CGU Insurance Limited v Chacmol Holdings Pty Ltd

[2003] VSC 493

Revised

SUPREME COURT OF VICTORIA

PRACTICE COURT

No. 5627 of 2003

CGU INSURANCE LIMITED
	Plaintiff
v.
CHACMOL HOLDINGS PTY LTD and ORS.	Defendants

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JUDGE:	MANDIE, J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	10 December 2003
DATE OF JUDGMENT:	10 December 2003
MEDIUM NEUTRAL CITATION:	[2003] VSC 493

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Practice and Procedure – Application for Mareva injunction

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P. Crutchfield	Minter Ellison
For the Defendants	Mr F. G. A. Beaumont, Q.C. with Mr D. Murphy	Middletons Moore & Bevins
For the Administrator of Australian Risk Analysis Pty Ltd	Ms D. McCredden

HIS HONOUR:

1. By a writ dated 3 December 2003 the plaintiff, CGU Insurance Limited, commenced this proceeding against Chacmol Holdings Pty Ltd and two directors of that company, Barry Johnson and Kathleen Johnson. 

1. A company which I will refer to for convenience as “AUA” has an agency agreement with the plaintiff, under which it obtained, as an insurance agent or broker, premiums from members of the defence forces and others for insurance policies and earned commission on those premiums.  The payment of the premiums less the commission over to CGU by AUA has become the subject of dispute and the plaintiff says that in excess of $3 million which should have been paid by AUA to the plaintiff, according to AUA’s own returns, has not been paid, and AUA does not seem to have this money any more.  It seems to be common ground that in excess of $3 million has not been paid over. 

1. AUA says that it has a variety of counter-claims based on the provisions of the agency agreement and the alleged failure of the plaintiff to comply with a number of those provisions, and these allegations are contained in a counter-claim in a separate proceeding which is already ongoing in the Commercial List.

1. There was a debenture or charge registered against AUA in favour of the first defendant in this proceeding, Chacmol, which appointed a controller over AUA and took over the business formerly conducted by AUA.  The evidence shows that the business conducted by AUA was partly this agency business for the plaintiff and partly a travel insurance business conducted by AUA which was not related, apparently, to the plaintiff, so that some income derived by AUA, and probably a large amount of income, was derived from the agency agreement, but also other income and other moneys came in in relation to other aspects of its business.

1. The endorsement of claim on the writ refers to moneys received on trust by AUA, which is now in administration as well as being under the controller appointed by Chacmol, and it pleads that in breach of trust and in breach of the agency agreement AUA failed to remit these moneys to the plaintiff.  It says that Chacmol has now taken possession of AUA’s assets and of the trust moneys and that Chacmol and the directors, Mr and Mrs Johnson, have assisted the alleged breaches of fiduciary duty by AUA, received trust moneys, and various forms of relief are sought, including injunctions, the delivery up of trust moneys and accounts and equitable damages.

1. On that basis an ex parte application was made to the Chief Justice, who ordered, on 3 December, in effect (without reciting the precise orders), with the various exceptions contained in the order, that the assets of the defendants Chacmol and the two individuals, Mr and Mrs Johnson, be frozen until the hearing of the present application on notice to the defendants.

1. The application now made to the Court is for an injunction restraining the defendants and each of them from in any way dealing with any of their assets wherever situated without the consent of the plaintiff, save in so far as those assets exceed $3.5 million.  Some exceptions are proposed by the plaintiff.  One relates to some insurance moneys in the sum of $205,000 which have been received for the benefit of the third defendant, and other exceptions which one normally finds in a Mareva injunction allow for the expenditure of weekly moneys by the second and third defendants for their living expenses and weekly moneys by the defendants for reasonable legal expenses.  An order is also sought to restrain the destruction of books of AUA other than by delivering them to the administrator.

1. The basis for seeking these orders does not appear to be primarily the dissipation or threatened dissipation of the assets of any of the defendants or any fear that they are about to flee the jurisdiction, which are the traditional bases for a Mareva injunction.  In any event, I am not satisfied on the material that there is any threat by any of the defendants to dissipate their assets.  The evidence is that Chacmol is carrying on the business, formerly the business of AUA, under the charge and it does not appear anywhere in the material that there is some threat to sell the business or in any way dissipate the assets of the business.  The second and third defendants have disclosed their assets, which comprise a number of pieces of real estate, most of which were acquired well before the arising of alleged causes of action in this or the other Commercial List proceeding, and some other assets of a personal nature.  I am not satisfied that there is any foundation for the orders sought on the basis of a threatened dissipation of assets by any of the defendants. 

1. Counsel for the plaintiff put his primary reliance on the existence of a case for tracing the trust moneys, being the premiums that were not paid over, into the property of the defendants.  However, there is no evidence that the second and third defendants have any property of that kind, and I would not be prepared to make an order on that basis.  There is not the slightest evidence that there is any particular asset of the second and third defendants listed in the document which they have produced in accordance with the order of the Chief Justice that could be the subject of a tracing remedy. 

1. Emphasis was placed by counsel for the plaintiff on the fact that trust moneys, he alleged, had been paid into the business of AUA and that was now being conducted by Chacmol.  When he took me to the figures on this, I had, I must confess, great difficulty understanding them, and it seems to me, to the extent that I do now understand them, that the plaintiff’s claim is, at least on the present material, difficult to substantiate.  The profit and loss statement which has been produced in relation to AUA shows a gross premium income of around $30 million, yet, according to the affidavit of Mr Johnson, the second defendant, the premium income from the business with CGU has declined from $23 million to $7 million, speaking in round figures.  There may be an explanation for this, but on the present material it would seem that the business of AUA is only partly based upon revenue and gross premiums from the plaintiff, and to a declining extent.  If one then turns to the bank statements that were put in evidence, it is hard to know whether the large amounts withdrawn, to which counsel for the plaintiff pointed, were CGU money or not.  The evidence from Mr Johnson seems to be that this bank account which has been the subject of debate has been the recipient of money from a number of sources.  It is all very unclear and hardly a satisfactory basis for the Court to make drastic orders which, on the uncontradicted material, would be likely to prevent Chacmol from carrying out the business which it is carrying out under its security. 

1. The drastic nature of the orders sought is such that the Court ought to be firmly persuaded of the basis for them, and, for the reasons that I have given, I am not firmly persuaded that there is a basis for any of them.  Nor am I persuaded that there has been any threat to destroy or dispose of books.  I refuse to make any of the orders sought by the plaintiff.

1. I will dismiss the summons of the plaintiff dated 3 December 2003 which seeks interlocutory injunctions, with costs.

I make no order as to costs of the administrator.

I will refer the plaintiff’s summons for directions dated 3 December 2003 and the defendants’ summons dated 9 December 2003 to the judge in charge of the Commercial List on 6 February 2004.

I will reserve costs in relation to those summonses.

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