Drinkwater v Gedrot Pty Ltd

[2001] NSWSC 893

CITATION:	DRINKWATER & ORS v. GEDROT PTY LTD & ORS [2001] NSWSC 893
CURRENT JURISDICTION:	EQUITY
FILE NUMBER(S):	SC 4053 of 2001
HEARING DATE(S):	14 & 20 September 2001
JUDGMENT DATE:	16 October 2001
PARTIES :	Peter Westgarth Drinkwater & John Francis Drinkwater - First Plaintiff Lustray Pty Limited - Second Plaintiff Caddyrack Inc - Third Plaintiff Gedrot Pty Ltd - First Defendant Gavros Pty Ltd - Second Defendant Bolton Point Investments Pty Ltd - Third Defendant Brighton Avenue Investments Pty Ltd - Fourth Defendant Excelsior Parade Properties Pty Ltd - Fifth Defendant William Stephen Kyrwood - Sixth Defendant Nettie Kyrwood - Seventh Defendant
JUDGMENT OF:	Bryson J at 1

COUNSEL :	A. Rogers - First, Second & Third Plaintiffs A.J. Abadee - Third and Fourth Defendants G.R. Kennett - Fifth Defendant E. Cox - Sixth and Seventh Defendants
SOLICITORS:	Hewitts Commercial Lawyers - First, Second & Third Plaintiffs Mason Lawyers - Third and Fourth Defendants Braye Cragg Solicitors - Fifth Defendant Peter Evans & Associates - Sixth and Seventh Defendants
CATCHWORDS:	INJUNCTIONS - Mareva Orders - non-innocent third parties - on complex facts where assets of family trusts had been transferred to other companies controlled by same principals, Mareva Orders were made.
LEGISLATION CITED:	Corporations Act 2001
CASES CITED:	Cardile & Ors v. LED Builders Pty Ltd (1999) 198 CLR 380.
DECISION:	See para.[43] for Orders.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

4053 OF 2001

BRYSON J.

TUESDAY 16 OCTOBER 2001

DRINKWATER & ORS v. GEDROT PTY LIMITED & ORS

Judgment

1 BRYSON J: These reasons deal with the plaintiffs’ application to continue Mareva Orders. The present proceedings are the 2001 proceedings. Gedrot Pty Ltd and Gavros Pty Ltd the first and second defendants did not appear on the return of the summons and the applications to continue Mareva Orders. Other defendants were represented by counsel.

2 Mareva Orders were first made in these proceedings by Hamilton J on 16 August 2001, in an ex parte application made on the day the Summons was filed. Further orders in similar terms but giving defendants access to assets were made on 17 August and modified on 22 August, and have been extended from time to time ancillary to the plaintiffs’ application for their continuance during the interlocutory period. The substantial order is in these terms:

1. The Defendant by themselves, their servants and agents be restrained …
(a) from disposing of or mortgaging (or increasing any mortgage liability) or encumbering or dissipating or dealing with in any manner whatsoever any of their assets whether such assets be within or outside the jurisdiction; and
(b) in the case of any such assets within the jurisdiction, from removing such assets from the jurisdiction;
except in the ordinary course of the defendants’ business and subject to:
(1) the proviso that the first to seventh defendants have access to his, her or its own assets for living expenses, payment of debts and legal expenses: and
(2) the proviso the restrain against disposal of assets by the first to seventh defendants be such that it does not exceed $829,900.00.

3 The order of 22 August gave the sixth and seventh defendants access to an additional $3000.

4 In the 1996 proceedings 3970 of 1996 the plaintiffs (who are the plaintiffs in both proceedings) obtained final orders on 28 November 1997. The final orders included (2) an order to the effect that Gedrot Pty Ltd and Gavros Pty Ltd (which are the first and second defendants in the 2001 proceedings) were to purchase 20 shares which the plaintiffs held in Caddyrack Pty Ltd at a valuation to be agreed or assessed. Value was determined by a Certificate of Master McLaughlin on 26 August 1999 at $41,495 a share, producing a total price of $829,900. Gedrot and Gavros have not conformed to the order and have not purchased the shares or paid for them. Causes of delay include that the order of 28 November 1997 was unsuccessfully challenged on appeal to the Court of Appeal and a further unsuccessful application for special leave to appeal to the High Court of Australia, and the Master’s Certificate was unsuccessfully challenged on appeal.

5 Caddyrack Pty Ltd was wound-up on 28 April 1998 by an order of this Division in proceedings 1640 of 1998 and the winding-up order provided to the effect that any transfer of shares in accordance with the orders of 28 November 1997 was to be valid and subsisting pursuant to s.468(1) of the Corporations Law. Caddyrack Pty Ltd was deregistered on 4 February 2001 under s.601AB of the Corporations Law which enabled ASIC to deregister on various grounds relating to inactivity. Caddyrack Pty Ltd could conceivably be reinstated under s.601AH of the Corporations Act 2001. The plaintiffs are seeking an order which would compel Bolton Point Investments and Brighton Avenue Investments Pty Ltd, the third and fourth defendants to which property earlier held by Gedrot and Gavros has been transferred, to carry out the obligations of Gedrot and Gavros to complete the purchase of 20 shares. Bolton Point Investments and Brighton Avenue Investments were not parties to the 1996 proceedings.

6 The 2001 proceedings were commenced on Summons, but pleadings must be directed as there is a need for a full and clear address to the basis on which the plaintiffs contend that in the course of enforcing their established right against Gedrot and Gavros the plaintiffs are entitled to compel action by Bolton Point Investments and Brighton Avenue Investments, and by other persons who have received property in which Gedrot and Gavros formerly had interests. There is a need to spell out in detail what is alleged to be the entitlement of Gedrot and Gavros, and of the plaintiffs, to have resources formerly available to Gedrot and Gavros applied to meeting Gedrot and Gavros’ established obligations. The nature of the plaintiffs’ claim can be seen now only in general terms, but can be seen sufficiently clearly for it to appear that there are substantial questions to be tried on the plaintiffs’ claim to recourse to property in the hands of later holders. There is a strong need for the basis on which recourse is claimed to be fully considered, fully stated, and related to a maturely considered tabulation in detail of the remedies required. Only in the broadest way can it be seen that the plaintiffs’ claims involve the propositions that Gedrot and Gavros are entitled to indemnity out of trust assets in respect of their obligations, and that that indemnity is to be enforced by treating the plaintiffs, actually or notionally, as receivers of property against which Gedrot and Gavros have rights of indemnity for the purpose of satisfying Gedrot and Gavros’ obligations out of that property or (it may be) by the actual appointment of some other person as receiver.

7 The evidence shows a remarkable series of transactions in which property over which Gedrot and Gavros have or may have claims, either as former trustees of trusts to which the property belonged, or perhaps (as counsel for some other defendants suggested) as beneficial owners, after assets have been transferred and otherwise dealt with, and new trustees have been appointed. The affairs of trusts have been reconstituted and otherwise shuffled about in ways for which no purpose or connecting thread can be seen except that all the trust vehicles are closely associated with Mr Terrence Kyrwood and Mr Geoffrey Kyrwood, the second and third defendants in the 1996 proceedings, and significant transactions and alterations of apparent entitlements have occurred during the period following the Court’s order of 28 November 1997, while enforcement was not available for procedural reasons including the pendency of appeals and the need to complete a reference to the Master and obtain his Certificate.

8 Significant events relating to trust dealings opened in 1982 and 1983, long before any relevant dealings between the plaintiffs and interests associated with Messrs Kyrwood, and then assumed forms in which they remained until after the orders of 28 November 1997. By Transfer dated 9 May 1983 and apparently registered on 12 April 1985, the sixth and seventh defendants Mr William Kyrwood and Mrs Nettie Kyrwood transferred to Mr Geoffrey Kyrwood and Mr Terrence Kyrwood, as tenants in common in equal shares, land at Excelsior Parade Toronto in three Certificates of Title. The Transfer was, on its face, given for value and acknowledged receipt of consideration of $112,000. The transferors are the parents of the transferees.

9 By Deed of Trust dated 18 February 1983 (earlier than the Transfer to them) Mr Geoffrey Kyrwood and Mr Terrence Kyrwood declared trusts of that land; a recital to the Deed of Trust established that they had entered into a contract to purchase the land for $112,000 and had done so as trustees on behalf of Gedrot and Gavros pursuant to three trusts identified in the Schedule to the Deed. It was not declared what proportions or interests in the land were held by each of the three trusts, from which it should be concluded that each of the three trusts had an equal proportion.

10 The three trusts referred to were established by three trust deeds each dated 16 June 1982. One of the deeds, in its terms a Discretionary Trust Deed, was made between Terrence Stanley Kyrwood as Settlor and Gedrot Pty Ltd as Trustee and established the trust which it is convenient to call the Terrence Kyrwood Family Trust, for beneficiaries in a class which included Mr Terrence Kyrwood, his wife Mrs Lynette Kyrwood and their children. Another deed also describing itself as a Discretionary Trust Deed created a trust referred to as the Geoffrey Kyrwood Family Trust; the Settlor was Mr Geoffrey Graham Kyrwood, the Trustee was Gavros Pty Ltd and the beneficiaries included Mr Geoffrey Graham Kyrwood, Mrs Sharon Elsie Kyrwood his wife and their children. Another Deed of Trust, referred to as the Kyrwood Unit Trust Deed, the first of the three referred to in the Schedule to the Deed of 18 February 1983, established a Unit Trust over a fund of $20; Geoffrey Kyrwood and Terrence Kyrwood were to be the trustees of the Unit Trust, Gavros Pty Ltd as trustee for the Terrence Kyrwood Family Trust was to be the first unit holder and Gedrot Pty Ltd as trustee for the Geoffrey Kyrwood Family Trust was to be the second unit holder. (It will be seen that in the Unit Trust Deed Gavros participated as trustee for the Terrence Kyrwood Family Trust and Gedrot participated as trustee for the Geoffrey Kyrwood Family Trust, although the terms of the Deeds of the same date which established Family Trusts show that Gavros was made trustee for the Geoffrey Kyrwood Family Trust and vice versa. No reason can be seen for this curious crossing of interests.)

11 These arrangements continued undisturbed so far as evidence shows when dealings between the plaintiffs and Messrs Geoffrey Kyrwood and Terrence Kyrwood and interests associated with them opened many years later, apparently about 1994, and continued during dealings, disagreements, apparent resolution by written agreement of 26 July 1996, and the 1996 litigation leading to the order of 28 November 1997. During this period the directors of Gedrot were Mr Geoffrey Kyrwood and Mrs Sharon Kyrwood his wife and the secretary was Mrs Sharon Kyrwood. Mr Geoffrey Kyrwood held one of the two issued shares and Mrs Sharon Kyrwood held the other. In Gavros Pty Ltd the directors were Mr Terrence Kyrwood and Mrs Lynette Kyrwood his wife and the Secretary was Mrs Lynette Kyrwood; each of them held one of the two issued shares. Each brother and his wife held office in the company which was trustee of the Family Trust for the other family.

12 Excelsior Parade Properties Pty Ltd is the fifth defendant. It was formed on 1 June 1998. Its officers at formation left office at once and from 1 June 1998 Mrs Sharon Kyrwood and Mrs Lynette Kyrwood were its directors; they continued to be its directors until 10 November 1999 when they resigned and Mr Geoffrey Kyrwood became sole director; he ceased to be a director on 16 June 2001 when Mrs Sharon Kyrwood and Mrs Lynette Kyrwood became directors again. Mrs Sharon Kyrwood has been Secretary since 1 June 1998. Mrs Lynette Kyrwood and Mrs Sharon Kyrwood have each held one of the two issued shares throughout.

13 Mr Geoffrey Kyrwood and Mr Terrence Kyrwood remained registered proprietors of the land at Excelsior Parade Toronto until they transferred title to the fifth defendant Excelsior Parade Properties Pty Ltd by Transfer dated 8 December 1999 which did not specify any money consideration but stated that the land was transferred “pursuant to the terms of the Deed of Confirmation of Appointment and Retirement of Trustee dated 12 June 1998”. At the time of the transfer Mr Geoffrey Kyrwood was sole director of Excelsior Parade Properties. Excelsior Parade Properties came to be or to appear to be entitled to become registered proprietor of the land pursuant to a Deed of Retirement by Geoffrey Kyrwood and Terrence Kyrwood as Trustees of the Kyrwood Unit Trust. The Deed of Retirement was dated 12 June 1998 and it referred only to Mr Geoffrey Kyrwood and Mr Terrence Kyrwood holding office as trustees of the Unit Trust. Gedrot and Gavros were the only unit holders and they were parties to the Deed of Confirmation of Appointment and Retirement of Trustees.

14 Having regard to the terms of the Deed of Trust of 18 February 1983, the Deed of Confirmation of Appointment and Retirement of Trustees, which constituted Excelsior Parade Properties as new trustee of the Unit Trust, did not entitle Excelsior Parade Properties to become the sole registered proprietor of the land, because the land was held, as the terms of the Deed of 12 February 1983 established, on two other trusts as well. Gedrot and Gavros were trustees of those trusts, Mr Geoffrey Kyrwood and Mr Terrence Kyrwood the retiring trustees were not trustees of those trusts, and Gedrot and Gavros by joining in and confirming the retirement and appointment of new trustees of the Unit Trust did nothing to affect their office holding as trustees of the Family Trusts. They did nothing to alter, even in purport, entitlement to hold office as trustee of either Family Trust or to become registered proprietor of land an interest in which was held on either of those trusts. The beneficial ownership of interests in land by the Family Trusts, and entitlement of Gedrot and Gavros to indemnity against trust property cannot have been in any way affected, in respect of any of the three trusts, by the retirement and appointment of a new trustee of the Unit Trust.

15 All companies and individuals involved must be taken to have known or to be affected with notice of the terms of the Deed of Trust of 12 February 1983, although as the transaction of 12 June 1998 and the Transfer of 8 December 1999 were not for value, the question of notice has no significance. From the close associations among these four individuals, Messrs Kyrwood and their wives and the parts they took in the trusts and the affairs of Gedrot and Gavros it must be that Excelsior Parade Properties took title with notice of the trusts declared in the Deed of Trust dated 18 February 1983 and of any entitlements of Gedrot and Gavros in respect of trust property; and also of the obligations of Gedrot and Gavros under the order of 28 November 1997.

16 At a date which does not appear from evidence, but was probably in or after December 1999, Excelsior Parade Properties mortgaged the land to National Australia Bank by a registered mortgage. Excelsior Parade Properties transferred the land to Stannic Securities Pty Ltd for $825,000, by a Transfer the date of which may have been 29 June 2001. A letter from Messrs Wood Roberts Solicitors to Excelsior Parade Properties dated 29 June 2001 reports that settlement of the sale was effected on that day and that the money received was applied in payments to Wood Roberts Solicitors $107,409.72, in payments to Mr William Stephen Kyrwood and Mrs Nettie Kyrwood of $103,933.84, payment of $398,000 to NAB, Caveators’ solicitors’ costs $385.00 and a deposit to Excelsior Parade Properties’ Newcastle Permanent Building Society (NPBS) Account of $131,784.52. Excelsior Parade Properties later received $60,500 from their selling agent as the balance of the deposit. Of the $107,409.72 paid to Messrs Wood Roberts $57,409.72 was said to be “Payment of our outstanding account” and $50,000 was said to be “payment to be held in trust pursuant to the terms of our agreement”.

17 There is a strong, indeed unqualified prima facie case that all the proceeds of sale are trust property of the Family Trusts of which Gedrot and Gavros are trustees and of the Unit Trust in which they hold units in their character as trustees of the Family Trusts. It appears from findings in the judgment of Young J (as his Honour then was) in the 1996 proceedings and from references in correspondence and at a number of places elsewhere, that Gedrot and Gavros were involved in the dealings which led to their being ordered to acquire shares in Caddyrack Pty Ltd in their character as trustees of the Family Trusts. As they were referred to in the Kyrwood Unit Trust Deed as trustees of the Family Trusts, the evidence indicates that their units and interests in the Unit Trust are also trust property of the Family Trusts. There are therefore prima facie indications of considerable strength that they are entitled to have recourse to trust property readily traceable into the hands of Excelsior Parade Properties, and to other traceable property disposed of by Excelsior Parade Properties, to indemnify them in carrying out obligations which they incurred as trustees of the Family Trust.

18 Counsel for the third and fourth defendants Bolton Point Investments and Brighton Avenue Investments submitted to the effect the relief sought against Bolton Point Investments and Brighton Avenue Investments is futile since Caddyrack has been deregistered, the company no longer exists and as such there are no shares in the company that may be transferred. I do not accept that the relief sought is futile for that reason because there is power to restore Caddyrack’s registration and there are grounds on which it may well be restored having regard to there not having been compliance with the order of 28 November 1997 and to the special provision made in the winding-up order for continued dealings with its shares.

19 Counsel also presented a chain of submissions under the heading that Gedrot and Gavros did not act in a representative capacity as trustees. As I understood what was put, for that reason they are not entitled to indemnity against trust assets. They were not, counsel said, alleged in any pleading in the 1996 litigation to be liable in a representative capacity, and counsel contended that it would have been proper practice to require their special capacity as trustees to be indicated in the Court’s orders. I do not regard the matter pointed to by counsel as indicating any deficiency in the 1996 proceedings or any qualification of the operation of the orders made therein; there would be no occasion to refer to whether or not Gedrot and Gavros were to act in execution of any trust in obeying the Court’s order. There is no indication, either in the reasons for judgment or at any other place to which counsel referred, that there was any significance in the distinction between whether Gedrot and Gavros incurred an obligation to buy the Caddyrack shares in their capacity as trustees or otherwise. They were referred to as trustees of the Family Trusts in the reasons for judgment. These contentions were not supported by any evidence or rational basis for supposing that Gedrot and Gavros had any existence or function other than as trustees of the Family Trusts. No reason appears in evidence to suppose that they had any other activities than as trustees of Family Trusts, or that they had separate spheres of operation outside the Family Trusts, and such an arrangement is inherently unlikely. The existence of such an arrangement is not assisted by references in records relating to the affairs of Caddyrack to shareholdings by Gedrot and Gavros (not of course being the shares which they were ordered to acquire) in which the existence of trusts of those other shares was not disclosed.

20 Counsel made further submissions the burden of which was that it did not appear from evidence that there was a risk that Bolton Point Investments or Brighton Avenue Investments might deal with trust assets so as to defeat a claim to indemnity made by or in right of Gedrot and Gavros, if such a claim were ever made. Counsel further made submissions to the effect that it has not been shown that there has been any risk of dissipation of assets, or that if there has, the evidential foundation is too slight to warrant Mareva Orders. As appears generally from these reasons, I am of the view that the whole chain of dealings and the close association among the individuals controlling the defendant companies indicates that there is risk of further dispersion, dissipation or concealing transactions against which Mareva Orders could guard. Except in relation to preservation of property there is very little likelihood of enforcement of any orders, in whatever form the plaintiffs may ultimately obtain orders, against any of these companies; none of them has any substantial capital, apart from the trust assets in question. I regard the risks as significant and I do not accept these contentions.

21 Counsel also submitted that, as a discretionary consideration, the availability of enforcement proceedings against Gedrot and Gavros was adverse to granting interlocutory relief against Bolton Point Investments and Brighton Avenue Investments. I do not accept this contention as there is no sign of any real prospect of actual enforcement against Gedrot and Gavros except in relation to trust assets against which those companies might be entitled to have recourse. Counsel described the question whether Gedrot and Gavros owned their shares in Caddyrack in a representative capacity (by which he meant as trustees) or beneficially as the nub of the argument. I do not regard this question as of any real importance for present purposes. (It is worth observing that what is under consideration is the money to be paid for shares in Caddyrack which Gedrot and Gavros do not yet own, not the shares which they already own.) If the shares which Gedrot and Gavros are to acquire are to be trust property, Gedrot and Gavros may claim indemnity out of trust assets in respect of the obligation to buy them. Whether their existing shares are trust property does not have a direct bearing on that question.

22 The position of Bolton Point Investments and Brighton Avenue Investments in the plaintiffs’ claim is not only their position as new trustees of the Family Trusts and transferees of units in the Unit Trusts. They have a further involvement in that as new trustees of the Family Trusts they did nothing to protect the interests of the Family Trusts in the land or to intervene against the appropriation of the land to the Unit Trust and its new trustee, although the controlling minds of all the companies were drawn from the same closely associated group, and Bolton Point Investments and Brighton Avenue Investments must be taken to have known what transactions were taking place. As new trustees they are necessary parties to any litigation in which there is an attempt to establish interests of the Family Trusts in the land or its proceeds, and they may bear responsibility for their inaction.

23 Counsel also contended that the most natural reading of the Deed of Trust of 18 February 1993 is that the references to the Family Trusts in that Deed and in the Schedule are references to interests of the Family Trusts in the land as holders of units in the Unit Trust. In my view the Deed is not reasonably susceptible of this reading; its plain meaning is that the land is subject to all three trusts.

24 There is evidence of some events which may have affected the legal ownership but cannot have affected the beneficial ownership of the units in the Kyrwood Unit Trust held by Gedrot and Gavros. By a document entitled Deed of Appointment and Retirement of Trustee Mr Terrence Kyrwood as appointor removed Gavros Pty Ltd as Trustee of the Terrence Kyrwood Family Trust and appointed Brighton Avenue Investments Pty Ltd to be new trustee. By a Transfer dated 18 December 1998 Gavros transferred 10 units in the Kyrwood Unit Trust to Brighton Avenue Investments; according to the terms of the Transfer, the Deed of Appointment and Retirement of Trustee was dated 12 June 1998 although, preposterously, the document in evidence as the Deed of Appointment and Retirement does not bear that date or any date and (if it should be significant) does not purport to have been registered in the General Register of Deeds. By another undated Deed of Appointment and Retirement of Trustee Mr Geoffrey Kyrwood removed Gedrot as Trustee of the Geoffrey Kyrwood Family Trust and appointed Bolton Point Investments Pty Ltd as new trustee; by another Transfer also dated 18 December 1998 also referring to the undated Deed of Appointment and Retirement of Trustee as dated 12 June 1998, 10 units in the Kyrwood Family Trust were transferred by Gedrot to Bolton Point Investments. These transactions could have no effect on the beneficial ownership of the units or on any right of Gedrot and Gavros to indemnity out of trust assets.

25 On the face of things the Deeds of Appointment and Retirement of Trustee may have been defective as Mr Terrence Kyrwood purported to remove Gavros as Trustee of the Terrence Kyrwood Family Trust whereas he was the settlor of the Family Trust for which Terrence Kyrwood and his family were beneficiaries of which Gedrot was Trustee, and vice versa. I do not have the full terms of the Deeds of Trust which may have contained provisions relating to the identities of appointors which I have not seen.

26 It will be recalled that the Deed constituting the Kyrwood Unit Trust speaks of Gedrot and Gavros as unit holders as trustees for the Family Trusts, and the third and fourth defendants Bolton Point Investments and Brighton Avenue Investments, who have taken transfers of those units in the character of new trustees and not for value, hold them subject to the same trusts and subject to any obligations to which property of those trusts is subject, including obligations arising in relation to Gedrot’s and Gavros’ liabilities to purchase shares in Caddyrack and entitlement to indemnity for those liabilities out of trust assets.

27 A fact of some significance is that Mr Geoffrey Kyrwood and Mr Terrence Kyrwood were made bankrupt by a sequestration order of the Federal Court on 18 June 2001, on the application of the plaintiffs and on an act of bankruptcy committed on 27 September 1999. Shifts and changes in office holdings in companies were obviously made in preparation for this event, and Excelsior Parade Properties entered into the contract to sell the land on the following day 19 June 2001, the sale being settled after the unusually short interval of 10 days.

28 These dealings are not susceptible of explanation in terms of reasonable management of trust affairs. No rational thread can be seen which could explain the erection and maintenance of the complex array of trust arrangements, shifts of trusteeships among corporations with much the same continuing principals drawn from a closely associated group, trusts which continued for many years without the trustee companies taking the rudimentary steps of getting in legal title to land in which trusts had interests and the shifting kaleidoscope of appearances made up of a continuing small number of pieces. As originally structured in 1982 and 1983 the arrangements have the strong air of being an exercise of intended concealment of the interests truly involved. When the corporate structures of interests were shuffled after an adverse judgment was given but before it was enforceable, the indications that the whole exercise was an exercise of concealment and evasion were greatly strengthened, and strikingly strengthened by transfer of the land to Excelsior Parade Properties in disregard of the complex trusts declared on 18 February 1983. No event has happened which could bring an end to these shifts and contrivances, and there is strong reason to fear that before the plaintiffs’ claim in the 2001 proceedings can be adjudicated and before their rights under the order of 28 November 1997 can be enforced some further transaction will be contrived and interposed against effectual enforcement of remedies against Gedrot and Gavros out of property to which those companies were entitled to resort to meet their obligations.

29 Unless Mareva Orders are made there is in my judgment a significant risk that funds now apparently available will be dissipated or become even more difficult to trace, either by active measures of concealment or by purported distributions under trust powers. It was submitted that each party against whom the Mareva Orders are sought to be continued has assets of the potential judgment debtor for trust funds against which Gedrot and Gavros would have to draw to comply with the order and for which they would be entitled to resort under their entitlement to indemnity. The plaintiffs’ solicitor referred to various contingencies and means by which the plaintiffs could establish control out of the affairs of Gedrot and Gavros; is not however necessary to address in detail or to decide which if any of the means put forward may be well based.

30 As well as the relatively straightforward line by which property effected by relevant trusts can be traced into the NPBS Account of into Excelsior Parade Properties, the bases on which $57,409.72 was paid out of the proceeds of trust funds to Messrs Wood Roberts Solicitors, and a further $50,000 was to be held in their trust account appear to be worthy of consideration and investigation. So too are the dealings between Excelsior Parade Properties and NAB and the manner in which the amount of $398,000 came to be payable to NAB or to be paid to NAB out of the proceeds of sale of the land. If money borrowed from NAB has been used for purposes such as payments out to beneficiaries there may be room for other tracing remedies.

31 Counsel for the fifth defendant Excelsior Parade Properties Pty Ltd submitted (to a similar effect as counsel for the third and fourth defendants) that the only significance of the 1983 Deed was to confirm that the land was part of the assets of the Unit Trust. This submission is contrary to the words and to the plain meaning of the Deed. The case supporting the view that Excelsior Parade Properties held the land and now holds proceeds of its sale subject to all three trusts is very strong. Its conduct, including the submissions of its counsel, show that there is a risk that it will not act accordingly and that assets of the Family Trusts will not be available to meet obligations of the Family Trusts.

32 Counsel submitted that as only declaratory relief is sought in the Summons against Excelsior Parade Properties, Mareva relief is not available against it. In my view the present form of the claims in the Summons is not the last word defining what is likely to be in issue in the litigation and the form of relief which is likely to be obtained, and the prospect that the plaintiffs may obtain remedies against assets which can be traced to or through Excelsior Parade Properties is clear. At the interlocutory stage, Mareva Orders protecting the potential for effective exercise and enforcement of the Court’s powers in the event that the plaintiffs may succeed is appropriate. The risk of dissipation is real, transfer of the land to Excelsior Parade Properties under cover only of the Unit Trust was itself a dissipation, and the sale of the land and disposal of proceeds in various directions are further dissipations. In my view Mareva relief against the fifth defendant is strongly called for.

33 Another matter worthy of investigation is the payment to the sixth and seventh defendants, Mr William Kyrwood and Mrs Nettie Kyrwood, of $103,933.84 described by Wood Roberts as “Repayment of funds under unregistered mortgage (for the release of the caveat)”. The document said to be the unregistered mortgage is in evidence as Exhibit 2. It is on its face undated. The explanation proffered for it is that it secured $100,000 of the $112,000 consideration of the transfer of the land from Mr William Kyrwood and Mrs Nettie Kyrwood to Mr Geoffrey Kyrwood and Mr Terrence Kyrwood as recorded in the Transfer dated 9 May 1983. The Caveat was lodged in January 2001. No adequate explanation, indeed no explanation, is proffered for this document’s not having been registered or protected by a caveat for many years. The terms of the mortgage transaction recorded in it are extremely diseconomic as it provided for no payment of principal until 1 January 2000, and provided for no payment of interest until the mortgagees decided to give notice that interest was to be paid, an event which it is said did not happen until the year 2000.

34 The claim against the sixth and seventh defendants was put forward as a claim within the circumstances in which Mareva orders may be made against third parties as shown by Cardile & Ors v. LED Builders Pty Ltd (1999) 198 CLR 380.

35 The supposed mortgagees gave an account of the document which they did not verify themselves; their account was given on information and belief without any apparent reason being shown why they were not able to support their own case on oath. The mortgage document and the transactions which are said to explain it are vehemently suspicious. The document was not brought forward or acted on for many years until after the mortgagors had committed an act of bankruptcy and the document could make itself useful as a vehicle to remove funds from the reach of enforcement of claims, and before then its existence could not be known from public sources. Until a caveat claiming to protect the interest of the mortgagees was lodged in January 2001 there were no means by which the existence of the mortgage or of any obligations secured by it can be known. It was not mentioned in the financial statements of any relevant trusts. No attempt to protect the unregistered mortgage was made when the land was transferred to Excelsior Parade Properties notwithstanding the risk that as an unregistered interest it might be defeated under the Torrens System. There are strong grounds for the suspicion that it was not ever intended to evidence an obligation, but was brought into existence against the possibility that it might be useful at some future time in an exercise to defeat creditors. The payment of money to the sixth and seventh defendants has been shown, prima facie, to be a measure of concealment and evasion, justifying a Mareva Order against those defendants and amplifying the grounds on which such an order should be made against others.

36 The principles on which the jurisdiction of the Federal Court to make Mareva Orders is based were authoritatively stated in the judgment of Gaudron, McHugh, Gummow and Callinan JJ in Cardile v. LED Builders (1999) 198 CLR 380 at 399-401. The passage related to the powers conferred by statute on the Federal Court, but the powers of the Supreme Court are not more narrow than those statutory powers. As this passage shows, the power to prevent the abuse or frustration of this Court’s process has been accepted as an established part of its armoury of powers, and Mareva Orders must be framed so as to come within the limit set by the purpose which the order can properly be intended to serve as an order to prevent the frustration of the Court’s process. The moulding of an interlocutory injunction must depend on the circumstances of each case and novelty of form is no objection. The following sentence in a passage of which their Honours approved appears to be directly applicable: (at 400-401) “The general principle which informs the exercise of the power to grant interlocutory relief is that the Court may make such orders, at least against the parties to the proceeding against whom final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked.”

37 In the operation of these principles there is ample power to protect means of enforcement of other orders than simple judgments for the payment of moneys as judgment debts. The principles readily extend, in my view, to a case such as the present where the first and second defendants have been ordered to buy shares, and enforcement of the order requires enforcement of rights of the first and second defendants to have access to and an indemnity out of trust property so as to be able to pay for the shares.

38 Their Honours’ observations on the position of third parties at 401-402 show their Honours’ view that a Mareva Order may be made against a non-party, meaning in this context persons other than Gedrot and Gavros, where the third parties are answerable or liable in some way to Gedrot and Gavros after the order of 28 November 1997 was made, or are holding, controlling or capable of disposing of the property of Gedrot and Gavros: see para [45]. Their Honours’ view also appears that Mareva Orders may be made where there has been deliberate blurring and attempts at the transferring of property rights and interests; see para [47]. Their Honours also made observations which show their approval of earlier expressions of the drastic nature of the remedy, the need for care in granting it, the need for protection by way of an undertaking as to damages and the significance of discretionary considerations – see paras [51-53], 403-404. At 405-406 their Honours stated the principle to guide the courts where the activities of third parties of the objects are to be restrained, -

What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word ‘may’, be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which: (i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including ‘claims and expectancies’ (The phrase used by Deane J in Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 625), of the judgment debtor or potential judgment debtor; or (ii) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.

39 It is not necessary to show that Gedrot or Gavros has a specific proprietary interest in assets held by another defendant, and it is sufficient that the assets be “mixed up” and “controlled”; see Cardile v. LED Builders (1999) 198 CLR 380 in the citation at 389 and in the judgment at 402. Although the observations of the High Court referred to control by the judgment debtor, the same principle must apply where, as here, the same group of persons has control over both the judgment debtor and other defendant companies.

40 The third, fourth and fifth defendants cannot be considered to be innocent third parties as that expression was used in Cardile’s case. In substance they and all their affairs are under the control of and are emanations of the wishes of the same group of members of the Kyrwood family as control Gedrot and Gavros, the two Family Trusts, the Unit Trust and all their affairs. The substance of the events and conduct involved is that they are not third parties at all, but further emanations of the same group of individuals. Nor could these defendants be regarded as innocent in the sense in which that word was there used; the events and conduct in which they have taken place, or in which they have been employed, have no apparent meaning except as evasive responses to liabilities incurred by Gedrot and Gavros. Much of what was submitted by counsel for the third and fourth defendants, and also by counsel of the fifth defendant, proceeded on the basis that they should be regarded as innocent third parties, and that their transaction should be appraised as if they had no real connection with Gedrot and Gavros, and as if the transactions were, or as if they appeared even on the surface to be ordinary events in the administration of trusts. The positions taken did not engage with the dominating realities of the case.

41 The sixth and seventh defendants are in a different position; they are not shown to be under the control of the members of the Kyrwood family who control the companies, and they have a claim to be considered as innocent third parties in relation to the application for Mareva Orders.

42 Submissions on behalf of the sixth and seventh defendants assumed the legitimacy of their position and of their reliance on the unregistered mortgage. In the circumstances of vehement suspicion relating to whether the mortgage was in truth intended to evidence an obligation, it cannot be assumed that the mortgage document has the effect which on its face it purports to have; there are circumstances which strongly indicate otherwise. Further, even if the mortgage was in truth intended to evidence an obligation its position in a competition of priorities with equitable interests created by the Deed of 18 February 1983, which was earlier in date than the equitable mortgage, requires to be assessed. There are significant indications adverse to a view that the unregistered mortgage is the better equity in view of there having been no caveat or other action in relation to it and of its not having been made known for many years while the affairs of the Family Trusts and Unit Trust appeared to operate. The Mareva Order makes provision for drawings by the sixth and seventh defendants out of the moneys which were paid to them, they have already disposed of part of the moneys, and in my view continuation of Mareva relief during the interlocutory period should be ordered against them.

43 Order:

Upon the plaintiffs and each of them by their solicitor giving to the Court the usual undertaking as to damages, order

(1) The Defendants and each of them by themselves, their servants and agents be restrained

(a) from disposing of or mortgaging (or increasing any mortgage liability) or encumbering or dissipating or dealing in any manner whatsoever with any of their assets whether such assets be within or outside the jurisdiction; and
(b) in the case of any such assets within the jurisdiction, from removing such assets from the jurisdiction;

except in the ordinary course of the business of each defendant and subject to:


(1) the proviso that each defendant has access to his, her or its own assets for living expenses, payment of debts and reasonable legal expenses of these proceedings; and

(2) the proviso that restraint against disposal of assets by the defendants be such that it does not related to assets in excess of $829,900.00 in value.


(2) Order 1 has effect as a Mareva Order until the final disposition of these proceedings or further order.

(3) Direct that the proceedings continue on pleadings: Statement of Claim to be filed within 28 days and thereafter in accordance with the Rules of Court.

(4) Reserve to all parties liberty to apply with respect to the operation of the Mareva Order.

(5) Order that the costs of the application for Mareva Order be plaintiffs’ costs in the proceedings.
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Last Modified: 01/03/2002