Archive for November, 2011

Fool for love

November 28, 2011

“The facts of this case are so fantastic as to strain credulity but they are true.”

That’s Justice Pembroke’s opening sentence in Adam Shepard in his capacity as Registered Trustee of the bankrupt estate of Dr Neil Gordon Stuart Wallman v Paul Mladenis & Ors [2011] NSWSC 1431.

He continues:

In October 2007 Dr Wallman was a recently divorced, middle-aged obstetrician and gynaecologist with adult children. He approached an introduction agency on the Gold Coast known as Hearts United (the third defendant) seeking love and companionship. On 4 November 2007 he signed an agreement with Hearts United the terms of which seem somewhat one-sided. For a consideration of $200,000 Hearts United promised to provide Dr Wallman, during a three year period, with a personal relationship consultant who would provide him with introductions. The only other services promised were “photo-viewing services” and an “escape package” to the Gold Coast.

2. The agreement referred to terms and conditions that appear to have been non-existent. It also stipulated that refunds were not offered. It may seem surprising that Dr Wallman agreed to sign such a document. It is even more surprising that, before signing the document, Dr Wallman paid a number of lump sums to Hearts United totalling $180,000. He was persuaded to do so by a person known as “Rita”, a sister of Mr Mladenis (the first defendant). Rita did not give evidence but it is obvious that during her lengthy telephone conversations with Dr Wallman to discuss his personal details, in which she canvassed his hopes and aspirations for love and companionship, she was understanding and sympathetic. She was also persuasive. At the conclusion of each telephone conversation she asked Dr Wallman for a large sum of money. Dr Wallman duly obliged, commencing with a payment of $40,000 followed by a series of further lump sums totalling $180,000. When Dr Wallman signed the agreement on 4 November 2007, it recited and gave him credit for the $180,000 he had already paid. Shortly afterwards, Dr Wallman paid the balance due under the agreement.

3. Understandably, the plaintiff, who is the trustee of Dr Wallman’s bankrupt estate, does not seek to recover the $200,000 paid by Dr Wallman pursuant to the 4 November 2007 agreement. But the payment of $200,000 was only the tip of the iceberg.

In early November 2007, Dr Wallman was introduced to “Lily Bolivique.” He fell for her. Mr Mladenis proposed that he pay Hearts United a further $100,000 for a “VIP” package which would cover Dr W’s wedding and honeymoon if he married Lily. A few days later Lily asked Dr Wallman for a loan of $200,000. Mr Mladenis told Dr Wallman that Lily was good for the money and that it would be easier if he paid the money to Hearts United for payment to Lily. Further payments followed – by January 2008 Dr Wallman had paid over a million dollars to Hearts United.

It’s not clear from the judgment how much Dr Wallman saw of Lily (I mean how often he saw her, that is) though she was still around in February 2008 when Dr Wallman saw her in Sydney. Some time after that she disappeared from the scene.

By mid-2009 Mr Mladenis was asking Dr Wallman for money to help him get the money back from “Lily.” Mr Mladenis said he had lent her money too and that she’d “done a runner back to Croatia.” By then Dr Wallman had paid Hearts United over $2 million. Now it became a story of rolling another cheese down the hill.

Back to Justice Pembroke:

[13]…Over the next two years Dr Wallman made many further payments to Hearts United. He was encouraged to do so by express and implied statements by Mr Mladenis to the effect that lawyers were retained in Croatia; that lawyers were retained in Brisbane; that the proceedings against Lily were successful; that Lily had appealed; that the appeal had been dismissed and that the monies were coming. The further payments were needed, he said, to fund the process of recovering the several million dollars that Dr Wallman had already paid.

14. It was, I am afraid to say, all lies. No monies had been paid to Lily and there were no monies to recover. To reassure Dr Wallman, Mr Mladenis provided him with a letter dated 18 March 2009 from a Serbian law firm called Radovic and Ratkovic. The letter was a forgery. The firm did not act on behalf of “Lily Bolovique” and had nothing to do with any fictitious legal process relating to her. Nor were there any Brisbane lawyers acting in connection with the matter. When Mr Mladenis was subsequently confronted by Dr Wallman’s son, who is a solicitor, he asserted that the Brisbane firm of Hopgood Gamin was acting on behalf of Dr Wallman and Mr Mladenis. But Mr Mladenis was curiously unwilling to provide the name of the member of the firm, or the employed solicitor, who was handling the file. He gave a spurious reason for not doing so. The reason for his reluctance was clear. The firm had no instructions. Its supposed involvement was a fiction.

The Mladenises bought cars and real estate with some of the money. None of the money, his Honour found, was paid to “Lily” (though surely she was paid something?). She was not, as she had been held out to be, another client of Hearts United. The only evidence that there was even one other client of Hearts United (a man in WA) was doubtful.

In the meantime, American Express got a judgment against Dr Wallman (presumably for an unpaid credit card bill) and served him with a bankruptcy notice which in July 2010 he failed to comply with. He was made bankrupt in August 2010.

This did not stop Mr Mladenis and, surprisingly, it did not stop Dr Wallman, despite his obligations to his Trustee. Perhaps that factor is why Mr Mladenis said that payments were now to be made to his wife rather than through Hearts United, though there could be other reasons.

In evidence were various sms messages from Mr Mladenis seeking money from Dr Wallman for what he said were his efforts to recover the money from “Lily” and in particular when he apparently went to Croatia via Dubai in Dec-January 2010-11 and to the Philippines in August 2011. It all came to an end on 27 August 2011, as the last few messages show:

Mate on the phone overseas can u transfer 4-400 now – 09-May-11

Hey mate confirmed funds and transactions for wed got confirmation with bank today yeahy can u lend me 6500 till then so i can pay lawyers pls thanks mate – 04-Jul-11

Neil can u transfer 4700 to me now in a meeting pls just do it it will be bk in your acc by 9am tomm explain later – 26-Jul-11

Can u send me 9 k pls with lawyers now – 02-Aug-11

Mate I’m chasing down that bitch in mamilla with some heavy s trying to get her to sigh our money – 26-Aug-11

I know I was just about to ask u transfer me money there’s no one there that can get to the bank till Monday I need to accommodation for the guys and find this bitch we have the add to her condo Fucken bitch the paper work was faxed if not I can get the hard copy for from Rita I need 4750 – 27-Aug-11

So what u can’t transfer anything from your account that’s bullshit – 27-Aug-11

Do the transfer so I can come bk or don’t ask me to help u after u get paper work because that means u don’t want to sort it out together I will get my money my self – 27-Aug-11

If I didn’t give a fuck I wouldn’t have comme here to fuck lily up with to bikers so do it and I will get Rita to give it bk to u with the papers on Monday – 27-Aug-11

What happened? Did the Trustee get on Dr Wallman’s trail? Did Dr Wallman confide in his solicitor son? Judging from the proceedings number, proceedings were promptly commenced or if already on foot, expedited. Justice is rarely so swift.

Of course, Mr Mladenis said there was another story or various other stories to account for the payments. In my experience there often is – something which the gullibile party is meant to feel a bit guilty about which is meant to stop them breaking out of the spiral or seeking help. The whole saga was a far cry from his public professional persona as a man who “enjoys time with the family, surfing and football.” Sometimes embarrassment about gullibility is sufficient.

To quote the judge, again:

44. The plaintiff in this case pleaded many causes of action. He was spoilt for choice. Deceit, misrepresentation, misleading conduct and breach of trust were the central elements. I am satisfied that the plaintiff’s case has been amply proved. In reaching that conclusion I have taken into account the seriousness of the allegations made, the inherent likelihood or unlikelihood of the events in question having occurred and the gravity of the consequences to the defendants that will inevitably follow if I make the findings of fact for which the plaintiff contends. Ultimately the proved facts were overwhelmingly against Mr Mladenis’ implausible explanations. The submissions on his behalf were entirely factual, concerned with the proper characterisation of the events that occurred. Their primary contention was that “the question of how Mr Mladenis has seduced Dr Wallman to part with over $3 million has not been answered”. To the contrary, I think it has. In my view, Mr Mladenis was dishonest. He caused Hearts United to obtain monies from Dr Wallman by dishonest means.

The exact remedies are yet to be sorted out and it must be said that some of his Honour’s expressed reasoning about Mrs Mladenis’s involvement in the fraud and deceptive conduct seems rather broad-brush – particularly so far as it is based on her duty to know or do certain things as a director of Hearts United. In the meantime, a freezing order has been continued over the defendants’ assets.


It turns out that Justice Pembroke was wrong and the commenter “Hearts Anon” below was right about Hearts United having clients other than Dr Wallman. See the SMH’s follow up report (now based on more than the judgment, Dr Wallman’s picture from the internet and Dr Wallman’s bankruptcy, also ascertainable from the net) here and also this 2010 press release.

Occupy Sydney

November 7, 2011

Over the weekend there have been more police shenanigans as the police have moved to shut down attempted resurgence of the Occupy Sydney project.

There is a piece in today’s SMH which trenchantly shows how police conduct is part of a more general high-handedness of police when it comes to control of the streets.

Of course, the Daily Telegraph has taken a more strident anti-protester view which is at one with its general adherence to conservative popularism.

I didn’t go to the demonstration on Saturday – more shame me. My guess is that not all those who went were adherents of the Occupy movement’s rather vague and generalized goals, but were concerned at the rigour and zeal with which the occupiers have been moved on by the police.

I don’t really buy that the individual police involved are merely obeying orders. Of course, the man who gave the order (whoever that man really is) has a special responsibility, but tactical response and riot control police are generally self-selected – they have to want to be the strong arm of the state against its citizens to be where they are.

It’s a well-paid gig – the overtime or time off in lieu (when you can go and do your second job as a private security guard or whatever) will be generous. At a price of a bit of boredom it can’t be that hard to stand around, armed and looking menacingly at a bunch of people sitting on the ground.

As far as I am concerned, these police are wasting their time, wasting our money and abusing our rights.

Did Charles Darwin really say that?

November 2, 2011

An edited version of the written version of a lecture then to be given and by now presumably given by Lyndon Terracini says:

I’m reminded of what Charles Darwin said: “It is not the strongest that survive, or the most intelligent, but the most responsive to change”.

I have searched in vain for this and various fragments of it as a statement attributable to Darwin. Certainly, The Origin of Species is fully searchable [eg here, chosen quite at random]. The claimed quotation crops up on a few motivational internet commonplace books but is even there doubted. It sounds rather Lamarckian to me, and on my mental map (based on half-decayed memories) that’s just the opposite to Darwinian.

Not that I’m aware that Darwin stirred from his couch (to which he took rather a lot later in life) particularly often to go to the opera.

More could be said about Mr Terracini’s address (as edited) and whether or not it matters whether Darwin said what LT says he said.
I know LT is being pragmatic – he is a manager, after all. He says he is being democratic. If he is right, it is likely that I shall go to the opera (at least, to Opera Australia) a bit less than I do at present and a lot of other people will go a lot more – even if that means once every few years. Overall that seems fair enough if it works out that way – that is, if he is right. That’s the burden for a manager.

If he is wrong, he is just trashing the brand.

Terracini anticipates that his speech will be met with outrage and insults from a group he rather insultingly identifies as “the club.” Apart from the usual ambition of people who put themselves forward as managers there is no reason to think his intentions are anything other than the best.

There is a lot of other stuff in the lecture about how Ji Min Park emoted in La Boheme and whether North America, according to the playwright of a play LT saw in Melbourne in September, is divided between comfortable white neighbourhoods and deprived black neighbourhoods. He seems to be thinking aloud here. I’m really not sure if it is realistic to expect opera to “represent” society as a whole.

Some of the context of the speech comes from the occasion – specifically it is a new music event and he is addressing the question of how new operas can be put on and how (or why not) they attract an audience. Self-evidently, they mostly do not. Terracini seems to speak with forked-tongue here, ostensibly praising Bliss and Love of the Nightingale whilst decrying composers who want to write like Webern (that’s probably more of a dig at Brett Dean than Richard Mills, though going further back it could also apply to Larry Sitsky and Golem.)


The full script of Terracini’s speech can now be found here.

A startling statement

November 2, 2011

By Justice Ward, in Australian Receivables Ltd v Tekitu Pty Ltd (Subject to Deed of Company Arrangement) (Deed Administrators Appointed) & ors [2011] NSWSC 1306 at [305]

Common law damages for breach of a contractual warranty will not be awarded to a party who has not relied on the alleged truth of the warranty because in those circumstances the breach of warranty is not causative of any loss.

The authority she cites for this is Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 114 ALR 355. That is a case about damages for misleading and deceptive conduct under the Trade Practices Act. The general gist of that judgment seems to me to be to distinguish TPA damages from either tortious or contractual damages, rather than to lay down the law as to what the damages for breach of a contract will be. On my reading, it seems to assume exactly the opposite position for contractual warranties to that which Justice Ward has drawn from it, though the position may really be a bit more complicated than that.

It’s a tiny detail buried in a very complex dispute between the vendors and purchasers of a debt collection business.

ARL was the purchaser. Tekitu was the vendor and gave a warranty about the long-service leave entitlements of employees (which ARL as the purchaser would have to take over). These figures turned out to be wrong, probably because the person responsible for preparing them did not understand the difference between the basis on which those entitlements arose in NSW and Victoria. Before the sale went through and indeed before the agreement was entered into, a consultant for ARL looked the figures then provided to him and thought or indeed realised they were a bit low.

The judge held that the purchaser was fixed with his knowledge and this meant that the purchaser was not relying on the truth of those figures, so suffered no loss as a result of their falsity. So there were no damages for breach of the warranty.

That seems odd to me and startlingly so. The case Justice Ward cited is a case about damages under the old Trade Practices Act. Those are generally thought to be reliance-based damages (though not always). Contractual damages are usually thought of as “expectation damages.” The whole point of such a warranty is that you can afterwards claim damages for the difference between the true position and the position warranted to be true or at least for the difference that the true position as opposed to the warranted position made to the value of the business.

When you take over a business, you have to take over the long-service leave entitlements of any employees you take on. That’s not just a point of contract between you and the vendor, but also (going from memory here) a question of the statute. You’d think it stands to reason that if you promised to pay $X for a business promised to have $Y long-service liabilities, then if the liabilities were $Y + $Z then your damages would be $Z.

Of course (as you will see if you read the judgment) it is always a bit more complicated than that in practice, but the principle seems clear enough and also pretty well-established.

A contract might set a time limit on when the purchaser could bring claims under the warranty and a limitation (lower or upper or even both) on the sorts of claims that could be brought. You can have a procedure requiring claims to be brought before completion and adjustments to the price made or retention monies paid on completion for an argument later (as commonly happens for sale of land).

But if the warranty is meaningless when you have reason to doubt its accuracy why have such a warranty in the contract at all?

It’s a small point in an enormous case where ARL was otherwise the victor on most points, so it may never be appealed. That means someone else will then use it as a precedent.

It seems a very odd precedent to me [OK: I’ve said “odd” more than once in this post: I’m struggling for any other relatively measured word.], but it will be handy to anyone wanting to wriggle out of a contractual warranty.