Commissioner of the Australian Federal Police v Courtenay Investments Ltd

[2013] WASC 396

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

CITATION:   COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE -v- COURTENAY INVESTMENTS LTD [2013] WASC 396

CORAM:   EDELMAN J

HEARD:   ON THE PAPERS

DELIVERED          :   29 OCTOBER 2013

FILE NO/S:   CIV 2702 of 2012

BETWEEN:   COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE

Applicant

AND

COURTENAY INVESTMENTS LTD
HAPPLE LTD
DAVENRITE LTD
First Defendants

AND

STUART ADRIAN CORP
Second Defendant

Catchwords:

Practice and procedure - Application by second defendant to withdraw as a party - Relevance of undertaking as to damages given by applicant in earlier restraint proceedings - Scope of operation of undertaking

Legislation:

Proceeds of Crime Act 1987 (Cth), s 43, s 44
Proceeds of Crime Act 2002 (Cth), s 19, s 21
Rules of the Supreme Court 1971 (WA), O 18 r 6(2)

Result:

Opportunity to make further submissions on issues raised in reasons

Category:    B

Representation:

Counsel:

Applicant:     No appearance

First Defendants           :     No appearance

Second Defendant         :     No appearance

Solicitors:

Applicant:     No appearance

First Defendants           :     No appearance

Second Defendant         :     No appearance

Cases referred to in judgment:

Indoor Holdings Pty Ltd v Bennett [2010] WASC 242

McCleary v Director of Public Prosecutions (Cth) (1998) 20 WAR 288

Omar v Darul-Iman (WA) Inc [2013] WASC 311

Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317

State of Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291

EDELMAN J: 

Introduction

1. This is an application by the second defendant, Mr Corp, to be removed as a party from these proceedings.  The application is not opposed but the Commissioner of the Australian Federal Police says that the withdrawal of Mr Corp should be subject to the condition that Mr Corp releases the Commonwealth of Australia from an undertaking as to damages.  Mr Corp disputes the imposition of this condition. 

2. The parties made brief written submissions and agreed that this dispute could be dealt with on the papers.  The Australian Federal Police say, with considerable force, that while Mr Corp wishes to maintain his reliance upon the undertaking as to damages then he remains a necessary and proper party to the proceedings.  It is hard to see how Mr Corp can maintain that he might be affected by the restraint imposed on the property which is the subject of the proceedings and, at the same time, argue that he is no longer a necessary and proper party.

3. In their written submissions both parties to this application assumed that the undertaking as to damages would be enforceable by Mr Corp even after he withdrew as a party.  For the reasons below, there may be very serious doubt about this assumption.  If orders cannot be agreed between the parties in light of the reasons below I will give the parties the opportunity to address this point.

The undertaking given by the Commonwealth of Australia

1. On 23 April 2010, an ex parte application was made by the Australian Federal Police under the Proceeds of Crime Act 2002 (Cth) for a restraining order including the following terms:

   Pursuant to Section 19(2)(b) of the Proceeds of Crime Act 2002 (Cth) ("the Act") the following specified property:-

   The sum of money being $885,003.47 as at 31 March 2010 plus interest accrued thereafter, held by the Official Trustee in Bankruptcy on behalf of:

   a)Davenrite Limited, a company incorporated in the Territory of the British Virgin Islands;

   b)Courtenay Investments Limited, a company incorporated in the Territory of the British Virgin Islands; and

   c)Happle Limited, a company incorporated in Gibraltar,

   must not be disposed of or otherwise dealt with by any person.

2. The restraining order under the Proceeds of Crime Act 2002 (Cth)[1] was granted on 10 June 2010 upon the giving of an undertaking by the Australian Federal Police in terms as follows:

   The applicant on behalf of the Commonwealth of Australia hereby undertakes to the Court that the Commonwealth will pay to any party restrained or affected by the restraints imposed by this restraining order, such damages as the Court may in its discretion consider in the circumstances to be just, such damages to be assessed by the Court or in accordance with such directions as the Court may make and to be paid in such manner as the Court may direct.

   [1] Proceeds of Crime Act 2002 (Cth) s 21.

3. On 25 October 2010, Mr Corp, on his application, and the first‑ and second‑named first defendants were joined as parties to the proceedings.

Whether the undertaking applies after Mr Corp withdraws as a party

1. Counsel for the Australian Federal Police submitted that before an order should be made removing Mr Corp as a party, Mr Corp should release the Commonwealth from its undertaking, so far as it operated only as between Mr Corp and the Commonwealth.  Mr Corp submitted that he should not be required to release the Commonwealth.

2. It is hard to understand why Mr Corp would refuse to release the Commonwealth from its undertaking as to damages, unless Mr Corp considered that there might be some basis upon which he could enforce the undertaking in the future. That basis could only arise if Mr Corp were affected by the restraints imposed by the restraining order. And, although I did not receive submissions on this point, if the restraints over the property might affect Mr Corp then there is 'an arguable possibility that he … may be affected by the making of the [final] order',[2] and that he is, therefore, a necessary and proper party to proceedings in relation to the property.[3]

   [2] State of Victoria v Sutton [1998] HCA 56; (1998) 195 CLR 291, 316 [77] (McHugh J).

   [3] Rules of the Supreme Court 1971 (WA) O 18 r 6(2).

3. The common assumption of the parties was that if Mr Corp were removed as a party to the proceedings the undertaking would continue to operate between the Mr Corp and the Commonwealth.  There is a serious question whether this common assumption is correct.  The terms of the undertaking in this case refer to the payment of compensation to 'any party restrained or affected by the restraints imposed by this restraining order'.  Although it is possible, and common, for an undertaking to extend to non‑parties,[4] the reference to 'any party restrained or affected' in the undertaking is generally construed as a reference to a party to the proceedings.[5]  It is arguable that if Mr Corp ceases to be a party then the undertaking will cease to apply to him. 

   [4] Omar v Darul-Iman (WA) Inc [2013] WASC 311 [39] (Pritchard J); Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317, 325 (Kirby P).

   [5] Indoor Holdings Pty Ltd v Bennett [2010] WASC 242 [24] - [26], [35] (Le Miere J).

4. In Indoor Holdings v Bennett,[6] an undertaking as to damages was given which referred to 'any party restrained or affected by the restraints imposed by this interlocutory injunction'.  Le Miere J held that the undertaking could not be construed as though the reference to 'any party' included a reference to persons not party to the litigation.[7] 

   [6] Indoor Holdings Pty Ltd v Bennett [2010] WASC 242.

   [7] Indoor Holdings Pty Ltd v Bennett [2010] WASC 242 [35]. See also Omar v Darul-Iman (WA) Inc [2013] WASC 311 [39] (Pritchard J).

5. An undertaking as to damages in favour of a 'party' does not confer a benefit on a person not party to the proceedings unless the intention to do so is clear from the form of the undertaking or order.[8]  Further, the undertaking does not operate retrospectively, so that if persons are joined as parties, as Mr Corp was on 25 October 2010, the undertaking in relation to that party operates only prospectively from the date of joinder.[9] 

   [8] Indoor Holdings Pty Ltd v Bennett [2010] WASC 242 [35] (Le Miere J).

   [9] Indoor Holdings Pty Ltd v Bennett [2010] WASC 242 [40] (Le Miere J).

6. The decision in Indoor Holdings concerned an undertaking as to damages given as part of an application for an interlocutory injunction.  But in McCleary v Director of Public Prosecutions (Cth),[10] Ipp J (Malcolm CJ and Franklyn J agreeing on this point) said that an undertaking given under the predecessor[11] to the current Proceeds of Crime Act is intended to serve the same purpose as an undertaking given to persuade the Court to grant an interlocutory injunction.  His Honour explained that Parliament intended in the Proceeds of Crime Act that the rules and practices applicable to undertakings in ordinary civil litigation be followed.[12]

   [10] McCleary v Director of Public Prosecutions (Cth) (1998) 20 WAR 288.

   [11] Proceeds of Crime Act 1987 (Cth) s 43, s 44.

   [12] McCleary v Director of Public Prosecutions (Cth) (1998) 20 WAR 288, 305.

7. There are two respects in which this case might be distinguished from Indoor Holdings.  The first respect is that at the time the undertaking was given by the Commonwealth there were no other parties to the proceedings.  The reference to 'party' in the undertaking might, therefore, be construed to include all those persons who become parties to the proceedings.  If so, the question which would then arise is whether the undertaking would apply to those persons only for the duration of the period in which they remain parties or whether it would continue to apply to those persons after they ceased to be a party.  I received no submissions on any of these issues.  The second respect is that it is arguable, and I put it no higher than that, that the reference to 'party' in the undertaking might be construed to mean 'person'.

Conclusion

1. Although I have received no submissions on the issue, for the reasons above it is arguable that if Mr Corp were removed as a party to the proceedings then the undertaking given by the Commonwealth would cease to be enforceable by him at least in relation to anything which occurred after that date.  The basis, therefore, upon which the Australian Federal Police submit that he is a necessary and proper party to the proceedings might no longer exist in relation to matters affecting the property after the date of removal. 

2. However, if this were correct, the undertaking might still have force, and be enforceable by Mr Corp, in relation to the property restrained for the period during which he was a party to these proceedings.  Mr Corp's potential reliance upon the undertaking for this period would, on this basis, undermine his claim that he is not a necessary or proper party.

3. The overall point, which was the subject of submissions, is that if the undertaking applies, and if Mr Corp maintains that he might have been affected by the restraints during any period in which the undertaking applies, then there is considerable force in the Australian Federal Police's submission that he should remain a party to these proceedings.  Mr Corp has not explained how he can maintain, on the one hand, that he might be affected by the restraints over the property and, on the other hand, that he has no interest in the proceedings and is not a necessary or proper party.  It is, of course, open to Mr Corp to take no active part in the proceedings and to submit to any order which the Court might make.  If Mr Corp maintains that he might be affected by the restraint and wishes to preserve his rights under the undertaking then this course is open to him.

4. I will provide the Australian Federal Police and Mr Corp with the opportunity to make submissions on the points above which have not been the subject of argument, as well as the matters raised in these reasons, if they wish to do so.  A directions hearing will be held in my list tomorrow to address any issues arising.