Australian Competition and Consumer Commission v Top Snack Foods Pty Ltd

[1997] FCA 1255

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE - joinder of parties - application to join additional respondents to the proceedings - whether proposed amended pleadings disclose any proper cause of action against proposed respondents

INJUNCTIONS - application for Mareva injunction - whether danger that assets will be dissipated so as to frustrate the process of the Court - grant of Mareva injunction against third party to the proceedings

Tomlinson v Cut Price Deli Pty Ltd (unreported, 23 June 1995), applied

LED Builders Pty Ltd v Eagle Homes Pty Ltd (unreported, 22 August 1997), applied

AUSTRALIAN COMPETITION & CONSUMER COMMISSION - v -
TOP SNACK FOODS PTY LTD & ORS
NG 782 OF 1997

TAMBERLIN J
SYDNEY
7 NOVEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 782  of   1997

BETWEEN:

AUSTRALIAN COMPETITION & CONSUMER COMMISSION
APPLICANT

AND:

TOP SNACK FOODS PTY LTD & ORS
(ACN 064 180 801)
FIRST RESPONDENT

GEORGE MANERA
SECOND RESPONDENT

NICHOLAS KRITHARAS
THIRD RESPONDENT

SELINA MANERA
FOURTH RESPONDENT

JUDGE:

TAMBERLIN J

DATE OF ORDER:

7 NOVEMBER 1997

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1. The applicant be granted leave to file a Further Amended Application and Second Further Amended Statement of Claim in the form annexed to the Notice of Motion filed 9 October 1997, joining the following corporations as respondents to this proceeding:

(a)       Nick Kritharas Holdings Pty Ltd (ACN 054 663 464)
           (b)       Adway Holdings Pty Ltd (ACN 054 201 857)

1. Until determination of these proceedings or until further order, Gatsios Holdings Pty Ltd, whether by itself, its servants, agents or otherwise howsoever, be restrained:

(a)  from:

(i)selling, assigning, charging, mortgaging, encumbering or otherwise dealing with or disposing of; or

(ii)causing or permitting to be sold, assigned, charged, mortgaged, encumbered or otherwise dealt with or disposed of; or

(iii)taking any steps (including, but not limited to, the entering into of any agreement) to sell, assign, charge, mortgage, encumber, or otherwise deal with or dispose of, or

(iv)advertising for sale

the properties known as Lots 1 and 3 in Strata Plan 51691 at Hurlstone Park, New South Wales, registered in Folio Identifier Numbers 1/51691 and 3/51691 respectively, without giving the applicant fourteen (14) days notice in writing; and

(b)from

(i)removing from jurisdiction, selling, assigning, charging, mortgaging, encumbering or otherwise dealing with or disposing of; or

(ii)causing or permitting to be removed from the jurisdiction, sold, assigned, charged, mortgaged, encumbered or otherwise dealt with or disposed of; or

(iii)taking any steps (including but not limited to the entering into of any agreement) to remove from the jurisdiction, sell, assign, charge, mortgage, encumber, or otherwise deal with or dispose of; or

(iv)advertising for sale

any other assets held by it as trustee for The KN Trust or any other assets in which it has an interest, either legal or equitable, and whether the interest is held directly or indirectly through an agent, nominee or servant, as at the date of making of this Order within the jurisdiction of this Court, including but not limited to any monies in the following bank account:

(i)National Australia Bank (Rockdale) Business Cheque Account, Gatsios Holdings Pty Ltd

without giving the Applicant fourteen (14) days notice in writing.

Provided that this order will not prevent any withdrawal of funds from the said account of amounts of less than $200 from time to time for the sole purpose of the education, maintenance and support of infant beneficiaries of the KN Family Trust.

1. Until determination of these proceedings or until further order, Nick Kritharas Holdings Pty Ltd, whether by itself, its servants, agents or otherwise howsoever, be restrained from:

(i)removing from the jurisdiction, selling, assigning, charging, mortgaging, encumbering or otherwise dealing with or disposing of; or

(ii)causing or permitting to be removed from the jurisdiction, sold, assigned, charged, mortgaged, encumbered or otherwise dealt with or disposed of; or

(iii)taking any steps (including but not limited to the entering into of any agreement) to remove from the jurisdiction, sell, assign, charge, mortgage, encumber, or otherwise to deal with or dispose of, or

(iv)advertise for sale

any assets in which it has an interest either legal or equitable, and whether the interest is held directly or indirectly through an agent, nominee of servant, as at the date of making this Order within the jurisdiction of this Court without giving the Applicant fourteen (14) days notice in writing.

1. A full affidavit be sworn by a director of Gatsios Holdings Pty Ltd and Nick Kritharas Holdings Pty Ltd within fourteen (14) days of the date of this order which in each case sets out full details as at the date of this order as to:

(a)the name and address of any bank, building society or other financial institution at which there is an account in the name, or under the control, of the relevant company, together with the number of such account and the balance therein;

(b)the name and address of any person or persons indebted to the relevant company and the amount of the debt or debts owed by such persons;

(c)an itemised inventory of any business assets owned by the relevant company;

(d)an itemised inventory of any other property, whether real or personal, owned by the relevant company or in respect of which the company has an interest;

(e)in respect of any of the real or personal property referred to above, whether it has been given as security for any debt, and, if so, the nature of the security and the debt so secured.

1. Liberty be reserved to Gatsios Holdings Pty Ltd and Nick Kritharas Holdings Pty Ltd to apply on three (3) days notice to vary or discharge any of the above Orders.

1. The costs of this Motion be costs in the cause.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 782 of 1997

BETWEEN:

AUSTRALIAN COMPETITION & CONSUMER COMMISSION
APPLICANT

AND:

TOP SNACK FOODS PTY LTD
(ACN 064 180 801)
FIRST RESPONDENT

GEORGE MANERA
SECOND RESPONDENT

NICHOLAS KRITHARAS
THIRD RESPONDENT

SELINA MANERA
FOURTH RESPONDENT

JUDGE:	TAMBERLIN J
DATE:	7 NOVEMBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

By Notice of Motion filed on 9 October 1997 the applicant, the Australian Competition and Consumer Commission (“ACCC”) seeks leave to join three companies as respondents to the proceedings, namely Adway Holdings Pty Ltd (“Adway”); Nick Kritharas Holdings Pty Ltd (“Kritharas”), and Gatsios Holdings Pty Ltd (“Gatsios”).  I will refer to the first respondent as Top Snack.

The third respondent, Nicholas Kritharas, is a director of Kritharas and the second respondent, George Manera, is a director of Adway.

The ACCC also seeks relief in the nature of a Mareva injunction against Gatsios and Kritharas, but not against Adway.  In addition, the ACCC seeks that an affidavit be sworn by a director of Gatsios setting out specified details as to the assets and financial records of that company.

The application is resisted.

When the matter came in for hearing before me on 31 October 1997 an application for an adjournment was made by a number of parties on the ground that they had been given insufficient notice to prepare for the hearing.

After reading the evidence and hearing submissions from Mr Renehan, who appeared for the ACCC, I am satisfied that sufficient notice was given to all parties of today’s hearing to warrant the refusal of the application for adjournment.  The evidence indicates that, by the latest, more than seven days before this hearing, the respondents were on notice of the hearing of this application.

The basis on which it is sought to join the three corporations is that the evidence indicates that the “Top Snack Foods Partnership”, was formed for the purpose of undertaking the business of implementing a system for the sale, distribution and marketing of drinks, food and confectionery.  This was a partnership in equal shares which began operations on 1 March 1994.  The partnership was between Kritharas and Adway.  These companies are each trustees of family trusts related respectively to Mr Nicholas Kritharas and Mr George Manera.  The trusts are referred to respectively as the “KN Trust” and the “Manera Family Trust”.

The substance of the relevant allegations made by the ACCC is that misleading and deceptive representations were made by Top Snack, on behalf of Adway and Kritharas, in relation to the sale and distribution of confectionary products intended for sale at small retail outlets.  The foreshadowed Second Further Amended Statement of Claim (“SFASC”) alleges that the first respondent, Top Snack, carried on the business as agent for Adway and Kritharas which were undisclosed principals of Top Snack.  The allegation made in par 78A of the proposed SFASC is that Adway and Kritharas, through the agency of the first respondent, engaged in deceptive and misleading conduct and made misrepresentations.

The affidavit of Ms Jan O’Neill of 8 October 1997 indicates that on 20 November 1996 a Deed of Removal and Appointment of a New Trustee to the KN Trust was entered into whereby Gatsios was replaced as trustee in lieu of Kritharas.  The timing of this charge is important. It appears that the KN Trust has substantial assets and some income.  The evidence is that Hill J of this Court, only thirteen days before the Deed was entered into,  granted leave to the ACCC to file an Amended Statement of Claim on 7 November 1996 to enable it to seek damages and compensation on behalf of nine persons who have allegedly suffered loss and damage as a result of the conduct of the respondents.  The ACCC submits that this is a relevant matter to take into account when considering whether Mareva relief should be granted against Gatsios on the basis that there is a danger that assets of the KN Trust which have been removed to the control of Gatsios might be diminished or dissipated.  The consequence would be that the enforcement of any judgment which might be obtained in due course from this Court after a full hearing may be rendered fruitless.

I am satisfied that sufficient ground has been shown to warrant the joinder of Adway and Kritharas at this stage, on the material presently before me, and to permit the amendments to the Amended Application and Further Amended Statement of Claim in relation to each of those parties.

A submission was made by Mr Howe, who appeared for Kritharas, to the effect that there was not sufficient evidence to warrant the declaration sought against Kritharas in the SFASC to the effect that the first respondent acted as agent for Adway and Kritharas.  However, having regard to the affidavit of Nicholas Kritharas sworn on 8 October 1996, I am satisfied that there is sufficient material to warrant the raising of this allegation as being arguable.  Mr Nicholas Kritharas in his affidavit asserts that he was the General Manager of Top Snack which was the trustee of the Top Snack Foods Unit Trust, the units in which were held equally by the partners in the partnership, namely Adway and Kritharas.

In relation to Gatsios it is submitted by Counsel that the pleadings do not disclose any relevant cause of action against it but merely allege firstly that it was duly incorporated and secondly that since about 20 November 1996 it has been the trustee of the KN Trust.  There is no allegation that Gatsios was a party to the contravening conduct which took place some time before it became trustee of the KN Trust.  The purpose of seeking to join Gatsios is said to be to obtain protective relief to ensure that the assets of the KN Trust are not dissipated so as to be not available to satisfy any judgment which might be obtained.  The ACCC concedes that it will be necessary for it to amend the pleadings in order to spell out the precise cause of action alleged against  Gatsios.

Accordingly, I grant leave to add Adway and Kritharas as respondents to the proceedings.  At this stage, as I am not satisfied that any proper cause of action has been alleged against Gatsios, I refuse leave to add Gatsios as a respondent at this stage.

As to the granting of Mareva relief. I am satisfied in this case, having regard to the history of the matter which I have previously examined in an earlier judgment and the affidavit evidence of Ms O’Neill, that there is a real danger that the assets of the respondents will be diminished or totally dissipated and that therefore it is appropriate to grant Mareva relief in the terms sought in the Notice of Motion with two modifications to which I shall refer later.  I am satisfied that a sufficient case has been made out against these companies.

On behalf of Gatsios it is said that it is not a party to the proceeding and that therefore Mareva relief ought not be granted against it.

The ACCC referred me to an unreported decision of Kiefel J of this Court, in Tomlinson v Cut Price Deli Pty Ltd (unreported, 23 June 1995), where her Honour granted Mareva relief against a non-party. This decision was approved and applied by the Full Federal Court (Beaumont, Branson and Tamberlin JJ) in LED Builders Pty Ltd v Eagle Homes Pty Ltd (unreported, 22 August 1997).

In my view this Court has ample power under s 23 of the Federal Court of Australia Act 1976 (Cth) to grant the relief sought against Gatsios. The power is also a necessary incident of its general power to grant relief against a non-party to prevent that party dissipating assets which would frustrate the process of the Court by depriving the applicant of the fruits of any judgment obtained in the action: see Jackson v Sterling Industries Ltd (1987) 162 CLR 612. The Court is of course, concerned to see whether there is first: a prima facie cause of action, and second: a danger that, by reason of the assets being removed or disposed of, the applicant would not be able to have the judgment satisfied: see Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321. I am satisfied that these requirements are established by the affidavit of Ms O’Neill, earlier evidence and the previous history of the matter.

Accordingly, I am satisfied that, in addition to Mareva relief against Kritharas, it is appropriate to grant such relief against Gatsios.

One of the orders sought in relation to Gatsios relates to moneys held in a bank account described as “National Australia Bank (Rockdale) Business Cheque Account, Gatsios Holdings Pty Limited”.  The order sought is to restrain disposing of moneys from that account without giving the ACCC fourteen days notice in writing.

Mr Gatsios gave evidence that this account is used for meeting living expenses of two infants aged five and seven on a regular basis, in the order of three to four times a week, and that it would be unduly onerous and inconvenient to require fourteen days notice to be given for every such withdrawal from the account.  There is some force in this point but I think it can be resolved in a practical way by qualifying the order sought so as to permit the withdrawal of moneys from time to time from the account of amounts less than $200 in order to meet the living, maintenance and education expenses of infant beneficiaries of the KN Trust.

Another modification to the form of orders sought was in relation to the request that the affidavit by directors of Gatsios and Kritharas be filed within seven days.  In the circumstances raised before me on the hearing I am satisfied that fourteen days should be substituted.

Summary

For the above reasons leave should be granted to add Adway and Kritharas as additional respondents and for the Amended Application and the Further Amended Statement of Claim to be amended against those respondents as set out in the terms filed with the Notice of Motion.

As regards Gatsios I refuse leave at this stage to add it as a respondent in view of the unsatisfactory nature of the specific pleadings against it.

In relation to the moneys held in the National Australia Bank I modify these orders sought in the Notice of Motion by adding at the end of Order 2, the sentence, “Provided that this order will not prevent any withdrawal of funds from the said account of amounts of less than $200 from time to time for the sole purpose of the education, maintenance and support of infant beneficiaries of the KN Family Trust.”

In relation to the fourth order sought, I substitute the period of fourteen days in lieu of seven days mentioned in the second line of that order.

Accordingly, I make orders in terms of the orders sought in the Notice of Motion in  par 1(b) and (c). I make Order 2 with the addition of the proviso set out above in relation to infant beneficiaries.

I make Order 3 as sought; and also Order 4 with a modification of fourteen days in lieu of seven days. I also make Orders 5 and 6 in terms sought in the Notice of Motion.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin

Associate:

Dated:            7 November 1997

Counsel for the Applicant:	Mr P J Renehan
Solicitor for the Applicant:	Australian Government Solicitor
Solicitor for the Fourth Respondent:	Snelgrove & Partners
Solicitor for Gatsios Holdings Pty Ltd	Michael Jokovic & Associates
Counsel for Gatsios Holdings Pty Ltd:	Mr B Slowgrove
Solicitor for Nick Kritharas Pty Ltd	Grahame Howe & Co
Date of Hearing:	31 October 1997
Date of Judgment:	7 November 1997