Comit Farms v Valamois & Ors No. DCCIV-02-128

[2004] SADC 7

COMIT FARMS PTY LTD v VALAMOIS & ORS.
[2003] SADC 7

Judge Lunn
Civil

REASONS ON THE PLAINTIFF’S APPLICATION OF 17 DECEMBER 2003 FOR ORDERS UNDER SECTION 14 OF THE ENFORCEMENT OF JUDGMENTS ACT 1991 AND REQUIRING NOTICE OF PASSPORT APPLICATIONS FROM THE 3^RD and 4^th DEFENDANTS.

1. The 1^st and 2^nd defendants regularly bought large quantities of vegetables from the plaintiff.  They are now bankrupt and were not involved in the present application.  On 3 January 2001 the 3^rd and 4^th defendants, who are apparently sons of the 1^st and 2^nd defendants, executed a guarantee and indemnity of the first two defendants’ liability to the plaintiff.

2. On 30 January 2002 the plaintiff instituted this action claiming $1,801,295 plus interest from the first two defendants as the balance owing for vegetables supplied to them and from the 3^rd and 4^th defendants under the guarantee.  A solicitor acting for all defendants made an admission that the defendants owed $1,224,128 to the plaintiff.  A formal judgment of the Court was entered against all defendants for this sum dated 18 April, 2002.  (Although it is referred to in some places as a “summary judgment” it was not apparently given under Rule 25, but rather it was a judgment on admissions under Rule 54.05.)  That judgment has never been set aside, paid or stayed.  The action proceeded in respect of the balance of the claim.

3. On 13 June 2002 the parties settled the balance of the claim and entered into a deed (“the Deed”) which in general terms provided for the defendants to pay an agreed amount to the plaintiff by instalments.  The defendants breached the Deed by not making payments as required.  On 9 September 2003 the plaintiff took out an application for summary judgment for the balance of the claim against the 3^rd and 4^th defendants which it alleged then stood at $613,552.  The 3^rd and 4^th defendants then raised a number of defences to their liability under the guarantee and the Deed including equitable fraud and misrepresentation.  There is a major dispute on the affidavit evidence about these defences.  After a full argument, on 22 December 2003 a Master dismissed the application for summary judgment and gave directions for the action to proceed on the balance of the claim over and above the judgment of 18 April 2002.  No application has yet been taken out by the 3^rd and 4^th defendants to set aside this judgment.  The matters raised by them in answer to the summary judgment application would seem to also give them grounds to contest their liability for the judgment amount.  It appears that the directions given by the Master on 22 December for affidavits to be filed envisaged that there will be a contested application to set aside this judgment against the 3^rd and 4^th defendants.

4. While the application for summary judgment was pending there was some attempt by the 3^rd and 4^th defendants to negotiate concessions from the plaintiff. For the purposes of the application before me I do not consider that these communications were privileged either under s67C of the Evidence Act 1929 or at common law.  In November 2003 the 3^rd defendant gave eight post-dated cheques drawn on his account to the plaintiff for amounts totalling $50,000 which were all dishonoured on presentation.  As a condition of the plaintiff agreeing to an adjournment of the summary judgment application the 3^rd and 4^th defendants agreed to surrender their passports to the plaintiff’s solicitor.  In consequence those passports have been held by the plaintiff’s solicitor since October 2003, although it was suggested in argument that one has since expired.  New solicitors acting for the 3^rd and 4^th defendants have demanded the return of the passports but they have not been returned and the 3^rd and 4^th defendants have not yet sought any orders for their return.  The 1^st and 2^nd defendants are no longer in Australia.

5. On 17 December 2003 the plaintiff issued an application pursuant to s14 of the Enforcement of Judgments Act 1991 and Rule 89.05 seeking the following orders:

   “1.That the Department of Foreign Affairs and Trade and the Australian Passports Office advise this Honourable Court of any application by George Valamois (also known as George Valamiou) and/or Chris Valamois (also known as Chris Valamiou) for the issue or replacement of a passport for either of them and that such application not proceed for a period of fourteen (14) days after the date of notification of same to this Honourable Court.

   2.That a Summons be issued requiring the defendants and each of them to appear for examination before the Court.

   ……

   4.That the Court direct an examination of the defendants and each of them pursuant to Section 14 of the Enforcement of Judgments Act 1991 to be held before a Master or Registrar.

   ……”

   Section 14 of the Enforcement of Judgments Act 1991 provides:

   “Absconding debtors

   14. (1)  If-

   (a)     a plaintiff has brought an action in a court for recovery of a monetary sum; and

   (b)     there are grounds for believing-

   (i)that the defendant is about to leave the State; and

   (ii)that the defendant’s absence from the State would seriously prejudice the plaintiff’s prospects of enforcing a judgment that has been, or may be, given in that plaintiff’s favour,

   the court may issue a summons requiring the defendant to appear for examination before the court, or issue a warrant to have the defendant arrested and brought before the court, for examination.

   (2)  If, after examination of the defendant, the court is satisfied that there is good reason for doing so, it may require the defendant to give security for the satisfaction of any judgment that has been or may be given in the plaintiff’s favour.

   ……”

   I am not aware of any judicial exposition of this section. It is in significantly different terms from its predecessors, being the repealed s35 of the Supreme Court Act 1935 and ss271-82 of the Local and District Criminal Courts Act 1926.  The authorities under those Acts are of little assistance on the issues here.

6. Section 14(1)(b)(i) creates a condition precedent for any order being made under s14 that there must be grounds for believing that the defendant is about to leave the State. The plaintiff has not satisfied this condition precedent. On the evidence before me, which the plaintiff’s counsel could not dispute, the 3^rd and 4^th defendants have always resided, and carried on business, in New South Wales and have not been, and are not, in the State of South Australia. They cannot be “about to leave the State” if they are not in the State. The plaintiff’s concern and belief is that they will leave Australia, but that is not sufficient to invoke the operation of s14. Although “the State” is not defined by the Enforcement of Judgments Act 1991, under s4 of the Acts Interpretation Act 1915, which applies to the Enforcement of Judgments Act 1991 unless a contrary intention appears, “the State” means the State of South Australia. Hence the plaintiff is not entitled to any relief under s14.

7. Even if the plaintiff had been able to satisfy the condition precedents in s14(1) for invoking the powers in that section, I would still not have issued a summons under that section against the 3^rd and 4^th defendants.  Subsection 14(1)(b)(ii) impliedly makes the operation of the section dependent upon the defendants’ absence from the State seriously prejudicing the plaintiff’s prospects of enforcing its judgment.  For reasons which will be mentioned later, there is no evidence that if the 3^rd and 4^th defendants are not in the State, or at least in Australia, the plaintiff’s ability to enforce its judgment will be seriously prejudiced because of their absence.  At the best for the plaintiff it is only a possibility.  The plaintiff’s counsel argued that the plaintiff would be prejudiced because it needed the 3^rd and 4^th defendants to be examined by the Court about their assets in order to facilitate an enforcement of the judgment. However, such an examination could be obtained more simply and expeditiously under s4 of the Enforcement of Judgments Act 1991. (I need not go into the question which I raised in argument whether s4 can be used against a judgment debtor residing in New South Wales or whether it would be necessary to register this judgment in that State and use similar procedures which are available there: in any event the results would be similar.) Insofar as it would be necessary to exercise a discretion under s14 I do not see why the order should be made when a similar result could be obtained more expeditiously under s4. The primary function of s14 is not to facilitate discovery of a judgment debtor’s assets, but to provide security for the payment of judgments where the debtor’s absence from the State would seriously prejudice the plaintiff in enforcing the judgment. An examination is not to be ordered under s14 unless it is ancillary to providing the basis for an order for security. That is not the case here.

8. The order sought in paragraph 1 was independent of the orders sought under s14. The plaintiff’s counsel submitted it could be made in the inherent jurisdiction of the Court. I am not aware of any authority, or precedent, on the point. For present purposes I am prepared to assume the Court would have such a jurisdiction but I do not need to decide the point.

9. The only relief sought in the action by the plaintiff is a monetary judgment. Subject to any future order setting aside the judgment of 18 April 2002 the plaintiff is entitled under the District Court Act and Rules to enforce its payment out of the assets of the 3^rd and 4^th defendants.  The prime concern of the plaintiff is to ascertain what assets the 3^rd and 4^th defendants now have so that it can direct appropriate processes of execution against them.  In correspondence the 3^rd and 4^th defendants had disclosed the addresses of various properties owned by them, but there is no evidence that the plaintiff has explored the prospects of any execution against them.  The tenor of the submissions of the plaintiff’s counsel was that the plaintiff did not believe the 3^rd and 4^th defendants were telling the truth about the matters remaining in issue in the action and therefore may not also have told the whole truth about the extent of their assets.  Where a plaintiff is concerned that it may be prejudiced in recovery of a judgment because the defendant may dispose of its assets to thwart the judgment it can seek a “Mareva” injunction to preserve the assets pending processes of execution against them: Orwell Steel v Asphalt and Tarmac Ltd [1985] 3 All ER 747; Humphris v Jenshol (1997) 160 ALR 107, but no such application has been made. (It is distinct from s14 relief: Al Nahkel v Lowe [1986] 1 All ER 729.) Insofar as a plaintiff needs information about a defendant’s assets in order to pursue a Mareva injunction it can seek orders of the Court for discovery in aid of the application: Civil Procedure SA, para [R68.03.30].  However, provided the assets of a judgment debtor remain in Australia, and are not dealt with adversely to the plaintiff’s claim, it is not usual for the Court to restrain judgment debtors from leaving the country if they otherwise wish to do so.  It is the assets, and not the physical persons of the defendants, which is to be the subject of any process of execution.

10. The only utility of the order sought in paragraph 1 can be that if it is made and the Department of Foreign Affairs informs the Court that a defendant has applied for another passport the Court can then consider making an order restraining that defendant from leaving the country.  However, if there is no basis for restraining a defendant from leaving the country, then there is no proper ground to make the order sought.

11. The onus is on the plaintiff to show that it has an arguable case that the 3^rd and 4^th defendants should be restrained from leaving the country.  It is an impediment on the personal freedom of the defendants, and should not be lightly imposed.  I accept that the plaintiff fears the 3^rd and 4^th defendants will leave the country. However, if they leave and do not return their chances of successfully defending the plaintiff’s claim at trial would be almost zero. There is no evidence that they have any immediate plans to leave the country and would not comply with any order made for discovery in aid of any future Mareva injunction and/or not attend on any hearing of an investigation summons under s4 of the Enforcement of Judgments Act 1991.  If the plaintiff had so wished it could have taken those steps some time ago.  In any event, any such order is more properly an adjunct to a Mareva injunction if it is shown to be a necessary part of that order rather than as relief independent of, and a precursor to, any Mareva injunction.  I am not satisfied on the evidence before me that the presence of the 3^rd and 4^th defendants in Australia is sufficiently necessary for the plaintiff to enforce its judgment to justify granting the order sought in paragraph 1.  Accordingly, that order, and all of the orders sought in the application, are refused.