Darede Nominees Pty Ltd v Caboolture 24 Hour Medical Centre Pty Ltd

IN THE FEDERAL COURT OF AUSTRALIA

)

QUEENSLAND DISTRICT REGISTRY

)	QLD G81 of 1987

GENERAL DIVISION

BETWEEX: DAREDE NOMINEES PTY. LTD.

Appllcant

AND:	CABOOLTURE 24 HOUR MEDICAL CENTRE PTY. LTD.

First Respondent

AND: GEOFFREY WALTER EDELSTEN

Second Respondent

AND:	LEANNE MARGARET EDELSTEJ

Third Fespondent

AND: STEPHEN FRANCIS WELLER

Fourth Respondent

AND: RALEMA PTY.

LTD.

Flfth Respondent

MINUTES OF ORDER

1 - 1

8 ,

JUDGE MAKING ORDER:

PINCUS J:

. -

~ ~-

--sJm 05

ORDER:	DATE OF	19 JUNE	87	.I
- I "A

WHERE M E :	BRISBANE
THE COURT ORDERS THAT:

Upon the applicant by its counsel undertaking to pay to any party adversely affected by the interlocutory

injunctions hereby granted such compensation (if

any) as

the Court thinks just, in	such manner as the Court
directs

1. The first respondent, by its directors, servants,

agents or otherwise howsoever be restrained until

the determination of these proceedmgs or further

earlier order from selling, transferring, disposing

or otherwise howsoever dealing

with, or attempting

to deal

with, any of its assets whatsoever other

than in the ordinary course

of business save to the

extent that they exceed

$350,000.00.

2 .	agents or otherwise howsoever be restrained until

The fifth respondent, by its director, servants, earlier order from selling, transferring, disposing or otherwise howsoever deallng wlth, or attempting to deal with, any of its assets whatsoever other

than in the ordinary course

of business save to the

extent that they exceed

$350,000.00.

3 . The costs of the application for lnterlocutory injunctions be costs in the proceedings.

4 . The respondents' appllcatlon for security for costs be dlsmlssed.

5. The applicant have its costs of the appllcatlon for securlty for costs to be taxed, such taxatlon-not to take place until further order.

6. The respondents' appllcatlon for partlculars of the

amended Statement of Clalm be dlsmlssed.

The applicant have ~ t s

costs of the appllcatlon for

partlculars to be taxed, such taxatlon not to take

place untll further order.

NOTE:	Settlement and entry of orders 1 s dealt wlth	In
Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

)

QUEENSLAND DISTRICT REGISTRY

)	QLD G81 of 1987

GENERAL DIVISION

)

BETWEEN:

DAREDE NOMINEES PTY. LTD.

Applicant

AND:	CABOOLTURE 24 HOUR MEDICAL CENTRE PTY. LTD. First Respondent

AND: GEOFFREY WALTER EDELSTEN

Second Respondent

AND:	LEANNE MARGARET EDELSTEN

Third Respondent

A N D :

STEPHEN FRANCIS WELLER

Fourth Respondent

AND:	RALEMA PTY. LTD.

Flfth Respondent

PINCUS J.

19 JUNE 1987

EX TEMPORE REASONS FOR

JUDGMENT

There are two applications before me in this matter, the

first of which is an appllcation for a Mareva Injunction.

"he applicant is

a company which

lent $250,000 to the

first, second and third respondents

on 2 April 1987, repayable on

1 April 1988, and claims that

it did so

on the security of the

first respondent's interest in two medical practlces, conducted	at
Caboolture and Southport respectively.

The respondents say that the intention was that only one

of the practices, that

of Caboolture, would be used as

security

and also say, in effect, that the first respondent's interest

that

practice

any

event

rather

tenuous;

the

flfth

respondent, another company

In the same group, is said to have the

only relevant interest in the practlce at Southport.

It is convenlent to begin by referrlng to some matters

whlch seem not to be dlsputed.

There 1 s no doubt about the loan

of	money, nor any doubt that some securlty was Intended to be

taken. There

is In

evldence a mortgage debenture over assets of

the flrst respondent.

It does not identlfy any partlcular asset

but creates a fixed charge over

"all freehold and leasehold land

in which" the respondent "has any Interest at any

time".

It is not dlsputed that there was never any questlon of

the flrst respondent's taklng

a lease from the owner

the

premlses In

which the Caboolture Medlcal Centre

1 s located and

that

all

the

owner's

discussions

were

had

wlth the

second

respondent. Simllarly, wlth respect to the Southport premlses,

is the second respondent

who is the lessee, under

an undated

lease, an executed copy of which has been produced.

In the principal application it is alleged that there

were to be securities given over both the practices and that this did not occur. It is suggested, in fact, that there was fraud.

3 .

The applicant claims that the respondents arranged matters

In such

a way that the intended security was not given

and, in particular,

that the Southport practice

has gone to the

fifth respondent.

It is an

oddlty of

the case that there is

dlspute

that the intention

of the respondents was, and always is, that the

second respondent personally, and not either

of the

companles,

should have the lease.

If that were so, it is dlfficult to

understand why there was discussion about a securlty over	a lease
to be given by the first respondent.

It 1s also common ground that on

Aprll 1987 at

the

offlce of the

Commlsslon

for

Corporate

Affalrs

there

was

registered a buslness named "Southport

24 Hour Medlcal

Cllnlc".

The name of the person carrying on that

busmess was reglstered as

that of the

flrst respondent, rather than the flfth respondent,

thus glvlng some support of

an independent klnd to the c a s e

that

at the tlme the loan was made

on 2 Aprll, It was clalmed that the

first respondent had an interest in the Southport cllnlc.

Next, it is not (at this stage, at least) dlsputed that	on 14 May
1987, not long before these proceedlngs were Instituted, the

second

respondent

executed

a sub-lease

relatlon

the

Southport clinlc to the

fifth respondent, commenclng

on 1

April

1987 - again, the day before the loan agreement. I say

"agaln"

because

that is the

day on which the

first

respondent

was

registered as carrying on that business.

4 .

The existence of

the sub-lease

is consistent wlth the

applicant's theory that, after the loan was made, the second

respondent

decided

that

the first respondent,

one of

the

r:'

borrowers, should have

no interest in

the Southport clinic; the

backdating supports that. Four days later, on 18 May 1987,

there

was

registered

under

the

Business

Names

Act

(Queensland),

"Statement of change in certain particulars" signed by the fourth respondent, showing that the fifth respondent had begun to carry on the business of the Southport clinic in succession to the flrst

respondent.

It is also common ground that there are same signs

financial trouble with respect to the affairs

what might be

loosely

called "the Edelsten Group." Some detall

about

that

aspect should be given.

On 6 Aprll 1987 there was issued out

of the Supreme

Court of Queensland a writ by the owner of the shopping centre In

which the

Caboolture

clinic

is located,

agalnst

the

second

respondent, claimlng $193,519.06

rental. The defence whlch was

delivered says, in effect, that there was an agreement for

lease

between the plaintiff and

defendant, but it was resclnded

repudiated and therefore the plaintiff is not entitled to any

rent. Further, the defence says that the plaintiff agreed that

the defendant, who is the second respondent in the present case,

should enter into occupation on or

about 2 February 1987,

(that

is, some months ago) but not pay

any rent until, inter

alia, "all

other lessor's

works were completed

to the satisfaction of the

defendant". There is a degree of improbability about such

restriction on the rights of the landlord. That is, as Mr.

Mulr

Q.C. for the applicant said, it

1s improbable that an experienced

developer would enter into such

a transaction. The defence in the

Supreme Court complains about

the condition

of the premises and

says that because

of non-fulfilment of the term just mentioned,

satisfaction of the

defendant, or because

there

was

agreement for lease, there is no rent due. There is, however,

suggestion that the defendant in that case has left, or

proposes

to leave the premlses. In short, the defence in that case is not

of a convlncing character, on the face of it.

Another case as to

whlch evldence

IS before me,

whlch

has been determlned recently, is

one In the Supreme Court

of New

South Wales.

Mr. Justlce Clarke in that court entered

~udgment

agalnst the second respondent

a sum of

$287,000 on 25

March

1987. It 1 s further admltted that another substantlal

~udgment

was entered by consent on 29 January 1987.

In December 1986,

the

Taxation Commisslon sued the second respondent	for $5.6	mllllon
and hls home at Dural 1s sald to be up for sale.

It is convenlent now to turn to the evidence adduced on

behalf of the applicant. Dr. L.G. S~mmelmann

says m an affidavlt

that a meetlng was held

on 2 Aprll 1987 at

which were present the

third and fourth respondents and one Meryl Shenker.

The

purpose

of the meeting, he says, was to

have executed a loan agreement,

debenture charge, and certificate certlfying that the applicant

carried on the

medical

practices

mentioned

above.

The word

"Applicant" in the

affidavit

seems

to be a mistake

and is

apparently intended to mean the first respondent.

Meryl Shenker who, I was informed, was present in court

during the hearing before me

has made an affidavlt whlch does

not

deny the purpose

of the

meeting

as alleged by Simmelmann, and

merely says that the only document she recelved	up to 2 April 1987
was a debenture charge.

Simmelmann also says

was told by his solicltor that

the latter

had requested copies

the lease and that Meryl

Shenker told hlm, and the solicitor, on 2 April that she did not have coples of the lease. Agaln, Meryl Shenker’s denial is limited and that limitation was referred to durlng the course of the hearlng. She does not deny, in particular, that the sollcltor requested copies of the lease. I can see no reason for hlm to do

so unless they were to be involved

In the transactlon.

Meryl Shenker does not deny that she told the solicltor,

during the course of the meeting, that she did not have coples

the lease, and paragraph 4 of her affldavlt

1s framed In such

way as to tend to support	what Slmmelmann says about that aspect
of the matter.

Simmelmann also says that the certlflcate as mentioned by him was signed on 2 Aprll but that

1s unequivocally denled. In

paragraph 17 of his affidavit, he says he was told by

his

solicitor that on or about 26 April the fourth respondent told hlm

that the first respondent

did not hold the said leases, meanlng

the leases of the two practices and that

he first respondent did

not then conduct the Southport practice.

This is not denied by

the fourth respondent, who makes no reference to paragraph 17 of

7 .

Simmelmann‘s affidavit

and

the

omission

seems

to me

very

significant. Simmelman

also

says that his solicitor claims that

on that occasion the

fourth

respondent refused to disclose the

name of the company conducting the Southport practice, and refused

to advise whether the change in the practice had occurred prior

or after the advance made

2 April, but said it occurred about

that tlme.

Again, this is not denied.

Counsel suggested various tests as to the strength

the case which must be put forward to glve ~urisdlctlon to grant a Mareva injunction, and the matters whlch I have referred to seem to me to give the applicant’s case, on the face of It,

considerable strength.

There are other clrcumstances, however,

which should be referred to.

Meryl Shenker made

an affldavlt In the Supreme Court of

Queensland recently, saylng that she had been told that the

flfth

respondent

carries on the

Southport

practlce

pursuant

sub-lease. That seems to be so, but the sub-lease was not entered

into until 14 May 1987.

Donna Maira Dreler has made an affidavit on

informatlon

and belief from one

Holloway, who was formerly the Queensland

Medical Director of the Edelsten group. Holloway is sald to have told Mrs. Dreler that on 2 May 1987 the second respondent told him

that there were liquidity problems; that he had obtained

loan of

$ 2 5 0 , 0 0 0

from Simmelmann but the loan

had been made against the

security of the two practices, but that, unknown to Simmelmann,

the Southport lease

had been transferred the day before

the

agreement was signed. According

to Mrs. Dreier, Holloway says

that was described by the second respondent

as a "good buslness

move".

An affidavit

has been filed denying that conversation by

hearsay; it was, of course, made on hearsay. However,

I thlnk It

is signiflcant, as

senior counsel for the applicant

has

polnted

out,

that

although

Simmelmann

has gone on oath,

the

chlef

protagonist on

the other side, the second respondent,

has not

chosen to

do so.

Simmelmann's affidavit was flled

on 1 June 1987 and,

presumably,

served

shortly

after.

Simmelmann

says

that

hls

solicitor was told on 29 April by the fourth respondent that a company called Dalima Pty. Ltd. conducted the Southport practlce and that Ralema Pty. Ltd., the flfth respondent, was part of the

Edelsten group

of companles.

In hls affidavlt, the

fourth respondent says that

Dallma

Pty. Ltd. 1s a central admlnlstratlve entlty

of the Edelsten group

and that it provldes "central admlnlstratlve facllltles

to the

medlcal practltloners practlslng Independently

at, Inter alla, the

Caboolture and Southport clinics." In the same affidavlt, the

fourth respondent says that the flrst respondent's buslness at the

Caboolture

cllnic

the

provision

facillties

and

administrative services.

Simmelmann's affidavit further says that hls solicitor

was told that neither the first nor the fifth respondent holds a

lease in respect of the premises in which the practices are

conducted.

The fourth respondent says as to that that "The right

9 .

of occupation is at the will of Dr. Edelsten as Lessee, subject to the Supreme Court Action.” What that seems to mean

is that

the

first respondent has no rights at all

respect

the

occupation, if

it has any, of

the

Caboolture

clinic,

contradistinction to the fifth respondent which

has a sub-lease.

It seems to be improbable that there was

an Intention to

take a securlty in respect of the Caboolture cllnic, If the flrst respondent was known to have no rights in it. The version of events put ogether by Slmmelmann seems to me a llttle

unsatlsfactory In some

ways; it is incomplete; he does not deal

wlth the background

of the transactlon. Nevertheless,

on the

crltical matters, hls version

of events seems,

In general, more

llkely than that put forward

on the other slde.

It 1s deslrable to refer

In some further detail

to the

case

made In the

statement of claim.

After

settlng

out

the

allegatlons referred to

above, that 15, the

allegatlons

wlth

respect to

the security avallable, the statement

of clalm

s a y s

that It was Intended to make the applicant belleve

that the flrst

respondent was the lessee

the premises in whlch the medlcal

practices were bemg

conducted, that the first respondent owned

and operated the practices, that it was not

default under

either

of the leases and that the loan would be secured by

substantlal assets and	an establishment capaclty to generate
substantial income.

It seems to

me, speaking generally, that the evidence

put forward by the applicant

supports

that

case

with some

10.

strength. The statement of .claim

goes on to say

that

the

respondents, and each of them, now contend that the fifth respondent owns and operates the practice at Southport, and that the applicant is unable to ascertain the truth of the contention.

"he evidence put forward

on the respondents' side shows,

as I have

suggested above,

that the connection

of the first and

fifth

respondents with those practices	1s a very difficult matter
indeed.

It seems to me impossible to belleve that If there had

been any revelation

of the position

as now dlsclosed, anyone would

have been interested in taking

securlty relatlng to those

practices; and it IS common ground that there was an Interest

obtaining securlty in

at least one of them.

The statement of clalm

also says, in paragraph 18(d),

that:

"The first Respondent

owns

the said practlce at

Southport but 1s

now transferrlng its Interest

it without conslderation to the

flfth Respondent."

It is not at

all

clear what has

happened as

between the flrst

respondent

and

the

fifth respondent. There is a degree of

artificlality, of course, in speaking of

them as separate

entities,

because

no doubt

hey

are

common

control.

Nevertheless, it seems correct to say that a strong case has

been

advanced that since the representations referred

to, the

flfth

respondent has acquired whatever interest the

first respondent had

in that

practice.

What

might

be called

simply

the

official

11.

document of 1 April 1987, the record

at the Commissioner

Corporate Affairs, is strong evidence of that. On the part

of the

fourth respondent, there is evidence giving an explanation as

. ,	why the records showed	what they did on 1 April 1987.	The
. >	-_

explanation involves the proposition that

an illegality was being

committed, and I find it very unsatisfactory.

The essence

of it, then,

1 s that

although the rather

tangled

web of

the Edelsten

group's

affairs

has

not

been

unravelled so far as relevant, for the purposes

of this case I

satisfied that there is a substantial case to

be advanced that the

applicant was misled

wlth respect

the

flrst

respondent's

interest in these practices, whlch,

as I

have said, seems to be

very

shadowy

indeed

and

that

the

flfth respondent

took

Its

interest In May, knowing

of these circumstances.

It seems clear

enough that there

a prima facle case; but two particular

matters have caused

me dlfflculty. The first 1 s that, as the

senior counsel for the respondents, Mr. Byrne

Q.C., argued, there

strong

evidence

that

the

applicant,

knowing

the

clrcumstances at least in a general way, affirmed the transaction,

by purporting to appoint a receiver under the debenture charge.

It has been glven me concern that the rellef

whlch

Mr. Muir Q.C. principally relies,

as a basis for obtaining

Mareva injunction,

is rescission, in the

face of this strong

evidence of affirmation.

Mr. Muir Q.C. suggests that an answer to the suggestion

of affirmation is that

not all the facts are known and there is

-1.

' 12.

something

in that.

also a possible

answer that, in

exercising its jurisdiction under the

Trade Practices Act,

grant whatever relief seems appropriate to meet the case,

particular to undo transactions

this sort, the Court

1 s

not

necessarily restricted

as the Supreme Court would be in exercising

jurisdiction under the general law. Puttlng that another

way, the

statutory powers under the

Trade Practices Act

are not necessarily

brought to an end by proof, even clear proof, of affirmation.

I, therefore, take the

view, prima

facle, that

the

applicant may well succeed in having the transactlon undone and

the money whlch has been lent returned, despite the matter

I have

mentioned. It

has

assumed importance because, as Mr. Byrne

Q.C.

has polnted out, the prlnclpal sum is not due to be repald untll

next year, on 1 Aprll 1988, and the application seeks a premature

repayment by way of rescission.

The second matter whlch has concerned me is the posltlon of the flfth respondent, and I

have had some doubt as to whether

or not any rellef should

be granted against

lt. My

doubts

have

been somewhat aggravated by reading the declsion

of the High Court

in the case

of Jackson v. Sterlinq Industrles Llmlted

(unreported,

11 June 1987) to which

Mr. Byrne Q.C. was good enough to refer

me.

The precise

point at issue

Jackson

v. Sterlinq

Industries Limited, namely, whether or not security could

ordered by way of

a payment into court in a claim of this

sort,

does not arise here, but the learned Justices made remarks about the basis of the Federal Court's power to grant relief under the

13.

Mareva principle which seem to	be of assistance to	Mr.	Byrne	Q . C .
for the respondents.

In particular, Wilson and

Dawson JJ.,

in thelr joint

reasons,

say

that

the

foundation

at present

the

Mareva

princlple

the

prevention

of abuse of process, and, in

particular, prevention

of abuse of process of the court. I do not

find that concept easy to grasp. If

a defendant or a

respondent

is sued or threatened wlth suit in this court

or another court and

attempts to get rid of his

assets, he will ordinarily do so in

way whlch does not Involve any approach to the court. It may be that thelr Honours intended to use the expression "abuse" in the same sense as that in whlch It was used by Robert Goff J., as he

then was, In

the case to which they referred, Iraq1 Mmlstry

Defence v. Arcepev Shipplns	Co.	S.A. C19811 1	Q.B. 65 at	p . 7 2 .
There hls Lordshlp sald:

" ... a ~urlsdlction whlch found Its orlgin

I n

the

prevention of an abuse has been transmltted m t o	a
rewriting of our establlshed law of insolvency."

His Lordshlp does not use the expresslon "abuse

of process of

court".

If it

were the case that I

had to find that any of the

respondents was gullty

of an abuse of process of the court, in the

ordinary sense, Mr. Byrne

Q . C .

must succeed.

But in the judgment of

Mr. Justice Deane, with whom the

Chief Justice agreed, he

uses an expression, which may well have

the

same

source

a similar

source,

but

significantly

different. His Honour refers to prevention of:

'I...

a defendant from disposing

of hls actual assets

(including claims

and

expectancies)

so as

frustrate the process of the court by depriving the

plaintiff of the fruits of any judgment obtalned in

the action.

That seems to be

a different concept from prevention

abuse of process of the court.

However that may be, I prefer to

decide the matter

on the assumptlon that Wllson J. and Dawson J.

dld not intend necessarily to suggest that

It 1 s necessary to find

an actual or threatened

abuse of process of the court

In the

ordlnary sense; I could not flnd one here.

On the whole of the case, and

not wlthout some doubt, I

am satisfled that the applicatlon for a Mareva Injunction should

succeed In both aspects; that	15, In respect	of	the first and
flfth respondents.

I should add that Mr. Byrne Q.C.

made the polnt that an

undertaking

had

been

given to

the

Supreme

Court

other

proceedlngs which cover some of the same ground. It seems to	me,
however, that It is no task of mlne to lnqulre Into why that	was
done. It is enough to note that It does not cover the same

ground, and is slgniflcantly

different.

Sub~ect to

anythlng

counsel may have to say as

to form, then,

I propose to make

order substantially In	terms of	the notlce of	motion whlch was
filed on 1 June 1987.

The second application which

is before me is one which

initially seemed to create

some difficulty; it is an application

for security for costs against the applicant. It seems to me that

15.

where an applicant

I s a mere trustee,

it IS, in general, rather

hard on a respondent,

in a case

where

there

are arguable

questions, to require it to look ultimately to the trustee's rlght

of indemnity to obtain satisfaction

of any order for costs.

Mr. Muir Q.C. has put before me evidence tendlng to suggest that the appllcant is

a substantlal company, but

I do not

accept that

is.

Its posltion, as at June 1986, has been

substantially worsened by making the loan

whlch It may not be

able

to recover; that 1s. the

loan In issue in this case.

I have, however, declded

that I should

not

grant

security for the reason put forward by counsel for the applicant,

that the case 1s about the money which was lent in Aprll and which

is repayable to the

applicant, on any vlew of the matter, In less

than a year.

The flrst, second and thlrd respondents are all

liable to repay It	on 1 Aprll 1988 and do not contest thelr
llability to do so,	so far as the evldence before me shows. If

the appllcant's attempt to get

an order for repayment of the money

before 1 Aprll 1988 falls, it 1s not likely to fall

so many months

before that date as to

create

signlficant

hardshlp

on the

assumedly successful respondents. Suppose, for example, that the

case comes on

for trlal late this

year, and it is dlfficult

imaglne

likely

come

on any earlier, all that the

respondents, if they then succeed, would suffer 1s

a fairly short

delay until 1 April 1988,

on which date they could recover their

costs against the applicant by simply deducting them from the	sum
then due.

16.

It	therefore appears that, contrary to the practlce

which should prevail in cases

of applicants who are mere trustees

without substantial asset, in these exceptlonal circumstances, no

order for security should

be made.

That conclusion makes it

unnecessary for me

to go into the rather

difficult question of the

extent to which the merits should be consldered

on applicatlons of

this ort.	The application	for	securlty	will	therefore	be
refused.

j cefiify that this and the

Preceding

pages are a truz copy of the reasons for

judgment herein of H:s Honour

M r	Justlce Plncus

Dated

[1987] FCA 466

19 Jun 1987