Prominent real estate agent and City of Joondalup Deputy Mayor Russell Poliwka has been ordered to pay $2 million to Perth investor Sherif Girgis after a Supreme Court judgement this week.
The judgement comes five years after a falling-out between the pair, who went into business after Mr Girgis won $30 million in Oz Lotto.
In his judgement, Justice Michael Vaughan was critical of both men but concluded that Mr Poliwka’s evidence in cross-examination was far less convincing than that of Mr Girgis.
“Having reflected upon and considered Mr Poliwka’s evidence as a whole – in light of the contemporaneous documents and the objective facts – I have serious reservations as to the reliability of much of Mr Poliwka’s evidence,” Justice Vaughan said.
Mr Girgis was a 23-year-old university student with two part-time jobs – as a trainee property valuer and at Grand Cinemas in Joondalup – when he won the Lotto jackpot in October 2007.
“On his own account Mr Girgis became overwhelmed on the news of his new fortune,” Justice Vaughan stated.
“Mr Girgis struggled with pressure from family, friends and acquaintances to provide them with financial assistance.”
Mr Poliwka was 57 years of age at the time, had been involved in real estate for at least 20 years and held other business interests, including the Albany Hotel and the Nannup Hotel.
During 2008, the two men formed a business relationship and invested together.
They jointly purchased the former Junction Hotel in Midland, which was reopened one year later after a major renovation.
They paid $800,000 for a boat called Moonlight Express and proceeded to run a charter business.
Around the same time, Mr Girgis purchased properties in Joondalup and Watermans Bay from a seller who used First Western Realty as the selling agent.
First Western later became managing and leasing agent for the Joondalup property, which housed a nightclub.
By 2012, the relationship had soured, with both men claiming they had advanced extra funds to their jointly owned businesses.
Mr Girgis, who was represented by law firm Solomon Brothers, claimed he had lost $3.4 million as a result of Mr Poliwka’s misleading or deceptive conduct, and failure to exercise reasonable care and skill when providing investment advice.
After assessing the relative experience of the two men while they were in business together, along with evidence about their business dealings, Justice Vaughan ruled largely in favour of Mr Girgis.
He ordered that Mr Poliwska pay $2 million to Mr Girgis, with a further payment of up to $610,000 subject to further hearings.
He also partially accepted Mr Poliwka’s counterclaim.
“However, the judgment amount will be for no more than $50,000,” Justice Vaughan said
Mr Girgis told Business News he was very thankful to have finished the legal dispute.
“There is justice in this world,” Mr Girgis said.
“It was never about recovering the money; I chased this because it was just wrong what happened.”
Mr Girgis is now the sole director of Girgis Group, which has a diversified investment portfolio including shares, property syndicates and two gyms.
The group has moved well away from hotels, nightclubs and boats, with shares invested via Entrust Private Wealth Management and RM Capital, while Qube Property Group and Nicheliving manage property investments.
Mr Girgis credited the current successful structure to financial adviser Greg Hart, who has been Girgis Group’s part-time chief financial officer since 2012.
Mr Poliwka told Business News he was shattered by the ruling, saying it beggared belief.
“If this stands, nobody would ever go into a joint venture again,” he said.
Mr Poliwka said he has already spent $1.6 million on legal fees and would lodge an appeal.
In the judgement, Justice Vaughan expressed misgivings about some of Mr Poliwka’s evidence.
They were both bankrupt at the time, and Mr Pollock was the subject of multiple charges by the Australian Securities and Investments Commission.
“In one material respect Mr Poliwka’s evidence was defensive and unbelievable,” Justice Vaughan wrote.
“In substance Mr Poliwka quarrelled with the proposition that in buying shares in a private company or units in a unit trust it was usual to have a comprehensive set of written warranties.
“Mr Poliwka said that there was no need for a written agreement or contract – the share transfers were the basis for the change in ownership.
“Mr Poliwka also denied that proceeding in the way in which he did was hazardous.
“That evidence was incredible for a person with Mr Poliwka’s accounting and business background –particularly so given Mr Pollock’s and Mr Errichetti’s known history as bankrupts and their involvement with the seller.
“The failure to accept the obvious reflected adversely on Mr Poliwka’s credibility and reliability.”
(The judgement noted that Mr Pollock’s involvement with the Midland hotel was never satisfactorily explained during the trial.)
Justice Vaughan noted that Mr Poliwka subsequently amended his evidence in regard to the above matter.
“Nevertheless, the conflicting evidence provided on the first day of cross-examination demonstrates that Mr Poliwka was prepared to assert things in evidence that he considered to be in his self-interest irrespective of whether they were what he truly believed,” Justice Vaughan stated.
“More concerning was Mr Poliwka’s unprompted suggestion, as to a particular document (his notes of a 2009 meeting with Mr Girgis), that it was just a working document and ‘obviously if I thought there was something sinister about it, I would have burnt it’.
“That was a remarkable suggestion for a witness to make under oath before the court. It did not reflect well on Mr Poliwka or his approach to the giving of evidence.“
In contrast, Justice Vaughan found that Mr Girgis was an honest witness doing his best to tell the truth about the events that had occurred.
However, he did note some significant limitations on the reliability of Mr Girgis’s recollections.
In particular, Mr Girgis was not reliable as to the sequence of events and what was said in his initial meetings with Mr Poliwka over late 2007 to March 2008.