Australian Competition & Consumer Commission v Top Snack Foods Pty Ltd
[1997] FCA 380
•16 MAY 1997
CATCHWORDS
PRACTICE AND PROCEDURE - application for interlocutory relief - application for affidavit to be sworn by third respondent disclosing third respondent’s financial status - whether Court has power to grant such relief - information in affidavit relevant to any subsequent application for a Mareva injunction - consideration of principles to guide discretion to grant application for affidavit - whether there is a danger that the third respondent may dispose of assets in order to defeat any judgment that might be obtained - application granted
Federal Court of Australia Act 1976 (Cth), s 23
Jackson v Sterling Industries Ltd (1987) 162 CLR 612, cited
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, cited
AUSTRALIAN COMPETITION & CONSUMER COMMISSION - v -
TOP SNACK FOODS PTY LTD, GEORGE MANERA, NICHOLAS KRITHARAS
and SELINA MANERA
No NG 782 of 1996
Tamberlin J
Sydney
16 May 1997
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 782 of 1996
GENERAL DIVISION )
BETWEEN: AUSTRALIAN COMPETITION
& CONSUMER COMMISSION
Applicant
AND: TOP SNACK FOODS PTY LTD
(ACN 064 180 801)
First Respondent
GEORGE MANERA
Second RespondentNICHOLAS KRITHARAS
Third RespondentSELINA MANERA
Fourth Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 16 MAY 1997
MINUTE OF ORDERS
THE COURT ORDERS THAT:
A full affidavit be sworn and served by the third respondent on or before 23 May 1997 which sets out full details as at today's date, 16 May 1997, 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 third respondent, together with the number of such account and the balance therein;
(b)the name and address of any person or persons indebted to the third respondent and the amount of the debt or debts owed by such persons;
(c)an itemised inventory of any business assets owned by the third respondent;
(d)an itemised inventory of any other property, whether real or personal, owned by the third respondent or in respect of which the third respondent 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.
The third respondent pay the costs of the applicant of this application.
NOTE: Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 782 of 1996 GENERAL DIVISION )
BETWEEN: AUSTRALIAN COMPETITION
& CONSUMER COMMISSION
Applicant
AND: TOP SNACK FOODS PTY LTD
(ACN 064 180 801)
First Respondent
GEORGE MANERA
Second RespondentNICHOLAS KRITHARAS
Third RespondentSELINA MANERA
Fourth Respondent
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 16 MAY 1997
REASONS FOR JUDGMENT
TAMBERLIN J:
The applicant by Notice of Motion filed on 28 February 1997 seeks a Mareva injunction to restrain the third respondent from dealing with any real property and from disposing of the proceeds of the sale or disposition of any real property, including four specified properties at Campsie.
A further order sought is that, within a specified time, the third respondent should file and serve a verified list of documents relating to the disposition of the four specified properties; a verified list of documents relating to a
discharge of mortgage over the properties between the third respondent and his father, dated 26 May 1992; and finally an affidavit to be sworn by the third respondent which sets out particulars as to all bank or other accounts under his control, details of his debtors and of any debts due to him, an inventory of business assets, an itemised inventory of all other property and details as to whether any of his property is security for any debt.
It is in relation to the last mentioned affidavit that the dispute before me arises.
The applicant asserts that it has good prospects of success in the proceeding. The third respondent did not seek to argue that there was no prima facie case. The applicant seeks compensation and damages. The applicant also asserts that there is a real risk of the third respondent dissipating his assets prior to the conclusion of the proceedings and so defeating any award of compensation or damages.
When the matter came before me on 14 March 1997 the third respondent proffered and the applicant accepted an undertaking in terms of the Mareva injunction sought. However, that left outstanding the question of the verified lists and the above affidavit.
The third respondent asserts that the four specified properties have now been sold. It appears that all the proceeds therefrom were fully expended prior to the date the undertakings were given on 13 March 1997.
The third respondent resists an order that the affidavit be sworn by him disclosing the financial details requested, in substance, for these reasons.
There is no Mareva injunction in force because there has been an undertaking accepted in relation to the real estate and the proceeds. The real estate has been sold and the proceeds have been expended. Therefore since the affidavit sought can only go to supporting a Mareva injunction, the orders should not be made.
There is no reason to conclude in fact that there is any danger that the third respondent is likely to dispose or dissipate any assets. He asserts he has no assets. Therefore the affidavit can serve no useful purpose.
It is clear that the Federal Court has power to issue a Mareva injunction. So much was established by the High Court decision in Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 622 where Deane J said:
"Orders preventing a defendant from disposing of his assets so as to create a situation in which any judgment obtained against him would not be satisfied may be of a comparatively recent development. They have, however, become an accepted incident of the jurisdiction of superior courts throughout most of the common law world. In this country, the jurisdiction to make such orders, commonly referred to as 'Mareva injunctions', has been progressively asserted and exercised by the Supreme Courts...."
His Honour went on to affirm that the power to grant such relief in relation to a matter in respect of which the Federal Court has jurisdiction is conferred by s 23 of the Federal Court of Australia Act 1976 (Cth) which gives power:
" to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate. "
Indeed, his Honour considered that, even absent s 23, the Federal Court has such power as an incident of the general grant to it, as a superior Court of law and equity, of jurisdiction to adjudicate on proceedings before it (at 623).
The wording of s 23 is wide and general. This wide language should be given full effect and its terms should not lightly be constrained by implicit limitations.
In the present case I am satisfied that the Court has power to order the third respondent to make the affidavit sought regardless of whether or not a Mareva injunction is sought. The information sought is clearly relevant to any subsequent application that may be made for a Mareva injunction. In the present case, the applicant fears dissipation, transfer or disposal of assets and wishes to see if there are any other assets which may be disposed of.
The primary question for determination is whether there are any reasonable grounds for such a belief which would enliven the power.
The underlying principles which justify the grant of a Mareva injunction are capable of applying with equal force in an appropriate case to the type of affidavit sought by the applicant. In Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 325 Gleeson CJ said:
"I consider that Giles J was correct in taking the view that the evidence as to the nature of the scheme in which the appellant was allegedly involved, which established a prima facie case against him, was such as to justify the conclusion that there was a danger that the appellant would dispose of assets in order to defeat any judgment that might be obtained against him and that such danger was sufficiently substantial to warrant the injunction." (Emphasis added)
The question in the present case is whether the evidence discloses a danger that the third respondent may dispose of assets in order to defeat any judgment that might be obtained against him and whether such danger was sufficiently
substantial to warrant the exercise of discretion to grant the injunction.
The third respondent asserts that he gave Mr Snelgrove, his solicitor, instructions during 1996 to act for him in relation to the four home units at Campsie. He also says that he mentioned the sale of the home units to Mr Snelgrove in early 1996 but did not give instructions specifically to act on the sale of the home units till mid-May 1996. Mr Snelgrove did not give evidence in the proceedings.
On or about 17 May 1996, the applicant notified the respondents of complaints concerning franchises marketed by the first respondent and sought a written response. The respondents wrote to the applicant on 21 May and 28 May 1996, seeking an extension of time for reply and further particulars of the complaints. The applicant replied on 31 May 1996. Detailed correspondence then took place between the parties up to July 1996 when a very detailed letter, responding to the complaints, was sent to the applicant. No reply was made to this letter and on 9 August a follow-up letter was sent by the second respondent. There was no substantive response to this until 20 September 1996 when the solicitor for the applicant wrote to the first respondent stating that she had been instructed to pursue the matter by commencing proceedings in the Federal Court.
In the meantime the third respondent gave instructions to Mr Snelgrove for home units 2 and 5 to be sold. Contracts for sale were prepared on 30 May 1996. He gave further instructions on 23 October 1996 for the sale of home units 3 and 8. The former date was 13 days after the first letter from the applicant referring to the complaints. The second instruction was given one month after the letter from the solicitor for the applicant indicating that action would be taken in the Federal Court.
The dates of the contracts were 30 October 1996, 9 November 1996 in respect of two contracts, and, in the case of the last contract, 5 January 1997. The transactions were settled as to two properties on 16 December 1996. A further property was settled on 17 December 1996. The final settlement date appears to be 6 February 1997. The third respondent says that he received only $32,640 in hand as the net proceeds of the sale after discharge of mortgages to various lenders. This included a mortgage of $100,000 which he claimed to have granted to his father in May 1992.
The circumstances in which the alleged mortgage was drawn up, are to say the least unusual.
Basically the third respondent says that his sister owned a shop provided to her by their father in the early 1980's. His sister and father allowed him to collect and use the rents from that property for his own benefit provided the money was repaid. In May 1992, because no repayments of the moneys had been made by him he says a mortgage was agreed. His father, who did not own the shop, was named as the mortgagee because it is asserted he wanted to be an intermediary between the third respondent and his sister if any dispute were to arise. He says that it is customary in Greek families for the father as head of the family to act in such a role. The mortgage was prepared some time after the date which it bears. It was back-dated to 26 May 1992. Stamp duty was not paid until 23 August 1996.
The third respondent says that the mortgage was prepared on the date upon which he met Mr Woodward, his accountant. It is said Mr Woodward advised him as to the agreement for mortgage. There are photo-copies of some diary notes of Mr Woodward from May 1992 and November 1993. Mr Woodward was not called. No explanation was given for this, apart from an assertion that he was no longer the accountant for the third respondent. His notes are inconclusive and in my view cannot be given any significant weight. The applicant was unable under cross-examination to specify the exact amount of the mortgage. Nor is there any evidence that any attempt was made to claim the interest said to be payable under the mortgage which was said to be 12% reducible to 9%.
I am of the opinion that to protect the father's "interest" there is a danger that the third respondent will dispose of any other assets he may have in order to defeat any judgment which might be obtained against him. Such danger is sufficiently substantial to warrant the order sought as to the making of the affidavit to enable the applicant to consider whether it should seek an injunction to restrain disposal of any assets.
In reaching this conclusion I have taken into account the following considerations:
That the shop and the rent are said to belong to the sister but the mortgage was given to the father. The explanation proffered that the father was to be an intermediary is unconvincing.
The third respondent was not able to specify the exact amount of the advances received except to say that they were somewhere between $100,000 and $120,000.
The mortgage was only prepared two years or so ago. It was falsely back-dated. It was not stamped until August 1996. No caveat was taken out to protect the claimed interest of the father, under the mortgage, until 23 October 1996.
The timing of the instructions to Mr Snelgrove were in relatively close proximity to the first intimation by the applicant that it had received complaints and in relation to the later date, namely 22 October 1996, the instruction was one month after the solicitor for the applicant indicated that court proceedings would be initiated.
The "notes" of Mr Woodward are equivocal.
Neither Mr Snelgrove nor Mr Woodward gave evidence. They could have corroborated to some extent important assertions made by the third respondent. No explanation was given as to the absence of Mr Woodward apart form the fact that he was no longer the accountant.
Clause 14 of the affidavit of the third respondent is internally inconsistent as to the date of preparation of the mortgage. No explanation was given in evidence as to this.
The speedy disposition of the $100,000 claimed by the father and the $32,640 net proceeds received by the third respondent.
The sister and the father reside outside Australia. However, the father was in Australia in the period October 1996 to March 1997 which is the period during which the contracts for sale were signed and the transactions completed.
Accordingly, I propose to grant the application and I propose to order that:
A full affidavit be sworn and served by the third respondent on or before 23 May 1997 which sets out full details as at today's date, 16 May 1997, 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 third respondent, together with the number of such account and the balance therein;
(b)the name and address of any person or persons indebted to the third respondent and the amount of the debt or debts owed by such persons;
(c)an itemised inventory of any business assets owned by the third respondent;
(d)an itemised inventory of any other property, whether real or personal, owned by the third respondent or in respect of which the third respondent 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.
The third respondent pay the costs of the applicant of this application.
I certify that this and
the preceding eleven (11)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 16 May 1997
Counsel for Applicant: Mr I Faulkner
Solicitor for Applicant: Australian Government Solicitor
Counsel for Respondent: Mr N F Francey
Solicitor for Respondent: Snelgrove & Partners
Date of Hearing: 14 May 1997
Date Judgment Delivered: 16 May 1997
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