltd Third Defendant: Outback Recovery Services Fourth Defendant: Wayne Jones 24 Hr Towing Services Fifth Defendant: Steve Markwort Representation: Counsel: Plaintiffs: M. Klooster Solicitors: Plaintiffs: F. Amirbeaggi, Yates Beaggi Lawyers Pty Ltd First Defendant: P. Bradley, director of George Zakharia Group Pty Ltd Third Defendant: D.J. Swain and P. Swain, Outback Recovery Services File Number(s): 2020/101008 Publication restriction: No Judgment 1. This is the Court's second judgment in this Equity Duty List matter. In the Court's first judgment Robb J granted interim relief permitting the return of certain trucks, trailers, motor cycles, caravans and heavy earth moving equipment ("the equipment") to the plaintiffs from the possession of the defendant: Rolfe v George Zakharia Group Pty Ltd [2020] NSWSC 391 ("the first judgment"). This judgment should be read with the first judgment. Events, persons and things are referred to in both judgments in the same way. 2. In the first judgment, Robb J granted this relief to the first plaintiff, Mr Michael Rolfe and the second plaintiff, M-H Engineering Solutions Pty Ltd, on the basis that they had established prima facie title to the equipment, which had been seized from the plaintiffs' address in Forbes early on the morning of 1 April 2020 in an operation orchestrated by the first defendant, George Zakharia Group Pty Ltd ("GZG"). The equipment was of a unique character, warranting the court's intervention on the basis that the plaintiffs should not be left to damages remedies. The Issues before Robb J and Lindsay J 1. GZG's case before Robb J was that the equipment was seized pursuant to its claim of right and that it had a strong defence to the plaintiffs' claim. Robb J expressed doubts in the first judgment that GZG's claim of right had much merit. I respectfully share those doubts. The combined equipment is worth in excess of $2 million. Not surprisingly, the removal of the heavy earthmoving equipment completely sterilised the plaintiffs' business operations. 2. After a hearing on 6 and 7 April 2020, Robb J declined to order that GZG redeliver the whole of the equipment to the plaintiffs. Instead, his Honour reviewed the list of equipment claimed back and on 9 April ordered the return to the plaintiffs only of the income earning equipment, which was necessary to conduct the plaintiffs' earth moving equipment hire business. 3. In the result, Robb J ordered the return of 26 of the 42 items claimed. His Honour required the plaintiffs to give not only the usual undertaking as to damages but several additional undertakings to care for and maintain the equipment, keep it insured, and not to encumber it. 4. Justice Robb's 9 April 2020 orders required GZG to deliver the 26 items of equipment to the plaintiffs by midday on 14 April. But GZG did not comply with that order. 5. The matter came back before Lindsay J in the Duty List on 15, 16 and 17 April 2020, upon the plaintiffs' further motion for relief. Before Lindsay J on 16 April 2020, a Mr Paul Bradley, a director of GZG, was given leave to appear on its behalf. He acknowledged GZG's non-compliance with the Court's orders and indicated that it would endeavour to comply with those orders by 11am, 17 April. The orders were amended to require compliance by that later time. But GZG did not comply with the extended deadline. 6. On 17 April, Mr Bradley submitted that all the seized equipment was now in the possession of AS Investigations Pty Ltd ("AS Investigations"), not GZG, and that in response to the Court's orders, GZG had instructed AS Investigations to deliver all the equipment to the plaintiff. But as will be seen, this turned out to be a less than complete or helpful statement of the facts. In any event, AS Investigations was joined as a second defendant that day. The Proceedings Return to the Duty List Again on 21 April 1. The matter came before me as the Duty Judge on 21 April 2020 was not able to be heard that day and was adjourned to 22 April. By that time, supplementary evidence showed that after its seizure on 1 April, the equipment had been distributed into the possession of a number of persons other than GZG and AS Investigations. 2. The additional evidence indicates that AS Investigations had engaged, or received the benefit of the services of, three other parties in order to execute the recovery of the equipment on 1 April. Under subcontract from AS Investigations, DJ and PJ Swain, trading as "Outback Recovery Services" ("Outback"), WJ AUTO Pty Limited, and trading as "Wayne Jones 24 Hr Towing Services" ("WJ AUTO") all performed functions to assist the recovery. And a Mr Steve Markwort volunteered to assist the other two parties with the provision of storage space for the equipment in the Forbes area. On 22 April 2020, these three parties were joined respectively as the third, fourth and fifth defendants in the proceedings. 3. On 22 April, counsel for the plaintiff, Mr M. Klooster complained that Robb J's orders requiring redelivery of the equipment on 14 April and then, as extended by Lindsay J, on 17 April, had still not been complied with by either the first or second defendants. 4. By 22 April, it was clear from the additional evidence filed that after its seizure, the equipment had been distributed among three storage yard sites in Forbes and Brocklehurst (a district just North of Dubbo), controlled by Outback, WJ AUTO and Mr Markwort respectively. Both Outback and WJ AUTO had transported the equipment to these sites in execution of their subcontracts in performance of GZG's retainer to AS Investigations. And Mr Markwort made some real estate available for storage of the equipment on a friendly basis to assist Outback and WJ AUTO but he was not otherwise involved in the seizure and removal. 5. Mr Klooster pressed for orders that Outback transport the equipment at that firm's own expense back to the plaintiffs' premises. He cited in support of this argument the non-compliance by the GZG with the earlier orders and Outback's present control of the equipment. 6. But the Court said it was not prepared to make the orders requested. The new evidence now showed why the Court's orders had not been complied with up to that point of time. Making the orders that the plaintiffs were now requesting was likely merely to lead to repeated non-compliance and a stalemate that was not for the benefit of any party. 7. The new facts may be shortly summarised. It is evident that Outback has done the heavy lifting, along with WJ AUTO, in removing and transporting all the equipment away from the plaintiffs' premises. Outback invoiced $22,374 for those services but is still unpaid. WJ AUTO had rendered an additional invoice for $1,628 for its services, which was also unpaid. Outback and WJ AUTO were unwilling to part with the equipment in the three yards in Forbes and Brocklehurst until they were paid. Mr Markwort was always just a volunteer helping out the people at Outback and WJ AUTO and did not want any separate remuneration for himself. 8. Outback's yards at Brocklehurst are fully fenced and locked. Mr Swain explained that the space in his yard is in high demand for the conduct of Outback's business and that Outback would be charging storage fees for the long-term storage of the equipment. Some storage fees have already been incurred since 1 April and Outback was seeking their payment as a condition of agreeing to release the equipment. The persons primarily liable for payment of Outback's transportation and storage fees would appear to be either GZG, AS Investigations or perhaps some other entity acting on their behalf as an agent. As the new facts have emerged, they reveal that this kind of practical issue was holding up redelivery of the goods to the plaintiffs in conformity with the court's orders. 9. It was all very well for GZG to command others to release the goods in response to existing Court orders and to report to the Court that they had done so, but the reality was that it was not providing the financial wherewithal to third parties, such as Outback, to ensure the release actually took place and so there was continuing non-compliance with the Court's orders. This situation was unlikely to change until Outback and WJ AUTO were paid. Formulating Relief against Outback and WJ AUTO on 23 April 1. On 23 April Mr Klooster argued for the extension of the Court's existing orders that by then only covered GZG and AS Investigations. He submitted that the orders should now extend to Outback, WJ AUTO and Mr Markwort. As Mr Markwort was not claiming any transportation or storage fees against any party, he did not resist the relief claimed against him and so the remaining contest took place between the plaintiffs and Outback and WJ AUTO. 2. In his written submissions, Mr Klooster put arguments: that no lien was available as against the plaintiffs either to Outback or to WJ AUTO, in the circumstances in which they had removed the plaintiffs' equipment; and that Outback and WJ AUTO should look to GZG and AS Investigations for payment. He submitted that by way of an extension of existing orders, the Court should now order those parties to deliver up the equipment and that they should do so at their own expense by being required to transport goods back from Dubbo to Forbes and from other locations in Forbes to the plaintiffs' yards in Forbes. He submitted that the plaintiffs had been deprived of their means of earning income and could not afford to pay anything to Outback or to WJ AUTO in addition to bearing the costs of the transportation of the goods back to their own premises. 3. But the orders being sought paid little regard to the fact that Outback and WJ AUTO were innocent parties who were caught up, it seems entirely unawares, in GZG's disputed seizure of the equipment from the plaintiffs. And the orders sought were unrealistic in expecting Outback and WJ AUTO to bear the substantial burden of the redelivery of the goods when they appear to have been misled by GZG into thinking that GZG had proper authority to engage them to undertake the removal of the equipment in the first place. 4. The Court can order Outback and WJ AUTO to release the equipment without first being paid. But as a condition of granting relief, the Court was disinclined to destroy whatever arguments Outback and WJ AUTO may have for claiming a lien against some party, or at the very least destroying the negotiating advantage that they had by being in possession of the goods. The Court decided that, as a condition of granting relief, something should be done to give partial protection to these defendants from the prospect of their invoices going unpaid as a result of the equipment being taken by the Court's order out of their possession. They appear to be liable at least in the tort of detinue to the plaintiffs, but they have not been involved in any conscious wrongdoing against the plaintiffs' interests. 5. As Robb J recognised, there was a real urgency in the Court making some orders for the return of the income-earning equipment, so that the plaintiffs could derive some financial return from them in these uncertain times. Whereas Robb J's orders against the first defendant required the first defendant to take responsibility for delivery of the goods, the Court will only require that the defendants release the goods for collection by the plaintiffs or their agents. 6. The principles are clear that a grant of interlocutory relief may be reconsidered if new facts have emerged which may affect whether or not the case for final relief is arguable, or the balance of convenience: Amalgamated Television Services v Marsden [1999] NSWCA 313 at [38], citing McLelland J in Brimaud v Honeysett Instant Print Limited (1988) 217 ALR 44 at [46]; Harrison Partners Construction Pty Ltd v Jevena Pty Ltd (2005) 225 ALR 369; [2005] NSWSC 1225, at [17]. 7. What is to be done about protecting the interests of Outback and WJ AUTO? As a condition of extending the existing mandatory injunctive relief, the Court decided to construct a regime to give some financial protection to these defendants. Nothing in Mr Bradley's engagement with the Court, on behalf of GZG, gave the Court the slightest confidence that GZG would provide a financial solution and pay Outback and WJ AUTO. Mr Bradley made clear: that GZG operated out of Melbourne; that it only had $5,000 in the bank; and that it probably did not have the means to pay a substantial sum of money to the plaintiffs. But GZG directly or indirectly had engaged Outback and WJ AUTO and should be required, if possible, to pay or secure the payment of Outback's and WJ AUTO's charges in the first instance. And the orders made so provide. They require GZG to pay into Court Outback's transportation fees of $22,374, the anticipated cost of transporting the equipment back to the plaintiff's premises of $24,000 and $7,000 on account of storage fees incurred by Outback. The orders also provide that if the money is not paid into Court by 4pm on 24 April that the plaintiffs are entitled to relist the proceedings to take enforcement action. 8. WJ AUTO's invoice was quite small, only $1,628, and the Court required it to be paid. This will not prevent the plaintiffs from seeking to recover this sum from other defendants. 9. Outback amended its claim for storage to $15,000, although the Court was initially only prepared to recognise $7,000 on this account. Outback's claim was for $37,374. The storage charges were ongoing. The Court decided to require the plaintiffs to give security for the payment of part of these sums (a total of $22,000) within 30 days as a condition of Outback being required to release the equipment, with such sum being required to be paid within 18 months of the orders of 24 April 2020 (24 October 2021), or at the conclusion of the proceedings, whichever was the earlier. 10. The payment of the sum is stated in the orders to be on a without prejudice basis, such that it can be recovered if it is shown after a later contest that it should be paid by defendants other than Outback. And it may well be recoverable as an outgoing of the plaintiffs from one of those defendants. Mr Klooster submitted that after the money is paid in 18 months' time that it may potentially be recovered back from Outback on grounds of unjust enrichment. But that may be quite difficult, because the Court has now set up a regime in which the plaintiffs receive an immediate tangible benefit through the remedy of an interlocutory mandatory injunction restoring equipment worth over $2 million to them, but at the price of meeting this liability in 18 months' time. 11. Neither plaintiffs nor Outback were happy with the outcome. Mr Klooster resisted these orders on behalf of the plaintiffs. Mrs Swain, on behalf of Outback, said to the Court it was "unfair" because Outback had paid its employees to remove the equipment on 1 April. 12. But the answer to both these contentions is that the Court was attempting to avoid as much injustice as possible to both of them, in circumstances where it appeared that GZG was arguably the main wrongdoer asserting a somewhat dubious claim of right. Though painful in the short term, the injustice to the plaintiffs and to Outback must be looked at in perspective. The amount that the plaintiffs are required to pay to Outback in 18 months' time is only 1% of the value of the equipment, and in the meantime, the plaintiffs will be able to earn income from the equipment. And Outback will now have the benefit of security for the payment of some of its unpaid transportation and storage fees, security that without the Court's orders, it would not have had, and in circumstances where Outback's recovery of its fees from other defendants looks increasingly doubtful. And it must be said that both of them should have been more careful in dealing with GZG. 13. The Court adjourned the proceedings to the afternoon of 24 April in part so that it could be seen whether GZG would pay the sum ordered against it. Also the Court wished to deal with another issue which had arisen. Formulating Relief Against Outback and WJ AUTO on 24 April 1. The additional evidence before the Court on 23 April changed the Court's perspective on the structure of the relief that Robb J had originally granted. It became quite clear by then that GZG did not have direct custody of any of the equipment, had no control over its release and movement, had no apparent interest in asserting control over it, and was not deriving any benefit from the equipment in its current location. Moreover, the equipment was incurring substantial storage charges. 2. This additional evidence dissolved the logic for leaving any part of the equipment in GZG's possession on an interlocutory basis. So the Court decided to amend Robb J's orders to permit the balance of the equipment, namely the non-income earning equipment, to be returned to the plaintiffs upon the same undertakings the plaintiffs had given in respect of the income-earning equipment. There was no practical benefit to GZG, or anyone else, to leaving the non-income earning equipment where it was. There were only disadvantages in doing so. These additional orders were made on 24 April. The orders were made after 4pm. By that time it was clear that GZG had not paid the sum ordered that it should pay into Court, and the plaintiffs were given liberty to seek to enforce the Court's 23 April orders for GZG to pay $55,374.00 into Court. Orders Orders Made on 23 April 2020 1. Accordingly, the Court makes the following orders, notations and directions: 1. On the following undertakings being provided to the Court by the Plaintiffs: 1. The usual undertaking as to damages; 2. Their further undertaking to seek expedition of these proceedings, and to prosecute the balance of these proceedings expeditiously; 3. Their further undertaking with respect to the property of the plaintiffs comprised in Schedule A to these Orders ("the Chattels"), that the Plaintiffs will: 1. not encumber, sell or otherwise dispose of the Chattels; 2. not use the Chattels, otherwise than in the ordinary course of business; 3. keep the Chattels properly insured and serviced; and 4. ensure that all reasonable steps are taken to preserve the Chattels; 1. Their further undertaking to pay the amount of $1,628.00 (inclusive of GST) to the Fourth Defendant. 1. Order that: 1. Upon the Plaintiffs giving 24 hours' prior notice, the Third Defendant release and permit collection by or on behalf of the Plaintiffs the Chattels in its possession by no later than 5pm on 27 April 2020; 2. The Fourth Defendant release and permit collection of the Chattels in its possession by the Plaintiffs during business hours upon two clear days' notice; and 3. The Fifth Defendant release and permit collection of the Chattels in his possession by the Plaintiffs during business hours upon two clear days' notice being provided. 1. Order the First Defendant to pay into Court on or before 4pm on 24 April 2020 the sum of $55,374.00, which is comprised of: 1. $22,374.00 on account of Tax Invoice No. INV-000895 issued by the Third Defendant dated 1 April 2020; and 2. $24,000.00 on account of the anticipated costs to transport the Chattels from their current locations back to the Plaintiff's premises at [address not to be published];, and 3. $7,000 on account of storage fees claimed to be incurred by the Third Defendant. 1. Note that all sums paid into Court under Order 3 are paid subject to disbursal by further order and without prejudice to the right of any party to contend at final hearing that that party has no final liability to bear such costs, and without prejudice to any party's right to dispute at final hearing the quantum of such costs. 2. In the event that the First Defendant does not comply with Order 6, the Court: 1. Grants liberty to the Plaintiffs to apply to seek enforcement of those orders; and 2. Notes the further undertaking provided by the Plaintiffs by their counsel to provide, within 30 days after receiving all the said Chattels in the Third Defendant's possession, security in an amount of $22,000.00 in favour of the Third Defendant over the Chattels, to secure the costs incurred by the Third Defendant referred to in 3(a) and (c) above, such security not to be enforced prior to the final resolution of these proceedings. 1. Order that the Plaintiffs inspect and document any damage that has occurred to all Chattels referred to in the Schedule hereto and coming into their possession or control ("the Equipment") pursuant to these orders, within 5 working days of the equipment coming into their possession. 2. Order that the Plaintiffs, upon receipt of the Chattels, permit the First Defendant a reasonable opportunity to inspect the Equipment so the First Defendant can inspect and document any damage that has occurred to the Equipment since it was removed from the Plaintiffs' possession on 1 April 2020. 3. Reserve the costs of this application. 4. Grant liberty to the Plaintiffs to file and serve a Notice of Motion returnable in the Expedition List on 1 May 2020. 5. Adjourn these proceedings before the Duty Judge at 2pm on 24 April 2020. 6. Grant liberty to apply to the Equity Duty Judge on 1 day's notice until 1 May 2020. Orders Made on 24 April 2020 1. Upon the matter returning to the duty list on 24 April, the Court made the following further orders, notations and directions: 1. On the following undertakings being provided to the Court by the Plaintiffs: 1. The usual undertaking as to damages; 2. Their further undertaking to seek expedition of these proceedings, and to prosecute the balance of these proceedings expeditiously; 3. Their further undertaking with respect to the property of the plaintiffs comprised in Schedule B to these Orders ("the Chattels"), that the Plaintiffs will: 1. not encumber, sell or otherwise dispose of the Chattels; 2. not use the Chattels, otherwise than in the ordinary course of business; 3. keep the Chattels properly insured and serviced; and 4. ensure that all reasonable steps are taken to preserve the Chattels; 1. Order that: 1. Commencing from 8.30am on Monday, 27 April 2020 and concluding at 1pm on Tuesday, 28 April 2020, the Third Defendant shall release and permit collection by or on behalf of the Plaintiffs the Chattels in its possession and the Plaintiffs shall remove the same; 2. The Fourth Defendant shall release and permit collection of the Chattels in its possession by the Plaintiffs during business hours upon two clear hours' notice; 3. The Fifth Defendant shall release and permit collection of the Chattels in his possession by the Plaintiffs during business hours upon two clear hours' notice being provided. 1. Note that the release of Chattels in accordance with Order 2 is done on: 1. Confirmation from the Fourth Defendant that the Plaintiffs have complied with the undertaking to pay the amount of $1,628.00 (inclusive of GST) to the Fourth Defendant; and 2. On the further undertaking provided by the Plaintiffs by their counsel noted in the Orders of Justice Slattery made 23 April 2020 and now amended (see note 4 below), that is: to provide, within 30 days after receiving all the said Chattels in the Third Defendant's possession or control, security in an amount of $22,000.00 in favour of the Third Defendant over the Chattels, to secure the costs incurred by the Third Defendant, and such security is not to be enforced before 24 October 2021 or prior to the final resolution of these proceedings, whichever is the sooner (which date shall be called the "relevant date") and the plaintiffs further undertakes to pay the third defendant the said sum of $22,000 on the relevant date but on a without admissions basis and reserving their rights against all defendants in these proceedings. 1. Note that the undertaking given in paragraph 5(b) of the orders made on 23 April 2020 is amended to be identical to the undertaking in subparagraph 3(b) hereof. 2. Grant liberty to apply on 24 hours' notice. 3. The Court rescinds Order 2(a) of the orders made on 23 April 2020 and replaces those orders with an order identical with order 2(a) to the orders made today. 4. Note that at 4.30pm today (24 April 2020) that the First Defendant has not paid the money due under Order 3 of the Orders made on 23 April 2020 and the Court lists the matter before the Duty Judge at 10am on Thursday 30 April 2020 for any enforcement action by the Plaintiffs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 April 2020