Caboche v Southern Equities Corp Ltd

CABOCHE & ORS v SOUTHERN EQUITIES CORP LTD & ORS

[2001] SASC 55

Full Court: Olsson, Duggan and Williams JJ

1................ OLSSON J......... I agree that this appeal must be dismissed, for the reasons expressed by Williams J.

2................ DUGGAN J....... In my view the appeals should be dismissed. I agree with the reasons of Williams J.

3................ WILLIAMS J.... These are appeals from decisions of a single Judge of this Court firstly, with respect to a Mareva order (extending to strangers to the action) and secondly with respect to an order requiring three personal defendants to file affidavits listing their current assets. The orders were entered by Debelle J on 3 November 2000 upon an application instituted by the respondent England on 11 February 2000.

The appellants Carindale Land Corporation (“CLC”), Fairoak Pty Ltd (“Fairoak”), Topsfield Pty Ltd (“Topsfield”) and Hastings Finance Pty Ltd (“Hastings Finance”) are not parties to the action and the appeals raise a question as to the extent of the Court’s jurisdiction to make an assets preservation order which restrains strangers to the action from dealing with their assets. The appeals also put in issue the Court’s powers to require Ms Caboche and Messrs Craig Bond and John Bond on oath to disclose their assets before any liability has been proved against them.
The appellants Craig Bond, John Bond and Delores Caboche are defendants (with others) to this action which has been brought by Mr England as liquidator of Southern Equities Corporation Ltd (“SECL”) (formerly Bond Corporation Holdings Ltd) in respect of the defendants’ alleged participation in a series of fraudulent transactions whereby works of art owned by SECL and its subsidiary Bond Corporation Pty Ltd, have been taken from their rightful owners. Mr England is seeking to recover the art works and damages. To date his efforts have enabled him to take possession of a portrait of Captain Cook (which has subsequently been sold by Mr England for $5.4 million). The liquidator is still proceeding with claims involving a further twelve paintings and damages and interest - in all upwards of $10 million.
The order under appeal restrains the appellants CLC, Fairoak, Topsfield and Hastings Finance Finance (together with Messrs Bond and Ms Caboche and a solicitor Mr Redmond), from dealing (except to a limited extent) with CLC or its assets. Mr England contends that if the action is successful the property in question should be available to satisfy a judgment against Mr Craig Bond who is the beneficial owner of the shares in CLC. The assets preservation (or Mareva) order was made upon the footing that there is a risk of a dissipation of assets which represent the interest of Mr Craig Bond in CLC (and in particular some land situated at Carindale). The orders were made against Ms Caboche and Mr John Bond upon the basis that they are directors of all companies bound by the order. Mr Craig Bond was a director of Carindale until 2 August 1994. The order against CLC, Fairoak, Topsfield and Hastings Finance Finance was made by reason of the part which these companies appear to have played in the distribution of profits stemming from Carindale land sales. On the hearing of this appeal there was a dispute as to whether Mr England as a potential judgment creditor of Craig Bond could demonstrate an ability to access this property if the plaintiff is successful at trial - particularly in view of the interests of Fairoak, Topsfield and Hastings Finance who claim to have been developing the land on their own account.
CLC is involved in the development of land at Carindale (a suburb of Brisbane Queensland). It is involved to the extent that it is the registered proprietor of the land and it has borrowed monies on mortgage for the development purposes. It also facilitates settlement on the sales of allotments by executing the transfers to the purchasers. The company provides this service without charge. Its borrowings in part are guaranteed by John Bond and Topsfield. Debelle J was of the view that the land is being developed by a joint venture between the appellants Hastings Finance, Fairoak and Topsfield (but not CLC). Upon the provisional findings of Debelle J, John Bond is responsible for the management of the operations of CLC and of the joint venture. The order under appeal allows development and sale of the land to continue but requires the proceeds of sale to be retained in the bank account of CLC with Bankwest, Perth.
On one view, the orders made against the strangers to the action should not be necessary in view of the breadth of the Mareva order against the shareholder and the directors of CLC. However, counsel for Mr England upon the appeal informed the court that the orders against the strangers had been sought as a precautionary measure bearing in mind their history of involvement in asset stripping of CLC as undermentioned.
In addition to the order made against Ms Caboche by reason of her directorship of CLC, Debelle J, by separate order, restrained Caboche from dealing with funds upon her account at the Challenge Bank. Complaints with respect to that order in her notice of appeal were not argued.
The material upon which Debelle J acted (and which is now to be considered for the purposes of this appeal) is that put forward upon affidavit on behalf of Mr England but with only limited material being filed in opposition. There are unanswered questions as to source of funds coming to the hands of CLC; these answers ought to be within the knowledge of one or more of the personal appellants but they have frankly informed the Court that they are reluctant to disclose this information to the liquidator before trial. The Court has yet to hear the defendants’ case and to consider under the strict conditions of a trial, the admissibility of evidence which has been assembled for interlocutory purposes. No finding has been made as to the bona fides of the appellants (or any other of the defendants). Although Mr England has put forward what is apparently a strong circumstantial case, Debelle J has only been required to express provisional views based upon material which may be incomplete and capable of further explanation at trial. However, the liquidator has examined Messrs Bond and Ms Caboche under ss 596 A and B of the Corporations Law (Cth) or equivalent powers under earlier legislation (including enquiry as to the witnesses’ assets) and their answers as relevant were available to Debelle J . His Honour’s doubts as to the accuracy of this evidence was one basis for the order requiring formal verification of complete lists of assets in aid of the relief sought by Mr England.
A principal ground of appeal is that the facts disclosed by Mr England do not satisfy the conditions identified in Cardile v LED Builders Pty Ltd (“Cardile”) (1999) 198 CLR 380 as the basis for making a Mareva order against strangers to the action. The appellants contend that unlike Cardile, this is not a case in which the defendants were divesting themselves of property to which they or any of them is beneficially entitled. On the contrary, the appellants contend that Mr England is only seeking to enjoin the divestment of assets of CLC which it holds as a trustee (on behalf of a joint venture of which it is not a member) and which would not be available to satisfy any judgment obtained against Mr Craig Bond.
Debelle J took the view that CLC is a company with substantial assets (including land under development). The relationship between that company and Hastings Finance Finance, Topsfield and Fairoak has not been formally documented although the appellants claim that (as evidenced by taxation returns) a joint venture for land development has been put in place in accordance with accounting advice given by Mr Mews a Western Australian chartered accountant. However, Mr Redmond, a Brisbane solicitor in his affidavit of 10 October 1999, describes his changing instructions from Mr John Bond with respect to a proposed joint venture agreement which was never signed. It is questionable as to how far Mr Mews’ advice was implemented.
Debelle J inferred that CLC is the legal and beneficial owner of the land which it has made available to the joint venture in order to generate profits for the Bond family. The arrangement is such that CLC derives no benefit from the realisation of the development potential of the land. Upon this appeal, the appellants sought to justify this state of affairs by their contention that the activities of the joint venturers have had the practical effect of going some way towards relieving CLC of some onerous obligations. The contrary view (for which Mr England contends) is that the joint venture is being operated for the purpose of financially denuding CLC for the advantage of the Bond family as profit in the land is realised.
The Valuer General’s valuation of the land as at 30 June 1989 is $4,999,000. The land is being developed in stages and is likely to yield substantial profits. Debelle J has traced the source of various monies which have become available to CLC. In early 1995 Mr Jurg Bollag made funds (US $3.2million) available to the Bond interests via a company, (Stoneham), in British Virgin Islands and then another company (Dampier) incorporated in Texas. The companies were each incorporated upon the instructions of Craig Bond in January 1995 to Mr Philpott, a Texas lawyer who has been examined in these proceedings. The money then passed through the trust account of a solicitor (Redmond) in Brisbane and part of this money (approximately $A2.1 million) was applied toward the purchase of the Carindale land and eventually treated as belonging to CLC. A total of A$4.3 million was made available to CLC as loans or investments which Debelle J described as being made to “cloak a payment to Bond interests”. The circumstances which prompted Mr Bollag to make funds available is one of the unanswered questions to which I have already referred.
CLC, according to its statutory returns, shows that it did not act as a trustee in 1994 or 1995. It is described as a land developer in its taxation returns. There is a body of evidence which supports the conclusion that CLC holds the land in question on its own account.
On 21 November 1995 the solicitor Redmond paid $798,667.71 to CLC. For the purpose only of this application, it is conceded by Messrs Bond and Caboche that some $300,000 of this amount represented proceeds of two paintings which gives rise to a claim against them (see Barnes v Addy (1874) LR 9 Ch App 244). Redmond has been unable to assist as to the source of these monies and believes (but without independent recollection) that his instructions regarding the transaction must have come from John Bond. However, it appears from the reasons given by Debelle J that Craig Bond:
“...instructed Philpott that a person wished to invest money in land in Queensland and that the money was to be paid to Stoneham and then to Dampier and then to a bank account in Queensland.”
Having derived monies from Redmond’s trust account and borrowed monies against the land as working capital, CLC together with Hastings Finance, Topsfield and Fairoak (under the direction of Mr John Bond) is party to a course of conduct under which profits said to be generated in the hands of the joint venture (comprising Hastings Finance, Topsfield and Fairoak) are being distributed to members of the Bond family as loans which are subsequently forgiven or written off as irrecoverable.
Distribution of the income of the joint venture is at the discretion of Mr John Bond. In practice the profits of the joint venture have been paid to Hastings Finance Finance which has also borne losses. (We were told by counsel that there was some perceived taxation advantage in passing profits through Hastings Finance by reason of its tax losses). Despite being the owner of this land CLC makes the land available to the joint venture for development without any reward.
In summary as relevant to this appeal the facts appear to be:
(a).... There has been an unexplained mixing of funds in the hands of CLC which does not operate as a trustee but treats these funds as its own. Mr Craig Bond and Mr John Bond each appear to have been instrumental in securing these funds and directing them into CLC via a Brisbane solicitor who from time to time acted for Messrs Craig and John Bond. Mr Craig Bond was still in contact with Philpott in May 1995 at which time Craig Bond informed Philpott that the Carindale development was not going well. By letter dated 16 June 1995 Philpott informed John Bond (at CLC’s Perth Office) that the advance was to be treated as an investment. Philpott was then purporting to be conveying a resolution of the Directors of Dampier.
(b).... Profits generated from the development of land belonging to CLC are being paid out via entities controlled by John Bond and Caboche to members of the Bond family upon the authority of a discretion exercised by John Bond pursuant to the terms of an unwritten joint venture agreement. This practice denies any benefit to CLC of the unrealised profit associated with its land acquisition.
(c).... The abovementioned amount of $798,667.71 has not been brought to account in the financial statements of CLC according to the report of Mr Morris, an investigating accountant retained by Mr England. Moreover the primary source documents (in particular the bank statements of CLC and the agreement for raising funds from Suncorp Metway - an independent lender) are difficult to reconcile with the appellants’ explanations based upon the evidence of Mr Mews as to what was intended and upon the evidence of Ms Caboche. There is no evidence of a legally enforceable agreement to support the supposed rights of the joint venturers.
Debelle J made the following observations:
“Hastings Finance Finance lends money which is ultimately received by members of the Bond family. The directors of Hastings Finance Finance are John Bond and Ms Caboche. There is no direct evidence of the shareholders of Hastings Finance Finance. In his affidavit Mr Mews said that Hastings Finance Finance was the main operating company in the Bond family group and that shareholders were Argos Pty Ltd as trustee for the Jody Bond Investment Trust, Redriff Pty Ltd as trustee for the Eileen Bond Investment Trust, Topsfield Pty Ltd as trustee for the JB Investment Trust, Tambar Pty Ltd as trustee for the Craig Bond Investment Trust and, Nemrod Pty Ltd as trustee for the Susanne Bond Investment Trust. If those shareholdings are correct, it is readily apparent that Hastings Finance Finance has been created for the purpose of providing monies to individual members of the Bond family. Tambar Pty Ltd, a defendant in this action, is controlled by Craig Bond.
John Bond is responsible for the management of Hastings Finance Finance and the application of its income. Most of its income is lent to the trusts of members of the family of Alan Bond. John Bond decides to whom Hastings Finance Finance will make the loans. The loans are then written off or forgiven. John Bond has the authority to decide which loans are irrecoverable. In the years ending 30 June 1996, 1997 and 1998, substantial loans totalling approximately $17.3 million have been made to entities associated with the Bond family. All but $1.2 million of these loans have been written off. As Ms Caboche admitted in the course of being examined, that is “a fairly extraordinary state of affairs...”

and

“...instead of Carindale receiving the profit from the development and sale of its land, the profits are diverted to Hastings Finance Finance of which John Bond and Ms Caboche are directors. John Bond then decides what loans to make to the various trusts for the benefit of the members of the Bond family and later, as a director of Hastings Finance Finance, decides if the company will forgive or write off those loans....”

and

“...the only asset of Carindale is being dealt with by a consortium of companies controlled by members of the Bond family and managed and directed by John Bond and Ms Caboche and the profits which that land is capable of realising are being diverted from Carindale to members of the Bond family. This conclusion is entirely consistent with the affidavit evidence of Mr Mews, a chartered accountant who gave advice to the joint venture. He said that his instructions were that the Carindale land was to be regarded as an asset to be developed for the members of the Bond family.”

The order fashioned by Debelle J does not restrict commerce in any way. Those interested are at liberty to continue with the land development but the proceeds of sale are effectively frozen so that the distribution of funds to the members of the Bond family or otherwise has been suspended for the time being. The order allows for some exceptions (for example to enable this action to be funded). If there is jurisdiction to make the assets preservation order, the balance of convenience in favour of protecting Mr England’s position is clear; the only disadvantage occasioned by the Mareva order is that the flow of discretionary payments to the Bond family is suspended.
It is not in dispute for the purposes of this appeal that Mr England has a substantial cause of action against the defendants (and in particular Craig Bond) and that Mr England has demonstrated a case sufficiently arguable to warrant impermanent injunctive relief to protect his position if other necessary conditions are met.
In the event that Mr England is successful against Craig Bond, he or his Trustee in bankruptcy will have access to his shares in CLC to meet the judgment debt. If necessary, steps can be taken to wind up that company and gain access to its underlying assets. It may be that strictly speaking, the exact nature of Craig Bond’s entitlement to the funds derived from the solicitor’s trust account at his direction has been obscured as monies were passed from one account to another and eventually treated (upon the analysis made by Debelle J) as belonging to CLC.
The fact that Craig Bond has arranged his affairs in a way which creates difficulty in identifying precise legal relationships does not mean that he (or his Trustee in bankruptcy) cannot recover these underlying assets which represent the placement of monies at his direction - whether these receipts by CLC be characterised in its hands as loans, gifts, investments or trust monies provided by Craig Bond.
The Court is not required for the purpose of this application to determine the ultimate rights of the parties (and Debelle J has not purported to do so). However, applying the principles of Jones v Dunkel (1959) 101 CLR 298 to the unanswered questions to which I have already referred, the facts as they emerge (at least for the purposes of this appeal) are clear. Indeed the appellants base their arguments upon a version of the facts which is without foundation if the evidence is left in its present state. By reason of the appellants’ reluctance to put all their cards on the table at this stage, I do not consider that they can now make complaint as to the conclusions which in the view of Debelle J were available. There is overwhelming evidence of there being a danger of assets being dealt with by the appellants so that the Court’s processes will be frustrated. Upon the whole of the evidence at present available it may be concluded that the directors of Carindale together with Hastings Finance Finance, Topsfield and Fairoak are exercising power to shift profits away from CLC to the Bond family. The evidence suggests that these profits properly belong to CLC of which Craig Bond beneficially is the only shareholder. (One share is held in trust for him).
The parties were on common ground in their reliance upon Cardile. The appellants developed an argument which sought to apply the facts of Cardile to the circumstances of the present case. However, the facts of the two cases do not bear much resemblance to each other and little is to be gained from such an exercise. Nevertheless the underlying legal principle of Cardile may be applied.

In Cardile (par 57) Gaudron, McHugh, Gummow and Callinan JJ in a joint judgment said:
“What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word “may”, be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which:
(i).... the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including “claims and expectancies”, of the judgment debtor or potential judgment debtor; or
(ii)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 relation to Mareva orders against non parties the joint judgment also commented (par 53):
“...Why, if some proceedings are available, have they not been taken? Why, if proceedings are available against the third party and have not been taken and the court is still minded to make a Mareva order, should not the grant of the relief be conditioned upon an undertaking by the applicant to commence, and ensure so far as is possible the expedition of, such proceedings? It is difficult to conceive of cases where such an undertaking would not be required....”
The essential thrust of Mr England’s case is that if the appellants had previously engaged in asset stripping, they might continue the practice. Kirby J in this respect draws attention to stable doors where the horses have bolted (see Cardile at par 90). At par 121 Kirby J also said:
“To secure an asset preservation order in a case such as the present, it will be necessary for the party seeking it to show, in addition to the conditions ordinary to the grant of relief injunctive in nature that (1) there is a danger that the non-party will dispose of relevant assets or property in its possession or under its control; and (2) that the affairs of the actual or potential judgment debtor and the non-party are closely intermingled, and that the actual or potential judgment creditor has a vested or accrued cause of action against the non-party or may otherwise become entitled to have recourse to the non-party, its property and assets to meet the claim.”

And at par 127:

“In many cases of disputed entitlement and contentious legal claims, it would be wholly unreasonable to impose on the actual or potential judgment creditor the obligation of establishing, in an application for such interlocutory orders, all of the propositions that would be necessary eventually to gain access to the diverted assets or property in later and different proceedings. To the extent that the non-party affected by the order was completely innocent of the diversion of assets and property, a greater measure of satisfaction would be required that such claims would, ultimately, be successful. But where (as here) the diversion was “blatant” and the non-parties were far from “innocent”, it was open to the Federal Court to conclude that resolute action was required....”

Counsel for Mr England informed us that in view of the remarks in Cardile he stood ready to formulate a claim against CLC if the Court so required but his client was reluctant unnecessarily to add a party to this litigation. It is not difficult to identify a claim in respect of the repatriation to Australia of the proceeds of art works after they had been fraudulently taken from SECL or its subsidiary.
At first instance the present appellants did not press the formality of joinder as a party of CLC as being necessary. Although the appellants now argue that the company should be joined, I consider that for the purposes of the appeal, justice will be done by treating the appellants as bound by the approach which they took at first instance (see Transcript of argument p 562). I reach this conclusion bearing in mind that the existence or absence of proceedings against CLC is a matter which is only relevant to discretionary considerations which must be brought to account in deciding whether a Mareva order can be justified (cf Cardile par 53). If it is unnecessary to join CLC then it is likewise difficult to see why proceedings against Topsfield, Fairoak or Hastings Finance should have to be now taken. The cause of action against all corporate appellants would be based upon the same course of conduct. I reject the appellants’ submission as to the need to join additional parties.
The appellants contend that the Court is bound to recognise the rights of the joint venturers as third parties to receive the profits from the sale of the land and that the order now under appeal wrongly interferes with the enjoyment of those rights. In Galaxia Maritime SA v Mineralimportexport: (1982) 1 WLR 539, the English Court of Appeal held that if a Mareva order would interfere with the performance of a contract between a third party and a defendant, then the rights of the third party ‘must clearly prevail over the plaintiff’s desire to secure the defendant’s assets for himself against the day of judgment.’ (see per Kerr LJ at 542).
In my opinion the principle in that case is applicable to protect the legal position of an innocent third party - such as the outside lender Suncorp Metway. However, the joint venturers appear to have no right in law which requires recognition. On Mr England’s case the non party appellants are party to a “non commercial exercise” designed to make funds available at the discretion of Mr John Bond from the property of CLC to members of the Bond family and without regard to the legal rights associated therewith. The appellants have been unable to identify any joint venture agreement enforceable at law which binds CLC to continue its association with the other appellant companies and which binds it to suffer the diversion of further profits upon the sale of its land.
All appellants in one way or another have joined in using or exercising a power of disposition of the profits from land sales which CLC in the interests of its shareholder ought to insist upon retaining as its own. These profits will contribute to the value of Craig Bond’s shareholding which in turn will help satisfy any judgment debt of Craig Bond. Proof of the appellants’ activities are sufficient to satisfy the first condition quoted from the joint judgment in Cardile (ie exercise of power to dispose of available assets) as the basis for jurisdiction. Process is available against CLC to satisfy the second condition mentioned in Cardile and may also be available against the other corporate appellants if they are party to the misapplication of profits from land sales. It is not now necessary to investigate in any detail the way in which a trustee in bankruptcy might approach the recovery of funds for the benefit of Craig Bond’s estate (cf Kirby J in Cardile - par 127 quoted above).
During argument upon the appeal, counsel for the appellants placed some reliance upon the fact that the corporate structure surrounding CLC was put in place before Mr England disclosed his claim in terms of the present action. However, it is not part of Mr England’s case that the manipulation of assets within the complex corporate structure has been undertaken in order specifically to defeat Mr England. Indeed the affidavit of the accountant Mr Mews would suggest that his advice in recommending a particular corporate structure was directed towards taxation and stamp duty considerations. Nevertheless, the modus operandi of the appellants is such that, if allowed to continue, their collective activity will deplete the pool of assets available to satisfy a judgment in the present action in favour of the plaintiffs - if it is obtained against Craig Bond. It is not a case in which Mr England needs to allege fraud. He need go no further than point to the systemic diversion of funds away from CLC in circumstances where there is no reason in law why the arrangement should continue. There is no finding that the corporate structure or the relevant transactions are shams; on the contrary Debelle J has identified the obligations of Mr John Bond and Ms Caboche arising under the Corporations Law upon the basis that the various appellant companies are carrying out operations in accordance with the appellants’ contentions. It is of the essence of the decision made at first instance that nothing is before the court which might justify the actions of Carindale’s directors as responsible company officers and nothing which would enable the joint venturers to insist upon the further flow of funds and nothing which would prevent CLC from selling land exclusively on its own account and retaining the profit.
In my opinion it has been demonstrated that each of the appellants has shown to be sufficiently “interested” in the subject matter of the present Mareva order to justify the order being made against each appellant in aid of the administration of justice or to prevent the frustration of the Court’s processes. (cf Cardile pars 42 and 44).
During oral argument on this appeal, counsel for Mr England was prepared to present an alternative argument that the evidence discloses a deliberate blurring of the rights to a bundle of assets He points out that this would be sufficient to justify a Mareva order (see Cardile pars 46 and 47). This was not the way in which the matter was approached by Debelle J. The appellants object to this submission being considered. In my opinion it is unnecessary to pursue that argument.
In my opinion the appeals fail with respect to the Mareva order.
It is next necessary to consider the order under appeal as to affidavits. The order requires the three personal appellants to disclose on oath assets in which they have any kind of interest and to state whether assets are held solely or jointly. Particulars are required of any joint ownership. The order requires the deponent to address his or her assets as they stand at the date of the affidavit (which is to be made within 28 days services of the order).
The order requiring Messrs Bond and Ms Caboche to file affidavits as to their assets can be justified upon two bases:
(i).... as ancillary to and in aid of the Mareva order (see Bekhor & Co Ltd v Bilton [1981] QB 923 and
(ii)in aid of the process of discovery upon which the Court had embarked (with unsatisfactory results) in the examination of Messrs Bond and Ms Caboche abovementioned. The authorities undermentioned which support this course must be considered in the light of the particular factual situation.
In the course of his examination Craig Bond gave evidence that he knew nothing about the company Dampier Inc and yet it subsequently emerged that Craig Bond instructed a friend, Mr Peter Philpott, to take steps on his behalf to incorporate the company. The monies supplied by Mr Bollag passed through companies (including Dampier) with which Craig Bond was closely associated.
In the course of his examination Mr John Bond also claimed to have little knowledge of Dampier but the solicitor Mr Redmond painted a different picture. According to Debelle J:
“...He received instructions from John Bond concerning Dampier early in 1995. John Bond saw Redmond in Brisbane. He told him that a company called Dampier, which had incorporated in one of the United States of America, was interested in establishing a joint venture for the development of the Carindale land. He said that Dampier could be contacted through a Mr Peter Philpott in Fort Worth, Texas. Redmond says that he neither spoke to Philpott nor contacted him in any way. Although he now has no independent recollection of doing so, Redmond prepared a loan agreement between an unnamed lender and Carindale. It is reasonable to infer for the purpose of this application that the lender was Dampier. The loan agreement was not executed. John Bond informed Redmond that Dampier would pay $4.3 million into Redmond’s trust account on 2 March 1995 and that that sum was to be paid in turn to Suncorp Metway in payment of the first instalment of the purchase price. On 2 March 1995, the sum of $4.3 million was deposited in Redmond’s trust account. Redmond says that he had no other knowledge as to the source of the sum of $4.3 million.
On 16 June 1995 Philpott sent a letter to John Bond at Carindale at its office in Perth stating that the directors of Dampier had resolved to convert the loan into an investment in the joint venture and to forgive the accrued interest on the loan. There is a document purporting to prove that the resolution was made on 12 June 1995. This is consistent with Philpott’s evidence that in May 1995, Craig Bond told him that the Carindale development was not going well and that it would not be possible to repay Dampier the money it had lent Carindale. It was decided to convert the loan to an investment in the joint venture to develop the land. Subsequently, Dampier agreed to forego its interest in the joint venture. Later, on a date which Redmond cannot recall, John Bond instructed Redmond to prepare a joint venture agreement between Fairoak, Topsfield and Hastings Finance Finance. Dampier was not a member of the joint venture as John Bond had told Redmond that it was no longer to be a party.”
In the course of her examination Ms Caboche stated on oath that:
(a).... the only money she held in the bank account is $12000 held in a cash management account;
(b)that she had no bank account with any bank overseas; and
(c).... she had no assets outside Australia.
As summarised by Debelle J the evidence obtained from records provided by Bank officers and a solicitor, Cole was:
“(a).. that, since about August 1995, Ms Caboche has had a savings account with the Bank of Montreal in Canada.
(b)that, on 12 February 1996, the sum of $US37053.31 ($50000 Canadian), payable to Ms Caboche, was received by the Royal Bank of Canada and transferred to the Bank of Montreal at its branch at Prince Albert, Saskatchewan on or about 27 February 1996;
(c).... that, on 15 June 1998, Ms Caboche instructed the Bank of Montreal to transfer $200000 (Canadian dollars) from her account to the trust account of Cole & Co, solicitors in Perth, that account being with the ANZ Bank at its branch at 77 St Georges Terrace, Perth;
(d)that the transfer of the sum of $200000 was made in accordance with Ms Caboche’s instructions; and
(e).... that Ms Caboche has from time to time instructed Mr Cole to invest the funds received into his trust account, the last investment being a deposit of $250852.91 on 15 July 2000 with Challenge Bank at its branch in Perth, Western Australia. The deposit was made for the period of 12 months maturing on 15 July 2001.”

(This evidence led to the order abovementioned with respect to the monies in the Challenge Bank).

Counsel for Mr England contends that in view of this evidence it was relevant to establish the assets of Messrs Bond and Ms Caboche in aid of an anticipated Mareva order against the assets of the three personal appellants. Although counsel for the appellants placed emphasis upon the role of Mr John Bond and Ms Caboche “in their capacity” as company directors, it should not be overlooked that they are also defendants in the action. Undoubtedly the ability to exercise the powers of a director were useful to Messrs Bond and Ms Caboche and added to the effectiveness of their control of monies passing through the bank account of CLC. However, the allegations made against them are not in any particular capacity except to the extent that Mr England relies upon the apparent breaches of their statutory responsibilities as directors to demonstrate the way in which they have wielded power.
In Bax Global(Australia) Pty Ltd v Evans (1999) 47 NSWLR 538 Austin J identified the Court’s authority to make an order for discovery of assets as an aid to the framing of the terms of an anticipated Mareva order. His Honour said at 544-545:
“Now that Cardile’s case has defined more precisely the source of the jurisdiction to make the Mareva orders themselves, some inferences can be drawn as to the Court’s jurisdiction to make ancillary disclosure orders. Since the source of the jurisdiction to make Mareva orders is the Court’s inherent power to prevent abuse of its processes and stultification of the administration of justice by the removal of assets from the plaintiff’s reach, the Court must also have the power to order disclosure of the nature and location of particular assets or assets of a class so that the Mareva relief is effective and not oppressive. As Robert Goff J pointed out in A v C (at 959), if the plaintiff does not know the number and location of (say) the defendant’s bank accounts, a Mareva order in respect of bank accounts generally could be oppressive both to the defendant and to the bankers who are required to act in accordance with it, especially where there is more than one account or several defendants. Without information about the nature and location of the defendant’s assets, the plaintiff may be unable to make the risk assessment which is necessary in order to give the undertaking as to damages, or if the undertaking is given, it may lead to an unexpected exposure. Robert Goff J concluded, as do I, that considerations such as these point to the conclusion that in the special cases where the court decides to make Mareva orders, it may make such disclosure orders as are necessary to ensure that the Mareva jurisdiction is properly and effectively exercised. While the power to do so does not depend upon the statutory discovery and interrogatory procedures. Cardile indicates (as I have mentioned) that these procedures should be considered as alternative methods of compelling disclosure, where they are available.”
In Australia Competition & Consumer Commission v Top Snack Foods Pty Ltd & Ors (Unreported, 16 May 1997 FCA) Tamberlin J said:
“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 the present case the order can be justified upon a basis not dissimilar to that upon which an order of discovery of assets was made in the Court by Lunn AJ in Eljay Pty Ltd v Hodby (1988) 142 LSJS 472 at 474. Such an affidavit will facilitate the framing of an order (if sought) as to which specific assets (to which the appellants may lay claim) should be the subject of some future Mareva order. Although the Court was told that the Mareva orders now in force were sought with respect to the activities of Messrs Bond and Ms Caboche as directors of one or more of the four appellant companies and more generally against Mr Craig Bond as a shareholder, the terms of the original application are not so limited. Further and more extensive orders could be justified by the terms of the application of 11 February 2000 and by the evidence which has emerged. The appellants have available to them a pool of money which they appear to have been applying without any regard to legal right. Bearing in mind the shortcomings in the evidence of the three personal appellants upon their examination, it is appropriate that there should be available in convenient form, a summary of their assets as the starting point for overseeing the existing Mareva order. The provision of such a summary may also be a preliminary step to a supplementary application seeking an order to preserve any assets of CLC to be found in the hands of the three personal appellants.

In my opinion, the appellants are correct in their submission that the exercise of jurisdiction to order an affidavit as to assets at this stage must be linked to an existing Mareva order or one which is at least in contemplation. Such an affidavit may be of use in providing a starting point for the supervision of the order to ascertain whether it has been breached (see Bekhor v Bilton (supra) at 952). It will also enable the terms of a proposed order to be more adequately framed in order to avoid embarrassment when in principle the court has reached the conclusion that such an order would be appropriate. (see A v C [1981] QB 956 at 959-960).
In addition to these two situations, it would also seem that the court has jurisdiction to go a step further and require an affidavit of assets where the applicant anticipates that the defendant may dispose of assets and requires the affidavit in order better to assess that danger (and of course the consequences of the usual undertaking as to damages which an order would require). The reasonableness of the applicant’s apprehension will then provide the jurisdictional basis for an affidavit by way of discovery as a first step in the process of seeking a Mareva order (see Top Snack Foods - cited above).
The Court’s power before final judgment to order affidavits as to assets is not at large although the Court has a broad discretion. The foundation of the jurisdiction is the need to prevent judgments of the Court from being rendered ineffective in such cases (Bekhor v Bilton at 941 per Ackner LJ). Debelle J asserted in his reasons that the Court will in the exercise of its discretion make such an order when it is just and convenient so to do. The appellants take issue with the breadth of that statement but His Honour was clearly speaking in the context of promoting the purposes for which a Mareva order may be granted.
Although in his reasons of 14 September 2000 Debelle J dealt with the question of discovery of assets before resolving the application for a Mareva order it appears from subsequent reasons of 27 October 2000 (concerning the working out of orders under his earlier reasons) that His Honour was then exercising the Court’s power as ancillary to a Mareva order. The order as to affidavits which was eventually entered on 3 November 2000 was one which complemented the Mareva order which was entered concurrently. Should it transpire that one of the personal appellants disclosed some interest in the monies derived from Mr Bollag or to any of the Carindale land, then Mr England might wish to approach the Court regarding the moulding of an order better suited to protecting the relevant assets.
In my opinion, the discovery order now under appeal appropriately accompanies the Mareva order in the light of the manipulation of assets and the unsatisfactory answers so far provided by the three personal appellants. The provision of affidavits may be a first step towards the application for further Mareva orders against the personal appellants.
I conclude that the orders for disclosure of assets upon oath were within the Court’s jurisdiction and properly made in the exercise of a discretion.
There are three appeal notices before the Court filed by different parties. It is convenient to address in an omnibus fashion the gravamen of the appellants’ complaints as contained in the notices of appeal and as developed in oral argument. The flaws in the appellants’ contentions may be identified as follows:
1...... The joint venturers have no right in law to continue to derive profit from the sale of the Carindale land which belongs to CLC. The appellants are therefore unable to put forward the interests of Topsfield, Fairoak and Hastings Finance Finance as standing in the path of a Mareva order.
2.The personal appellants have not been sued in a representative capacity. The orders made against John Bond and Dolores Caboche have been made by reason of their directorships but not in that capacity. The orders have been made against them (together with Craig Bond) as defendants in the action by reason of the power which they wield as directors or former directors or otherwise and in light of their use of such powers to strip CLC of its assets. The application of 11 February 2000 (as now relevant) is that Messrs Bond and Ms Caboche “be restrained from dealing with CLC or its assets...”. The power which is being restrained is that which they severally and collectively exercise - whether under lawful authority or otherwise. It is this exercise of power (so as to denude CLC) which provides one basis for enlivening the jurisdiction.
3...... In his reasons Debelle J refers to CLC as being “an asset of Craig Bond”. This is a convenient global reference to the interests of Mr Craig Bond in the shares of the company and in the various monies which have been made available to the company by his solicitor or at his direction. It is also a reference to the Carindale land and its development potential and to the right which is available to Mr Craig Bond as a shareholder to secure the winding up of the company and to derive a dividend therefrom. The appellants are of course literally correct in their submission that CLC is an entity in its own right and that it holds its assets on its own account.
4.The order for affidavits was ancillary to the Mareva order to preserve the value of the shareholding in CLC and its assets. Insofar as it may transpire from the affidavits that the personal appellants are claiming to own property in which Carindale arguably has an interest, it may be appropriate for some supplement to be sought to the present Mareva order. The order for discovery will facilitate the supervision of the existing order as well as pointing up the need for some further order.
5...... The Bond family has no right to the profits to be made from the sale of the Carindale land. These profits belong to CLC. The Mareva order does not alter the status quo.
In my opinion the appeals should be dismissed.

[2001] SASC 55

8 March 2001