Aspermont Ltd v Lechmere Financial Corporation - [2002] WASCA 52

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ASPERMONT LTD -v- LECHMERE FINANCIAL CORPORATION [2002] WASCA 52

CORAM: HASLUCK J

HEARD: 19 FEBRUARY 2002

DELIVERED : 15 MARCH 2002

FILE NO/S: FUL 4 of 2002

MATTER :On appeal from a decision of Master Bredmeyer in COR 162 of 2001
BETWEEN: ASPERMONT LTD (ACN 000 375 048)
Appellant
AND
LECHMERE FINANCIAL CORPORATION
Respondent

Catchwords:

Corporations Law - Statutory demand - Genuine dispute - Appeal against finding of no genuine dispute - Application for mareva order pending appeal - Powers of Court to grant such an order - Power of single Judge - Power to grant mareva order in respect of proceedings not yet commenced

Legislation:

Corporations Law, s 459C, s 459E, s 459F(2)(a)(i), s 459F(2)(a)(ii), s 459G, s 459H, s 459S(1)

Rules of the Supreme Court 1971, O 52 r 1, O 52 r 1(1), O 63 r 10(1), O 84 r 1, O 84 r 2

Supreme Court Act 1935 (WA), s 25(9), s 58, s 58(1)(b), s 61

Result:

Application dismissed

Category: A

Representation:

Counsel:

Appellant: Mr M D Cuerden
Respondent: Mr A R Beech

Solicitors:

Appellant: Paterson & Associates
Respondent: Tottle Christensen

Case(s) referred to in judgment(s):

A‑Pak Plastics Pty Ltd v Merhone Pty Ltd (1995) 13 ACLC 896
Brereton v Milstein [1988] VR 508
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334
Chew v Satay House of WA Pty Ltd, unreported; SCt of WA; Library No 970570; 29 October 1997
Energy Equity Corporation Ltd v Sinedie Pty Ltd [2002] WASCA 3
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
Ketchum International Plc v Group Public Relations Holdings Ltd [1996] 4 All ER 374
Livestock Traders International Pty Ltd v Bui & Anor (1996) 22 ACSR 51
Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362
Mutual Export Corporation v Asia Australian Express Ltd (1990) 19 NSWLR 285
Official Receiver of State of Israel v Raveh (2001) 24 WAR 53
Patrick Stevedores Operations (No 2) Pty Ltd & Ors v Maritime Union of Australia & Ors (1998) 195 CLR 1
Perth Mint v Mickelberg & Ors (No 2) [1985] WAR 117
R&I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59
Raveh v The Official Receiver of the State of Israel in his capacity as Liquidator North America Bank Ltd (In Liq) [2002] WASCA 27
The Commonwealth of Australia v McCormack (1984) 155 CLR 273
Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294

Case(s) also cited:

Abella v Anderson [1987] 2 Qd R 1
Asian Century Holdings Inc v Fleuris Pty Ltd [2000] WASCA 59
Better Sprinkler Systems Pty Ltd v Koussidis (1999) 203 LSJS 348; [1999] SASC 291
David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265
Deputy Federal Commissioner of Taxation v Hickey & Horne (1996) 96 ATC 4892; (1996) 33 ATR 453
Equuscorp Pty Ltd v Perpetual Trustees WA Ltd (1997) 25 ACSR 675
Federal Commissioner of Taxation v Myer Emporium Ltd (1986) 160 CLR 220
Jones v Dunkel (1959) 101 CLR 298
Ninemia Maritime Corporation v Trave GmbH & Co KG (The Niedersachsen) [1984] 1 All ER 398
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Sheldrick v WT Partnership (Aust) Pty Ltd (1998) 89 IR 206

HASLUCK J: The appellant, Aspermont Ltd, has applied for a mareva injunction pursuant to O 52 r 1 of the Rules of the Supreme Court 1971.
On 14 December 2001 a Master of the Supreme Court dismissed, in part, an application by the appellant to set aside a statutory demand served upon it by the respondent Lechmere Financial Corporation, pursuant to s 459E of the Corporations Law.
The appellant proceeded to file and serve a notice of appeal directed to the Full Court in respect of that decision. The grounds of appeal include an assertion that the learned Master erred in fact and in law in finding that there was no genuine dispute about the alleged debt specified in the statutory demand.
The present application raises an issue as to whether the Court has power to grant a mareva injunction in these circumstances. If the power to make such an order is available, a further question arises as to whether such an order should be made.
It will be useful to begin by looking at the circumstances giving rise to the disputed debt and the matters in controversy before the Master. I will draw principally upon the learned Master's reasons for judgment.
Aspermont is a publishing company based in Perth which publishes Australia's Mining Monthly and six or seven other publications. The managing director is a Mr Andrew Kent who owns two‑thirds of the shares through a private company.
Lechmere is a company controlled by Mr Richard MacLellan. It is registered in the British Virgin Islands. Mr MacLellan is an accountant and is based in Monaco. He helps people who want to invest offshore, his main corporate vehicles being the EBC Trust Corporation, Euro Corporate Services Limited and Vernon Finance Limited.
It seems that Mr MacLellan is an investor in Aspermont and he and Mr Kent had business dealings together over many years.
Lechmere contends that between the end of 1993 and the end of 1995 it funded Mr Kent's acquisition of an interest in Australia's Mining Monthly.
Lechmere's evidence, in general terms, is that, on a date which is not clear, it loaned $780,000 to Mr Kent to buy a half interest in the magazine from a Mr Calcraft. Mr Kent then proceeded to pay or arrange the payment of interest in respect of the debt.
The evidentiary materials before the Master suggested that in the second half of 1996 a proposal was canvassed whereby Aspermont would acquire the Kent half interest in the magazine for $780,000. The consideration was to be provided by Aspermont taking over Mr Kent's debt to Lechmere and by giving him 9,000,000 share options in Aspermont.
There is a contested issue between Aspermont and Lechmere as to whether this proposal was carried into effect so that Aspermont became legally bound to meet the debt and relevant interest payments.
In his reasons for judgment the learned Master noted that there is no written loan agreement entered into by Lechmere and Kent documenting the original loan of $780,000 to Kent. Further, Lechmere cannot point to any written agreement between Lechmere, Kent and Aspermont providing for Aspermont to assume liability for Kent's debt and the interest payments due in respect of the same.
For ease of reference, but without purporting to make any finding as to the effect of the negotiations, I will call the latter transaction the "Aspermont assumption of liability arrangement".
Notwithstanding the absence of formal documentation, it is apparent from the learned Master's reasons for judgment that there are various events and documents which suggest that the Aspermont assumption of liability arrangement was carried into effect. I will return to this aspect of the matter in due course. For the moment, it is sufficient to say that Aspermont took steps to have the assumption of liability arrangement approved at an annual general meeting of the company to be held on 15 August 1997. Various documents such as an explanatory memorandum and minutes of the meeting in question refer to a transaction whereby Aspermont will purchase Mr Kent's interest in the business known as Australia's Mining Monthly.
I note in passing that cl 7 of the explanatory memorandum purported to address the effect of the resolutions to be submitted to the company meeting. The relevant passage suggests that if the resolution concerning the proposed acquisition was passed then Aspermont as of 1 July 1997 "will acquire Kent's interest" and "Aspermont Ltd will assume from Mr Kent a liability to pay Lechmere Financial Corporation $780,000 on June 30, 2002 (the loan). Aspermont Ltd will be liable to pay interest on the loan at 15 per cent per annum payable half yearly in arrears."
It is accepted in the learned Master's reasons for judgment that the resolution in question was passed at the annual general meeting held on 15 August 1997.
It was against this general background that Lechmere later issued a statutory demand dated 25 April 2001 directed to Aspermont in respect of debts amounting in total to $535,000.
The amount in question was made up of a sum of $351,000 representing interest on the loan of $780,000 said to be owed by Aspermont to Lechmere. According to the statutory demand, interest in respect of each half year was said to be the sum of $58,500. Interest had allegedly not been paid in respect of certain specified half years subsequent to 30 June 1998. A sum of $184,000 was also claimed as representing the benefit of debts formerly owed by Aspermont to various trade creditors which debts were assigned by those creditors to Lechmere in 1997.
I digress briefly to note that a company can be wound up if the Court is satisfied that it is insolvent. The effect of various provisions of the Corporations Law is that a creditor may serve upon a company a formal demand requiring the company to pay or to secure or compound for a specified debt. By s 459C a rebuttable presumption of insolvency arises where the company the subject of the demand fails to comply with a statutory demand.
Section 459G allows for an application to the Court to set aside a statutory demand to be made within 21 days after service of the demand. By s 459H the Court may set aside or vary the demand if it is satisfied that there is a genuine dispute about the existence or amount of a debt to which the demand relates.
In Mibor Investments Pty Ltd v Commonwealth Bank of Australia (1993) 11 ACSR 362 Hayne J observed that it has long been held that as a matter of discretion a winding up order will not be made on a debt which is bona fide disputed. Amendments to the Corporations Law made considerable changes to the law. However, the basic rule concerning the existence of a genuine dispute remains. It is said to be grounded in part upon the notion that if the debtor company is justified in refusing to pay, the applicant may not be qualified as a creditor to file an application for a winding up order. A winding up application is not to be used for the improper purpose of compelling a solvent company to pay a disputed debt.
Hayne J went on to say at p 366 that what is meant in s 459G by a "genuine dispute" could be better understood in the light of the rationale just mentioned and the following considerations:
"First, any application to set aside a statutory demand must be made very quickly: it must be made within 21 days. Second, the statute contemplates a summary procedure, the only outcome of which will be an order affecting the statutory demand, not any order or judgment declaring a debt to be owing or not to be owing or ordering payment of any money sum. Third, the only significance that the statutory demand has is that if there is failure to comply with it then the company is deemed to be insolvent. Thus the demand is no more than a precursor to an application for winding up in insolvency. Fourth, an application to wind up in insolvency must be determined within 6 months (unless the court is satisfied that special circumstances justify an extension of that time): s 459R. Fifth, on the hearing of the application to wind up, the company may not oppose the application on grounds that it might have taken in any application to set aside the demand, unless those grounds are material to proving that the company is solvent.
These matters, taken in combination, suggest that at least in most cases, it is not expected that the court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the court conclude that there is a dispute and that it is a genuine dispute."
Aspermont's application pursuant to s 459G of the Corporations Law to set aside the Lechmere demand was brought before the learned Master on 25 September 2001 and again on 3 October and 16 November 2001.
It is apparent from the Master's reasons for judgment delivered on 14 December 2001 that, after a careful analysis of the matters in issue and related evidentiary materials, he was persuaded that the Aspermont assumption of liability arrangement imposed a binding obligation upon Aspermont. He was prepared to hold, however, that the amount the subject of the statutory demand should be reduced to $292,500 upon the basis that the claim for $184,000 in respect of assigned debts should be set aside and that there was a genuine dispute as to $58,500 in respect of one of the half yearly interest payments.
It seems that Aspermont was of the view that it was now required to pay the sum of $292,500 to Lechmere (described as the "defendant" in the proceedings before the Master) otherwise the company would be presumed to be insolvent. It formed this view as a result of advice received from its solicitors notwithstanding that an appeal against the Master's decision was in contemplation.
The relevant events are described in the affidavit of Aspermont's solicitor, Michael Edward Paterson, sworn 22 January 2002, being part of the evidentiary materials presented to me in support of the subsequent application for a mareva injunction.
Aspermont's solicitor said that he received instructions to appeal the decision late on Wednesday 19 December 2001. The consequence of the learned Master's decision and the operation of s 459F(2)(a)(ii) was that Aspermont was required to pay the sum of $292,500 to Lechmere by 21 December 2001, being 7 days after the Aspermont application to set aside was determined. Because the solicitor was flying to Canberra, he advised that he was not able to prepare a notice of appeal, nor take steps to prevent the necessity to pay monies to Lechmere by 21 December 2001. Accordingly, he suggested that the money should be paid under protest.
The solicitor went on to say in his affidavit that as Mr Kent had claimed in the proceedings that any money owed by Lechmere to Aspermont belonged beneficially to him, there was a prospect that Mr Kent might commence proceedings against Lechmere and seek an injunction preventing it from disposing of the monies to be received from Aspermont. Such proceedings were subsequently commenced.
It was said further by Aspermont's solicitor that on 21 December 2001 Aspermont paid the sum of $292,500 into Lechmere's bank account of the Midland Bank, Bond Street, London branch at the direction of Lechmere's solicitors. He understands from the executive officer of Aspermont that in fact the money was not paid under protest.
In early January 2002 the solicitor sought an undertaking from Lechmere to freeze the funds until the outcome of the appeal but Lechmere declined to give the undertaking. It was common ground at the hearing before me that no application was made by or on behalf of Aspermont for a stay or for an extension of time to meet the statutory demand (being a possibility allowed for by s 459F(2)(a)(i) of the Corporations Law).
Aspermont's notice of appeal was filed and served on 15 January 2002 and the present application for a mareva injunction to restrain Lechmere from disposing of the sum of $292,500 was filed simultaneously.
I pause to note that at the hearing before me counsel for Aspermont submitted to the Court a minute of proposed substituted notice of appeal. In the absence of a formal application to amend and sufficient notice to the opposing party I did not allow the proposed amendments. I was only prepared to take account of the minute as a foreshadowed application to amend. I accepted that it was of relevance in seeking to understand the strength of the arguments to be presented to the Full Court.
Mr Paterson's affidavits of 15 and 22 January 2002 described the asset position of Lechmere and the nature of Aspermont's concerns. Reliance was placed upon affidavits forming part of the evidentiary materials before the Master.
I will not traverse the entirety of the matters touched upon in these affidavits. Mr Paterson said that he had caused a search to be carried out at the Department of Land Administration on 21 January 2002 to determine if the Respondent had any registered interest in any real property in Western Australia. A copy of the search showed that the Respondent did not have any such land. He said that in his belief it was not possible to obtain searches of companies registered in the British Virgin Islands. The basis of his belief was the last sentence of par 4 of the affidavit of Richard Cameron MacLellan sworn 2 August 2001 and filed on behalf of Lechmere.
Mr Paterson also exhibited a certificate of incorporation dated 2 September 1993 verifying that Lechmere was incorporated in the Territory of the British Virgin Islands in 1993. He drew attention to various financial accounts and passages in the affidavits mentioned earlier which suggested that the only asset of Lechmere of which Mr Kent and Aspermont were aware was a parcel of shares in Aspermont worth $125,455.70. I note in passing that these assertions were not refuted or qualified by any affidavit filed on behalf of Lechmere as respondent to the appeal and the present application for a mareva injunction.
Against this background, I must now turn to the principles bearing upon the grant of mareva orders.
One finds in s 25(9) of the Supreme Court Act 1935 (WA) a general power for the Court to make various orders, including interlocutory orders, if and when and in terms that the Court thinks to be "just or convenient". This provision does not indicate the circumstances in which such orders should be made and it is often said that the Court has an inherent jurisdiction as both a court of law and equity to make such orders in aid of its general jurisdiction.
In Jackson v Sterling Industries Ltd (1987) 162 CLR 612 Wilson J and Dawson J observed that initially the mareva injunction was of limited scope being available only against a foreign defendant with moveable assets within the jurisdiction which, unless restrained, he was likely to remove. Some broader rationale was required to explain the eventual extension of the remedy to defendants resident within the jurisdiction and to the dissipation of assets within the jurisdiction for the purpose of defeating any judgment. The appropriate rationale was to be found in the notion that the purpose of the mareva injunction was to prevent the abuse of the process of the Court by the frustration of its remedies. This suggested that the power of a court to grant injunctions or orders of the mareva type was as much to be found in its inherent power to prevent the abuse of its process as in any statutory power to grant such relief as is "just or convenient".
One important result of viewing mareva orders in this way was to emphasise the limits of the remedy. Its use must be necessary in order to prevent the abuse of the process of the Court. The mareva injunction represents a limited exception to the general rule that a plaintiff must obtain his judgment and then enforce it. He cannot prevent the defendant from disposing of his assets merely because he fears there will be nothing against which to enforce his judgment and nor can he be given a secured position against other creditors.
It follows from reasoning of this kind that a mareva order is essentially an ancillary remedy to prevent a party frustrating the substantial judicial process of the Court in relation to the pursuit of a cause of action before the Court. The power to grant a mareva order must be exercised sparingly.
These principles have been approved and applied in this Court in cases such as Perth Mint v Mickelberg & Ors (No 2) [1985] WAR 117 and R&I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59. In the former case, the Full Court held that in order to obtain a mareva injunction the plaintiff must show a good arguable case and a real risk that if the injunction is not granted the defendant will remove or dissipate his assets. The strength of the plaintiff's case is to be viewed in context to the risk of dissipation or removal of assets. The purpose of the order is to ensure, so far as is possible, that the pool of assets against which a court order might be enforced in due course is not diminished in a manner which would be an abuse of its process.

A number of decided cases have suggested that an applicant for a mareva injunction must establish that he has a good arguable case which will lead to the obtaining of a judgment for some liquidated sum or some approximate, even if unliquidated, amount. For example, in Brereton v Milstein [1988] VR 508 the application was refused because it was doubtful whether the plaintiff's claim for an account satisfied this requirement.
However, more recently decided cases strongly suggest that a mareva order can be made against a person who is not necessarily a party to the proceedings presently before the Court and in circumstances where a claim for a nominated amount have not yet been commenced.
In Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 copyright infringement proceedings were brought against a company which carried on a housing construction business. Before judgment, the shareholders formed a new company to carry on a construction business using new plans. Having obtained judgment, the applicant elected for an account of profits and applied for mareva type orders against the shareholders in the new company pending the taking of the account. Neither the shareholders nor the new company were parties to the proceedings.
The High Court held that the new company should be restrained from disposing of or dealing with the business name, but should not otherwise be restrained.
Four members of the High Court held that a mareva order may be appropriate against a third party if (a) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of assets of the judgment debtor or potential judgment debtor; or (b) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.
In Chew v Satay House of WA Pty Ltd, unreported; SCt of WA; Library No 970570; 29 October 1997 Parker J noted that as a consequence of events surrounding the advancement of a restaurant venture two sets of proceedings were instituted. The company which had the lease of the relevant premises claimed for rent and other outgoings. An originating application was also filed in which the applicant sought relief for oppression including an order that the respondent company be wound up as well as an accounting. Parker J was prepared to grant a mareva injunction in the latter proceedings which precluded the personal respondents from selling a residential property in a Perth suburb, notwithstanding that the residential property was not the subject of any of the dealings or agreements between the parties and was not connected with the restaurant business.
Parker J referred to the growing body of authorities since the first emergence of the mareva injunction which demonstrated the evolutionary nature of the principles guiding the use of the remedy. He went on to say:
"…decisions in particular in this country have shown that it is not an invariable requirement that the plaintiff have an accrued and vested cause of action as justice may require that injunctive relief be granted even before the cause of action arises. It has been held that a mareva injunction may be granted where there is no pending proceeding before the Court and the parties seeking the injunction do not propound a cause of action but are merely claiming moneys in pending arbitration proceedings; Construction Engineering (Aust) Pty Ltd v Tambel (Australasia) Pty Ltd [1984] 1 NSWLR 274; or before additional tax becomes due and payable under an assessment from the Commissioner of Taxation; Deputy Commissioner of Taxation v Sharp (1988) 82 ACTR 1."
His Honour went on to refer to the views of Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 at 362 to the effect that the right to an interlocutory injunction is incidental to and dependent on the enforcement of a substantive right which usually, although not invariably, takes the shape of a cause of action. Parker J said further that the decided cases, in rare circumstances, have allowed for a valid application of the remedy of the mareva injunction in proceedings where there was no legal or equitable right then existing or then asserted in the proceeding. Nonetheless, as a general rule, a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that by reason of the defendant's conduct, the plaintiff, if he succeeds, will not be able to have his judgment satisfied. The discretionary nature of the remedy gives rise, of course, to the need to assess the balance of convenience.
Parker J added that in the circumstances before him the relief by way of a mareva order should be allowed because the claimant was, as far as he realistically could, pursuing the causes of action which he had prima facie demonstrated to exist in his favour against the respondent. The circumstances showed that his present inability to do so more specifically or directly was due to the apparent failures of the respondents and the need to await the liquidator's report, and, if then necessary, an accounting. There was a risk that the processes of the Court might in the end be frustrated by the misconduct of the respondents unless the injunction was granted.
The decision of Parker J was cited with approval by Murray J in Official Receiver of State of Israel v Raveh (2001) 24 WAR 53. In that case the plaintiff proposed to have a judgment obtained in the District Court of Israel registered as a foreign judgment in Western Australia. The plaintiff's application for an injunction was refused on the grounds that it was not related to an underlying right or cause of action pursued in the Supreme Court of Western Australia. Murray J was of the view that a mareva order could only be granted to operate upon a defendant who seeks to evade or acts in a way calculated to defeat the enforcement in the Supreme Court of Western Australia of a substantive right pursued by the plaintiff in that Court.
In the course of his judgment, Murray J said at par 22:
"There is a line of such cases which follows the decision of the House of Lords in a case which was also concerned with a question of service out of the jurisdiction, Siskina v Distos Compania Naviera SA [1979] AC 210. If the establishment and enforcement of the underlying right upon which the plaintiff's cause of action relies is capable of being the subject of proceedings in this Court, then it will not be an impediment to the grant of a mareva order that no such proceedings have in fact been issued and that none are pending in the Court, particularly where such proceedings may be imminent. The terms of a mareva order may be fashioned to ensure that the Court's substantive processes in aid of the establishment of the underlying right or cause of action relied upon by the applicant for the injunction are pursued with expedition: see generally the judgment of Parker J in Chew v Satay House of WA Pty Ltd (unreported; SCt of WA; Library No 970570; 29 October 1997) at 12‑13."
I digress briefly to note that the decision of Murray J was reviewed by the Full Court in Raveh v The Official Receiver of the State of Israel in his capacity as Liquidator North America Bank Ltd (In Liq) [2002] WASCA 27 but not in a manner that impinges upon the views Murray J expressed concerning the principles applicable to the grant of a mareva injunction.
I am conscious, of course, that in the present case the application for a mareva order arises in the context of an appeal. However, as to that aspect of the matter, I note that by s 58 of the Supreme Court Act 1935 the jurisdiction of the Full Court in regard to appeals is to be exercised subject to the provisions of the Act and to the Rules of Court.
By s 61 of the Act any direction incidental to a cause or matter before the Full Court not involving the decision of the appeal may be given by a single Judge. By O 63 r 10(1) the Full Court on any appeal shall have all the powers and duties as to amendment and otherwise of the Court, Judge or Master appealed from.
The decision of the Court of Appeal in Ketchum International Plc v Group Public Relations Holdings Ltd [1996] 4 All ER 374 indicates that the Court of Appeal has an original jurisdiction pursuant to a rule of the kind just mentioned to grant injunctive relief to restrain a defendant from disposing of assets pending the unsuccessful plaintiff's substantive appeal.
The reasoning of the Court of Appeal in that case suggests that the jurisdiction is similar to the jurisdiction exercised where an unsuccessful defendant sought a stay of execution pending an appeal. It is based on the principle that justice requires that the Court should be able to take steps to ensure that its judgments are not rendered valueless by an unjustifiable disposal of assets.
Further, there was no reason in principle why the considerations applicable to the grant of a mareva injunction should not be applied in favour of such a plaintiff provided he had a good arguable appeal. Where leave was not required to appeal from the substantive judgment, injunctive relief of the type sought should not be granted unless leave to appeal would have been granted, had it been required.
Stuart-Smith LJ observed that the jurisdiction to grant an injunction pending appeal was not limited to cases concerned with the preservation of a fund or property the subject of the action, but was based on the wider principle that justice requires that the Court should be able to take steps to ensure that their judgments were not rendered valueless by an unjustifiable disposal of assets. He went on to say at p 381:
"Moreover, I cannot see any reason in principle why the considerations which are applicable when the Court is considering the grant of a mareva injunction should not be applied in favour of a plaintiff, even if he has lost in the Court below, though the question will not be 'does he have a good arguable case?' but 'does he have a good arguable appeal?' This is likely to be a more difficult test to satisfy, and, if the case turns upon questions of fact which the Judge has resolved against the plaintiff, may well be insuperable. This threshold must be at least as high as that which has to be satisfied when the Court considers whether or not to grant leave to appeal, where that is required."
Let me now return to the circumstances of the present case.
At the hearing before me Aspermont placed considerable reliance upon the reasoning of the Court of Appeal in Ketchum (supra) in support of the proposition that the Full Court in this State has power to make mareva orders in respect of a disputed issue that is being taken on appeal. Counsel argued that s 61 of the Supreme Court Act permits a single Judge to exercise the powers of the Full Court in that regard. Counsel for Lechmere was generally opposed to the order sought by Aspermont but did not take any specific objection to Aspermont's submission concerning this aspect of the matter. Nonetheless, before proceeding further, I find it necessary to resolve this jurisdictional issue.
The effect of s 58(1)(b) of the Supreme Court Act is that, subject as otherwise provided in the Act and to the Rules of Court, the Full Court shall have jurisdiction to hear and determine appeals from a Master whether sitting in Court or in Chambers.
I have already noted that by O 63 r 10(1) the Full Court on any appeal shall have all the powers and duties as to amendment and otherwise of the Court, Judge or Master appealed from. Order 52 Rule 1(1), being the provision relied upon by Aspermont in the present case, provides that an application for the grant of an injunction may be made by any party to a cause or matter either before, at or after the hearing of the cause or matter, whether or not the injunction was claimed in the party's writ, originating summons, counterclaim or third party notice, as the case may be.
To this point, I am of the view, consistently with the line of reasoning reflected in Ketchum (supra), that in a conventional case where a plaintiff has advanced a claim at trial for recovery of a nominated sum it would be open to such a plaintiff to apply to the Full Court for a mareva order if he or she is obliged to take a matter on appeal. It follows from the reasoning in Ketchum (supra) and the other decided cases concerning mareva orders that the appellant in the hypothetical case I have posited would have to persuade the appellate Court that he has a good arguable case on appeal and that there is a sufficient need for the Court to protect its process from abuse in relation to the eventual enforcement of a judgment if the appeal succeeds.
I make the obvious point in passing that in such a case, where the plaintiff has not been successful, there can be no question of applying for a stay of execution, and thus, arguably, the application for a mareva order represents the only avenue of relief.
However, in regard to the application before me, the further question must then be dealt with as to whether s 61 of the Supreme Court Act, being the provision relied upon by Aspermont, empowers a single Judge of the Full Court to exercise the powers of the Full Court I have just described.
Section 61 of the Supreme Court Act reads as follows:
"1.In any cause or matter pending before the Full Court, any direction incidental thereto not involving the decision of the appeal may be given by a single Judge, and a single Judge may at any time during vacation make any interim order to prevent prejudice to the claims of any parties pending an appeal, if he thinks fit.
2.Every order made by a Judge in pursuance of this section may be discharged or varied by the Full Court."
It might be argued that the use of the word "direction" in this provision represents an explicit limitation on the powers allowed to a single Judge with the result that a single Judge is not at liberty to make a mareva order of the kind sought.
In giving consideration to such an issue I take account of the views expressed in Campbell: Rules of Court at p 44 where the learned author, in discussing rules and directions, refers to a distinction between those commands which are laws or rules and those commands which are occasional or particular. The author observes that the exercise by a court of a statutory or inherent power to promulgate rules of practice and procedure of general application needs to be distinguished from its exercise of its inherent jurisdiction to make orders and directions regarding the procedure to be followed in a particular case. I note also that according to the Concise Oxford Dictionary the noun "direction" is defined as an instruction what to do or order. Further, it is apparent from O 84 r 1 and O 84 r 2 of the Rules of the Supreme Court that in certain contexts the term "order" is to be regarded as in the nature of a general rule while as what the court directs is the application of an instruction or order to the circumstances of a particular case.
Accordingly, when I return to s 61 of the Supreme Court Act and the power of a single Judge to make "any direction" incidental to a cause or matter pending before the Full Court, I am of the view that the term "direction" is sufficiently broad to embrace the making of a specific order directed to the circumstances of a particular case. Accordingly, I consider that the effect of s 61 is to allow to a single Judge power to make a mareva order in respect of a cause or matter pending before the Full Court. This determination leaves open, of course, the further question, which I will return to later, as to whether the power to make a mareva order is enlivened by the circumstances of this particular case.
Aspermont contends that the circumstances of the present case justify the grant of a mareva order. Such an order will have the effect of preserving in a bank account under the control of Lechmere the sum of $292,500 paid to Lechmere immediately after the learned Master's ruling that there was no genuine dispute as to that part of the statutory demand. The appellant submits that it has a good arguable case on appeal and that there is a real risk that the appeal process will be frustrated in relation to the eventual enforcement of a judgment for such an amount unless the order sought is made.
Various issues are identified by the notice of appeal, and the foreshadowed amendment to the same, in support of the notion that Aspermont has a good arguable case on appeal. Aspermont relies upon those passages in the learned Master's reasons for judgment in which it is noted by the Master that there is no written loan agreement entered into by Lechmere and Kent documenting the original loan of $780,000 to Kent. The Master acknowledged also that Lechmere cannot point to any written agreement between Lechmere, Kent and Aspermont providing for Aspermont to assume liability for Kent's debt and the relevant interest payments. Counsel for Aspermont underpinned his submissions by pointing to par 59 to par 61 of Mr MacLellan's affidavit of 2 August 2001 and a related exhibit from which it appears that Lechmere continued to press Kent to meet the debt after the date on which Aspermont had supposedly assumed sole responsibility for the same.
Counsel for Aspermont argued also that the learned Master erred in excluding affidavit evidence directed to the question of whether there was a quorum at the AGM of Aspermont at which, on Lechmere's case, the Aspermont assumption of liability arrangement was approved. This evidence was excluded pursuant to a line of case law which requires that all points that an applicant intends to rely upon in seeking to set aside a statutory demand must be raised within the prescribed period, and cannot be introduced at a later stage. Counsel for Aspermont submitted that there is no High Court authority on the point and the ruling made by the learned Master in the circumstances of the present case represented a miscarriage of justice. Counsel for Aspermont placed reliance upon a recent decision of Pullin J in this Court in Energy Equity Corporation Ltd v Sinedie Pty Ltd [2002] WASCA 3.
In further support of the various grounds reflected in the notice of appeal counsel submitted that the learned Master was in error in having assumed that the passing of a resolution by Aspermont at its AGM on 15 August 1997 approving the Aspermont assumption of liability arrangement was sufficient to bind Aspermont to meet the relevant debt. The resolution, of itself, did not represent the acceptance of a binding obligation and, in the absence of any evidence as to the terms and conditions of any prior agreement, the resolution could not be regarded as an operative event in the nature of a condition precedent or condition subsequent that had the effect of bringing an agreement into force.
Counsel for Aspermont went on to submit that the learned Master's finding that no genuine dispute existed was based essentially upon seven pieces of documentary evidence which were characterised by the learned Master as an admission against interest that Aspermont had undertaken a liability for the debt.
The first piece of evidence was said to be a document which, taken at its highest, related to the original loan agreement between Lechmere and Mr Kent. It was not material to the question of whether Aspermont had assumed liability for the debt as a consequence of a novation of the original loan agreement entered into between Aspermont and Lechmere. Counsel recognised that there could be tacit acquiescence by one party in the novation of a contract, but there must be consensus ad idem on the part of the relevant parties to a novation, either by tacit or express agreement, and there was no evidence of such a consensus in the present case. Mutual Export Corporation v Asia Australian Express Ltd (1990) 19 NSWLR 285.

Counsel went on to submit that the remaining pieces of documentary evidence adverted to by the learned Master in his reasons, such as the explanatory memorandum and minutes were equivocal. They pointed to an intention to assume liability for the debt but did not establish that the liability had actually been undertaken. The fact that Aspermont had apparently made one payment of $28,000 to Lechmere did not evidence a tacit novation of the original loan agreement because such a step was equally consistent with the notion that Aspermont was prepared to indemnify Mr Kent against liability for a payment due to Lechmere.
I refer to the Mibor Investments case (supra) mentioned in earlier discussion. In that case Hayne J observed that all that is required by the legislation is that the Court conclude that there is a dispute and that it is a genuine dispute. This is consistent with the reasoning in other cases mentioned in the learned Master's reasons for judgment such as Turner Corporation (WA) Pty Ltd v Blackburne & Dixon Pty Ltd [1999] WASCA 294. A genuine dispute requires firstly that the dispute be bona fide and truly exist in fact, and secondly, the grounds for alleging the existence of a dispute are real and not spurious, hypothetical, illusory or misconceived.
I consider that in the circumstances of the present case it can be said that Aspermont has a good arguable case on appeal. To my mind, the presence of some documentary evidence suggesting that Aspermont had in mind to bind itself, and took various steps towards assuming liability for the debt, is not sufficient to outweigh the absence of specific evidence identifying an agreement between the parties in the nature of a novation agreement whereby Aspermont assumed liability for the debt. As the learned Master acknowledged, if there is a genuine dispute about the existence of the loan and the assumption of liability arrangement, there must be a genuine dispute about the existence of the interest, being the claim to which the statutory demand related.
I must now turn to the next requirement for the grant of a mareva order. The appellant relied upon various facts and matters in submitting that there was a real risk that the appeal process would be frustrated. Counsel referred to the evidentiary materials mentioned earlier from which it appeared that Lechmere is a company incorporated in the British Virgin Islands and operating out of Monaco. It owns no real estate within the State of Western Australia and its only known asset is shares in Aspermont worth $125,455.70. Further, by its own admission, Lechmere owes in excess of $1,000,000 to a company called Vernon Finance Limited which is controlled by Mr MacLellan, a person who controls Lechmere. Counsel placed considerable emphasis upon the fact that no answering affidavit had been filed on behalf of Lechmere to refute the suggestion that it had limited assets. A real prospect existed that the sum of $292,500 previously paid to Lechmere, being in an overseas bank account, could be resorted to by Lechmere for the purpose of reducing a debt due to a related company.
In my view, in the absence of an answering affidavit, Aspermont has sufficiently made out a case that there is a real risk that if the mareva order is not granted Lechmere will remove or dissipate its assets. Such a finding, however, leaves unanswered the essential question of whether the power to make a mareva order is enlivened by the circumstances of this case at all, bearing in mind that the ruling made by the learned Master did not impose upon Aspermont an obligation to pay to Lechmere the sum of $292,500 referable to interest due on the loan. In that regard, I remind myself, as Hayne J noted in the Mibor case (supra) mentioned earlier, that the statutory demand procedure does not give rise to any judgment "ordering payment of a money sum".
Counsel for the respondent submitted that the principle informing the grant of mareva orders is that such orders may be made as are needed to ensure the effective exercise of the jurisdiction invoked in the primary claim. Patrick Stevedores Operations (No 2) Pty Ltd & Ors v Maritime Union of Australia & Ors (1998) 195 CLR 1; Cardile v LED Builders Pty Ltd (supra).
He went on to submit that mareva orders are appropriately sought by a party who makes a primary claim which, if successful, will result in a money judgment (or other specific equitable relief in relation to some other property) against the opposing party, in circumstances where a risk appears that the efficacy of such final relief may be defeated by the defendant's dissipation of or other conduct in relation to its assets. The decided cases suggest, however, that one of the essential requirements for the grant of a mareva order is that there is a sufficient degree of likelihood that the plaintiff will recover judgment against a defendant for a certain or approximate sum.
In the present case, counsel for Lechmere argued that Aspermont's claim was incapable of resulting in the respondent being ordered to pay the appellant any sum of money. Accordingly, there was no occasion for the protection of the efficacy of the jurisdiction invoked by Aspermont.
Counsel for Lechmere underlined this submission by contending that what an application to set aside a statutory demand determines, and all it determines, is whether the statutory demand should be set aside. It does not determine whether one party owed the other the debt the subject of the statutory demand. Thus, the appeal in the present case could not give rise to any order or judgment whose efficacy needs protection. There was no order sought in the appeal ordering Lechmere to repay to the appellant the sum of $292,500 because there was no order at first instance that Aspermont pay this sum to Lechmere. The application must fail at the outset because there was no possible judgment or award the efficacy of which might be prejudiced were the injunction not to be granted.
I pause to observe that there is considerable force in these submissions. In A‑Pak Plastics Pty Ltd v Merhone Pty Ltd (1995) 13 ACLC 896 a company successfully applied to set aside a statutory demand. The Court of Appeal in New South Wales held that the claimant had an appeal as of right because the order made by the Court was a final order. Sheller JA, with whom the other members of the Court agreed, noted that the failure to comply with a statutory demand is not conclusive of insolvency nor the only means by which insolvency may be proved. However, in so far as an application for a company to be wound up in insolvency relies on a failure by the company to comply with the statutory demand, the company may not, without leave, oppose the application on a ground that the company could have but did not rely on for the purpose of an application by it for the demand to be set aside. Section 459S(1).
He went on to say that compliance with a statutory demand ends any possibility that a creditor may use that statutory demand in proceedings to wind the debtor company up in insolvency. Non‑compliance provides the creditor with a means, though not the only means, of proving a ground for having a company wound up in insolvency.
He said further that a statutory demand served under s 459E has no consequence beyond giving rise to a presumed insolvency. If an order setting aside a statutory demand is reversed on appeal, the appellate court should, ordinarily, re‑instate the statutory demand to take effect from the date it was served on the principle that restitutio in integrum is the right of every successful appellant. See The Commonwealth of Australia v McCormack (1984) 155 CLR 273 at 276.
It followed from this, in the opinion of Sheller J, that the matter in issue where application is made to set aside a statutory demand is not the amount of the demand but whether the applicant is entitled to have the statutory demand set aside. This is the lis or matter in issue before the Court.
I have already noted in my review of the previously decided cases concerning mareva injunctions that the mareva order exists to enable the Court to protect its process from abuse in relation to the eventual enforcement of a judgment. It appears to follow from the reasoning of Sheller J in the A‑Pak case (supra) that even if the appeal in the present case is successful this will not lead to an order in Aspermont's favour for recovery of a certain sum or repayment of the sum of $292,500 forwarded to Lechmere. It cannot be said that Aspermont will be deprived directly of the fruits of a possible ruling in its favour if the appeal succeeds. Viewed in that light, it becomes difficult for Aspermont to assert that it may be adversely affected by an abuse of process, being the basis upon which a mareva order is usually granted.
Counsel for Aspermont sought to answer these objections by relying upon those previously decided cases mentioned earlier such as Cardile and Raveh (supra) in which courts were prepared to countenance the grant of a mareva injunction in circumstances where the applicant for relief was not seeking recovery of a specific amount against an existing party to the proceedings. It will be recalled that in the latter case Murray J observed that if the establishment of the underlying right upon which the plaintiff's cause of action relies is capable of being the subject of proceedings in the Court, then it will not be an impediment to the grant of a mareva order that no such proceedings have in fact been issued and that none are pending in the Court.
Thus, in the present case, it might be argued, that if Aspermont was successful in persuading the Full Court that there was a genuine dispute in respect of the amount paid by Aspermont to Lechmere as a consequence of the Master's ruling, with the result that the statutory demand was set aside in its entirety, it would then be open to Aspermont to commence proceedings for recovery of the amount paid upon the basis that there was a failure of consideration or Lechmere would be unjustly enriched if the amount were retained. The mareva order exists essentially to enable the Court to protect its process from abuse in relation to the eventual enforcement of a judgment. It was therefore arguably appropriate in a situation in which Aspermont, as a prospective claimant, appeared to have a good arguable case that it was not responsible for payment of the disputed debt and related interest payments that the Court should take steps to ensure that the amount in issue was preserved.
Counsel for Aspermont submitted further that the restitution principle mentioned in McCormack's case (supra) was sufficiently broad, in any event, to require that the amount in question be returned to Aspermont if the appeal from the learned Master's ruling succeeded. Counsel acknowledged that the Master's ruling did not directly require that the amount be paid but this was the practical effect of the order. If the payment were not made Aspermont would be subject to a rebuttable presumption of insolvency and in seeking to avert the possibility of being wound up it would be precluded from relying upon matters which were in issue in the proceedings before the Master. The combination of these considerations meant that it was put in an impossible situation and was left with no option but to make the payment. In effect, it was compelled to make the payment that was in fact made.
I have to say immediately that I am not persuaded by Aspermont's submissions in regard to this latter issue. The reasoning of Sheller J in the A‑Pak case (supra) is persuasive authority for the proposition that the restitution to be effected in the event of the present appeal succeeding would be simply the setting aside of the statutory demand upon the basis that a genuine dispute existed. I am not persuaded that the obligation to re‑instate would extend to a payment made not under the compulsion of a Court order but pursuant to a pragmatic evaluation of what was in the best interests of the company.
Further, and in any event, it is not entirely accurate to say that Aspermont was left with no option but to pay. It could have chosen not to pay and then to have sought to prove its solvency by rebutting the presumption raised against it as a consequence of the Master's ruling and a subsequent non‑compliance with the statutory demand. Alternatively, it could have sought an order pursuant to s 459F(2)(a)(i) of the Corporations Law for an extension of time within which to meet the statutory demand upon the basis that an appeal was pending or in contemplation. Livestock Traders International Pty Ltd v Bui & Anor (1996) 22 ACSR 51.
These considerations also have a bearing upon a resolution of the former issue. Having regard to the decisions in Cardile, Raveh and Chew v Satay House (supra) I accept that the principles bearing upon the grant of a mareva order are still evolving and that cases may arise in which it is thought appropriate for the Court to grant an order with a view to protecting an abuse of its process, notwithstanding that the applicant for relief will not necessarily recover a nominated amount from the opposing party in the pending suit or appeal. However, various difficulties stand in the way of applying such an approach to the circumstances of the present case.
First, cases such as Cardile, Raveh and Chew (supra) clearly contemplate that a suit or procedure aimed at effecting recovery is imminent and that persuasive reasons exist as to why it has not been instituted. For example, in Cardile (supra), it seems, events took place during the progress of the litigation which obliged the claimant to evoke the Court's aid. Moreover, the link between the defendant companies in question was such that the newly formed company could be obliged to disgorge or contribute funds due to the judgment debtor. In Chew's case (supra) it was arguably necessary to pursue the claim for oppression and obtain a liquidator's report before the related claim could be pursued. In the present case, however, one cannot say with certainty whether a claim for recovery of the amount paid will be pursued even if the appeal is successful.
Let me explore this point further. If the appeal is successful, Aspermont is likely to obtain a ruling in its favour that a genuine dispute exists and as a consequence the statutory demand as to the claim for interest may be set aside. This, however, does not necessarily resolve the question of whether Lechmere is unjustly enriched by the payment made because that will require a ruling in Aspermont's favour in proceedings commenced by Aspermont directed to whether it is liable to Lechmere for the principal debt and related interest pursuant to the Aspermont assumption of liability arrangement. The amount of the principal debt is sizeable and there may well be various commercial reasons, including a consideration of the financial standing of the parties involved in the dispute, as to whether Aspermont considers it is worthwhile litigating such matters.
In my view, it is inappropriate for the Court to make an order preserving certain property and with a view to protecting its process and the eventual enforcement of a judgment, when it is by no means certain that the envisaged proceedings will be commenced. I recognise, of course, that it is possible in certain circumstances to grant injunctive relief upon condition that proceedings are commenced or certain steps are taken. However, as I have already noted in my review of the decided cases, the grant of a mareva order is a power which should be exercised sparingly and I am not persuaded that a conditional order of this kind is appropriate in the circumstances of the present case. The decided cases establish that a mareva order will not be granted merely for the purpose of providing a plaintiff with security for a claim.
Second, I take account of the fact that it was open to Aspermont to apply for an extension of time within which to meet the statutory demand upon the basis that it intended to appeal. It is clear from the decided cases that the rationale underlying the grant of a mareva order is that the Court must be persuaded that the grant of such an order is necessary to avert an abuse of process in relation to the eventual enforcement of a judgment. As I have already noted, the power to grant an order should be exercised with restraint and it therefore seems to me that in circumstances where it was open to the party applying for an order to avert the consequences of an unfavourable ruling by taking a procedural step other than an application for an mareva order, it becomes difficult for the relevant party to convince the Court that something akin to an abuse of process is likely to occur if the order is not granted.
Third, although I have been prepared to hold that Aspermont has a good arguable case on appeal as to whether a genuine dispute exists concerning the payment of interest under the debt, I am not necessarily persuaded that it has a good arguable case in respect of possible proceedings for a declaration as to whether it is liable under the Aspermont assumption of liability arrangement. It is apparent from my review of the authorities that in deciding whether a genuine dispute exists the Court is only required to determine whether the dispute exists in fact and whether the grounds for alleging the existence of a dispute are real and not spurious. An issue of that kind is not the same as arriving at a determination that Aspermont has a good arguable case that it is not bound by the Aspermont assumption of liability arrangement. A consideration of this kind highlights the difficulty and inappropriateness of endeavouring to grant relief by way of a mareva order not in respect of a pending suit but in respect of an as yet undefined claim in proceedings which may or may not be commenced. This suggests that relief of the kind countenanced in cases such as Cardile, Raveh and Chew (supra) should be regarded as exceptional.
For these reasons, I am not persuaded that a mareva order of the kind sought should be granted in the circumstances of the present case. It follows that the order previously made will be discharged. I will hear from the parties as to whether any further orders and directions are required.