Bartle v On Q Securities Pty Ltd
[2018] WASC 234
•19 JULY 2018
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: BARTLE -v- ON Q SECURITIES PTY LTD [2018] WASC 234
CORAM: VAUGHAN J
HEARD: 19 JULY 2018
DELIVERED : 19 JULY 2018
FILE NO/S: CIV 2199 of 2018
BETWEEN: GIOVANNA BARTLE
Plaintiff
AND
ON Q SECURITIES PTY LTD
First Defendant
STEVEN FREDERICK BURGE
Second Defendant
ALAN JAMES CAMP
Third Defendant
Catchwords:
Practice and procedure - Application for ex parte interim injunction - Turns on own facts
Legislation:
Bankruptcy Act 1966 (Cth)
Corporations Act 2001 (Cth)
Result:
Application dismissed
Representation:
Counsel:
| Plaintiff | : | In person |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | In person |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
| Third Defendant | : | No appearance |
Case(s) referred to in decision(s):
Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Deputy Commissioner of Taxation v Hua Bank Berhad [2010] FCA 1014; (2010) 273 ALR 194
Jebb v Superior Lawns Australian Pty Ltd [2017] WASC 335; (2017) 123 ASCR 358
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105
Patterson v BTR Engineering (Aust) Ltd & Ors (1989) 18 NSWLR 319
Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188
Perth Mint v Mickleberg [No 2] [1985] WAR 117
Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76
Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110
VAUGHAN J:
(These reasons were delivered orally at the conclusion of the hearing. They have been edited to correct matters of grammar and infelicity of expression. Authorities and other references have also been footnoted rather than appearing in the body of the reasons.)
Background
The plaintiff, Ms Bartle, applies for an ex parte interim injunction by originating motion dated 10 July 2018.
Three defendants are named in the originating motion. The second defendant, Steven Burge, is Ms Bartle's former husband. They married in 2008 and have, according to Ms Bartle's evidence, been separated since at least September 2017.
The first defendant is a company, On Q Securities Pty Ltd, that is associated with the second defendant. Ms Bartle claims to be entitled to 50% of the issued shares in the first defendant. Ms Bartle also claims to be a creditor of the first defendant.
The third defendant, Alan Camp, is a legal practitioner. Mr Camp is the sole director of the first defendant. He has been its sole director since 21 October 2011.
None of the defendants have been served. Ms Bartle proceeds on an ex parte basis because she believes that, were the defendants to learn of the application, they would transfer assets, in particular the shares in the first defendant and money it holds - money indeed having already been transferred - thus frustrating enforcement of the judgment Ms Bartle seeks to secure. However, as will be seen, the interlocutory relief sought on an ex parte basis is not solely relief in the form of a freezing order. Ms Bartle seeks a range of interlocutory relief, some akin to a freezing order, but some in the nature of an interlocutory injunction available only in equity's exclusive or auxiliary jurisdiction.
The specific orders sought by way of an ex parte interim injunction are set out in a minute dated 10 July 2018. In substance, the orders sought are that:
(1)An urgent ex parte interim injunction be granted as an emergency measure pending an inter partes hearing:
(a)to restrain the first and second defendants from disposing of the income of the first defendant; and
(b)to compel the second and third defendants to continue to meet financial and contractual obligations of the first defendant to Ms Bartle and her landlord.
(2)The defendants be restrained from dealing with or transferring shares in the first defendant or the assets of the first defendant.
(3)The defendants pay the costs of the application.
Other iterations of the relief sought are found elsewhere in the papers; for example, within Ms Bartle's submissions at par 14 and in her affidavit at par 18. In some respects the relief set out there exceeds the relief applied for in the minute. For the purpose of this application, having regard to the terms of the originating motion, I consider the relief sought by reference to the orders sought in the minute.
The application is supported by an affidavit of Ms Bartle sworn 10 July 2018 and an outline of submissions of the same date. In part the affidavit comprises of a series of legal contentions and is repetitive of what is found in the submissions. Insofar as the affidavit deals with relevant matters of fact, rather than law, the factual backdrop to the application is as follows.
Ms Bartle met the second defendant in December 2006. They became engaged in mid‑2007 and married on 28 September 2008. Ms Bartle separated from the second defendant in September 2017.
The first defendant conducts a financial planning business from premises in South Perth. There are a number of staff. The second defendant is the licensee, general manager and principal financial adviser. Otherwise, the staff consist of a bookkeeper/office manager, a personal assistant to the second defendant, a responsible manager and another financial planner/consultant.
As mentioned already, the third defendant is the director of the first defendant. According to Ms Bartle's evidence, the third defendant has very little involvement in the first defendant's day‑to‑day business activities.
The second defendant became involved with the first defendant in 2008. The circumstances in which he did so are described in an affidavit of Fiona Halsey, which is attached to Ms Bartle's affidavit. Ms Halsey and her husband were the former proprietors of the business carried out by the first defendant. In substance, Ms Halsey deposes to the following effect:
(1)The first defendant was formerly known as Fairfield Financial Services Pty Ltd and Halsey Financial Services Pty Ltd.
(2)Ms Halsey and her husband caused the company to be incorporated.
(3)From March 2002 to March 2008 the company carried on a financial services business through the efforts of Ms Halsey and her husband.
(4)In around March 2008 it was agreed that the shares in the first defendant would be sold to entities associated with the second defendant and a Stephen Duckham.
(5)Specifically, in or around March 2008 it was agreed that all of the shares would be sold to Hanberg Enterprises Pty Ltd as trustee of the Sixbee Family Trust (referred to as 'Burge') and the Duckham Group Pty Ltd as trustee for the Steve Duckham Family Trust (referred to as 'Duckham').
Ms Halsey's recollection is that Burge and Duckham acquired an equal interest in the company. However, she did not recall whether the shares were transferred so that each share was held jointly by Burge and Duckham or whether each of Burge and Duckham acquired different shares (although of the same class).
On completion of the sale of the shares, the purchasers were provided with one or more share transfer forms. Ms Halsey assumed that the second defendant, Mr Burge, would have updated the ownership of the shares. However, by at least 2015 or 2016, she became aware that this had not occurred. This concerned Ms Halsey.
Ms Halsey made contact with the second defendant, who referred her to the third defendant. The third defendant assured Ms Halsey that he, the third defendant, would update the share registry with the Australian Securities and Investments Commission (ASIC). However, this has not occurred. Ms Halsey states that she has never agreed at any time with anyone that she would hold the shares in the first defendant as trustee for any of the second defendant, Duckham, the third defendant, or any entity associated with any of them.
The ASIC extract for the first defendant shows it to have two issued shares. The member is shown to be Ms Halsey; however, it is said that she does not hold the shares beneficially. As mentioned, the third defendant is shown as the sole director of On Q Securities Pty Ltd. Ms Bartle deposes to the effect that the second defendant has said to her that the shares in the first defendant continue to be in Ms Halsey's name because that suits him (the second defendant) for the moment.
While, according to Ms Halsey, the shares in the first defendant were sold to companies associated with the second defendant and Mr Duckham, Ms Bartle deposes to the effect that Mr Duckham is now out of the picture. Ms Bartle deposes that the second defendant and Mr Duckham were business partners and that business relationship had existed for many years by the time that she met the second defendant. Ms Bartle also deposes to the effect that Mr Duckham stood down as a director of the first defendant in May 2009 and that nothing has been heard from him in recent times.
Ms Bartle deposes that the second defendant became bankrupt on 1 August 2012. Apparently he remains a bankrupt because the trustee in bankruptcy has extended the bankruptcy until August 2020. The fact of the second defendant's bankruptcy perhaps explains the third defendant's presence as a director of the first defendant.
Ms Bartle was also made a bankrupt on 14 April 2014. The papers do not disclose whether that bankruptcy has ended. Ordinarily a bankruptcy finishes three years after its commencement. Accordingly, in the absence of any disclosure to the contrary, I infer that Ms Bartle's bankruptcy has ended.
Ms Bartle deposes that the second defendant, despite bankruptcy, has day‑to‑day control of the first defendant. Whether that is correct or not does not matter for today's purposes. I will proceed to consider the application for an ex parte interim injunction on the basis that Ms Bartle is able to make good her assertion that the second defendant is the de facto controller of the first defendant.
Ms Bartle gives evidence that, throughout her marriage to the second defendant, her day‑to‑day living expenses, including rent, have been met by the first defendant. Precisely how that has been done is unclear. Ms Bartle does not depose expressly to the relevant arrangements. The highest that the evidence reaches is that which is contained in a letter from the second defendant to Ms Bartle dated 11 May 2018 on the first defendant's letterhead (attachment 6 to Ms Bartle's affidavit).
The letter refers to a decline in the income of the first defendant. There is then reference to the liabilities owed and the company's cash at bank. The following is then stated:
If it were not for the director taking an extreme cut in remuneration for his services to the company and other avenues of imminent savings such as further reduction of space, the company would be very near to trading whilst insolvent.
The above is very regrettable but unfortunately beyond the control of the companies.
In such circumstances we have had to look at ways of cutting costs.
The company is of the view that you have been overpaid for your services for some time now, even since before your employment was ended.
The company board has met and have come to the conclusion that from the week beginning 21 May 2018 your payments will be reduced to $1,500 per week. There will be two separate payments - Rent $769 per week (paid directly to your landlord) and to your account $731 per week. The company will continue to pay the tax on your income of approximately $630 per week. Your gross income, that is, the cost to the company, is approximately $110,000 per annum.
As you are aware, this payment is interim only and made by the company in acknowledgment for your services to the company principally indirectly through your support of the General Manager and to allow time for you to adjust to your new circumstances.
The inference arising from the letter is that Ms Bartle has been paid as an employee. However, there is a handwritten note on the document from Ms Bartle where she says that she is not an employee. Whether that is correct or not - and whether, in any case, she has been paid as if she were an employee or not - cannot be determined on the available evidentiary materials.
Otherwise Ms Bartle deposes that prior to 2014 she was in receipt of $5,000 per week and that funds were also paid to meet her other expenses, such as utilities, HBF, insurance, car costs and so on. Rent of $1,500 per week on the premises she resided in, and continues to reside in, was also met.
It is also said, at par 98 of Ms Bartle's affidavit, that these amounts came out of the first defendant's funds and, at par 103, Ms Bartle refers to what is said to have been her 'rightful distribution' of money from the first defendant. See also par 97, which refers to Ms Bartle being on the books of the first defendant, and par 100, referring to credit cards for personal and household use being paid every month from the income of the first defendant.
Since July 2014, however, the amounts made available to Ms Bartle have reduced. The second defendant has given various reasons for that, all of which are rejected by Ms Bartle. Separately, Ms Bartle points to documentary and other evidence which shows payments of considerable funds out of the first defendant to the benefit of various parties.
In terms of the reduction in her receipt of funds from the first defendant, Ms Bartle deposes as follows:
101… from July 2014, [the second defendant], in collusion with [the third defendant], began systematically cutting down my weekly allocation money, either paying me late or not paying me at all and then refusing to reimburse me - citing, 'They had no money in the company left after they had paid all of the company's expenses', in a bid to paint a picture of poverty, so that [the second defendant] could eventually carry out his threat to cut me off financially as follows.
102By October 2017 [the second defendant] had cut my weekly money down from: $5,000 per week; to $3,800 per week; to $2,800 per week; to $1,900 per week; to $1,500 per week and finally down to $1,169 per week, where it now is, and also began refusing to pay any of the items [as to daily incidental living expenses] he was previously paying out of company funds ...
Accordingly, at the moment Ms Bartle is receiving a weekly amount of $1,169 per week. It is unclear whether that is being paid by the first defendant. The tenor of Ms Bartle's affidavit is that all payments are sourced through the first defendant. But a letter dated 28 August 2017 from the second defendant to Ms Bartle (appearing at attachment 5 to Ms Bartle's affidavit) suggests that the payments are being made via the Burge Family Trust.
In any case, it is clear that one of the key complaints of Ms Bartle is that she is not receiving distributions to which she considers herself to be entitled, out of the assets of the first defendant, and that the second and third defendants are refusing her access to the first defendant's funds and income to meet her expenses, contrary to what occurred in the past.
A lot of other material appears in Ms Bartle's affidavit. It is unnecessary to refer to that material other than in passing. Ms Bartle deposes, among other things, to: (1) certain alleged irregularities when the third defendant acted for her in connection with proceedings that led to her bankruptcy; (2) financial records that she has been provided with; and (3) inconsistencies between statements made by the second defendant in the context of divorce proceedings with his former wife (a wife who preceded Ms Bartle) and the apparent objective facts. I understand these materials to potentially go to Ms Bartle's contention that there is a real risk of asset dissipation on the part of the defendants.
The nature of the claim advanced by Ms Bartle
Ms Bartle has filed an ex parte originating motion, a supporting affidavit and submissions. Also filed is a minute of proposed orders, a certificate of urgency and an undertaking as to damages.
I will return to the undertaking in considering the balance of convenience. Mention should, however, be made now that the undertaking is not in the usual form and is plainly deficient. It commences by claiming an existing legal and equitable right to the first defendant (par 1), makes mention of making application for an interim injunction as a member of the first defendant by operation of law (par 2) and coming to court with clean hands acting in the best interests of the company as a whole (par 3).
The undertaking goes on to state as follows:
4I claim that the granting of an urgent ex parte Interim Injunction contemplated by the Plaintiff does not in any way impede the normal running of [the first defendant] or diminish the revenue of the company to the detriment of its Members.
5In fact quite the reverse: I claim that the granting of an urgent ex parte Interim Injunction will help to safeguard the income of [the first defendant] in its entirety until Trial for the benefit of both the Plaintiff and the Defendants, and cause a detriment to neither.
6The only likely detriment of the Supreme Court granting me an urgent ex parte Interim Injunction, is the inconvenience it will cause the bankrupt Second Defendant ... who will be restrained from improperly dissipating and/or transferring the assets of [the first defendant] and warehousing them to his sole benefit and use, in contravention of sections 588FB, FDA, Corporations Act 2001, and section 588FB Corporations Act 2001.
7In the unlikely event that [the first defendant] suffers any damage caused by the granting of this application, I undertake that the cost of these damages should be borne from mine and the Second Defendant's joint funds in [the first defendant], which will be in plentiful supply, when funds are no longer being transferred out to other related companies, Trusts or entities for [the second defendant]'s sole benefit and use.
Thus, as I read it, the undertaking is only to meet damages from funds in the first defendant. Accordingly, the undertaking assumes that Ms Bartle has an entitlement to those funds. It assumes her success in the proceedings against the defendants. But an undertaking as to damages would only be called on if Ms Bartle were unsuccessful. In those circumstances Ms Bartle would not have any entitlement to the funds held by the first defendant. It follows that the purported undertaking as to damages in the form as proffered is worthless.
Otherwise I recite what has been filed to explain what has not been filed.
Missing from the papers as filed is any writ or other originating process setting out the nature of the claim that Ms Bartle advances against the defendants. That is a substantial omission. There is no freestanding right to seek an interim or interlocutory injunction. The power to grant an interim or interlocutory injunction is not to be exercised by reference to unconstrained notions of what appears to be just. It must be exercised by reference to the substantive rights sought to be vindicated and the final relief claimed by the applicant in the proceedings.[1]
[1] Sino Iron Pty Ltd v Mineralogy Pty Ltd [No 2] [2017] WASCA 76 [130].
The papers suggest that Ms Bartle seeks to agitate four categories of claim against the defendants. I raised these categories with Ms Bartle in the course of her oral address. Ms Bartle did not suggest that there were any other claims that she propounds. The four categories of claim as identified are as follows:
(1)A claim that Ms Bartle is entitled to 50% of the issued shares in the first defendant; and, thereby, to 50% of the first defendant's assets, income and the assets transferred by the first defendant (As to that claim, see Ms Bartle's written submissions at pars 3 and 4, her affidavit at pars 13, 14, 50(c), 51 and 52, and the undertaking as to damages at pars 1 and 2.)
The precise basis on which the claim is made is unclear. The suggestion appears to be that Ms Bartle, as fiancée and later wife of the second defendant, had an expectation that she would receive an equitable share transfer in the first defendant in much the same way as the second defendant's former wife had in another company, Hanberg Enterprises Pty Ltd, on their separation and divorce prior to Ms Bartle's marriage to the second defendant (see Ms Bartle's affidavit at pars 41 to 43).
(2)A claim that Ms Bartle is a creditor of the first defendant (see Ms Bartle's affidavit at pars 103 to 104).
The claim as creditor is made on the basis money is owed being the difference between what Ms Bartle claims is her 'rightful distribution' out of the first defendant's assets and what has, in fact, been received.
(3)Ms Bartle makes a claim alleging oppressive and unfairly discriminatory conduct in the affairs of the first defendant, a claim that invokes s 232, s 233 and s 234 of the Corporations Act 2001 (Cth) (see Ms Bartle's affidavit at pars 15 and 18 and the undertaking as to damages at par 2).
(4)In respect of transfers of assets by the first defendant, a series of claims are advanced (see Ms Bartle's affidavit at par 21 and Ms Bartle's written submissions at par 20). These comprise:
(a)an unreasonable director related transaction claim pursuant to s 588FDA of the Corporations Act 2001 (Cth);
(b)an uncommercial transaction claim pursuant to s 588FB of the Corporations Act 2001 (Cth); and
(c)a transfer to defeat creditors claim pursuant to s 121 of the Bankruptcy Act 1966 (Cth).
As to the last tranche of asserted claims, Ms Bartle claims that she has standing to pursue claims on behalf of the first defendant (see Ms Bartle's affidavit at pars 16 and 17). Ms Bartle relies on s 237 of the Corporations Act 2001 (Cth) and asserts that she is acting with leave granted pursuant to s 237. That is self‑evidently misconceived. It is not enough that Ms Bartle asserts that she has a good case to be granted leave. Leave must, in fact, have actually been granted. There is no evidence of any grant of leave under s 237.
Principles on an application for interlocutory injunction
Among other authorities, Ms Bartle referred me to the statement of principles enunciated by Beech J, as his Honour then was, in Twinside Pty Ltd v Venetian Nominees Pty Ltd[2] and the High Court decision in Australian Broadcasting Corporation v O'Neill.[3] By reference to those authorities and others such as Mineralogy Pty Ltd v Sino Iron Pty Ltd[4] it is well‑established that:
(1)The two main inquiries that arise are whether the plaintiff has made out a prima facie case and whether the balance of convenience favours the grant of the injunction.
(2)The first inquiry as to a 'prima facie case' does not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed. It is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of a status quo pending the trial.
(3)How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks.
(4)The second inquiry is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.
(5)Whether an applicant for an interlocutory injunction has made out a sufficient prima facie case and whether the balance of convenience favours the grant of such relief are related, not independent questions. For example, as the apparent strength of the plaintiff's case diminishes, the balance of convenience moves against the making of an order.
[2] Twinside Pty Ltd v Venetian Nominees Pty Ltd [2008] WASC 110 [7] - [12].
[3] Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57 [65] - [71].
[4] Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 [87].
On occasions, the principles are summarised in terms that there are three things to be shown: (1) a serious question to be tried; (2) that the plaintiff will suffer irreparable injury for which damages will not be adequate compensation; and (3) that the balance of convenience favours the grant of the injunction. Recently, in Sino Iron Pty Ltd v Mineralogy Ltd [No 2], the Court of Appeal proceeded on the basis that the question of adequacy of damages is an aspect of the balance of convenience.[5] I will take the same approach.
[5] Sino Iron Pty Ltd v Mineralogy Ltd [No 2] [131].
Also on the subject of the adequacy of damages, as a consideration relevant to balance of convenience, it should be recalled that in Sino Iron Pty Ltd and Mineralogy Pty Ltd [No 2] the Court of Appeal stated:
… in equity's auxiliary jurisdiction, the question of whether the plaintiff will suffer irreparable injury for which damages will not be adequate compensation involves no more than a consideration of whether the injury cannot properly be compensated in damages, or by an order for accounts or some other interim remedy. The question of whether the injury cannot properly be compensated in damages involves a consideration of whether it is just in all the circumstances that the plaintiff be confined to their remedy in damages.[6]
[6] Sino Iron Pty Ltd v Mineralogy Ltd [No 2] [131].
Thus the key question is whether it would be just in all the circumstances of the case to confine Ms Bartle to a remedy in damages.
Standing back, the question of whether or not to grant an interlocutory injunction involves balancing the risk of injustice. The injustice which might be suffered by the defendants if the injunction is granted and Ms Bartle later fails at trial is balanced against the injustice which might be suffered by Ms Bartle if the injunction is not granted and she later succeeds at trial.[7]
[7] See Twinside Pty Ltd v Venetian Nominees Pty Ltd [11].
It is, however, first necessary for an assessment to be made of the strength of the plaintiff's probability of ultimate success. This impacts in two ways: first, in determining whether Ms Bartle has made out a prima facie case of sufficient strength to justify the grant of an interlocutory injunction; and second, to enable the strength of the case to be taken into account in the assessment of the balance of convenience and justice.[8]
[8] Mineralogy Pty Ltd v Sino Iron Pty Ltd [23], [102], [117].
In part, as I have mentioned, the application for an interim injunction was apparently informed by the notions that underpin an application for a freezing order. In particular, Ms Bartle sought to restrain the defendants from dealing with or disposing of the assets and income of the first defendant. Ms Bartle also sought to restrain any dealings in the shares of the first defendant.
In the present circumstances, by reference to O 52A r 5 of the Rules of the Supreme Court 1971 (WA), there are essentially two conditions before the discretion to make a freezing order is enlivened. I must be satisfied that: (1) Ms Bartle has a 'good arguable case' against the defendants on an accrued cause of action that is justiciable in the court; and (2) there is a danger that a prospective judgment be wholly or partially unsatisfied because assets otherwise available to meet judgment debt might be removed or otherwise disposed of, dealt with or diminished in value.
Satisfaction of the two conditions does not mean that a freezing order will be made as of right. The interim remedy is discretionary. The court conducts a balancing exercise. The overarching question is whether, in all the circumstances, the case is one in which it is in the interests of justice to grant the freezing order. The court will consider the likely consequence to the applicant if the assets are dissipated and the hardship that the freezing order will inflict on the defendant. The rights of third parties who may be affected will also be borne in mind.[9]
[9] See Deputy Commissioner of Taxation v Hua Bank Berhad [2010] FCA 1014; (2010) 273 ALR 194 [10].
The question of what amounts to a good arguable case was set out by Beech J, as his Honour then was, in Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd.[10] The test is to be understood in the sense of a case which is more than barely capable of serious argument and yet not necessarily one which the judge believes to have a better than 50% chance of success.[11] It is equivalent to the general law requirement that the applicant must establish that it has a reasonably arguable case on legal and factual matters.[12]
[10] Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188.
[11] Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [143].
[12] Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [144].
The danger that the prospective judgment will be wholly or partially unsatisfied may be inferred from the nature of the case. For example, if there is a good arguable case of fraud or dishonesty, then the court may infer a risk of dissipation of assets in the absence of a freezing order.[13] Where that is not the case, there must be evidence to establish the danger of asset dissipation. The authorities express the relevant danger in terms of 'real risk' that, by reason of dissipation, the judgment or prospective judgment will go unsatisfied.[14]
[13] See eg Patterson v BTR Engineering (Aust) Ltd & Ors (1989) 18 NSWLR 319 [326].
[14] See eg Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 [26]; Perth Mint v Mickleberg [No 2] [1985] WAR 117 [118]; Patterson v BTR Engineering (Aust) Ltd & Ors [321] - [322], [327]; Deputy Commissioner of Taxation v Hua Bank Berhad [8].
Disposition
The starting point in determining whether Ms Bartle has made good her case for the ex parte interim injunction as sought is to consider whether she has established a prima facie case; and, if so, to assess the strength of that case. I will do so by considering each of the identified causes of action in turn.
First is the claim that Ms Bartle is entitled to 50% of the issued shares in the first defendant; and, thereby, to 50% of the first defendant's assets, income and the assets transferred by the first defendant.
There is no entitlement to the shares as against Ms Halsey. Ms Halsey deposes to selling the shares to entities associated with the second defendant and Mr Duckham. How then does Ms Bartle seek to establish an entitlement?
Both in written and oral submissions it was said, in substance, that Ms Bartle had a 50% share in the company. It was said that the second defendant was trying to deny her proprietary right. Ms Bartle said the company was the company's 'main joint marital asset' as shared between herself and the second defendant.
Ms Bartle put reliance on the fact that, on acquisition, the second defendant had said that it, the first defendant, would be 'our' asset (meaning Ms Bartle's and the second defendant's). Ms Bartle also relied on the fact that assets had been received by the second defendant's former first wife on her separation and divorce from the second defendant. The argument, in substance, as Ms Bartle said in oral submissions, was that 'half of the asset pool … [in context referring the first defendant] … was mine'.
Having reviewed the papers, the evidence gets no higher than what is deposed to at pars 41 to 43 of Ms Bartle's affidavit. There Ms Bartle states:
41At the time that [the second defendant] bought [the first defendant] he was director of Burge and Duckham Financial Services Pty Ltd ('Burge and Duckham') trading as On Q Prosperity ('On Q Prosperity') with his then business partner Mr Stephen Rodney Duckham ('Mr Duckham') since 28th February 1994 and was going through an acrimonious divorce with his former wife of 14 years ...
42Mr Burge agreed to give his former wife ... $2,000,000 in assets and $3,250 per month in child allowance plus school fees, uniforms and books, allegedly because 'Mr Duckham did not want ... solicitors auditing any of their companies' financial affairs'.
(a)I expressed my concerns to [the second defendant] that by giving his former wife all their marital assets and committing himself to such a high level of monthly child support, he could potentially expose us to financial risk if there were a downturn in the business, because we did not own our own home or any other investments.
(b)[The second defendant] replied that 'We now had On Q Securities, which is all we needed to secure our financial future and that it was better to pay her out and get her completely out of our lives'.
(c) [The second defendant] also told me that 'I did not need to worry because we would quickly build up our own asset base' because Burge and Duckham had gone from being a small company earning $1,000,000 per annum, to $5,000,000 per annum and that in their last financial year of 2006 the company had turned over $10,000,000 with a staff of 45 people; and that their projected future earnings would eventually be $50,000,000 per annum.
43Therefore, I had an expectation that, as his fiancée and then as his wife, at some point I would receive an equitable share transfer in [the first defendant] in much the same way as his former wife ... had received in Hanberg Enterprises Pty Ltd.
That evidence is insufficient, in my view, to establish a prima facie case that Ms Bartle has any present entitlement to or interest in the issued shares in the first defendant. Ms Halsey holds the shares. She does so as a trustee. Prima facie Ms Halsey holds the shares as trustee on behalf of the purchasers. It is open, of course, for the purchasers to have transferred their interest to others. Then Ms Halsey would hold on trust for those new beneficiaries. But nothing in the evidence referred to is sufficient to establish a prima facie case that the second defendant caused the relevant purchaser to transfer any interest in the shares to Ms Bartle.
The evidence that I have recounted is little more than a casual conversation. There is nothing within it that suggests an intention that it have contractual effect; and, even if there was a contractual intention, there is, within the suggested conversation, nothing by way of consideration which could mean that there was a binding agreement. It could be no more than an intended gift, where the donor has not done all that is necessary for the donor to perfect it, meaning that equity would not enforce the gift.
To the extent that Ms Bartle rests her claim on an expectation that, as the second defendant's former wife received property from the second defendant, then so too would she, that claim is misconceived. It is entirely normal for there to be a division of property following the end of a marriage. A former husband and wife will ordinarily conduct matrimonial property proceedings. The Family Court of Australia and the Family Court of Western Australia have broad powers to effect alteration of property interests under s 79 of the Family Law Act 1979 (Cth). The court may make such orders as it thinks appropriate to alter the interests of the parties to a marriage with respect to their property and indeed the property interests they hold in associated entities. However, that is not a jurisdiction that may be exercised by this court. In this court it is necessary that Ms Bartle establish a prima facie case that she has a present entitlement to, or interest in, the issued shares in the first defendant. The evidence falls far short of being able to do so.
Ms Bartle claims, in addition to the shares in the first defendant, an interest in or entitlement to 50% of the first defendant's assets, income and the assets transferred by the first defendant.
That claim is misconceived. Even if Ms Bartle could establish an entitlement to or interest in the issued shares in the first defendant, it does not follow that, as a member, Ms Bartle has any legal or equitable interest in the assets and income of the first defendant. The first defendant is a separate legal entity. It holds its property for itself. It would be contrary to fundamental principles of company law to suggest that a company holds its property on trust for its shareholders.
The second claim, that Ms Bartle is a creditor of the first defendant, falls with the first claim. Ms Bartle's claim that she is a creditor is dependent on her establishing an entitlement to or interest in 50% of the issued shares in the first defendant. The claim as creditor is as to deprivation of what is, on Ms Bartle's case, her rightful distribution as a shareholder. But, insofar as the evidence falls short of Ms Bartle establishing a prima facie case as to a present entitlement to or interest in the issued shares in the first defendant, there is no such rightful distribution of which Ms Bartle has been deprived.
The third claim, grounded in allegations of oppressive or unfairly discriminatory conduct in the affairs of the first defendant, also falls with the lack of evidence to support the contention that Ms Bartle has a present entitlement to or interest in 50% of the issued shares in the first defendant.
There is a further problem with the oppression claim. Let it be assumed, contrary to my finding, that Ms Bartle has established a prima facie case that she is presently entitled to or has an interest in 50% of the issued shares in the first defendant. Even so, as the ASIC extract unequivocally shows, Ms Bartle is not registered as the member. The only person registered as a member is Ms Halsey. On the current state of the authorities, that precludes Ms Bartle having standing to pursue an oppression action.
The issue is discussed by Kenneth Martin J in Jebb v Superior Lawns Australian Pty Ltd.[15] At pars 151 to 177, his Honour discusses two core propositions. The first is summarised at par 151:
The first proposition is ... to the effect that, in order to viably prosecute a statutory oppression action under Pt 2F.1 of the Corporations Act to a trial, a plaintiff needs, as a matter of necessary standing, to fall within one or other of the specified categories under s 234 of the Corporations Act and then to remain so until completion of the action. The most straightforward of the s 234 categories for that standing is that the plaintiff be a member (ie, shareholder) at the commencement of a statutory oppression action. The requirement is uncontroversial and is now well established.
[15] Jebb v Superior Lawns Australian Pty Ltd [2017] WASC 335; (2017) 123 ASCR 358.
The second of his Honour's propositions is summarised at par 153:
The second key proposition ... is a recognition of the overall supremacy of the share register kept recording a corporation's members, in terms of the Corporations Act's regime as regards any pursuit of a statutory oppression action under Pt 2F.1. Considerations emerging from the equitable ownership of shares through trusts and the like simply do not present as considerations of materiality in that corporate regulatory environment.
In short, equitable ownership is insufficient to enable a person to advance a cause of action for statutory oppression. The applicant must establish standing in terms of s 234 of the Corporations Act2001 (Cth). The evidence of Ms Bartle is insufficient to do so. In particular, insofar as membership is determined by entry on the register of members, that is clearly not satisfied; the only person entered on the register of members is Ms Halsey. None of the other subsections within s 234 have any prima facie application.
Accordingly, in my view, there is no prima facie case as to the claim grounded on statutory oppression or unfairly discriminatory conduct in the affairs of the first defendant.
That leaves the fourth grouping of claims. These are all misconceived.
An unreasonable director related transaction claim may only be pursued when a company is in liquidation; that is, it is a claim to be pursued by a liquidator in a winding-up. So, too, an uncommercial transaction claim is only to be pursued by a liquidator in a winding-up. The first defendant is not in liquidation. It is not being wound up. A claim based on those contentions is clearly doomed to fail.
As for the claim based on s 121 of the Bankruptcy Act 1966 (Cth), that is concerned with transfers by a person who becomes bankrupt. In the present case, however, Ms Bartle's concern is expressed as to transfers by the first defendant. The first defendant, as a company, cannot ever become a bankrupt. Bankruptcy is for natural persons. In any case, as with the corporate antecedent transaction clawback claims, a claim under s 121 of the Bankruptcy Act 1966 (Cth) would be pursued by a trustee in bankruptcy rather than a person in the position of Ms Bartle. Moreover, it would ordinarily be pursued in a court with bankruptcy jurisdiction rather than this court.
For these reasons I conclude that Ms Bartle has not established a prima facie case as to any of her articulated claims. There is, on the evidentiary materials presented to me, no serious issue to be tried.
It follows that, in terms of the ordinary principles that apply on an application for an interim interlocutory injunction, there is no basis for an interlocutory restraint. I am not satisfied that there is a sufficient likelihood of success to justify, in all the circumstances, an interim or interlocutory restraint pending trial or further order.
Similarly, in terms of the principles that apply in the related area of interim or interlocutory restraint by way of a freezing order, I am not satisfied that Ms Bartle has demonstrated that she has a good arguable case.
In the circumstances it is not necessary to consider the balance of convenience at any length. Nor, so far as a freezing order is sought, the risk of dissipation.
I should record, however, that, absent a strong risk of dissipation, damages would be an adequate remedy. As to the risk of dissipation, while the business practices of the second defendant and the third defendant are, on Ms Bartle's evidence, highly questionable, there is not a good arguable case of fraud or dishonesty such as would, in my opinion, lead me to infer a risk of dissipation. Nor is there specific evidence to establish a danger of asset dissipation.
In addition, as I have observed, the undertaking as to damages is inadequate.
Were there to be a prima facie case sufficient to justify the interim restraints sought, contrary to my findings, I would not accept that the balance of convenience favours the grant of those interim restraints.
In circumstances where the undertaking as proffered is worthless, the injustice which might be suffered by the defendants if the injunction were granted, but Ms Bartle later failed at trial, is outweighed by the injustice which Ms Bartle will suffer if the injunction is not granted and, despite my views as to there not being a prima facie case, Ms Bartle later succeeds. That is all the more so given the debilitating effect the restraint as sought would have on the day‑to‑day business operations of the first defendant.
An undertaking as to damages is commonly described as the price that must be paid to obtain an interim or interlocutory injunction. The undertaking as proffered suggests that Ms Bartle is not willing to pay that price.
Conclusion
For these reasons Ms Bartle has not made out her case for an interim injunction as sought. Accordingly, the application will be dismissed. The formal orders of the court will be that the plaintiff's application by ex parte originating motion dated 10 July 2018 is dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
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ASSOCIATE TO JUSTICE VAUGHAN1 AUGUST 2018
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