Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [No 4]
[2009] WASC 407
•17 SEPTEMBER 2009
COMPUTER ACCOUNTING AND TAX PTY LTD -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [No 4] [2009] WASC 407
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2009] WASC 407 | |
| Case No: | CIV:2265/2006 | 17 SEPTEMBER 2009 | |
| Coram: | SIMMONDS J | 17/09/09 | |
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Application to amend freezing orders dismissed Request submissions from parties as to costs | ||
| B | |||
| PDF Version |
| Parties: | COMPUTER ACCOUNTING AND TAX PTY LTD PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD DONALD CAMPBELL SMITH As Executor of the Estate of MARTIN PAUL BANNING |
Catchwords: | Practice and procedure Application to amend freezing orders Relevant amount of the unencumbered value Application dismissed Turns on own facts Costs Indemnity costs Unsuccessful applicant responsible for reasonable costs and expenses of innocent third party Submissions from parties as to costs requested |
Legislation: | Civil Judgments Enforcement Act 2004 (WA), s 59, s 86(1)(e) Rules of the Supreme Court 1971 (WA), O 52A |
Case References: | Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S) EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59 Forbes v Frigger [2009] WASC 77 Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; The Niedersachsen [1984] 1 All ER 398 Norilya Minerals Pty Ltd v Ireland (1994) 12 WAR 485 Perth Mint v Mickelberg (No 2) [1985] WAR 117 Project Development Co Ltd SA v KMK Securities Ltd [1983] 1 All ER 465 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD
First Defendant
DONALD CAMPBELL SMITH As Executor of the Estate of MARTIN PAUL BANNING
Second Defendant
Catchwords:
Practice and procedure - Application to amend freezing orders - Relevant amount of the unencumbered value - Application dismissed - Turns on own facts
Costs - Indemnity costs - Unsuccessful applicant responsible for reasonable costs and expenses of innocent third party - Submissions from parties as to costs requested
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Legislation:
Civil Judgments Enforcement Act 2004 (WA), s 59, s 86(1)(e)
Rules of the Supreme Court 1971 (WA), O 52A
Result:
Application to amend freezing orders dismissed
Request submissions from parties as to costs
Category: B
Representation:
Counsel:
Plaintiff : Mr C P Stokes
First Defendant : Mr T R Stephenson
Second Defendant : Mr T R Stephenson
Solicitors:
Plaintiff : Chris Stokes & Associates
First Defendant : Eastwood Law
Second Defendant : Eastwood Law
Case(s) referred to in judgment(s):
Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133
Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S)
EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59
Forbes v Frigger [2009] WASC 77
Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; The Niedersachsen [1984] 1 All ER 398
Norilya Minerals Pty Ltd v Ireland (1994) 12 WAR 485
Perth Mint v Mickelberg (No 2) [1985] WAR 117
Project Development Co Ltd SA v KMK Securities Ltd [1983] 1 All ER 465
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- SIMMONDS J: (This judgment is edited from the transcript).
Introduction
1 For the reasons that I will set out, I have determined that I will dismiss the plaintiff's application and that I will ask for submissions from the parties as to costs in that event. There is a matter - and I will return to it at the end of my reasons - in the submissions of the defendants, as well as of Banning Holdings, in relation to costs, and I will mention them but, as I will indicate, I believe I require a further matter.
2 I introduce these reasons by describing what is before me as an application by chamber summons dated 27 August 2009 to vary certain freezing orders made for the benefit of the applicant, the plaintiff in CIV 2265 of 2006. I will call that 'the present action'.
3 Those freezing orders were made by me on 8 January 2008 and were varied by Hasluck J on 11 January 2008. They were further varied by me following a hearing on 21 November 2008 and again following a hearing on 20 April of this year.
4 I call the orders so varied 'the freezing orders'. The freezing orders were made under Rules of the Supreme Court 1971 (WA) O 52A. As will become apparent, that source supplies a number of the considerations that in my view should guide my consideration of the present application. There is also an order sought by the plaintiff for the costs of the application, to be made payable by the directors of the first defendant personally.
5 I first set out the background of the present application. I then describe the orders sought. I next describe the submissions of the parties in relation to those orders and my conclusions. I also refer to submissions, primarily in writing, made to me by counsel for another party.
Background
6 As to the background, the present action is for damages and other relief in respect of the conduct of the defendants in the sale of a property in Armadale to the plaintiff.
7 Following a trial on the present action, I delivered reasons for judgment for the plaintiff on 9 July 2008 (see Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133). As a result of judgment orders, the defendants were ordered by pay
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- the amount of $1,106,027.27 plus interest at 6% from the date of judgment. I call that the 'judgment sum', as well as costs to be taxed. That judgment is presently under appeal (CACV 76 of 2008) and that appeal was heard about a month and a half ago.
8 The freezing orders follow the form in what is now Consolidated Practice Direction (CPD) 9.6.1.1. The most recent variations to the freezing orders, those made following the hearing on 20 April 2009, were to allow for the payment of the judgment sum as that sum was defined in a deed of company arrangement made 20 March 2009 (the Original DOCA). The Original DOCA was annexed to the affidavit of Donald Campbell Smith sworn 10 March 2009 in support of the defendants' application to vary the freezing orders. I refer in particular to Original DOCA cl 1.1. The amount so defined there coincides with the judgment sum as I defined it at the outset of these reasons.
9 Mr Campbell Smith is the executor of the estate of the original second defendant Martin Paul Banning. Mr Banning died in September 2008. Mr Campbell Smith, by orders that I understand have not yet been extracted, was substituted as second defendant in the present action. The affidavit of Mr Campbell Smith sworn 10 September 2009 in opposition to the present application states that an amended deed of company arrangement has been approved at a creditors meeting held on 28 August 2009 (the Amended DOCA) (see 2(b) and annexure 6 to that affidavit).
10 Reference was made at the hearing before me to the deed of company arrangement by reference to the Amended DOCA and counsel for the plaintiff did not at that hearing press any objection to such reference. I understood from both counsel that the effect of the amendments made by the Amended DOCA was simply to extend certain periods within which actions to be taken under the Original DOCA were to be taken.
11 The only, or at least the only substantial, valuable asset of the estate of Mr Banning is his share interest in Banning Holdings Pty Ltd (Banning Holdings). At his death, Mr Banning held a 50% share interest in that company, his widow, Sandra Banning (Mrs Banning), holds the other 50% shareholding interest and she is the sole beneficiary of the estate of Mr Banning.
12 Two principal sets of steps have been taken to enforce the payment of the judgment sum. One set of steps led to the making of a property seizure and sale order dated 15 August 2008 (the PSS order, as it was
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- called). The PSS order was made by Principal Registrar Chapman, and I took that order to have been made under the Civil Judgments Enforcement Act 2004 (WA) s 59 (the CJE Act).
13 The other set of steps led to the order I made on 21 November 2008 for the appointment of a receiver, principally in respect of the shareholding interest of the estate of Mr Banning in Banning Holdings. I call that the 'receivership order'. This order as extracted refers to the CJE Act s 86(1)(e).
14 There are presently proceedings in CIV 1727 of 2009 concerning the effect of a purported sale by the receiver of that share interest to the two directors of the plaintiff, Angela Cecilia Theresa Frigger (Mrs Frigger) and her husband Hartmut Hubert Joseph Frigger. I call the two collectively 'the Friggers'.
15 The dispute concerns the effect, if any, of a pre-emptive rights provision in the memorandum and articles of association of Banning Holdings. In addition, I note that the defendants have made certain applications in the present action in relation to the receivership order listed to be heard on 7 October 2009.
16 Finally, I made certain special costs orders in the present action, for the reasons delivered on 6 May 2009 (see Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S)). The taxation of costs has commenced but no determinations have yet been made in that taxation, as I will explain.
Orders sought
17 I turn then to the orders sought by the plaintiff. The present application was brought on an urgent basis on a certificate of urgency. The orders sought are the following (and I use the numbering in the plaintiff's chamber summons dated 27 August 2009):
(2) that the freezing orders of 8 January 2008 be further amended as follows:
(a) at [6(a)] the amount of $380,000 be struck out and an amount of $630,000 be inserted;
(b) add [6(c)] 'the net proceeds of the sale of 9 Lacey Street, Perth be placed in the trust account of Chris Stokes and Associates' - solicitors for the plaintiff, I note - 'to be used for the judgment creditor's legal and enforcement costs';
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- (3) costs of this application be payable forthwith by the directors of the first defendant personally, to be taxed if not agreed.
18 In proposed order 2(a) the amount of $380,000 refers to the minimum amount, called in the freezing orders 'the relevant amount' of the unencumbered value of 'your assets in Australia' (Australian assets), which by [6(a)] of the freezing orders (in the circumstances which it was accepted before me have happened), 'you must not remove from Australia or in any way dispose of, deal with or diminish'. I return below to 'unencumbered value', 'your assets' and 'you'.
19 In proposed order 2(b) '9 Lacey Street, Perth' refers to property of which Banning Holdings is the registered proprietor, presently the subject of a contract of sale expected to settle soon.
20 The application is supported by three affidavits of Mrs Frigger, one sworn 27 August 2009, another sworn 10 September 2009 and a third sworn 14 September 2009, and three affidavits of Graham Trevor Lean, one sworn 3 September 2009, one sworn 10 September 2009 and one sworn 15 September 2009. Mrs Frigger is the director of the plaintiff, as I have indicated. Mr Lean is the court appointed receiver of Mr Banning's share in Banning Holdings under the receivership order.
21 Although I was disposed not to admit into evidence before me the Lean affidavit of 15 September 2009, counsel for the defendants, who also appeared as counsel for Banning Holdings, indicated he wished to make submissions as to certain passages in that affidavit and, accordingly, I took it there was no objection to my consideration of that affidavit as a whole.
22 In opposition to the application is an affidavit of Stewart Vivyan Forbes sworn 9 September 2009 and the affidavit of Mr Campbell Smith sworn 10 September 2009. Mr Forbes is the counsel retained by the defendants in relation to the taxation of costs in the present action. Mr Campbell Smith is not only the executor of the estate of Mr Banning, as I have indicated, he is also a director of Banning Holdings.
23 I should add that my consideration of the present application was not assisted by the process by which affidavits came to be filed over the course of the hearings of this matter on 11, 14 and 15 September 2009.
24 I deal then with the first two proposed orders sought together, followed by the third proposed order sought. Turning to the first two proposed orders, the changes to the freezing orders, I first need to
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- consider the principles applicable to consideration of those proposed orders. In my view, the principles which guide me in considering an application for variation of a freezing order of the present kind are to be drawn from the principles that apply in determining whether or not to make a freezing order under O 52A in the first place. The purpose or function of orders under O 52A is expressed in Civil Procedure in Western Australia (16 September 2009) [52A.0.3] as follows:
The function of a freezing order is to render the administration of the law effective and to prevent abuse and not, when expressed in general terms, to protect the interests of the plaintiff.
Reference is made in [52A.0.3] to Perth Mint v Mickelberg (No 2) [1985] WAR 117, 118 and [5] of CPD 9.6.1.
25 Further, a freezing order is not to be viewed as in the nature of security for the judgment debt or other amounts payable to the judgment creditor by court order, as explained in Civil Procedure in Western Australia [52A.0.8]:
The jurisdiction cannot be invoked for the purpose of providing security to plaintiffs … and the order would impose no real hardship on the defendants.
- The authority of Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; The Niedersachsen [1984] 1 All ER 398, 419 is referred to.
26 It follows, in my view, that where orders are sought to be varied to make them more restrictive it is necessary for the court to be satisfied that the changes are, by reason of circumstances discovered or arising since the making of the original orders, appropriate to achieve the purposes of the freezing orders; that is, to render the administration of the law effective and to prevent abuse. In my view, it is clear the proposed orders to vary the freezing orders are to make those freezing orders more restrictive.
Proposed order 2(a)
27 I turn then to the first of the proposed orders, proposed order 2(a). On the analysis that I have just provided, order 2(a) in my view requires me, in the circumstances of this case, to assess whether or not the plaintiff has shown that the relevant amount, as that is defined in the freezing orders, by reason of circumstances discovered or arising since the making
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- of the original orders, is insufficient for the purposes for which the freezing orders were made.
28 That, in my view, in turn requires me to assess whether or not the plaintiff's taxed costs are likely to be above $380,000. If there has not been such a showing, then in my view I should not normally incline to exercise my discretion to vary the relevant amount as proposed under order 2(a), absent special circumstances.
29 For the plaintiff, it was put to me, as I understood the submission, that I needed only to determine whether there was a real prospect, as counsel put it to me, that tax costs would exceed that amount. I consider that sets the requirement too low. I consider I need to determine whether or not the likely taxed costs will be at an amount above the relevant amount (see Biscoe P, Freezing and Search Orders: Mareva and Anton Piller Orders (2nd ed, 2008) [6.50] and authorities cited there).
30 The relevant amount of $380,000 in the freezing orders is the result of the substitution of that sum for the previous relevant amount of $1,200,000. This substitution followed the payment to the plaintiff of, or of approximately, the amount identified in the Amended DOCA, cl 1.1, the judgment sum, as I have indicated.
31 Substitution was made by the variations of the freezing orders of April 2009, order 2(a). That amount was fixed by me then on the basis of what I saw then to be a reasonable allowance for the plaintiff's taxed costs. At that time I had not delivered my judgment in Computer Accounting and Tax Pty Ltd v Professional Services of Australia Pty Ltd [2008] WASC 133 (S).
32 In my view, that allowance also included an amount for significant enforcement costs in relation to the receivership and the PSS order, where for the sum of both, an amount of about $100,000 was referred to by counsel for the plaintiff at the hearing of the application for variation of the freezing orders on 20 April 2009 (see ts 1858).
33 Mrs Frigger's affidavit of 27 August 2009 [9] says that 'the total legal and enforcement costs' are estimated at approximately $630,000, while the bill of costs in the taxation in the amount of $631,000 (see [6] of the affidavit) had been filed. Mrs Frigger's affidavit of 10 September 2009 says that a further bill of costs in substitution for the earlier bill was sent to the defendants on 26 August 2009 and showed the amount of $701,339.67 [6].
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34 It would seem that those bills do not include enforcement costs (see Mrs Frigger's affidavit of 27 August 2009 [5]). If so, it is not altogether clear to me then why 'total legal and enforcement costs' are estimated by Mrs Frigger as at 27 August 2009 at $630,000. However, at most I will take it that it was contemplated as at that date that there might be a reduction in the taxed costs of the plaintiff other than enforcement costs.
35 I do not consider that any such contemplated reduction is of sufficient size to have a bearing on my deliberations. However, the Forbes affidavit is to the effect that the opinion of the deponent is that 'approximately' one half of the costs the subject of the plaintiff's bill of costs for $631,205.70 will be taxed off in those proceedings for various reasons (see [4], read with [1] - [3]).
36 I accept, on the basis of that evidence, that an amount of approximately $315,000 at least should be taken account of for my purposes for taxed costs, excluding enforcement costs.
37 The Forbes affidavit also indicates that the plaintiff, at a hearing in the taxation on 24 August 2009, sought its adjournment off to another judicial officer, an application the defendants did not oppose (see [7]). The adjourned hearing, I was told, has not yet been held.
38 I turn then to enforcement costs. The enforcement costs in this action, invoked by the plaintiff for the purposes of its application, were of the receivership and of the PSS order. As for the costs of the receivership, the Lean affidavit indicates that the receiver has invoiced a total amount of remuneration, disbursements and costs, plus GST, in the course of the receivership apparently to the date of the swearing of the affidavit, 3 September 2009, of $79,346.50. The deponent says that to that amount should be added the costs of defending proceedings against him in respect of the receivership (see [2] of his affidavit in attachment A) for the specified amount.
39 I would presume that there should also be added the receiver's remuneration and other disbursements and costs of the receivership for the period after 3 September 2009. While no amount is specified for all of these other amounts, I would infer it is in the order of $70,000 (see the Lean affidavit of 10 September 2009, attachment A [6.00]) referring to a total of $150,000, which I took to include the amount of $79,346.50.
40 Under the terms of the receivership order, the costs of the receiver 'including his remuneration, the cost of obtaining his appointment, of completing his security, of passing of accounts and obtaining his
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- discharge' are to be taxed 'unless assessed by the Master' as follows - and shall be primarily payable by the judgment debtors by making payment of the taxed costs to the judgment creditor within such time as the Master may allow on taxation or assessment or as otherwise ordered by this honourable court. That is [8] of the order dated 24 November 2008.
41 It is well understood that the remuneration costs, charges and expenses of a court appointed receiver are generally recoverable by the receiver, not by the person responsible for obtaining the receiver's appointment (see Civil Procedure in Western Australia, [51.4.1] on remuneration). However, in view of the provision in receivership order 8, I consider that an amount for receiver's costs should be included in assessing the sufficiency of the freezing orders sum at $380,000, subject to the matters I reach below.
42 It was put to me by counsel for the defendants that I should ignore the receiver's costs and charges as these had not yet been taxed. However, I consider I should take account of those, even before taxation, for the purposes of assessing what the administration of justice and protection against abuse require in respect of the amount I should consider, on what I have before me, is likely to be the result of such a taxation. So doing, however, I should also take account of any disputes which would affect the liability or amount of such costs.
43 As to such a dispute, there is an application in relation to the receivership listed to be heard on 7 October 2009, to which I have already referred. I understand the application is by the defendants for the removal of the receiver and for the disallowance at least of some of his claimed fees, charges and expenses. At this point it is not clear what reduction, if any, I should make on those accounts. However, I consider I should weigh the possibility of such a reduction in considering what allowance it has been shown I should make now for the costs of the receivership.
44 Mrs Frigger's affidavit of 27 August 2009 as to the PSS order states that the enforcement costs of that order are approximately $32,000 (see [5.2]). The Campbell Smith affidavit of 10 September 2009 states that a 'significant amount' of the enforcement costs of the PSS order, as disputed by the defendants, is an amount properly payable by them, being the amount for 'commission' sought by the sheriff (see [2(a)] of that affidavit).
45 In my view, on all of the evidence before me - and particularly that as to the disputes as to the plaintiff's earlier bill of costs and the costs of the PSS order and the application as to the receivership that is listed for
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- 7 October 2009 - I have not been shown that the relevant amount of $380,000 in the freezing orders is insufficient for the purposes of those orders.
46 On that basis, and no other reason to increase the amount being shown, I do not consider I should, in the exercise of my discretion, vary the freezing orders in terms of [2(a)]. However, it is possible, following the determination of one or more of those disputes or of that application, that a larger or conceivably a smaller amount should be specified in the freezing orders.
Proposed order 2(b)
47 I turn then to changes to the freezing orders proposed by proposed order 2(b). This is the proposed order as to control of the proceeds of the sale of the property at 9 Lacey Street. It was common ground before me that order 2(b) at the least required me to determine whether or not the plaintiff had shown the unencumbered value of 'your Australian assets', for the purposes of the freezing orders, was less than $380,000. If there were such a showing, then counsel for the plaintiff submitted there would be a strong basis for making an order of the kind the plaintiff indicated it was seeking. In my view, the converse also holds. That is, that in the absence of such a showing, it would require a particular or special case for that order to be made.
48 I will indicate, however, at this point - and return to it below - that counsel for the defendants put to me that, in any event, I had no jurisdiction to make the order the plaintiff was seeking.
49 I turn then to the unencumbered value of 'your Australian assets'. For the plaintiff, my attention was directed to what was said to be unexplained reductions in the cash assets of Banning Holdings from $660,956 as at 31 January 2009 (see Lean affidavit of 3 September 2009, annexures, page 37) to $12,625 (see Campbell Smith affidavit of 10 September 2009, annexure 3).
50 I consider that the most I can draw from that evidence is that the unencumbered value of that asset of Banning Holdings is lower than $380,000. I do not consider I can draw from it any evidence as to the value of other assets of Banning Holdings. Further, to the extent the unencumbered value of 'your Australian assets' remains greater than $380,000, the defendants can proceed with respect to 'your Australian assets' without regard to the freezing orders (see order 6(b)). Of course, the unencumbered value I have referred to might be below $380,000
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- because of one or more transactions within the exceptions to the freezing orders (see order 6(a) and see in particular as to those exceptions orders 10 and 17). In my view, however, it is strongly arguable that the burden would be on the defendants to show that such diminution was that result (see Civil Procedure in Western Australia, [52A.0.18]).
51 However, I do not consider I need finally to determine this point on this application in view of my conclusion on the matter of the plaintiff's showing as to the unencumbered value of 'your Australian assets'. I begin my consideration of that showing by noting that under the freezing orders 'you' is defined so as to include the first and second defendants (see [4(b)]) and is not apt to include Banning Holdings. However, the term 'your assets' with respect to the 'unencumbered value' of which the provision of the freezing order [6(a)] - prohibiting removal, disposition, dealing or diminution - operates is defined as follows in [7(1)(c)(ii)]:
The following assets in particular: the assets of your business Professional Services of Australia Pty Ltd and Banning Holdings Pty Ltd both carried on at 9 Lacey Street, Perth or, if any or all of the assets have been sold, the net proceeds of sale.
52 The term 'unencumbered value' is itself defined in the freezing orders, [4(d)], as follows: 'Unencumbered value' means value 'free of mortgages, charges, liens or other encumbrances'.
53 I also note freezing orders order 6(b), to which I have previously referred, which reads as follows:
If the unencumbered value of your Australian assets exceeds the relevant amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount.
54 Mrs Frigger's affidavit says that the unencumbered value of the defendants' assets is less than $380,000 (see [10] of the affidavit of 27 August 2009). In my view, by reason of the terms of the freezing orders referred to, I must also consider the assets of Banning Holdings in assessing whether or not it has been shown to me that the unencumbered value of 'your Australian assets' is less than $380,000. Counsel for the plaintiff in his written submissions appeared to accept that my consideration should so extend. However, in his oral submissions in reply he appeared to take the position that I should confine my consideration to the assets of the first and second defendants. One of the assets of the latter is, of course, the estate's 50% share interest in Banning
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- Holdings, the unencumbered value of which would, unlike the unencumbered value of the first defendant's assets, directly or indirectly through market value take account of all of the liabilities of the business, not limited to those protected by an encumbrance.
55 If I correctly understood that to be counsel for the plaintiff's final position, then in my view that position is incompatible with the freezing order provisions I have reviewed. In the event, however, I do not consider that the matter is of significance in view of my conclusion as to the unencumbered value of the assets of the first and second defendants.
56 I start with the unencumbered value of the assets of the first defendant. It is not in dispute that the only significant asset of the first defendant for my purposes is 11 Lacey Street. I note that by the terms of the Amended DOCA - cl 5.1.3 - the remaining liability to the judgment creditor for the tax costs in the action, after the payments made pursuant to cl 5.1.1 and cl 5.1.2, is to be satisfied from the proceeds of the sale of 11 Lacey Street by 31 December 2009.
57 There is a firm offer of $605,000 that has been received for that property (Campbell Smith affidavit of 10 September 2009 [2(c)]). The only encumbrance on the sale proceeds that might be contended for, as counsel for the plaintiff did, was payment of the amounts due to Priority Creditors under the Amended DOCA, cl 5.1.5, read with cl 5.1.1, 'Priority Creditor'.
58 The only such claims, on the evidence before me, are those remaining for the present administrator of the Amended DOCA as the former administrator appears to have been paid out or almost paid out (see Mrs Frigger's affidavit of 27 August 2009, annexure ATF1, at page 2, read with Amended DOCA, cl 5.1.2(i)). This is subject to the payment of those amounts from the 'Fund' established under the Amended DOCA, to which Banning Holdings is required to contribute (see Amended DOCA, cl 4, read with cl 5.1.2).
59 The expected fees, costs and charges of the present administrator beyond the amount there shown as already paid to him appear, on the material before me, to be likely in the order of $100,000 - $120,000 (see cl 5.1.2(ii) of Mrs Frigger's affidavit of 27 August 2009, at pages 7 and 8). To this sum might be added liability for capital gains tax on the purchase which, on the evidence I have, is about $120,000 (Mrs Frigger's affidavit of 14 September 2009, 12.3, [(c)]). It is not apparent to me whether there were any offsets to that tax apparently available to the first plaintiff of the
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- kind referred to in the Lean affidavit of 15 September 2009 (attachment sch 2) as available to Banning Holdings in respect of its capital gains tax liability on certain transactions.
60 In any event, counsel for the defendants, who also appeared for Banning Holdings, contended the capital gains tax liability was not an encumbrance. However, in view of the wording of cl 5.1.5 and the definition of unencumbered value, it seems to me the contrary is strongly arguable. At the same time, for reasons which will become apparent, I do not consider I need to reach a final view on the point.
61 For my purposes then, I would deduct from the $605,000 for 11 Lacey Street up to $246,837 (see in addition to the amounts above, including capital gains tax in full, the costs of sale and adjustments, Mrs Frigger's affidavit of 14 September 2009, [12.3(b)] and [12.3(d)]), yielding $358,163 as the net, to which must be added, however, whatever amount Banning Holdings pays into the Fund to meet the costs, charges and expenses of the present administrator. As will appear shortly when I consider the sale of 9 Lacey Street, there is evidence of the possibility - and I underline 'possibility' - of such an addition.
62 This takes me to the unencumbered value of the assets of the second defendant. It is not in dispute that the second defendant's only significant asset for my purposes is or was the estate's share interest in Banning Holdings or the proceeds of its sale. However, I ignore for present purposes the proceeds of the sale of that share interest to the Friggers. The proceeds, it is agreed, would be $730,000 if the sale to the Friggers were upheld.
63 For the plaintiff, reference to the value of the share interest was made to the range of the four bids the receiver obtained for the interest on 27 February 2009. Those bids were $10,500, $55,000, $201,000 and the Friggers' bid, which was accepted, at $730,000 (Lean affidavit of 10 September 2009, annexure A attaching WP2). However, it was not evident to me that I should simply take the mean as the value I should derive from those bids as at the present date for such value. Much has occurred since 27 February 2009. There is also the matter of whether the correct approach to value is to take the mean or some other accounting for the bids.
64 For the plaintiff, reference was also made to the statement in the Lean affidavit of 15 September 2009 [3], that Banning Holdings would be an insolvent company if all the proceeds of the sale of 9 Lacey Street 'are
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- paid out to third parties'. I accept for my purposes, as counsel for the defendants, who also appeared for Banning Holdings, submitted, that that statement should be read as indicating an intention to pay at least some of the proceeds pursuant to the Amended DOCA (cl 4, read with cl 5.1.2 above).
65 I note that the evidence as to insolvency does not, in my view, indicate that it must be considered that the payments under the Amended DOCA would not be made but, rather, that there is a risk that no such payments will be made or not made in full; nor in my view does that statement indicate that Banning Holdings is presently insolvent. The Lean affidavit of 15 September 2009, [4], also says:
Due to the ongoing sales of the company's assets, I don't believe the one share I hold in the company has any value other than to [Mrs Banning].
- I substituted 'Mrs Banning' for the reference to 'her' in the statement in [4].
66 Counsel for the plaintiff directed my attention to correspondence (Mrs Frigger's affidavit of 27 August 2009, annexure AF2) in relation to the proceedings CIV 1727 of 2009, in which the Friggers are seeking specific performance of the agreement between them and the receiver for purchase of the share interest in Banning Holdings of the estate of Mr Banning. That correspondence, in the form of an 'open letter' from the solicitors for the Friggers, was an offer to settle the proceedings on the basis that Mrs Banning bought the share interest for the price there referred to and paid the costs there described within the period of time there indicated.
67 Counsel for the plaintiff put to me that I should take Mrs Banning's non-acceptance of that offer as supporting the statement in the Lean affidavit quoted above. Altogether, apart from the question whether the latter is the subject of privilege of both the plaintiff and Mrs Banning - a privilege I have no indication she has waived - I do not infer anything of significance for my purposes from her non acceptance.
68 There are simply too many inferences consistent with her putting a significant value on the shares which I consider are open; nor do I consider that the Lean affidavit, [4] adds to the other evidence before me, as it does not explain with sufficient particularity the basis for the view as to value there expressed. That is, without more about the contribution of the ongoing sales referred to in the valuation of an equity interest in Banning Holdings, I do not consider I have a sufficient basis for that view.
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69 The only other relevant evidence before me as to the value of the share interest of the second defendant in Banning Holdings was that the 'realisable surplus 50%, representing the value of one fully paid $1 share', as shown in the balance sheet of Banning Holdings as at 31 August 2009, is in the Campbell Smith affidavit of 10 September 2009, annexure 3, being that balance sheet. That value was there put as $670,773.98.
70 Questions were raised by counsel for the plaintiff as to the adequacy of the valuation method that used book values for assets. However, in my view, I can take account of the balance sheet in assessing what has been shown to me as to that value, whereas here I have no recent - I underline 'recent' - market value evidence and the market value evidence I do have is in the form I have previously described.
71 Questions were also raised by counsel for the plaintiff as to the amount shown in the balance sheet as an asset of Banning Holdings represented by a claim for $582,831 against the first defendant. That value is shown as nil in the Lean affidavit of 15 September 2009, annexure sch BI took those questions as referring also to the other assets of Banning Holdings shown by sch B as having a nil value but which on the balance sheet are shown as other than doubtful, being approximately $3,500 for a mortgage loan to Tim and David Caporn (the Caporns) in relation to the Federal Hotel and $85,000 for a mortgage loan to G White, also in relation to that hotel.
72 Of course, I have a conflict in the evidence as to the value of those assets. It is one I do not consider I have to resolve for the purposes of the present application, as I now indicate. Reducing the value, based on realisable surplus for the amounts in question, would produce a realisable surplus 50%, representing the value of one fully paid $1 share of $290,853.
73 Counsel for the defendants, who also appeared for Banning Holdings, put to me any such realisable surplus value was too conservative. The outstanding question, which I understood to be the mortgage loan to the Caporns, was assigned a book value of $173,000 in Campbell Smith's affidavit of 10 September 2009, annexure 3, balance sheet, but there written down by $166,551 as a doubtful asset. In this respect, both the balance sheet and the Lean affidavit of 15 September 2009, annexure sch B, are in substantial agreement. It was not made clear to me why, in the face of that evidence, I should take it as not being shown that a higher value should be assigned to the asset.
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74 Counsel for the plaintiff put to me that I should also take account of the encumbrance on the value of the share in Banning Holdings represented by the lien of the receiver for his remuneration and expenses. A court appointed receiver is entitled to an equitable lien, in respect of those amounts, over the assets over which he is appointed receiver (see Civil Procedure in Western Australia, [23,550.20] and authorities cited there). Counsel for the defendants put to me, as I understood him, that it was at least arguable there was no such lien in this case in view of the receivership order 8 quoted above.
75 In my view, I do not have to determine any such matter. That is because, even reducing the value of the share by the amount of the receiver's costs, charges and expenses, put at the largest amount put to me - $150,000 - I conclude that it has not been shown to me that significant unencumbered value should not be assigned to the share interest of the second defendant in Banning Holdings; a significant unencumbered value which, combined with the unencumbered value for 11 Lacey Street above, produces a total significantly above $380,000.
76 This takes me to the assets of Banning Holdings. I note that the assets of Banning Holdings, to the extent provided for in the Amended DOCA, are to be pressed into service to assist the first defendant to meet the obligations under the judgment in the present action in the way I have described. That way is most directly indicated in the Amended DOCA, cl 4, read with cl 5.1.2. I focus here on the single asset of Banning Holdings - 9 Lacey Street - on which argument before me focused. Nine Lacey Street is the subject of a contract of sale for a price of $632,000 (Campbell Smith affidavit of 10 September 2009, [2(b)] and annexure 4).
77 There is no indication of any encumbrance on that asset, save for a filing in respect of a fixed and floating charge in favour of a related company, Baystar Holdings Pty Ltd, for a maximum prospective liability of $2 million (Lean affidavit of 15 September 2009, annexure ACTF13, which appears to be an annexure by that number from the affidavit in the present action of Mrs Frigger sworn 5 June 2008). However, there is evidence that there is now no liability so secured (see Campbell Smith affidavit of 10 September 2009, annexure 3).
78 I was referred to evidence from Mr Banning given by affidavit in these proceedings that, as at 18 January 2008, the sum of $3,565,000 was in fact so secured. However, I was not directed to any other evidence that there was then, or has been since, such an amount, or any amount, owing to Baystar. I note that some of that other evidence includes what purport
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- to be financial statements for Banning Holdings for 2008. I consider that, on the evidence I have considered as a whole, I am not justified in adjusting the unencumbered value of 9 Lacey Street for the Baystar security.
79 The capital gains evidence I have for the asset shows a liability of $176,100 (Mrs Frigger's affidavit of 14 September 2009, [12.7]). It may be, however, that that liability should be reduced to a significantly lower amount, as appears to be indicated in the Lean affidavit of 15 September 2009, attachment sch 2, which also appears to show a much larger capital gains tax liability of $282,000.
80 Allowing for capital gains tax at the amount shown in Mrs Frigger's affidavit of 14 September 2009 and sales expenses and adjustments, on which I appear to have no other evidence than the amounts for 11 Lacey Street - and from those amounts I arrive at the sum for 9 Lacey Street of $20,000 - yields net proceeds of $425,900, or $612,000 without allowance for capital gains tax. Both of those sums are of course significantly more than $380,000.
81 I conclude overall then that the unencumbered value of 'your Australian assets' for the purposes of the freezing orders has not been shown to me to be below $380,000. This is so even without the assets of Banning Holdings. On that basis then, there is no question of an order being made in terms of proposed order 2(b) in the chamber summons, given that there are no other special circumstances evident to me to so proceed.
82 I should not conclude this portion of my reasons, however, without noting the argument by counsel for the defendants, who also appeared for Banning Holdings, that I had no jurisdiction to make such an order in any event.
83 In my view, without deciding the matter, it seems to me that the order sought in its terms in the chamber summons is not one that O 52A would permit me to make. The order sought is in the nature of an enforcement order against a non-party. Order 52A does not authorise the making of an enforcement order against a party, let alone a non-party.
84 However, counsel for the plaintiff submitted that the order was intended to add to the freezing orders a requirement for the approval of the plaintiff for dealings with the proceeds in question. I presume that such approval was not required for the use of the proceeds to pay the
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- plaintiff's tax, including enforcement costs. I also presume that any such approval could not be unreasonably withheld.
85 It seems to me that the court would have jurisdiction to make such an order under its jurisdiction to make ancillary orders (see O 52A r 6 and Civil Procedure in Western Australia, [52A.0.21]), including asset preservation orders against third parties, as explained in [52A.0.12]. However, I do not consider I need to go further into the matter of jurisdiction in view of my conclusion previously described.
Proposed order 3
86 I turn then to the costs order sought by the plaintiff's present application. It follows of course that, the present application of the plaintiff needing to be dismissed, there is no question of an order in the terms the plaintiff sought. However, in the event of the dismissal of the application, counsel for the defendants, who, as previously stated, also appeared for Banning Holdings, as I understood his written submissions, sought an indemnity costs order for the costs of Banning Holdings. Such representation, given the terms of proposed order 2(b), was in my view appropriate and no objection was taken to such an appearance by counsel for the plaintiff. To the extent of any need for formal joinder of Banning Holdings for the purposes of the present application, I would make such an order.
87 There is authority that, where a party has unsuccessfully resorted to a process of the O 52A kind against an innocent third party, the unsuccessful party should expect to pay all the reasonable costs and expenses to which the innocent third party is put by the unsuccessful party (see Civil Procedure in Western Australia, [52A.0.15], referring to Project Development Co Ltd SA v KMK Securities Ltd [1983] 1 All ER 465 (Parker J) (467 - 468).
88 The costs order would commonly be in the usual indemnity form that the unsuccessful party pay the costs incurred by the third party 'except insofar as they are of an unreasonable amount or have been unreasonably incurred' (Norilya Minerals Pty Ltd v Ireland (1994) 12 WAR 485, 488, referred to in Civil Procedure in Western Australia, [52A.0.15]). This would mean the innocent third party would not have to establish that the costs were necessary or proper or that the costs were of a reasonable amount and reasonably incurred (see Forbes v Frigger [2009] WASC 77 at [60], Hasluck J quoting from EMI Records Ltd v Ian Cameron Wallace Ltd [1983] 1 Ch 59, (71) (Sir Robert Megarry VC)). Compare in this respect the order made in Project Development at (467 - 468).
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89 It seems to me that, on the face of the matter, the principles I have described apply here. However, the principles would appear to apply only to the costs and expenses of the innocent third party (here, Banning Holdings), not to any other party's costs and expenses. I do not understand the written submissions of counsel for the defendants, who appeared for Banning Holdings, to contend otherwise. However, I note that neither counsel addressed in their oral submissions the costs orders I should make in the event I dismiss the plaintiff's application. I will hear from both parties as to those costs orders accordingly.
Submissions made by counsel for another party
90 I turn then to the matter of submissions made to me by counsel for another party. At the hearing on 11 September 2009 the receiver sought to appear and be heard by counsel. I understood this was in support of the application by the plaintiff because of the receiver's interest in the preservation of the assets of Banning Holdings, including 9 Lacey Street, under the freezing orders as these were proposed to be varied.
91 At the hearing on 11 September 2009 I declined to permit this, as the receiver was not a party to the freezing orders nor, like Banning Holdings, a third party to which the orders applied. However, I confirmed with him that counsel for the plaintiff was in a position to draw on the assistance of counsel for the receiver and I gave liberty for the matter of the appearance of the receiver to be returned to if necessary.
92 In the event, counsel for the receiver subsequently put up written submissions, of which I took account in my consideration of the plaintiff's application. She did not appear at the subsequent hearings on 14 and 15 September 2009 or today. However, counsel for the receiver's written submissions also sought clarification of the receivership orders, order 2. That order reads as follows:
For the purposes of this order, the receiver is appointed in this action to appropriate and realise the property so as to satisfy the judgment debt.
93 The clarification sought was as to the meaning of 'judgment debt' in order 2. It seems to me that the matter of such clarification was not entailed in hearing and disposing of the plaintiff's application. Counsel for the plaintiff and counsel for the defendants, who also appeared for Banning Holdings, did not find it necessary to address the matter of clarification of 'judgment debt' in order 2. As I will shortly explain, it appears to me that there is a more appropriate setting in which such clarification might be provided.
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94 The receiver, as an officer of the court, is of course at liberty at any time to apply to the court, with notice to other parties affected where appropriate, for clarification of the terms of the orders appointing him. However, in my view, the present application was not the appropriate setting in which to provide such clarification, because of the nature of the present application and because there is a more appropriate setting in which such clarification might be provided.
95 In that last respect, I note again the hearing listed for 7 October 2009 in relation to the receivership order. In my view, that hearing is more appropriately used than the hearing of the present application for such clarification of the receivership orders as the receiver considers he requires. This assumes, of course, that the receiver makes proper application for such clarification then.
Conclusion
96 It follows then that I would make the orders I have foreshadowed, subject to the further submissions I have referred to.
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