Australian Securities and Investments Commission v Maxwell

[2003] NSWSC 1264

CITATION:	ASIC v. Maxwell & Ors [2003] NSWSC 1264
HEARING DATE(S):	19 December, 2003
JUDGMENT DATE:	19 December 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Defendants' application dismissed.
CATCHWORDS:	CORPORATIONS - MAREVA INJUNCTION - Properties acquired for speculative real estate development - investments solicited from public prima facie in breach of Corporations Act - investment projects comprised speculative real estate investments - ASIC obtained interlocutory injunctions restraining further dealings with properties - Defendants applied to dissolve injunctions. - HELD - Speculative real estate investment inherently risky - no evidence to show subject properties were commercially viable - injunctions should not be dissolved.
LEGISLATION CITED:	Corporations Act 2001 (Cth)
PARTIES :	Australian Securities & Investments Commission - Plaintiff Donald Richard Maxwell - First Defendant Business Express Success Techniques Pty Ltd - Second Defendant Oceanwalk Projects Pty Ltd - Third Defendant Procorp Investments Pty Ltd - Fourth Defendant Central Development Group Pty Ltd - Fifth Defendant The Wake (Waitara) Pty Ltd - Sixth Defendant Alliance Developments Pty Ltd - Seventh Defendant Malcolm Fortune - Eighth Defendant Coakley Associates Pty Ltd - Ninth Defendant Bankstown Project Two Pty Ltd - Tenth Defendant Drummoyne Constructions Pty Ltd - Eleventh Defendant Great Northern Constructions Pty Ltd - Twelfth Defendant Homebush Project One Pty Ltd - Thirteenth Defendant Liverpool Projects Limited - Fourteenth Defendant Mansions on Mann Limited - Fifteenth Defendant Maroubra Properties Pty Ltd - Sixteenth Defendant Miranda Villas Pty Ltd - Seventeenth Defendant Procorp Investments (Gosford) Pty Ltd - Eighteenth Defendant Zepher Pty Ltd - Nineteenth Defendant Jim Kolios - Twentieth Defendant Northern Sight Pty Ltd - Twenty-first Defendant
FILE NUMBER(S):	SC 5298/03
COUNSEL:	D.R. Stack - Plaintiff C.D. Wood - First & Second Defendants A.R. Martin (Sol) - Tenth to Fifteenth and Twenty-first Defendants
SOLICITORS:	Michael Burnett - Plaintiff Piggott Stinson Ratner Thom - First & Second Defendants Gibson Lawyers - Tenth to Fifteenth and Twenty-first Defendants

JUDGMENT – Ex tempore

1    On 20 October 2003 Austin J granted Mareva injunctions restraining a number of the Defendants in these proceedings from dealing with certain real estate assets. The orders were made by consent, ex parte orders having previously been made by Gzell J on 15 October 2003 on the application of Australian Securities & Investment Commission (“ASIC”). Minor variations to the Mareva injunctions were apparently made by Barrett J on 4 November and by Hamilton J on 28 November 2003. 2    On 1 December 2003, further orders were made by consent by Barrett J. Those orders stayed the Mareva injunctions as against the Twelfth and Fifteenth Defendants for a period of two weeks to enable those Defendants to procure, if they could, finance for the construction of the projects which they controlled. 3    The matter came back into my list on 15 December 2003. Orders were then made, in the first instance, by consent. In effect, the Mareva injunctions as affecting the subject properties were reimposed with certain changes. However, Mr A.R. Martin, who appears for the Tenth to Fifteenth and Twenty-first Defendants, later advised me that orders had been made affecting the Twenty-first Defendant by mistake in that he did not believe those orders were to be made and thus he inadvertently consented to them. 4    Mr Martin foreshadowed that he would seek to have dissolved the Mareva injunctions restraining certain of the Defendants in dealing with the properties which they control, and the matter was stood into today's list with a direction to Mr Martin's clients to file by yesterday such evidence as they wished to rely upon. One affidavit has been filed, an affidavit of Mr Collins. Mr Martin urges the Court to lift the injunctions restraining the relevant Defendants from dealing with five properties, each of which is held by one of the Defendants. The properties are at Ettalong, Soldiers Point, Gosford, Newport and Liverpool. The basis of the application is that the relevant Defendants hold those properties for the purpose of redevelopment. 5    It is alleged by ASIC that investors, being members of the public, were induced to subscribe for investment in these properties, in contravention of the Corporations Act 2001 (Cth). Each of the Defendants is a special project company, apparently, and each of these five properties is held by one of the Defendants. 6 Mr Martin submits that the Mareva injunctions restraining any dealing with those properties should be lifted because the relevant Defendants are unable to obtain construction finance for the development of those properties. Mr Martin urges that if construction finance is not obtained then there is a substantial risk that the creditors in respect of those projects will not be able to reap the benefits of their investment and, indeed, the projects may result in substantial losses. 7 ASIC opposes any relaxation of the injunctions. It says that the projects are already in obvious financial difficulties. That appears to me to be clear enough. It says that there is at least some equity remaining in the projects which the investors in those projects might be able to recover, even as the projects presently stand. However, if the remaining equity in the projects is committed to development, particularly long term development of a speculative character, then there is an appreciable risk that such equity that remains may be lost entirely or, at least, substantially reduced. The history of investment in speculative real estate development in this country over the last twenty years and the corporate crashes that have ensued with losses of enormous sums to the public certainly illustrate starkly the reality of that risk. 8 It seems to me that the critical issue for determination in the question whether or not the injunctions ought to be lifted is whether the relevant Defendants can show by evidence that, in fact, there is no substantial risk of dissipation or loss of the relevant assets, if they are permitted to go ahead with their proposals as they wish. Mr Martin, very frankly and properly, conceded that he does not have the evidence available at present to demonstrate what is the equity in these properties and what, in fact, is the commercial viability of the projects which the Defendants wish to pursue. 9 In those circumstances, it seems it me that no sufficient ground has been demonstrated for variation of the injunctions which presently affect the subject properties. That is not to say that at some future time the Defendants will be prevented from making a further application if their circumstances change. However, on the state of the evidence as it now is, it does not seem to me to be proper, nor in the interests of those ASIC seeks to protect, to make any variation to the injunctions which have previously been consented to by the Defendants. The application to vary is, therefore, dismissed. 10 The costs of this application are to be paid by the Tenth to Fifteenth and the Twenty-first Defendants.

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Last Modified: 02/19/2004