Cardile & Ors v LED Builders Pty Limited

[1998] HCATrans 346

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S61 of 1998

B e t w e e n -

PAUL CARDILE, LUCY CARDILE and ULTRA MODERN DEVELOPMENTS PTY LIMITED

Appellants

and

L.E.D. BUILDERS PTY LIMITED

Respondent

GAUDRON J

McHUGH J

GUMMOW J
KIRBY J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 7 OCTOBER 1998, AT 10.22 AM

Copyright in the High Court of Australia

MR T.M. JUCOVIC, QC:   May it please the Court, I appear with my learned friend MR D.J. HAMMERSCHLAG, for the appellants.  instructed by Banki Haddock Fiora)

MR T.E.F. HUGHES, QC:   May it please the Court, I appear with my learned friend, MR A.J. GRANT, for the respondent. (instructed by Speed and Stracey)

GAUDRON J:   Yes, Mr Jucovic.

MR JUCOVIC:   This appeal concerns the grant of orders in the nature of Mareva injunction against the three appellants.  The orders, in effect, with exceptions which are presently irrelevant, restrained the three appellants in dealing with their assets until further orders.  The orders are found, your Honours, at pages 330 and 333 of the appeal book volume 2.  The order at 330 was continued by the order at 333 until further order.

GAUDRON J:   That usual undertaking as to damages ‑ ‑ ‑

MR JUCOVIC:   Yes, your Honour.

GAUDRON J:    ‑ ‑ ‑ extends to parties, but does not extend to third parties.  Is that correct, in the Federal Court?

MR JUCOVIC:   Yes, I think that is correct, your Honour.

GUMMOW J:   I think there is a practice note which brings in third parties, and if there is, we had better know about it.

MR JUCOVIC:   Yes, I will check that, your Honour.  There was an undertaking as to damages given, and I do not think there is any dispute between the parties before your Honours that it was given to the present appellants.

MR HUGHES:   That is so.

GAUDRON J:   Yes, I see.  And it certainly extends to these people who are not parties to the main proceeding, as it were.

MR JUCOVIC:   Yes.  Your Honours, the proceedings were proceedings between the present respondent and a company called Eagle Homes for infringement by Eagle Homes of copyright in plans of the respondent.  Liability has been found and there has been an account of profits being sought.  There has been a trial of that issue, presently reserved, and no judgment in a monetary sum exists between the respondent and Eagle Homes.

The appellants’ connection with Eagle Homes has to be looked at in relation to each of the appellants.  Mr Cardile is a director of Eagle Homes, Mrs Cardile is not.  Mr and Mrs Cardile are shareholders of Eagle Homes.  They also, the judge found, control another company called Ultra Modern Developments Pty Limited, which is the third appellant.

The connection which they had in relation to the assets and the conduct of the business of Eagle Homes was that two dividends which were of $400,000 and $800,000 were paid out of profits available for the payment of dividends.

GAUDRON J:   They were paid and not merely credited?

MR JUCOVIC:   I have to be more precise than that, your Honour.

GAUDRON J:   Yes.

MR JUCOVIC:   They were certainly declared ‑ ‑ ‑

GAUDRON J:   I thought they were credited to the account.

MR JUCOVIC:   ‑ ‑ ‑ and then credited to a loan account.

GAUDRON J:   So money did not actually pass hands?

MR JUCOVIC:   Money did not actually pass.  The evidence revealed 30 June 1996 shareholders loan accounts had increased to a sum of $200,000, so to the extent that they had been credited to a loan account, the loan account had been discharged pro tanto to a sum of approximately $200,000, so far as the evidence disclosed as at 30 June 1996, your Honour.

McHUGH J:   Was there not a finding of fact by the trial judge that the purpose of the declaration of the dividends was more probably than not to safeguard the dividends against the claims of outside creditors?

MR JUCOVIC:   That is so, your Honour.  The purpose of the company was motivated by the existence of the proceedings brought against Eagle Homes by the respondent in these proceedings.  There is a finding to that effect.

McHUGH J:   You have really to conduct the case on the basis that – or, do you accept that you have to conduct the case on the basis that your clients have organised their affairs, so far as they legally can at all events, that nothing – that so far as they can, they will safeguard their assets against the claims of the respondent?  Do you accept that?

MR JUCOVIC:   I do not accept it entirely, your Honour.

McHUGH J:   You do?

MR JUCOVIC:   No, I do not.

McHUGH J:   You do not?

MR JUCOVIC:   No.  I accept that Eagles Homes has, by three acts, organised its affairs in such a way as there may be assets that would otherwise be available for the payment of its creditor.

KIRBY J:   Do you accept the assertion in Mr Hughes’ submission, paragraph (7), that, the conduct of your clients, “as provisionally found by the primary judge and the Full Court, would constitute a species of fraud”?

MR JUCOVIC:   No, I do not, your Honour.

McHUGH J:   That rather begs the question, does it not?

MR JUCOVIC:   It begs the question, your Honour.  It begs the question.

KIRBY J:   Why does it beg the question?

MR JUCOVIC:   Because it does not involve – because what this order avoids analysing is what is the species of conduct of the appellants and whether that species of conduct gives rise to any particular claim or remedy in the hands of any particular person.

KIRBY J:   Yes, but it is suggested that it is being done to strip the defendant of assets that would otherwise be available to satisfy a judgment.  Do you accept that?  It sounds awfully like it on my understanding of the facts.  I mean, we can spread jam over these things.  We can couch them in nice words but that seems to be the bottom line.

MR JUCOVIC:   Your Honour, it may or may not have given rise to claims against the appellants either by the respondent or some other person which may or may give rise to the payment of a monetary sum as a personal liability or may or may give rise to the need to the avoidance of title to assets that are in their hands, but to say that it is a species of fraud assumes some underlying obligation to the respondent in these proceedings and conduct which is a breach of that underlying obligation.  It may well be ‑ ‑ ‑

GUMMOW J:   What you are putting in a way is evocative in a way of the situation in the Hospital Products litigation, plenty of fraud maybe, not necessarily this particular remedy.  That is what the case ultimately turned on.  Absent money judgment not necessarily the other remedies.

MR JUCOVIC:   That is so, your Honour, and the ‑ ‑ ‑

KIRBY J:   My question did not presuppose that the remedy would be available.  I was simply trying to get the characterisation of the factual foundation.  It does not necessarily follow even if it be fraud.

MR JUCOVIC:   Yes.

KIRBY J:   The remedy which has been granted is available by law.

MR JUCOVIC:   Yes.  If I could ‑ ‑ ‑

GAUDRON J:   Well, if it was done with the purpose of defeating any order made by the court with knowledge of the likely order, I suppose you might be in a different territory, would you?

MR JUCOVIC:   Your Honour, this is not a case where there has been granted an injunction to restrain quia timet, the passing of a particular asset to the appellant.  Nor is it a case where it is said that the conduct was in breach of an order that had already been made by a court in the nature of a Mareva injunction in the nature of an asset preservation order, in respect of which it could be said that the appellants were aiding and abetting some form of contempt.  The nature of an asset preservation order does not involve, on the part of a third party, any action against a third party, prior to any order being made of which they have notice, any actual remedy.

GAUDRON J:   There is an asset preservation order here against the actual main respondent, if I could call it that, to the proceedings.

MR JUCOVIC:   That is so, your Honour.

GAUDRON J:   There would not be much doubt that if the present appellants were to assist it in breaching it, that certain consequences would flow.

MR JUCOVIC:   There is no doubt about that, your Honour.

GAUDRON J:   The question then is, what is the purpose of further orders?

GUMMOW J:   Where can I find the preservation order against the actual immediate party?

MR JUCOVIC:   There are a couple of orders made, your Honour.

GUMMOW J:   Because in a way, that is the starting point.

MR JUCOVIC:   Yes, thank you, your Honour.  Justice Emmett made an order against Eagle Homes in these very proceedings.

GUMMOW J:   Yes.  Is it 287?

McHUGH J:   There is one at 259, I think.

MR JUCOVIC:   Yes, it is at 287, your Honour.

GUMMOW J:   Is that order still in force?
MR JUCOVIC:   That is still on foot, your Honour.  There is an earlier order made by Justice Whitlam at page 128 which dealt with specific assets.

GAUDRON J:   That is page 128?

MR JUCOVIC:   Page 128 of volume 1, your Honour.

KIRBY J:   That was made after a contested hearing, was it?

MR JUCOVIC:   The order at 259 was made after a contested hearing – I am sorry.  The only contest at the hearing was the form of the exceptions, and that is dealt with in Justice Emmett’s judgment.

GUMMOW J:   Wait a minute; the order at 128, is that a final order, where it is said an undertaking as to damages concerns an interlocutory order?

KIRBY J:   That is made by Justice Whitlam.

MR JUCOVIC:   That is so.  In form it appears to be a final order ‑ ‑ ‑

GUMMOW J:   It looks like a final injunction.

MR JUCOVIC:   Yes.

GUMMOW J:   That would be fairly extraordinary, would it not?

MR JUCOVIC:   There is no noting of an undertaking as to damages although there is one at page 130.  I was incorrect, the form of the usual undertaking as to damages extends to parties adversely affected by the order.  Your Honour will see that at page 130.

GUMMOW J:   Yes.  It is a very brave person who gives that sort of undertaking, though.

MR JUCOVIC:   Your Honour, the substantial order - in answer to your Honour Justice Kirby’s question, there was an application to expand, as it were, the orders made by Justice Whitlam.

GUMMOW J:   …..that answer, but at 120, is that a final injunction?

MR JUCOVIC:   In the form it appears to be, your Honour.

GUMMOW J:   That is not what was in ‑ ‑ ‑

GAUDRON J:   Subject to the liberty to apply.

GUMMOW J:   Yes, subject to the liberty to apply.

MR JUCOVIC:   In the form it appears - - -

GAUDRON J:   Only during the vacation.

MR JUCOVIC:   Your Honours might note that it was made on 23 December 1996.

GUMMOW J:   Yes, that is no excuse for not doing these things properly in the Federal Court.

KIRBY J:   Well, I read “for” as during the vacation at any time or on three days notice at other times.  It is an “or” there.

GUMMOW J:   People get punished for contempt of these orders.  You ought to be clear what they are.

MR JUCOVIC:   Yes, your Honour. 

GUMMOW J:   So is the order at 128 which seems to be still on foot, is that right?

MR JUCOVIC:   The order at 128 is still on foot, your Honour.  The order at page 259 and 260 is still on foot and the issue before Justice Emmett ‑ ‑ ‑

GUMMOW J:   Page 259 is undoubtedly interlocutory.

MR JUCOVIC:   It is undoubtedly interlocutory.

GUMMOW J:   Is that still on foot.

MR JUCOVIC:   That is still on foot, your Honour.

GAUDRON J:   And were there undertakings as to damages with respect to that order as well?  It seems to be that there was with respect to the order made by Justice Whitlam by reason of the sealing of the usual undertaking.

MR JUCOVIC:   Yes.  Your Honour, although I appeared at the hearing of this, I did not appear for Eagle Homes.  There does not appear on the face of it to be an undertaking as to damages.  I would assume there is one.

KIRBY J:   They may be recorded in the transcript.

MR JUCOVIC:   They may be recorded in the transcript.

GUMMOW J:   There may be something in the rules that says it is assumed that it is given.

MR JUCOVIC:   Yes, and your Honour the issue so far as Eagle Homes was concerned before Justice Emmett was dealt with at pages 271 and 274 of Justice Emmett’s judgment and the undertakings were given and the only issue was with the form of the exceptions to the rule and there was a debate, your Honour, as your Honours would see, and there was no appeal against Justice Emmett’s order against Eagle Homes.  There was a debate about whether or not Eagle Homes should have access to its assets to pay for the further conduct of the proceedings which remained to be heard at first instance before the Federal Court.  His Honour said they had but he was not willing to allow access to assets for the purpose of the conduct of any appeal.

GAUDRON J:   And that was not appealed?

MR JUCOVIC:   There was no appeal as to that and then his Honour turned to the question of relief against my clients, the present appellants, starting at 274.  Your Honour, Ultra Modern Homes connection with Eagle Homes was that it – there was evidence before the court that after a while plans become obsolete in the sense that they no longer become attractive for sale and from - Ultra Modern Homes, which is controlled by Mr and Mrs Cardile, conducted business in relation to plans, new plans, which had been brought into – which obviously had been brought – there is no finding about who brought the plans into existence or who owned the copyright in the plans, but their business was to conduct the erection of homes according to new plans.  The business of Eagle Homes continued in relation to existing plans and Eagle Homes registered a business name called Eagle Homes.

McHUGH J:   Well, that may be the fateful mistake that they made in this case that they – after Ultra Modern was incorporated Eagle Homes registered the business name and then later transferred it to Ultra Modern so it is at least arguable that the business name and all the profits that has been earned by its use belongs to Eagle Homes.

MR JUCOVIC:   Your Honour, that may be ‑ ‑ ‑

McHUGH J:   I put that to you because one matter that is worrying me is that this might be an omelette type case where you just cannot unscramble these transactions.  If there had not been the transfer of the business name you might have been in a much better position but, arguably, on the winding up of Eagles Homes, there may be rights to the business now conducted by Ultra, its profits and all the proceeds that your clients have got from Ultra Modern.

GAUDRON J:   You say that is for a liquidator, if that happens.

McHUGH J:   That as well ‑ ‑ ‑

GAUDRON J:   And that the parties are no worse off.

MR JUCOVIC:   The parties are no worse off.  But ‑ ‑ ‑

McHUGH J:   I understand the legal basis of it, but if you look at it from the point of view that the Mareva injunction jurisdiction extends so far as enabling a potential creditor to go down the track and recover the assets, then maybe the net is not spread too widely to include the personal appellants, as well as Ultra Modern Developments.  Sooner or later somebody may have to unscramble all this.  On your case, you concede there is at least $200,000 owing.  On the respondent’s case, there may be a great deal more and eventually, that judgment may only be satisfied by a process of unscrambling a huge number of transactions involving all the appellants.

MR JUCOVIC:   Your Honour, your Honour is adverting to something that Justice Gummow also adverted to, that is, really, if there is a wrong, what is the remedy and what is the form of the order.

McHUGH J:   Yes.

MR JUCOVIC:   If one leaves aside the issue of parties for the moment, and asks the form of the remedy, there may well be a remedy which is as wide as your Honour mentions.  On the other hand, the remedy may simply be that there was some form of breach in Ultra Modern not paying some form of licence fee to use the name Eagle Homes.  There is loose language about appropriating the goodwill of Eagle Homes in this case, but what it has is the right to use that name.  It has used that name in relation to the building of what I would call new plans.  There is no evidence that those new plans, in the sense of ownership of copyright, were the property of Eagle Homes.  No doubt there may well be some form of relief.  But the form of this order – then when you get to parties, it is a right that either Eagle Homes has, which ‑ ‑ ‑

McHUGH J:   Yes, I appreciate the force of your argument in terms of parties.  The critical question, for my mind at the moment, is whether or not the remedy of the Mareva injunction is so wide that it can encompass persons against whom the creditor has no cause of action, certainly can on the authorities, there is no doubt about that, but whether it is wide enough to enable you to unscramble future transactions where other parties have interposed. 

MR JUCOVIC:   Your Honour, central to the Mareva jurisdiction is the notion Justice Gaudron pointed out in Jackson v Sterling Industries that the Mareva injunction does not create any right in any asset.  So that either the asset that is in the hands of the third party to the proceedings is owned by the potential judgment debtor, so that it is in truth its asset, and is subject to the process of execution, and if there is an allegation to that effect, that is something that can be unscrambled in the sense that that can be investigated within the proceedings to determine that fact. 

McHUGH J:   Well, they can certainly be unscrambled, Mr Jucovic, but the question is, at the end of the day will there be anything to eat or it had disappeared in some way; and that is the purpose, to preserve these assets.

MR JUCOVIC:   Yes.  It is to preserve – either Eagle Homes or its liquidator has an asset ‑ ‑ ‑

GUMMOW J:   Yes, but to preserve them for what?

MR JUCOVIC:   It is to preserve them for execution by the respondent by the processes of the court of execution in the proceedings, so that there is something there to execute upon.  If the company goes into liquidation, the process of execution on the judgment is stayed and the judgment creditor has a right to prove in the liquidation issues where the whole of the assets, whatever they be, of the judgment debtor are administered for the benefit of all creditors, your Honour.

GUMMOW J:   But there could be some equitable execution, could there not?  There could be a receiver or a chose in action.  Short of a liquidation, in other words.

MR JUCOVIC:   Yes, and may I point out that that issue was adverted to by Justice Emmett.

GUMMOW J:   Yes, he referred to Butler Pollnow, I saw that.

MR JUCOVIC:   Yes.  But where a receiver is appointed, your Honour, a receiver is appointed to an asset of the judgment, or the potential judgment debtor, to preserve that asset.  There is a distinction between a receiver appointed in aid of an asset preservation order and a receiver appointed to assist in some form of execution or equitable execution and I will come to the two cases, which the Registrar has referred us to, but that distinction emerges in those two cases.

Your Honours, there needs to be some precise basis upon which it could be said that an order in the nature of an asset preservation order should go to prevent some form of abuse of process of the court or frustration of the court’s processes.  It would be our submission that the precise basis has to be found in something more than some imprecise assertion of control or mixing up.

KIRBY J:   Why?  Why, in terms of principle?

MR JUCOVIC:   Your Honour, this order is made until further order.  A Mareva order is made to prevent a judgment debtor from abusing the processes of the court by deliberately ridding himself of his assets.  It is there so that at the time when execution comes those assets will be available to meet the judgment.

KIRBY J:   Based on the common experience of mankind that people try, when in a corner, to get rid of the assets available to their creditors.

MR JUCOVIC:   The whole of the law of insolvency is based upon that.

KIRBY J:   Yes.

MR JUCOVIC:   And the whole development of the law of insolvency is based upon that, your Honour.

KIRBY J:   But that does not necessarily mean that it is covered entirely by that area and that the remedies of courts to defend their process are stunted ‑ that is the whole ‑ ‑ ‑

MR JUCOVIC:   Yes.  The whole of the law of solvency is based upon the assumption that between unsecured creditors there be a pari passu distribution.  The court has been at pains in the Jackson v Sterling Industries to point out that this is not intended to do anything other than prevent an abuse of process of the court and not to effect a reordering of the priorities on a winding up or a liquidation, your Honour.

KIRBY J:   Or it is to hold this situation.

MR JUCOVIC:   It is to hold the situation

KIRBY J:   Status quo.

GAUDRON J:   The most obvious nature of this order would seem to be one in aid of the insolvency laws rather than the process of the court.  That seems to be the only way in which it operates.

MR JUCOVIC:   That is so, your Honour.  One way of looking at it is the creation of ‑ ‑ ‑

GUMMOW J:   Particularly when using terms like “unscrambling”.  That is what happens in insolvent administrations.

MR JUCOVIC:   Well, a number of things happen.  There are remedies – personal remedies and property comes back that is put into the pot.  The insolvency laws do not provide this remedy.  The law provides remedies for the appointment of receivers to assets and the protection of assets.  It can only be in aid of a future insolvency or a future execution in this way:  come the day on which judgment is entered for a sum, whether it is $200,000 or more, what does this order do?  It just sits there, your Honours.  It does not, unless there is an allegation that the assets in truth are the assets of Eagle Homes ‑ ‑ ‑

GUMMOW J:   But, you can freeze things right, left and centre, but at the end of the day you have to find some legal footing to get hold of them to satisfy some judgment.

MR JUCOVIC:   That is so, your Honour.

GUMMOW J:   Now, what would happen in this case?  You could punish people for breach of these orders but that is not going to put money in your pocket – in the plaintiffs’ pocket.  How is the plaintiff going to get money into its pocket by getting into these third party assets, that is what I do not understand, short of a public administration through the insolvency law.

MR JUCOVIC:   That is so, your Honour.  Your Honour could test it this way.  It would be a breach of these orders.

GUMMOW J:   So is not Justice Gaudron right when she says this may be to be seen in aid of the insolvency laws?

MR JUCOVIC:   Yes, it is.

GUMMOW J:   It has not been described that way.

MR JUCOVIC:   It has not been described that way, I accept that.

McHUGH J:   Well, are not the insolvency laws in aid of creditors in part and therefore is it not only one stage removed?  I mean, if you ask what is going to be there at the end of the day to satisfy a judgment in favour of the respondent, the respondent says, “It might be a long process but by appointment of a receiver, liquidation, by actions under 37A of the Conveyancing Act of New South Wales against the appellants, funds will be brought into the hands of Eagle Homes and that will be available to meet various judgments.”

GUMMOW J:   No, it will just have a right to a dividend.

MR JUCOVIC:   Your Honour, the vice of this order is that that issue may never be determined.  If it is not in aid of any right to which – it has got to be – if I could go back to the nature of the order, it is to all the assets of the appellants.  They are preserved for what purpose?  Some order that might be made in an insolvency.

McHUGH J:   Yes, I know, but assuming at the end of the day that there is no direct action by the respondent against the appellants, the fact is that on an insolvency they might get a dividend of 15 cents in the dollar.  They might get a dividend of 95 cents in the dollar out of the assets but it discharges the judgment debt that is owed.  It will not do it directly but it does it indirectly.  Why should not courts be bound by all this formalism at this late stage of the 20th century.  They were not bound by it in the MUA Case.

GAUDRON J:   This is somewhat different case.

McHUGH J:   Well, it was different.

GAUDRON J:   That was to restrain a fraud.  The purpose of the injunction of the majority view in that case was of a different nature from what is said to be the nature of a Marevai junction, per se.  In any event, in that case it was directed to the ability of the Court to make useful orders of the kind which the legislation contemplated.

GUMMOW J:   MUA was about the further commission in tort, tortious activities;  pursuit of this alleged conspiracy.

MR JUCOVIC:   Yes.  The orders there were ancillary to the final relief that could be given in the proceedings before the Court.  They were, as it were ‑ ‑ ‑

McHUGH J:   Had to do a lot of unscrambling, or you might have had to do a lot of unscrambling.

MR JUCOVIC:   He might have had to do a lot of unscrambling but the orders there were moulded by reference to the final relief that could be given in the proceedings by the Court. If I could just take your Honours to a couple of passages where the Court makes that clear in the majority judgment. It is (1998) HCA 30. If I could just take your Honours to two short passages.

KIRBY J:   Which page?

MR JUCOVIC:   Paragraph 26.  Starting at paragraph 25, the Court analysed the jurisdiction of the Federal Court by reference to the Act which gave rise to the issue that founded the jurisdiction of the Federal Court.  Then, after discussing the meaning of the term, “matter arising under”, their Honours, in the joint judgment, pointed out at paragraph 26 the following:

The power to make an interlocutory order is exercised by reference to the relief finally available but that is not, or is not necessarily, to say that the power to make the final order is the source of the power to make an interlocutory order or confines the power to make an interlocutory order.

So, it is exercised by reference to the relief finally available, your Honours.  Then, at paragraph 28:

In Jackson v Sterling Industries Ltd, Brennan J and Toohey J expressed the point as being that s 23 confers on the Federal Court such powers as are necessary or incidental to the exercise of the jurisdiction of that Court.

If I could then take your Honours to paragraph 35, under the heading “Interlocutory relief”, there is a reference to section 23 of the Federal Court Act and what Justice Deane said in Jackson v Sterling Industries:

that power…..exists only ‘in relation to matters’ in respect of which jurisdiction has been conferred upon the Federal Court.  Even in relation to such matters, the power is restricted to the making of the ‘kinds’ of order, whether final or interlocutory, which are capable of properly being seen as ‘appropriate’ to be made by the Federal Court in the exercise of its jurisdiction.”

One limitation on the powers of the Federal Court to grant interlocutory injunctions is that those powers must be exercised for the purpose for which they are conferred.  In a later passage of the judgments of Deane J in Jackson v Sterling Industries Ltd, his Honour said a power to prevent the abuse or frustration of a court’s process should be accepted “as an established part of the armoury of a court of law and equity” and that “the power to grant such relief in relation to a matter in which the Federal Court has jurisdiction is comprehended by the express grant to that Court by section 23 of the Federal Court of Australia Act”.  But, his Honour observed, orders must be framed “so as to come within the limits set by the purpose which [the order] can properly be intended to serve”.

We emphasise that, your Honours.

The Mareva injunction is the paradigm example of an order to prevent the frustration of a court’s process, but other examples may be found.  The moulding of an interlocutory injunction must depend upon the circumstances of each case.  As Brennan J observed in Jackson v Sterling Industries Ltd:

“A judicial power…..may be exercised according to the exigencies of the case –

And can I just emphasise the final paragraph at paragraph 35:

The general principle which informs the exercise of the power to grant interlocutory relief is that the court may make such orders, at least against the parties to the proceedings –

and we underline “against the parties to the proceedings” –

against whom final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked.  The Federal Court had jurisdiction to make interlocutory orders to prevent frustration of its process in the present proceeding.

That is because – there could be an unscrambling, if you want to use the analogy, but it is unscrambling at the suit of the party who was the party to the proceedings.

McHUGH J:   Well, can I put this to you?  Supposing that instead of Eagle Homes being interposed here it was Mr Cardile himself who was the infringer and who had transferred assets or made payments and loans to the other appellants, what would you say then about the capacity of the Federal Court to issue a Mareva injunction?

MR JUCOVIC:   I am not sure that I follow the difference in ‑ ‑ ‑

McHUGH J:   It seems to me that your argument depends very much on Salomon v Salomon and because of the division between personal liability and the liability of the entity and the fact that you have a company interposed here, that the Mareva injunction will not go.  What I was putting to you was what would you say if the infringer was Mr Cardile?  He entered into arrangements to repay loans to the other appellants and a Mareva injunction was sought against them in the circumstances of this case.  You would be on weak ground there, would you not?

MR JUCOVIC:   Your Honour, I would submit not.  Mr Cardile would be personally liable for the judgment.  It would then be necessary to analyse the particular factual circumstances.  Mr Cardile obviously would not pay a dividend.

McHUGH J:   No.

MR JUCOVIC:   He may pay off some loans.

McHUGH J:   Yes.

MR JUCOVIC:   He may pay off some loans for the purpose of ensuring that one creditor rather than another creditor is preferred.  In this scenario Eagle Homes might be the creditor.  The question would then arise, if it is a payment off of the loan, whether or not it is a preference or there is some other wrong, probably only a preference, your Honour, or a disposition within – may I say it cannot be a disposition under 37A with intent to defraud creditors.

GUMMOW J:   Why is that?

MR JUCOVIC:   Your Honour pointed out in a case which is not on our list, it is in the joint judgment called PT Garuda Indonesia v Grellman 35 FCR 515 at 525. Your Honours recently had before your Honours the case of Kinnane  as well.  

GUMMOW J:   What is the point?

MR JUCOVIC:   Your Honour referred to this passage and that is that 37A never impeached preferences.  The payment off of one creditor instead of another was not within the purview of fraud for the purposes of 37A.  If your Honours would permit me simply to read one simple passage.  This is at page 525:

The effect of the decisions upon the Elizabethan Statute was that a transaction could not be impeached on the ground merely that it constituted a preference of a particular creditor by his debtor:  H W May, The Law of Fraudulent and Voluntary Conveyances (3rd ed, 1908), pp 76-78, 139.  The mere preference of one creditor over another does not bring the case within the Elizabethan Statute, and apart from the provisions of the bankruptcy law, such as the preference provisions, the law tolerated dispositions giving one creditor a preference over others:

and there is a reference to some other cases, your Honours.  In your Honour Justice McHugh’s example, the point we would seek to make is that there needs to be an analysis.

McHUGH J:   I am sorry.

MR JUCOVIC:   The point we would seek to make in your example is there needs to be an analysis of whether the transaction gives rise to any rights against the person, the recipient of the assets.

It is not as if, your Honour, there is some notion here of receiving property impressed with a trust or someone else’s property.  The very nature of the asset preservation order is that it gives the prospective judgment creditor no right to the asset.  One simply has to analyse, what is it that is being protected by an order in the nature of a Mareva order.

McHUGH J:   This is a problem about talking about Mareva orders in this context. What we are really talking about is the power conferred by section 23 of the Federal Court of Australia Act which:

has power…..to make orders of such kinds, including interlocutory orders,…..as the Court thinks appropriate.

MR JUCOVIC:   Yes.

McHUGH J:   That is on broad statutory power, and to refer to English authorities or Mareva injunctions is an invitation to error.  They may give you some guidance, but one has to focus on the statutory power, and surely it is a power that enables substantial justice to be done, in an age whereby inter-company transactions, by associated company transactions, by international transfers, assets can be whipped away in an instant.  And in that context, why does not the power extend to ensuring that litigants before the Federal Court will get their judgments met in some form or other?

GAUDRON J:   One answer, I suppose, is because, at most, the Federal Court, in the proceedings with which we are concerned, can provide for execution against the assets of Eagle Homes Pty Limited.  It can provide for no more in these proceedings.

MR JUCOVIC:   That is precisely what we have put, your Honour.  The ‑ ‑ ‑

GAUDRON J:   And it therefore cannot be appropriate to hold the assets of parties against which there can be no levy of execution.

MR JUCOVIC:   That is so, your Honour.  Your Honour, I call it a Mareva order for simplicity sake.  The judgment in Patrick makes it plain that one looks at the jurisdiction of the Federal Court.  What jurisdiction is invested under Acts given to it, in this case the Copyright Act. What remedies are available under those Acts? What remedies are available under section 23? Section 23 has been dealt with. The basis of the jurisdiction to make a Mareva type order has been dealt with in Jackson v Sterling Industries in a way that says that one must recognise it has a limitation, and the limitation is that it is to prevent the abuse of the processes of that court in aid of eventual execution.

McHUGH J:   Well, I am not sure that it is limited in terms of abuses of the process of the Court.  I mean, courts operate in the real world.  People bring actions to vindicate rights and to, if they get a verdict, obtain compensation for the rights that they have lost.

MR JUCOVIC:   Yes.

McHUGH J:   And the question then is whether or not such a power should not be construed to extend to protecting those rights in that real sense, or does one drop back to a formalistic approach similar to the view that has existed in many areas of law over long periods of time?  To the professional lawyer, to the purist, there is a lot to be said for it psychologically and otherwise but why should we not be bold in the exercise of this jurisdiction?  Why read limitations into it?  It is a power conferred on a court in terms - very wide, as the Court thinks appropriate.  Why should you imply a restriction on those words?

GAUDRON J:   And you have to restrict them within the concepts that come from Chapter III, to start with.

McHUGH J:   Well, that is another explanation.

KIRBY J:   I hope I do not see section 78B hovering in the background.

MR JUCOVIC:   No, your Honour, because we are not involved here with any construction of anything other than ‑ ‑ ‑

GAUDRON J:   And within the confines of covering clause 5 of the Constitution. That is at least your second confinement.

MR JUCOVIC:   Yes.

GAUDRON J:   And that must bring you to the notion whether you - both of those must raise fairly immediate problems with respect to third parties in circumstances where there is no right of the claimant for relief that has been infringed by them.

MR JUCOVIC:   Yes.  Your Honour, the ‑ ‑ ‑

GUMMOW J:   It may be that you could enact a copyright law which said, “There will be these remedies against third parties who are sufficiently connected” and then there would be a matter arising under that law of the Commonwealth but the matter arising under the law of the Commonwealth here seems just to give the presently framed remedies in the Copyright Act. The question then is, are they supplemented in some way, and to what extent? By section 23 as part of the one matter.

MR JUCOVIC:   That is so, your Honour.

KIRBY J:   Do you raise any constitutional question as a suggested impediment that the order is made, or not?  I think the Court is entitled to have a direct answer to that.

MR JUCOVIC:   No, your Honour.  We raise a combination of answers.

GUMMOW J:   You do not say anything is invalid?  You do not say any section in the Act is invalid?

MR JUCOVIC:   That is so, your Honour.  It is really a question of what, on its proper construction, the Act means.  In answer to the order, and in answer directly to what your Honour Justice McHugh says, firstly we raise what Jackson v Sterling Industries said about the nature of this order, and I will take your Honour to the various passages.  We raise the proposition that if the order has to be ancillary to some right, one has to examine what the right is.  It would have been open to – and I will come back to this – the respondent, because it claims it has some sort of entitlement arising under 37A, to vindicate that right, if it had it.

GUMMOW J:   Where do these remedial rights come from in this case?  Are they rights of execution picked up from State law?

MR JUCOVIC:   Section 37A ‑ ‑ ‑

GUMMOW J:   In the Federal Court Act, itself, does it deal with execution?

MR JUCOVIC:   There are processes of the court dealing with execution, your Honour.

GUMMOW J:   It came out of the rules, did it not?

MR JUCOVIC:   Yes.  There will be provisions in the rules as to execution.  Why we say there is a problem is that it is in a sense grossly unfair to the appellants.  If there is a cause of action under 37A, or there is some right, that can be brought forward, and the issue of the nature of the appellants rights to their own property could be resolved, and their free right to use their assets.  The respondent has not brought an action under 37A, or has not brought an action at all, against the appellants, asserting any rights.

So that the second thing that we would wish to say, apart from the way in which the High Court in Jackson v Sterling Industries Ltd construed section 23 in the context of a Mareva-type injunction, is that there has to be something which is adjacent to or adjunct to, adjectival to, some right which is preserved until final order and some execution can follow.

Now, no case is brought relying on section 37A.  If it were, your Honour, the Court would need to examine, with some precision, what it was that gave rise to the applicants’ rights.  It could not be against all the assets of the appellants, your Honour; the respondent could not possibly get an order of this nature against all the assets.  It would have to be limited by reference to whatever rights 37A gives.  What section 37A, your Honour, does is that it avoids, as against creditors, title, and it avoids it prospectively.  It gives no personal right of action.  If at the time at which title to properly passes to the third party, that property exists in the hands of the third party or it is identifiable in the hands of the third party, title is avoided and revests in Eagle Homes, but no personal action - and an account or a transfer of the property is required.  No personal right of action, your Honour.  Your Honours, that is made very plain by authority in this Court in Brady v Stapleton (1952) 88 CLR 322 and at page 334, in the joint judgment of Justices Dixon and Fullagar, it is said that:

The company had a title, though a defeasible title.  The defeasance has, in the event, taken place, but it cannot relate back so as to make a sale by the company wrongful and impose a personal liability on the company.

So that as a necessity, one would have to examine what is in fact covered by section 37A and what remedy is available.  One has to identify property in the hands of the appellants at the time of avoidance, which has not occurred – there is no evidence that it has occurred – which the appellants have to account to a liquidator or a trustee in bankruptcy for.

One then would have to analyse whether 37A has anything to say about the items of property that went over in this case.  In essence, there are, in essence, dividends declared.  Section 37A requires the alienation of property.  It avoids the alienation of property.

GUMMOW J:   These are dividends declared by ‑ ‑ ‑?

MR JUCOVIC:   By Eagle Homes.

GUMMOW J:   Yes.

GAUDRON J:   Which had the effect of reducing the indebtedness of the shareholders.

MR JUCOVIC:   Which had the effect of making the company indebted to the shareholders.

GAUDRON J:   And reducing their indebtedness to the company.

MR JUCOVIC:   The other way round.

GAUDRON J:   I see.  There was not a ‑ ‑ ‑

MR JUCOVIC:   The evidence simply discloses that dividends were declared.  We say, stopping there, the declaration of a dividend is not the alienation of property from Eagle Homes to the shareholder; it is the creation of a right.  In fact, a right in the shareholding and the liability in Eagle Homes.

CALLINAN J:   But, as Justice McHugh put to you, the name was an asset, and that name was only registered, I think, on the same day as it was immediately transferred over; is that not right?

MR JUCOVIC:   May I come to the name, as well, your Honour.

CALLINAN J:   Yes, certainly.

MR JUCOVIC:   Analysing what is available under 37A – dividends.  The declaration is the creation of a liability; the test is, is it an alienation of an asset?

GUMMOW J:   Well, assume it is not, but assume - judgments are covered at least for costs.  That would found the winding up, would it not, against Eagle Homes?

MR JUCOVIC:   Yes, your Honour.

GUMMOW J:   What would a liquidator then do with respect to this dividend?

MR JUCOVIC:   He would have to decide whether or not, under some right available to him as liquidator, as against him, usually, the transaction is a transaction that gives rise to some form of remedy, whether it be the payment of a sum of money or the return of the dividend.

GUMMOW J:   Yes.

MR JUCOVIC:   The dividend was admittedly paid out of profits available for the payment of dividends.

GAUDRON J:   If it operated simply to, by the crediting, reduce the indebtedness of the Cardiles, or operate, sorry, to reduce the indebtedness of the company to the Cardiles, it might be a preference.

MR JUCOVIC:   It might be a preference, your Honour, but it would – one has to carefully distinguish this.  Our position is the payment – the declaration of the dividend is one thing.  It is the creation of a liability.  He creates a debt.  The debt is recognised by crediting the shareholder’s loan accounts.  To the extent that it may have reduced the indebtedness of the Cardiles pre-existing to the company it would be a pro tanto reduction of the indebtedness, either it is a preference or not, and recoverable as against the liquidator or not.  It is not a preference for the purposes of section 37A.  If I can then ask in relation to the other transaction, what is it that is alienated by the company?

Now, something has to be analysed and has to be before the court to determine – there has to be some issue before the court to determine what is alienated.  Your Honour Justice McHugh rightly points out that perhaps the thing that should not have been done is to have a transfer of the business name because that may lead to certain consequences, but a business name, itself, is not – a business name registration under the Business Names Act is not itself usually thought of as a property.  It does not create any rights, it is prevention against ‑ ‑ ‑

CALLINAN J:   Passing off.

MR JUCOVIC:   It is protection against prosecution for trading under a name that is not registered, your Honour, that is the effect of the Business Names Act.

KIRBY J:   Are you saying that the name “McDonalds” is not a property, or “The Ritz Hotel”?

MR JUCOVIC:   Our submission to your Honours is that if one wants to restrain – our general submission to your Honours is ‑ ‑ ‑

GUMMOW J:   Well, is there evidence here that this business name had common law good will attached to it?

MR JUCOVIC:   No, your Honour.

CALLINAN J:   Well, why did you ‑ ‑ ‑

MR JUCOVIC:   I am sorry, there is no finding about it, your Honour.

GUMMOW J:   Is there any finding about that?

MR JUCOVIC:   No, your Honour.

CALLINAN J:   Why did you bother to register it and transfer it on the same day if it had no value?

MR JUCOVIC:   Your Honour, there is no finding about it.  Your Honour is quite ‑ ‑ ‑

CALLINAN J:   No, but I mean, it seems to me to be an almost irresistible inference that it did have value because you chose to register it when you have been operating under that name for a long time and on the same day as you registered it you transferred it.

MR JUCOVIC:   Yes.  There could have been all sorts of reasons of convenience, your Honour, if you wanted to trade under the name Eagle Homes.  The point is that if there was ‑ ‑ ‑

GUMMOW J:   But assume some fourth party then starts up Eagle Homes, who sues them?

MR JUCOVIC:   Your Honour, the question I am posing for your Honours is under 37A.

GUMMOW J:   Who sues them, the transferee of this business name?  Who owns the goodwill that found an action?

MR JUCOVIC:   Your Honour, the ‑ ‑ ‑

GUMMOW J:   Was this transfer with goodwill, or what was it?

MR JUCOVIC:   The only evidence is that it is a transfer of a business name registration.  What I am posing for your Honours is the need to investigate, and was not done below at all - precisely what rights are given, because ‑ ‑ ‑

GUMMOW J:   It may be…..significance is an indication of the state of mind of those transferring it, I suppose, what they thought they were doing.

MR JUCOVIC:   I do not dispute that proposition, your Honour, but when I asked ‑ ‑ ‑

GUMMOW J:   They may have not achieved what they thought they were doing, but what they thought they were doing was transferring the goodwill and the asset attached to their trading activities under the name “Eagle Homes”.

MR JUCOVIC:   Your Honour, there has to be a proper analysis of what property is revested, pursuant to the operation of 37A.

CALLINAN J:   Mr Jucovic, I see at page 58 of the record there is a discussion in the reasons for judgment, beginning at about line 20, of the reason, or possible reasons.  It does not go quite so far as to explain it, but it almost does, beginning at line 20 on page 48.

MR JUCOVIC:   Yes, this is, your Honour, the judgment of Justice Davies in the ‑ ‑ ‑

CALLINAN J:   Yes, in the original proceeding.

MR JUCOVIC:   Your Honour, I accept your Honour’s reference to that.  The question to be posed is, what property is revested pursuant to 37A, if the other elements of 37A could be made out in relation to the conduct of Eagle Homes and the conduct of Ultra Modern Developments?  The only tangible piece of property, the only thing tangible, in the sense that one can look at it, if you can call it tangible, is the business name registration.  I am pointing out to your Honours ‑ ‑ ‑

GUMMOW J:   That is not an item of property.

MR JUCOVIC:   That is not an item of property.

GUMMOW J:   It is a defence to a prosecution.

MR JUCOVIC:   It is a defence to a prosecution. 

GUMMOW J:   If a liquidator went into this company, he could say, “I am going to sell this business, and I am going to sell the business and the name ‘Eagle Homes’ attached to it”.  Could you do so?

MR JUCOVIC:   Yes, that is so, your Honour.  Now, if that had been investigated someone could work out what liability would be incurred by the appellant, Ultra Modern Developments or Mr and Mrs Cardile for that conduct, if any, and an order could be framed in relation to a specific asset or some personal liability, but not the entirety of their assets.  The amount involved, your Honour, may bear absolutely no relationship to the judgment in these proceedings.  Could I just take your Honours to the passages in Jackson v Sterling Industries Ltd that we rely upon.

GUMMOW J:   We were taken to that in great detail in MUA; but you read that out to us if you want to if it makes some point.  Perhaps you should tell us the point and the page.

MR JUCOVIC:   Your Honours, we have given your Honours at paragraph 29 of our written submissions the various passages that we rely upon.  I should add to those passages only two references:  to the judgment of Justice Toohey at page 632 and to the judgment of Justice Gaudron at page 641 to 642.

KIRBY J:   I think their Honours were dissenting.

GAUDRON J:   We went to the wider view only, of the power.

MR JUCOVIC:   Your Honours were dissenting.  Your Honours took a wider view of the nature of the power, but your Honours also took a view that is consistent with what we put here, in our respectful submission.  Your Honours also took a view as to whether security was in fact granted by the form of the order, which is different from the view that the majority took, but I should give your Honours a reference to that.  And if I can just only read you one - say no more than at page 625, where Justice Deane says ‑ his Honour makes the point that the Mareva order at page 625:

must be framed so as to come within the limits set by the purpose which it can properly be intended to serve.

Your Honour, it has usually been said in relation to Mareva orders that one has to show firstly a prima facie case for the relief sought in the proceedings, plus some form of abuse, and one Australian authority which is referred to in my learned friend’s written submissions to that effect is Patterson v BTR Engineering (Aust) Limited.  The English authorities are referred to in paragraph 17 of our written submissions, your Honour.  We submit that – - -

KIRBY J:   Did you look at any other country, Canada or New Zealand?  I mean, we really must grow up from this business of just using English comparative law material.  I acknowledge that the Mareva injunction began in England, but it is now used throughout the common law world.

MR JUCOVIC:   I accept what your Honour says.  I do not have that authority for your Honour.  The point that is being made in these authorities is that the Mareva being an asset preservation order to prevent abuse of process, does not arise in a vacuum, it is given to protect the enforcement of a substantive right.

GUMMOW J:   It is said that the Channel Tunnel Case involved some weakening, if that is the word, or loosening of this requirement of substantive right.  What do you say about that?

MR JUCOVIC:   It does not.  It does not go as far as my learned friend needs it to go.  That is what we primarily say.

GUMMOW J:   Why not?

MR JUCOVIC:   Because it identifies the need for some right, but it says that the fact that that right – the fact that the Court - your Honour, the case involved whether or not an arbitration should be stayed, and it involved the question of whether an injunction should go.

GUMMOW J:   To do what?

MR JUCOVIC:   I should take your Honour to the case. It is found in (1993) AC 334. The main judgment is that of Lord Mustill.

GUMMOW J:   Was there contractual right involved here to have an arbitration?

MR JUCOVIC:   Yes, your Honour.

GAUDRON J:   It is a perfectly ordinary equitable injunction in preservation of contractual rights, is it not?

MR JUCOVIC:   That is so, your Honour.

GUMMOW J:   What is the fuss?

MR JUCOVIC:   It does not go as far as my learned friend needs it.

GUMMOW J:   I know but why did it go to the House of Lords?  I daresay you cannot answer that.

MR JUCOVIC:   I am sorry, I cannot answer that, your Honour.

GAUDRON J:   It seems to be a confusion of doctrine if one looks – I am just looking at the headnote.  There is a perfectly ordinary exercise of equitable jurisdiction and power.

MR JUCOVIC:   That is so.  There was an underlying right.  The real question is whether The Siskina should be limited.  One way of analysing it is whether The Siskina should be limited to whether the relief would be granted in the particular case, your Honour, but there still needed to be an underlying right and in this case, not so.  The Mercedes Benz Case, your Honour, which - your Honour the relevant passage as to what is required in the judgment of Lord Mustill is found at page 362 between lines E and D, (1993) AC.  Lord Mustill says:

My Lords, I cannot accept this argument.  I prefer not to engage the question whether the law is now firmly established in terms of Lord Brandon’s statement, or whether it will call for further elaboration to deal with new practical situations at present unforeseen.  For present purposes it is sufficient to say that the doctrine of the Siskina, put at its highest, is that the right to an interlocutory injunction cannot exist in isolation, but is always incidental to and dependant on the enforcement of a substantive right, which usually although not invariably takes the shape of a cause of action.

GUMMOW J:   I think Lord Browne‑Wilkinson put his finger on it, I think, at 342F.  He found:

the respondents have been validly served…..and there is an alleged invasion of the appellants’ contractual rights…..since the final relief (if any) will be granted by the arbitrators…..the English court, it is said, has no power to grant the interlocutory injunction.

MR JUCOVIC:   Yes.

GUMMOW J:   Well, that would last about half an hour in the Equity Division - - -

MR JUCOVIC:   Yes.

GUMMOW J:   - - - in Sydney, I hope.

MR JUCOVIC:   Your Honours, Mr Hughes, in his written submissions, refers to three rights at paragraph (10) of his written submissions.  If I could just deal with those.  The first right, Mr Hughes says:

Accepting, but only for the purposes of argument, that the right to an interlocutory injunction cannot exist in isolation but is always incidental to and dependant upon the enforcement of a substantive right, the Respondents have a substantive right as against the Appellants to invoke the jurisdiction of the Federal court in order to prevent the pollution of the stream of justice that would otherwise flow form the abuse of process practised by them.  At all events, while it is not essential that the substantive right should be a cause of action -

and refers to Channel Tunnel.  Your Honours, if there were a substantive right to prevent the pollution of the stream of justice, what is it here?  It is as limited, we say, by the decision in Jackson v Sterling Industries.  What this order does, it, in effect, punishes the appellants for having previously been involved in transactions with Eagles Homes at a time at which there was no existing Mareva order, without analysing why it is that they have to account to the respondent for anything.  Some light is thrown on that proposition by one of the decisions that the Registrar drew our attention to called Harris v Beauchamp Brothers (1894) 1 QB 801. Your Honour, this was a case about the limits of what is called equitable execution. Your Honour, it demonstrates ‑ ‑ ‑

GUMMOW J:   Well, at page 809, perhaps, Lord Davey, because the language is not all that different from section 23 of the Federal Court Act.

MR JUCOVIC:   That is so, your Honour.  It demonstrates what the proper course of action would be in relation to execution, your Honour.  A receiver had been appointed to certain partnership assets by the judgment creditor.  Your Honour, the assets to which the receiver was appointed are referred to at page 802 at about point 3.  There was an order made by Justice Wright:

appointing a receiver of (1.) the policies, (2.) the book debts of the firm, (3.) moneys in any bank to the credit of the firm or of G.W. Beauchamp, being moneys received on account of the firm or the proceeds of sale of any of the firm’s effects, and that out of the moneys…..should be paid, and that the balance should be paid into Court.

Your Honours would see in the judgment of the Court of Appeal commencing at page 805, consisting of Lord Esher, Lord Justice Lopes and Lord Justice Davey, given by Lord Justice Davey, he characterised the order at the foot of page 805 as:

The order in question was made, by way of what is called “equitable execution” to enforce a judgment obtained in the action and dated August 2, 1893 -

Then the basis of the order, and the argument as to whether it was properly made, commences at the foot of that page, where:

The learned counsel for the plaintiff boldly argued, that, if you have got a subject-matter which might be made available for the satisfaction of the judgment debt, you may have a receiver, if it is a better mode of getting it in than the usual mode.  In our opinion, this is wrong.

GUMMOW J:   Is this not now being said, in England, to be out of date?

MR JUCOVIC:   Yes, your Honour.  There is a first instance decision that I will take your Honours to, which is the other decision that Registrar referred us to, Soinco SACI v Novokuznetsk Aluminium (1998) 2 WLR, and he took a different view.  This again, your Honours, was a case about equitable execution, not a case about a Mareva injunction, and the scope of the remedy of equitable execution.  He reviews the authorities, including Harris v Beauchamp Brothers, and that is reviewed, your Honours, commencing at pages 339 to 344. Then he says, commencing at page 344, between lines C and D, that under section 37 of their Act there is a different approach, they are not bound by – this is the same section which now, in England, seems to be the basis for the Mareva jurisdiction, in which Justices Wilson and Dawson in Jackson v Sterling Industries Ltd said obviated the need for any further debate about the basis for the Mareva injunction in England.  That was section 37, your Honours. 

The words used were “just and convenient” and the conclusion reached is at page 347, and he decided to extend an order which would not have been available pre the passing of section 37 of the Act, your Honours.  Not be available because execution could not take place in respect of debts, which had not accrued under the English rules.

GAUDRON J:   There was some suggestion of procedures devised to ensure that it could not take place.

MR JUCOVIC:   There was some suggestion that the – smothering the debt.  It is hard to understand ‑ ‑ ‑

GAUDRON J:   Prepaying the instalments and then it is set off.

MR JUCOVIC:   Yes. 

GUMMOW J:   Page 348G deals with Marevas over to 349.

MR JUCOVIC:   Yes, that is so, your Honour.  He points out that since cases such as Harris v Beauchamp there has been an extension in the Mareva field.  The point about this case is that it was the appointment of a receiver to the asset of the judgment debtor.  If I could take your Honours back shortly to ‑ ‑ ‑

GUMMOW J:   But it is consistent, perhaps, with what Justice McHugh is putting to you as to how one interprets these sections giving general powers.

MR JUCOVIC:   The court might have to decide whether its processes of execution should be as they are or should stay the same.  We are talking here about the process of execution, per se.  By a judge‑made law it could be said that one extends the previous understanding of what can be used in aid of execution.  There is nothing that takes this case beyond a situation where there was a right; the right was vindicated by the order of the court that there be a judgment in favour of the defendant, and the execution of that right.  There is nothing that takes it beyond that.

It is useful, if I could take your Honours back to the earlier case to see what was being discussed there, because they did point out, in effect, that the other way – they pointed out, firstly, the nature of equitable execution in a narrower way.  That has now been dealt with in this judgment of Justice Colman at first instance in England.  They also pointed out that procedures which are available where there is an allegation of fraudulent conduct, they see it as a new action to be dealt with in which the issues can be determined; and as being unjust to circumvent that action by the granting of an order in the nature of equitable execution because it presupposes something that has not been determined.

GUMMOW J:   Yes.  That suggests, of course, that it is not part of the same matter.

MR HUGHES:   But to say that is not to say that the application for Mareva relief is not part of the same matter.

GUMMOW J:   No.

MR HUGHES:   But I thought that in frankness I should say to your Honours that one might encounter difficulties if one sought to mount section 37A proceedings in the Federal Court but ‑ ‑ ‑

GUMMOW J:   You do have orders presently in your favour for costs, do you, at some stage?

MR HUGHES:   Yes, costs of the appeal.  Certainly costs of the appeal and costs, of course, of the infringement proceedings.  They are all against Eagle Homes, your Honour.

GUMMOW J:   Yes.

GAUDRON J:   What I wanted to know, your inferences of fact came close to, I thought, and I wish to know if you put it this way, came close to an assertion of a perversion of the course of justice.

MR HUGHES:   Yes, and I think ‑ ‑ ‑

GAUDRON J:   And you put it on that basis?

MR HUGHES:   I do.  I think that what we have said in our outline was that the course of conduct – maybe this is too picturesque a description.  I am not innocent of such faults.

KIRBY J:   I am not sure.  I asked the question earlier because my understanding is that at least two rationales are presented.  One is to defend the position of parties and another is to defend the position of the court.

MR HUGHES:   Yes, and Jackson makes it clear that the foundation of Mareva relief is underpinning the authority of the court.

McHUGH J:   But, if for example, these orders were discharged or had not been made by the Full Court and the appellants had disposed of their assets, they would have committed no contempt of the Federal Court in either of the two senses that Lord Diplock spoke about:  contempt of the general administration of justice or contempt in a particular case.

MR HUGHES:   No, there would not have been a criminal contempt.

McHUGH J:   Well, they have said there is no distinction between civil and criminal contempt for practical purposes. 

MR HUGHES:   I think there would have been no disobedience on the facts that your Honour postulates of an order of the court because there would have been no Mareva.

GAUDRON J:   There are more contempts than disobedience of an order.

McHUGH J:   Yes, you can commit contempt, for example, by discharging a person because he served on a jury.

MR HUGHES:   Yes, but it is not necessary for me to show that there has been a contempt of whatever kind.

McHUGH J:   But it does help to identify whether or not there is any actual or potential threat to the administration of justice, either in the particular case or generally.

MR HUGHES:   The actual, or potential, threat to the administration of justice in this case is demonstrated by the accounts of the company.

McHUGH J:   But you have orders in place blocking them from doing anything further.  It seems to me your real difficulty is that notwithstanding how bad the conduct of the appellants may be, on your argument, and on the concurrent findings below, the fact is that you are really seeking to protect remedies, not in this litigation, but remedies in future litigation.

MR HUGHES:   But, marching hand in hand with that endeavour is the endeavour to uphold the authority of the Federal Court by preventing the further transfer of wealth, assets, which should never have gone to the appellants in this case because their disposition was part of a dishonest enterprise.

KIRBY J:   I do not think you should get carried away with this public spirited contribution of your litigation.  I mean, the bottom line is you are not there to uphold the Federal Court, you are there to uphold what little part you can ultimately get your hands on, which is perfectly legitimate.

MR HUGHES:   Quite, your Honour.  My clients may have mixed motives, but we are entitled, given the foundational basis of Mareva relief, to say, and as we did say to the court below, the Full Court, if these injunctive orders are not made the authority of the court may be set at nought.

GUMMOW J:   What is the authority of the court?  To exercise judicial power of the common law?

MR HUGHES:   Yes, and to uphold its own processes.

GUMMOW J:   Yes; well, that depends what the processes are, I suppose.

MR HUGHES:   Enforcement.

GUMMOW J:   Yes.

MR HUGHES:   Well, unfortunate.  The availability of assets in Eagle Homes, getting those assets by any legitimate curial means to satisfy the judgment that is going to be given, in due course, by the trial judge who took the account of profits.

GAUDRON J:   That is where it all starts.  How do the assets of Mr and Mrs Cardile and Ultra Modern satisfy the judgment?

MR HUGHES:   They would be there to satisfy the judgment, your Honour, if they had not been abstracted.

GAUDRON J:   Yes, I know what would have been “if”.

MR HUGHES:   But, this is a putting back exercise, ultimately.

GAUDRON J:   No,it is not.  There may be procedures to bring that about, but the orders made do not put the assets back. 

MR HUGHES:   No, but they prevent their further dissipation or transfer by persons who are shown to have a predisposition, judging by their previous conduct.

GAUDRON J:   But are not shown to have effected a fraud on creditors.

MR HUGHES:   In my submission, they have been shown ‑ ‑ ‑

GAUDRON J:   There is an inference that they have.

MR HUGHES:   Yes.

GAUDRON J:   But there has not been a finding.

MR HUGHES:   Oh no, only a prima facie ‑ ‑ ‑

GAUDRON J:   Yes.

MR HUGHES:   There is a prima facie conclusion fairly open on the evidence that these appellants have committed a fraud on creditors, not just the creditor, or potential creditor, for which I appear. 

I see it is nearly a quarter past four.  I think there is a minute to go.  What I want to do, and I will be as brief as I possibly can tomorrow, is to refer to some of the other cases we want to refer to, particularly the two cases which the Court was good enough to ask us to make submissions about.

GAUDRON J:   Yes.  In that case, we will adjourn it until 9.30 am tomorrow morning.

AT 4.15 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 8 OCTOBER 1998