Grabowski v Jaffari [2013] NZHC 3417 (17 December 2013)

Last Updated: 27 March 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-892 [2013] NZHC 3417

BETWEEN LIVIA GRABOWSKI Judgment Creditor

AND MEHDI JAFFARI AND TRACY JAFFARI

Judgment Debtor

Hearing: 9 December 2013

Counsel: M T Hutchings and B M K Pamatatau for Judgment Creditor

C S Henry for Judgment Debtors

Judgment: 17 December 2013

_{JUDGMENT OF RODNEY HANSEN J}

This judgment was delivered by me on 17 December 2013 at 2.00 p.m., pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ...............................

Solicitors: Malcolm Whilock, Auckland

Barter and Company Ltd, Auckland

_{Counsel: M T Hutchings, [e-mail]}

GRABOWSKI v JAFFARI AND JAFFARI [2013] NZHC 3417 [17 December 2013]

Introduction

[1] On 15 July 2011, in the District Court of New South Wales, Mrs Grabowski, as executrix of the estate of her mother (the late Ms Eleanor Cato), obtained judgment against the judgment debtors for $A186,480.83 (the liability judgment). On 18 August 2011, judgment was entered against the judgment debtors for the costs of the proceedings amounting to $A73,077.37 (the costs judgment).

[2] The liability judgment was registered in this Court under the Reciprocal Enforcement of Judgments Act 1934 (the Act). The notice of registration inadvertently attached the later or costs judgment. This has now been rectified and the judgment creditor applies to register the costs judgment. For their part, the judgment debtors apply to set aside the liability judgment and resist registration of the costs judgment on the ground that the liability judgment was obtained by fraud in terms of s 6(1)(d) of the Act.

[3] It is accepted that the critical issue is whether the substantive judgment was obtained by fraud. If it was, the registration of the liability judgment must be set aside and registration of the costs judgment declined. If the judgment debtors fail to show that the liability judgment was obtained by fraud, they accept that they cannot resist registration of the costs judgment and would have no grounds to apply to set the liability judgment aside.

Factual background

[4] Ms Cato was a successful businesswoman. She and Ms Grabowski ran a successful engineering business in New South Wales. Unfortunately, as Judge Gibb, the trial Judge, said in her judgment, Ms Cato was also a smoker. In her final years she battled with emphysema.

[5] Ms Cato had a lifelong interest in alternative healing therapies. During the last year of her life she enlisted the assistance of Mr Jaffari who describes himself as a leech therapist. A little over a year before she died, on 30 October 2008, Ms Cato paid Mr and Mrs Jaffari $A50,000 for the purpose of funding a marketing DVD to

promote Mr Jaffari’s practice. A further payment of $A100,000 was paid on 1 April

2008.

[6] After her mother’s death, Ms Grabowski sought to recover the money as a loan. The Jaffaris responded that the two payments were gifts not loans. In the alternative, and if it were to be held that the payments were loans, the Jaffaris claimed they were either forgiven or repayable only if sales of the DVD generated sufficient funds. The Jaffaris also sought to set-off the cost of Mr Jaffari’s services which had never been charged. The claim of set-off was, however, abandoned in the course of final submissions.

Judge’s decision

[7] In a comprehensive 52-page decision, Judge Gibb said there was no dispute that the money was paid and there is no suggestion that any part of it had been repaid. She referred to a letter written by Mr and Mrs Jaffari which referred to the initial payment of $50,000 as a loan; stated their intention to repay the loan from sales of the DVD; and offered as security a house they own in New Zealand. A handwritten notation on the letter records the additional payment of $100,000.

[8] The Judge characterised the key issue as “one of credit”. She said:

Either I believe the documentation and the evidence of the daughter/executor and her brother (the son of the late Ms Cato), or I believe the defendants (jointly or severally).

She was blunt and uncompromising on that issue. She described Ms Grabowski as:

... direct, frank, open and honest to the point of being a model witness. I found her to be both honest, indeed painfully so in the context, and reliable. I accept her evidence without any reservation at all.

[9] In contrast, she said she found each of the defendants to be unreliable, with no credit, their evidence false to the point of dishonesty. She referred to the internal and collateral contradictions and plain fabrications in their evidence as too numerous to count. She said they gave contradictory and contrived evidence. For reasons which she explained in detail and at length, the Judge rejected a range of defences, some of which she described as “curious”.

Fraud – the approach

[10] Section 6(1) of the Act relevantly provides:

6 Cases in which registered judgments must, or may, be set aside

(1) On an application in that behalf duly made by any party against whom a registered judgment may be enforced, the registration of the judgment shall be set aside if the High Court is satisfied—

...

(d) That the judgment was obtained by fraud; or

...

[11] On an application to set aside the registration of a foreign judgment, the Court may direct that an issue between the judgment creditor and the judgment debtor must be stated and tried and to give such further directions as may be necessary: r 23.20(2) High Court Rules. In the leading New Zealand case of Svirskis v Gibson,¹ the Court of Appeal said² that the power to direct an issue is discretionary and in deciding whether it should be exercised, the Court is entitled to have regard to all the circumstances of the case, including whether the judgment debtor is merely seeking to try again on substantially the same evidence issues already adjudicated on in the overseas court. The Court of Appeal went on to refer to Syal v Heyward³ where it was said that the Court is not bound to direct an issue and should not do so in the case of an application based on alleged fraud unless satisfied that a prima facie case of fraud on the foreign court is established. The Court of Appeal commented:⁴

We do not regard this general statement as proposing any mechanical or rigid test or as excluding the kind of considerations just mentioned.

[12] In James Meikle Pty Limited v Noakes⁵ Prichard J observed that⁶:

The judgment of the Court of Appeal in Svirskis v Gibson [1977] 2 NZLR 4 makes it clear that to succeed on this ground the judgment debtor is not necessarily required to show a prima facie case of fraud – the whole

¹ _{Svirskis v Gibson [1977] 2 NZLR 4 (CA).}

² _{At 10.}

³ _{Syal v Heyward [1948] 2 KB 443; [1948] 2 All ER 576.}

⁴ _{At 10.}

⁵ _{James Meikle Pty Limited v Noakes HC Auckland A823/80, 25 July 1983.}

⁶ At 8.

circumstances must be looked at and if the Court is then left with a feeling of uneasiness to the manner in which, or the evidence on which, judgment in the original court was obtained, this is sufficient to call for a direction that an issue be tried under r 23(2) of the Reciprocal Enforcement of Judgments Rules 1935. I have no such qualms in the present case.

[13] In Richards v Cogswell,⁷ Barker J endorsed “a feeling of uneasiness” as

providing a sufficient basis to decline to confirm provisional registration.

Grounds of challenge

[14] In his submissions, Mr Henry focused on a number of specific issues which he said gave rise to a feeling of uneasiness as to the basis on which the judgment was obtained. He was careful to say that while none of the matters on which he relied may by themselves generate sufficient cause for concern, collectively they were sufficient to cast doubt on the basis of the foreign judgment.

Letter of demand

[15] The first of the matters to which he referred was evidence in relation to instructions given by Ms Grabowski for the issue of a letter of demand. Ms Cato died at 5.00 am on 30 October 2008. The same day her solicitors sent a letter of demand to Mr and Mrs Jaffari. The Judge described the timing as “a sad coincidence of fate”. Ms Grabowski had said in evidence that earlier in October her mother had mentioned to her that she had asked Mr Jaffari on a number of occasions when he was going to repay the loan. Ms Cato told Ms Grabowski that she was starting to doubt his integrity and asked her to instruct her solicitor to write to him and request that the loan be repaid. Her mother told her where to find the loan documentation, comprising the letter Mr and Mrs Jaffari had written following receipt of the

$50,000.

[16] Mr Henry sought to cast doubt on Ms Grabowski’s evidence that the instructions to the solicitor had been given before Ms Cato’s death. He submitted that there is “a very strong inference” to be drawn that the instructions were transmitted on the day of Ms Cato’s death. He argued that, because Ms Grabowski

_{held her mother’s power of attorney, she did not need her instructions to issue a letter}

⁷ Richards v Cogswell (1995) 8 PRNZ 383 (HC) at 390.

of demand and did not do so until after her mother had died because she knew her mother would oppose instructing her solicitors to make demand on the Jaffaris. Mr Henry complained that counsel for Mr and Mrs Jaffari were not allowed to cross- examine Ms Grabowski on the timing of her instructions to the solicitors and also pointed to the solicitor’s failure to respond to a request made after the hearing to give the time on 30 October 2008 when they were instructed to write the letter.

[17] A reading of the trial transcript establishes that counsel for the Jaffaris was not prevented from cross-examining Ms Grabowski on when she gave instructions to the solicitors. In the absence of a pleading of fraud, the Judge ruled that counsel could not allege that Ms Grabowski lied when she told the solicitors she was conveying instructions on behalf of her mother. But the question of what her mother said to her and whether she instructed the solicitors at her mother’s instigation was fully canvassed in cross-examination. The precise timing of the instructions was not an issue at trial. It was not raised until Mr Jaffari wrote to the solicitors over a year later asking for:

Your logged details of the time on 30^th October 2008 when you were instructed by the plaintiff, Livia Grabowski on behalf of the late Ms Cato, to issue the letter of demand.

The solicitor was under no obligation to respond to the letter and nothing can be taken from the failure to do so.

Terms of will

[18] It was next submitted that had Ms Cato intended the funds transferred to Mr and Mrs Jaffari to be a loan, she would have said so in her will. Mr Henry submitted that Ms Cato, as an astute businesswoman – ailing and making a will – would have made some mention of the outstanding debt with a view to ensuring its collection.

[19] I disagree. I do not think anything can be taken from the omission of any reference to the debt. A will is not the usual vehicle for conveying instructions of that nature. Ms Grabowski’s account of her mother’s instructions to her is much more consonant with experience of human behaviour at such times.

Perjured evidence

[20] There was reliance on what was characterised by Mr Henry as perjured evidence by Ms Grabowski. She said in evidence that on 4 April 2008, the day of her son’s wedding, she received a telephone call from an officer of her mother’s bank. He told her the bank had received a cheque for $100,000 for payment from her mother’s account to Mr Jaffari. She was asked for authority to cash it. She immediately called her mother who told her that she had agreed to increase the loan to Mr and Mrs Jaffari.

[21] The bank records show that the $100,000 was debited to Ms Cato’s account the previous day. This is said to demonstrate that Ms Grabowski’s evidence on the issue was fabricated. In my view, it shows no such thing. Ms Cato’s account could well have been debited in advance of a decision on whether to pay out on the cheque. The Judge was plainly alive to that possibility. In the course of Ms Grabowski’s evidence, the following question was put to her:

Do you say that [the bank] had that conversation with you the day after the

money had already moved from your mother’s account?

Counsel for Ms Grabowski immediately objected and the Judge commented:

There’s actually a fallacy in that question. It’s noted that the day after the date of it which appears on the statement, but that is not the same proposition.

[22] When referred to the bank account, Ms Grabowski was adamant that the conversation had indeed taken place on the following day. Plainly, in making her credibility findings, the Judge will have given weight to any concerns that might have arisen from this aspect of Ms Grabowski’s evidence.

Untested evidence

[23] At the hearing Ms Grabowski sought to have admitted the affidavit evidence of her brother, Roy Francescato. For Mr and Mrs Jaffari, it was submitted that the District Court erred in accepting his “untested” evidence without requiring any evidence of substance to confirm his inability to attend Court.

[24] The Judge was presented with a medical certificate which disclosed that Mr Francescato was receiving medical treatment for bipolar disease and diabetes. The certificate read in part:

He’s better to avoid presenting to the Court if possible to avoid deterioration of his mental health. He experiences anxiety and panic attacks when he thinks about Court proceedings generally and in particular when this matter involves reminding him of anything related to his mother.

[25] The Judge observed that the certificate did not actually say the witness was unfit to give evidence. A lengthy discussion with counsel ensued, in the course of which the Judge struck out all the contentious passages in the affidavit. At the conclusion of the interchange, counsel for Mr and Mrs Jaffari said that the course adopted “meets my difficulties”.

[26] Mr Henry, nevertheless, criticised the Judge for accepting the remaining evidence of Mr Francescato, including his statement that theirs was a close family. He also took issue with evidence that was excluded but which he said was inconsistent with Ms Grabowski’s case.

[27] Having ruled on the admissibility issue to the satisfaction of the Jaffaris’ counsel, the Judge was plainly entitled to take into account the uncontroversial evidence that remained and was obliged to disregard what had been excluded. The Jafarris cannot seek to make use of evidence which was excluded from consideration at their request.

Conduct of trial

[28] Mr Henry criticised the conduct of the trial and the terms of the judgment as indicating partiality on the part of the trial Judge. He referred to the “repeated interruption” of counsel for the Jaffaris when he tried to test the accuracy of the judgment creditor’s evidence: the way in which the Judge characterised Mr Jaffari and his conduct in her decision; and her “evident distain for Mr Jaffari’s metier” as exemplified by her ascribing to him the occupation of “leech therapist”.

[29] I was taken to a number of passages in the transcript in which the Judge was actively engaged with counsel. In all instances, her interventions were shown to be

necessary and appropriate. Any rulings she made were vindicated in argument. I

was referred to nothing to suggest unfairness in the conduct of the trial.

[30] The Judge expressed her findings in trenchant terms. As the passages already referred to show, she pulled no punches in finding that the Jaffaris lacked credibility. However, this assessment and the other key findings she was obliged to make, were supported by a meticulous examination of the evidence and the submissions of counsel. She relied on Mr Jaffari’s own evidence in describing him as a leech therapist. In my respectful view, the Judge’s conduct of the hearing was unimpeachable and her judgment showed an impressive grasp of the facts and the issues.

[31] It is to be noted that in seeking leave to appeal the judgment out of time many of the complaints made by the Jaffaris before me were canvassed before the New South Wales Court of Appeal, first, when Mr and Mrs Jaffari sought an extension of time for the filing of a notice of appeal and then when they sought a review of the judgment dismissing their application.

[32] Both courts rejected criticism of the trial Judge’s conduct of the trial. In her

judgment on the application to review,⁸ McColl JA said:⁹

Having read [the] transcript, I cannot discern anything in the trial Judge’s interventions which would support a complaint that Her Honour demonstrated a pre-disposition against the first applicant.

[33] The findings of the New South Wales Court of Appeal are, of course, not binding on this Court. It is not without significance, however, that after a thorough examination of the proposed grounds of appeal, three judges of the New South Wales Court of Appeal (one at the first hearing, two on the review) vindicated the Judge’s

_{conduct of the hearing.}

⁸ _{Jaffari v Grabowski [2013] NSWCA 114.}

⁹ At [74].

Conclusion

[34] The matters raised on behalf of the judgment debtor have given me not the slightest cause for unease. There is nothing to indicate that the judgment was obtained by fraud. On the contrary, I am satisfied that the judgment creditor’s claim was heard and determined on the merits. The judgment debtors’ opposition to registration was essentially an attempt to challenge the Judge’s findings by relitigating selected issues and criticising her conduct of the hearing. Individually and collectively they provide no basis for resisting registration.

Result

[35] The application to set aside the liability judgment is refused.

[36] Leave is granted to register the costs judgment. Notice of registration may be effected by service on Mr Henry. Any application to set aside registration must be made within five days of service of notice of registration.

[37] Costs are reserved. Mr Henry indicated that the judgment debtors would seek costs for attendances consequent on the error in the notice of registration of the liability judgment. In the circumstances, if the parties are unable to agree, I will rule on costs on the basis of memoranda. The judgment creditor’s memorandum on costs is to be filed within 20 working days. The judgment debtors’ memorandum to be filed within a further 10 working days.