Privilege ruling helps trustees turn screws on Swaab

Contests about whether privilege has been waived are what life’s all about.

Who doesn’t relish a hot war over confidential correspondence that may hold the potential to cause discomfort to those fighting for the right to stay shtum.

“Even if the defendants’ submission is accepted as a correct characterisation of the facts, the submission falls well short of repelling the plaintiffs’ case of dishonest concealment.” NSW Supreme Court judge Michael Slattery.

This week a judgement was delivered in respect of just such a battle and while at this point the only person with a view on the material in contest that’s both informed and independent is judgment author and NSW Supreme Court judge Michael Slattery, that could change by next Friday if, as his honour has ordered, the material to which he says privilege no longer applies is handed over to SV Partners’ Fabian Micheletto and Michael Carrafa.

The pair applied for a ruling on whether the sought after material is subject to privilege in their capacities as the trustees of the bankrupt estate of Peter Ronald Evans.

Resisting that application were two corporate creditors of Evans’ estate – Cleveland Investments Global Pty Ltd and Ficaro Pty Ltd – and their law firm Swaab.

Their resistance is understandable. The trustees allege that through a deed of settlement the two creditors engineered a dishonest scheme that allowed them to be paid in full ahead of other creditors to Evans’ estate.

The trustees want a $400,000 payment the creditors received handed over to them and they want compensation for losses stemming from the fact that the scheme deprived Evans’ estate of a valuable asset, that being a residence at Hardy’s Bay on the NSW Central Coast.

As part of the allegedly dishonest scheme, the defendant creditors engaged Swaab partner Mark Baddams to apply to the NSW Supreme Court for freezing orders to prevent the property from being dealt with other than through the impugned settlement deed. The Swaab partnership is the fourth defendant.

As is explained by his honour in Carrafa v Asfar (No. 3) [2023] NSWSC 24, when the creditors who are party to the deed the trustees want dissolved obtained the freezing orders, they assumed a fiduciary obligation on behalf of the trustees and all of Evans’ creditors.

While Justice Slattery made clear this week that his reasons didn’t comprise a finding of fraudulent conduct, it was equally clear that the trustees had established a prima facie case which would be examined and resolved at final hearing.

“It is to be noted that where the Court has in these reasons said that inferences of dishonesty are available is statement that there are reasonable grounds for inferring dishonest conduct,” the judge said.

“But this does not mean that without more those inferences should now be drawn. The contest about drawing those inferences must await a final hearing. In accordance with authority such statements should be construed as only indicating the availability of such inferences,” he said.

In response to a request for comment Swaab managing partner Mary Digiglio told iNO: “All allegations of improper conduct on behalf of the fourth defendant are firmly denied and we will continue to defend the claims made in the proceedings.”

At this stage no date has been set for a final hearing and his honour gave the defendants 10 days to give notice of any intention to seek leave to appeal from this week’s judgment and orders, which if not stayed will mean Micheletto and Carrafa will soon have access to a sealed envelope whose contents the defendants have fought to keep under the cloak of privilege.

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Further reading:

Lawfirm In Trustees’ Sights Over Suspect Settlement