Cummins v PathLine Australia Pty Ltd & Ng No. Scciv-01-1203

[2004] SASC 95

JOHN GABRIEL CUMMINS  v  PATHLINE AUSTRALIA PTY LTD AND JOHN KONG-SHANG NG

[2004] SASC 95

Civil
Bleby J

1. The plaintiff’s cause of action arises out of an alleged contract with the defendants relating to the grant of a licence to operate a waste depot at Inkerman, north of Adelaide.

2. The plaintiff alleges that he is entitled to the sum of $500,000 by way of success fee in the granting of the licence to the first defendant. The defendants deny liability under the alleged contract. There is a counterclaim by the defendant for damages. The matter has been managed as a long and complex matter in this Court, and the trial is set down to commence on 7 June 2004.

3. The plaintiff has applied for an injunction to restrain the defendants in the proceedings from transferring the licence, alleging that it is the only asset in Australia of the first defendant, the plaintiff having formed the belief, on information available to him, that the licence was to be sold, and expressing the fear that he has that the proceeds of sale will be remitted to parties outside Australia.

4. Alternatively, the application seeks an order restraining the defendant from disposing, discharging or otherwise dealing with the sum of $750,000 being part of the proceeds of sale of the licence, that amount being the plaintiff’s estimate of the likely amount of his plus interest thereon and costs, if he is successful.

5. By way of further alternative he seeks an order that the defendants pay that amount into Court pending determination of the action. There is an incidental application for further and better discovery of documents relating to the sale of the licence.

6. The defendants by affidavit, filed pursuant to my direction at the preliminary hearing yesterday, have disclosed that the licence has in fact now been sold and that a substantial cash consideration has been received by the first defendant. The question on this application is whether there is a danger that the defendants might dispose of their assets or take them out of reach of execution or otherwise deal with them, so that there is a danger that the plaintiff, if successful, will not be able to have his judgment satisfied, which might thereby render ineffective the judgment of this Court. Devlin v Collins (1984) 37 SASR 98, Jackson v Stirling Industries Ltd (1987) 162 CLR 612.

7. The defendants do not dispute that the plaintiff has a substantial cause of action justiciable by this Court, and that it is an arguable cause of action. The pleadings, however, would indicate that relationships between the plaintiff and the defendants have become somewhat acrimonious, and that is a matter of some relevance to these proceedings.

8. I am satisfied, on the non-confidential exhibits to the affidavit which has been filed on behalf of the defendants, that the defendant presently has an asset in South Australia more than sufficient to meet any liability to the plaintiff pursuant to a judgment of the Court in this action. However, that asset is now in liquid form, and can be easily removed from the jurisdiction, unlike the Environment Protection Authority licence, which the present asset replaces. There are effectively no other assets of any significance of the defendants within the jurisdiction. The liquid asset presently comprises a short-term cash deposit with Australia and New Zealand Banking Group Ltd of little over $5.686 million. It is due to mature on 30 March 2004. The nature of that asset and its negotiability is significant. The defendant has deposed that it is not the intention of the first defendant to remove the funds from South Australia.

9. The second defendant has also deposed to the existence of a debt due to ‘PathLine Group’ in Hong Kong. I infer from the name, from the second defendant’s close association with Hong Kong, from the fact that, at least one and possibly both of the other directors of the first defendant are residents of Hong Kong, but most of all from the fact that 99,999 of the 100,000 fully paid shares in the first defendant are held by PathLine Ltd, the address being given as an address in Hong Kong, that the first defendant and PathLine Group are related entities. The amount of the debt due to the PathLine Group is said to be $4.5 million.

10. The second defendant in his affidavit deposes to the fact that the question of interest on and the timing of payment of that debt is being negotiated with the Hong Kong parent. It is a relevant fact that the debt could appear not to be to an arms-length creditor.

11. Confidential Exhibits KSM8 and KSM16 to the affidavit of the second defendant are said to disclose some ongoing business and investment opportunities being pursued by the defendants in Australia. The affidavit places them no higher than proposals at present being considered or negotiated, and I infer that there is no commitment by the defendants to any such proposals, nor any certainty of those proposals being represented by assets of the defendants within Australia. The plaintiff’s ability to recover any judgment sum from the defendants, if he is successful in the action, could easily be thwarted by the ready ability of the defendants to transfer their only asset of any significance out of the jurisdiction and to a related entity in another country.

12. On the other hand, the plaintiff is not entitled to an order in the nature of security for any potential judgment that he might obtain. Neate Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 8 WAR 183 at 186; Devlin v Collins (1984) 37 SASR 98 per White J at 199; Jackson v Sterling Industries Pty (1987), 162CLR 612. Furthermore, the defendants are entitled in the meantime to use their assets in the ordinary course of their business without being unduly constrained by an order of the Court.

13. The undisputed assertions of the plaintiff suggest that the second defendant has demonstrated in the past some disdain for the law and legal process.  That is another factor which must be weighed in the balance given that he is a director of and the apparent driving force behind the first defendant.

14. In reaching a decision one cannot overlook the fact that, despite knowledge of the plaintiff’s application, the fact of sale of the licence was not disclosed until the date of the first hearing yesterday, and details of the proceeds of sale were not disclosed until the defendants were required to do so by my order yesterday.

15. As to the residence of the second defendant, which has been the subject of some submissions, he has sworn that he has resided in Australia for most of the previous two years and that he intends to continue to reside in Australia.  He possesses a visa which allows that. However, one cannot overlook his close associations, both business and personal, that he has with Hong Kong and his ability and inclination to visit Hong Kong and elsewhere frequently.

16. I must also bear in mind that, as at present advised, the period of any necessary protection, if justified, is reasonably short.  The trial is due to commence on 7 June 2004. It is not as though the action has just begun and the protection sought might be sought for a number of years.

17. In my opinion, there is a danger of assets being withdrawn from the jurisdiction and thus of having the possible effect of frustrating the due process of the Court.  The Court and its process and, incidentally, the plaintiff, are entitled to some protection against that. However, it should only be to the extent necessary to ensure that the Court’s process is not frustrated, while at the same time allowing the defendants to apply their assets in pursuit of their legitimate business interests in this country. Any order of the court of this nature must be framed so as to remain within the limits set by the purpose which the order is to serve.

18. I therefore propose that an order be made to ensure that sufficient at least of the defendants’ assets to satisfy a possible judgment in favour of the plaintiff cannot summarily be removed from the jurisdiction or otherwise dissipated, but so as not to restrict the defendants in the application of their assets for legitimate business purposes in this country. It may be that upon the defendants seeking some other form of investment of the money in question I might be inclined to discharge the order, but I would not wish to bind any judge who might subsequently have to deal with the matter.

19. It may also warrant discharge of the order if some of the defendants’ hoped for business ventures come to fruition and there is shown to be a substantial and ongoing business presence in Australia, or it is shown that there are cash flows from other actual ventures, or some need for disposition of the moneys in the ordinary course of business.  Those are matters which will have to be considered at the time.

20. The order I therefore propose is as follows:

    That upon the plaintiff by his counsel undertaking to abide any order which this Court may make as to damages, in case this Court shall be of the opinion that the defendant shall have sustained any by reason of this order, which the plaintiff ought to pay, ORDER:

    1.   That until further order the defendants be restrained and an injunction is hereby granted restraining the defendants from withdrawing from, charging, encumbering or otherwise disposing of the beneficial interest in any moneys held on deposit with Australia and New Zealand Banking Group Ltd in the name of the first or second defendants or either of them an amount which would reduce the amount of money so held on behalf of the defendants or either of them to an amount less than $750,000;

    2.   That the defendants be at liberty to apply on 24 hours notice to vary or discharge this order;

    3.   That a sealed copy of this order, bearing the endorsement required by rule 84.03(3a) of the Supreme Court rules be forthwith served on the solicitors for the defendants and on Australia & New Zealand Banking Group Ltd, 13 Grenfell Street, Adelaide;

    4.   That the costs of this application be reserved to the trial judge.

21. The order, Mr McCarthy and Ms Powell, is different from that suggested by Mr McCarthy’s draft. It’s intended to allow flexibility of deposit within the ANZ Bank.  In other words it is not confined to only one account or only one type of investment, as long as the moneys are held by the ANZ Bank.  But it is intended, as you will see by this order, to grant you liberty to apply at short notice should the situation change or should the money be required for some legitimate investment purpose.