Cardile v LED Builders Pty Ltd

Case [1999] HCA 18

HIGH COURT OF AUSTRALIA

GAUDRON, McHUGH, GUMMOW, KIRBY AND CALLINAN JJ

PAUL CARDILE & ORS  APPELLANTS

AND

LED BUILDERS PTY LIMITED  RESPONDENT

Cardile v LED Builders Pty Limited (S61-1998)
[1999] HCA 18
6 May 1999
S61/1998

ORDER

  1. Appeal allowed.

  1. Set aside Order 4 of the orders made by the Full Court of the Federal Court of Australia on 22 August 1997.

  1. Set aside each Order 1 of the several orders made by Emmett J on 22 August 1997 and 26 August 1997.

  1. Set aside that part of Order 2 of the orders made by the Full Court of the Federal Court of Australia on 22 August 1997 which disposes of the costs of the appeal to that court.  In place thereof, order each party to bear its, his and her own costs of the appeal to that court.

  1. Suspend the operation of Orders 1, 2, 3 and 4 of these Orders for 14 days from the date of the making of this Order.

  1. Remit the matter to a judge of the Federal Court of Australia for the making, on application by LED Builders Pty Limited, and on provision of the necessary undertakings, of orders for interlocutory relief in or to the effect of the form set out in the joint majority judgment.

On appeal from the Federal Court of Australia

2.

Representation:

T M Jucovic QC with D J Hammerschlag for the appellants (instructed by Banki Haddock Fiora)

T E F Hughes QC with A J Grant for the respondent (instructed by
Speed and Stracey)

Notice:  This copy of the Court’s Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Cardile & Ors v LED Builders Pty Limited

Federal court - Interlocutory relief - Asset preservation order - Juridical foundation - Whether capable of arising against property of a non-party - Whether order preventing disposal of assets by non‑party necessary to protect the administration of justice - Undertakings as to damages - Discretionary considerations in granting relief.

Companies - Interlocutory relief - Asset preservation order - Whether relief available against recipients of dividend payments - Whether relief available to protect goodwill.

Words and phrases - "Mareva injunction" - "asset preservation order" - "injunction" - "intermingling" - "alienation".

Conveyancing Act 1919 (NSW), s 37A.
Federal Court of Australia Act 1976 (Cth), s 23.

  1. GAUDRON, McHUGH, GUMMOW AND CALLINAN JJ.   This appeal raises a question whether an order identified as a Mareva injunction or order may be granted against a third party to proceedings in circumstances in which that party has not been shown to have an interest in the assets or funds (with one possible exception) of the potential judgment debtor.

    The proceedings in the Federal Court

  2. It appears that, on 1 July 1993, Eagle Homes Pty Ltd ("Eagle Homes"), the business of which was housing construction, declared a dividend of $400,000 in favour of Mr and Mrs Cardile and that the dividend was paid by book entry crediting their loan accounts.  There…

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AGLC
Cardile v LED Builders Pty Ltd [1999] HCA 18
Case
[1999] HCA 18
Decision Date

CaseChat Overview and Summary

The High Court of Australia considered an appeal by the Cardiles and Ultra Modern (the appellants) against orders made by the Full Court of the Federal Court of Australia, which had affirmed interlocutory asset preservation orders granted by Emmett J. The dispute concerned LED Builders Pty Limited's (the respondent) application for these orders to preserve assets held by the appellants, who were not parties to the primary copyright proceedings between LED Builders and Eagle Homes.

The central legal issues before the High Court were whether the Federal Court had the jurisdiction to make asset preservation orders against non-parties, specifically where there was no direct cause of action maintainable by the respondent against those non-parties, and whether such orders were necessary to protect the administration of justice. The appellants also challenged the breadth of the orders granted, arguing they unduly restrained the disposal of their assets beyond what was necessary to satisfy a potential future judgment.

The High Court affirmed the Full Court's rejection of the appellants' jurisdictional arguments, finding that the Federal Court did possess the power to make such orders against non-parties in appropriate circumstances to prevent the frustration of justice. However, the Court found that the orders as made were excessively broad. It reasoned that the scope of an asset preservation order should be limited to the amount reasonably estimated to be required to satisfy the respondent's potential judgment, and no more. The Court noted that while precise estimation might be difficult, it was a necessary principle to apply to avoid undue disturbance of the appellants' assets.

Consequently, the High Court allowed the appeal, setting aside the orders of the Full Court and the primary judge. The matter was remitted to a judge of the Federal Court for the making of new interlocutory orders, provided the respondent applied for them and provided necessary undertakings as to damages. The operation of the new orders was suspended for 14 days.

Orders

Orders of the court

1.

Appeal allowed.

2.

Set aside Order 4 of the orders made by the Full Court of the Federal Court of Australia on 22 August 1997.

3.

Set aside each Order 1 of the several orders made by Emmett J on 22 August 1997 and 26 August 1997.

4.

Set aside that part of Order 2 of the orders made by the Full Court of the Federal Court of Australia on 22 August 1997 which disposes of the costs of the appeal to that court. In place thereof, order each party to bear its, his and her own costs of the appeal to that court.

5.

Suspend the operation of Orders 1, 2, 3 and 4 of these Orders for 14 days from the date of the making of this Order.

6.

Remit the matter to a judge of the Federal Court of Australia for the making, on application by LED Builders Pty Limited, and on provision of the necessary undertakings, of orders for interlocutory relief in or to the effect of the form set out in the joint majority judgment.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

HUGH, GUMMOW AND CALLINAN JJ KIRBY J

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Ratio Decidendi

Legal Principle Established

Established by: HUGH, GUMMOW AND CALLINAN JJ, KIRBY J

The general liberty to apply, reserved to the appellants, afforded a means to elucidate the prospects of recoupment and the ultimate utility to LED of the asset preservation order which it sought. That was where their arguments should have been heard, once the primary judge made the findings, which he did, concerning the conduct of Eagle Homes and of the appellants. The arguments of the latter, suggesting a jurisdictional impediment (or one of power) were rightly rejected by the Full Court. This Court should affirm the Full Court's approach. It should dismiss all of the original grounds of appeal for, in substance, they (like the appellants' initial submissions to this Court) addressed nothing else than the questions of jurisdiction and power which formed the basis of the appellants' special leave application[205].[205]Ground 1 in the notice of appeal asserted that the Federal Court did not have jurisdiction to make the orders against the appellants where there was no cause of action maintainable by LED against them and in respect of property in the hands of the appellants not available to LED to satisfy a judgment which LED might in future obtain against Eagle Homes. Ground 2 asserted that the Full Court had erred in interfering with the order made by Emmett J and in granting "Mareva relief" upon five stated grounds at least three of which (grounds 2(a), (b) and (c)) refer to substantially the same point as in the first ground. Discretionary considerations and form of orders The appellants, nonetheless, made a number of telling points in their oral arguments concerning the width of the orders which LED had sought and which, on remitter, the primary judge ultimately made. For example, they complained about the terms of those orders restraining the Cardiles and Ultra Modern "from disposing of or dealing with any of their money, property or other assets" other than for specified purposes. It is difficult to justify an order so broadly expressed. It effectively freezes all of the assets of the appellants subject only to the specified exceptions. The ultimate measure of the property and other assets of the appellants which could properly be made the subject of an asset preservation order is that part of such property and assets which, on a reasonable estimate, would be needed to meet a judgment of the Federal Court in favour of LED in the copyright proceedings. No more. There was no warrant for freezing the assets of the appellants beyond LED's potential judgment. True, it would have been difficult for the primary judge to estimate, with precision, the ultimate recovery of LED, given that the claim for any account of profits had been heard by another judge and reserved. However, it was necessary, in terms of principle, to limit the disturbance of the property and other assets of the Cardiles and Ultra Modern to the potential recovery of LED and nothing more. Although the orders as made listed many of the exclusions common in such orders, the appellants also complained that the exception for "the ordinary living expenses of [the Cardiles]" was insufficiently broad to permit them to take a holiday. I will not condescend to consider whether this was so for there are three substantial answers to the complaints belatedly made about the form of the orders.