Durban Roodepoort Deep Ltd v Mostert - [2004] WASC 9

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: DURBAN ROODEPOORT DEEP LTD -v- MOSTERT & ORS [2004] WASC 9

CORAM: EM HEENAN J

HEARD: 20 JANUARY 2004

DELIVERED : 20 JANUARY 2004

FILE NO/S: CIV 1772 of 2002

BETWEEN: DURBAN ROODEPOORT DEEP LTD (ARBN 086 277 616)
Plaintiff
AND
CHARLES PHILIP MOSTERT
First Defendant
JOHN STRATTON
Second Defendant
NOBLE INVESTMENTS PTY LTD (ACN 007 998 914)
LEADENHALL AUSTRALIA LTD (ACN 007 997 248)
ADVENT INVESTORS PTY LTD (ACN 008 134 209)
Third Defendants
TIMOTHY OWEN LEBBON
Fourth Defendant

Catchwords:

Interim Mareva order - Application to dismiss or vary

Legislation:

Nil

Result:

Application to discharge or vary Mareva order dismissed

Category: B

Representation:

Counsel:

Plaintiff:     Mr D J Martino
First Defendant             :     Mr P G Clifford
Second Defendant         :     No appearance
Third Defendants          :     No appearance
Fourth Defendant          :     No appearance

Solicitors:

Plaintiff:     Allens Arthur Robinson
First Defendant             :     Haydn Robinson
Second Defendant         :     No appearance
Third Defendants          :     No appearance
Fourth Defendant          :     No appearance

Case(s) referred to in judgment(s):

A v Hayden (1984) 156 CLR 532
Fantasia v Otho Pty Ltd, unreported; SCt of WA; Library No 980054; 13 February 1998
First Industry Corporation v Goh [2002] WASC 68
Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410

Case(s) also cited:

Nil

EM HEENAN J: On 23 December 2003 I granted the plaintiff an interim Mareva order against the first defendant, the terms of which are apparent from the court record. The application for that order was based in part upon the contents of an affidavit of David Johannes Botes sworn 28 November 2003 which has been filed in the proceedings.
The plaintiff relied on that affidavit and in particular pars 6 to 18 of the affidavit to raise an arguable case that there was a risk that, unless restrained, the first defendant may deal with assets within the jurisdiction of this Court in such a way as to obstruct, prevent or jeopardise the effective enforcement of any judgment which might eventually be obtained against the first defendant by the plaintiff in the proceedings.
For reasons which I have previously given I granted the Mareva order on an interim basis allowing liberty to apply for it to be discharged and anticipating that any substantial argument about whether or not it should be continued would occur at the end of January. However, in the meantime a number of events have occurred which have lent urgency to the question of whether or not the Mareva order should continue or continue in the terms in which it was granted.
The first defendant has applied by summons dated 24 December 2003 for a discharge of the interim Mareva order which I made the previous day. That application came before me recently on 13 January 2004 and after hearing submissions from the parties I declined to discharge the order. One of the reasons relied upon by the first defendant in support of the application for the discharge of the order on that occasion was that the first defendant had entered into two property transactions and that the completion of the second of these could not occur while the Mareva order stood in its original terms.
These property transactions require brief mention. It is not necessary to give the full details of them but they are as follows. First, the first defendant, Mr Mostert, entered into an executory contract for the sale of a house and land owned solely by him at Melville Beach Road, Applecross, for approximately $1.5 million. That property was encumbered by several charges, including a mortgage to the plaintiff who was notified of the proposed sale in order that arrangements could be made for the discharge of its mortgage. There were other secured liabilities over that property which also needed to be discharged for the sale to be completed.
The completion of the sale of the Melville Beach Road property was an event for which the interim Mareva order made provision in the sense that distribution of the proceeds of sale in a manner which would effect the discharge of secured liabilities and other proper expenses of the sale, certain other incidental expenses, the preservation of the balance in a fund under the control of the first defendant but subject to the Mareva order, could all occur. In other words, the proposed discharge of the Mareva order was not necessitated by the sale of the Melville Beach Road property. Second, from the proceeds of the sale of the Melville Beach Road property, after the discharge of the secured liabilities and other incidental proper expenses, the first defendant purchased, or purported to purchase, a second replacement property for a price of approximately $900,000 or a little less.
An executory contract for the purchase and sale of that second property was executed requiring settlement in the near future. The purchaser of that property named in the contract of sale was the first defendant's wife or her nominee. Subsequent affidavit evidence has disclosed that it is the intention of the first defendant, if permitted, to purchase the second property in the joint names of himself and his wife and for them to be registered as the sole proprietors of an estate in fee simple in that land as joint tenants.
The whole of the purchase price for that second property is to be supplied by the balance of the funds emanating from the sale of the Melville Beach Road home. That will require the use of the funds which were to be kept in a holding account in the name of the first defendant under the terms of the Mareva order and hence the present application for a variation of the Mareva order.
When that application last came before me, I refused to grant any variation to the order which would permit the completion of the sale of the second property in any manner which utilised the net proceeds of the sale of the Melville Beach Road property, and I gave reasons briefly for that at the time. It seemed to me on that occasion, and it still seems to me, that the purchase of the second property for $900,000 from the proceeds of the sale of the Melville Beach Road land will involve use of the personal assets or property of the first defendant in a manner which will convert so much of the property or money as is so utilised into an asset jointly owned by himself and his wife, and hence will be a disposition by him of a portion of his previous sole estate and interest in that property. As such, it has the potential to effect a reduction in the assets of the first defendant which may be available to satisfy my eventual judgment in favour of the plaintiff in these proceedings.
While making that ruling, I deferred any immediate determination of one of the other grounds upon which the first defendant sought the discharge or variation of the Mareva order. The reason for deferring that was because of the magnitude of the issues that were involved and the lack of time during the vacation general chambers list to deal with that issue. It was then proposed that those issues could be brought on for hearing at a special appointment with written submissions from the parties about a fortnight or so later. That has not occurred because the settlement of the contract for the sale of the second property is due this afternoon and failure to settle in the terms of the contract will expose the first defendant and his wife to the possibility of recision, penalty interest or damages. The first defendant presses for an immediate decision on the point previously reserved. The plaintiff opposes this because of lack of opportunity to prepare written and other submissions, but in view of the urgency which has developed, I have decided to deal with the matter now.
I consider that there is a strong arguable case that the completion of the purchase of the second property by utilising the sum of $900,000 or thereabouts, being the proceeds of the sale of the Melville Beach property after the satisfaction of secured liabilities and other proper expenses, will represent a transaction which effectively renders more difficult or jeopardises the recovery of any judgment which the plaintiff in the proceedings may eventually recover against the first defendant. It is, in effect, the voluntary disposition of a joint interest in this new property to the first defendant's wife who, once becoming registered as a joint tenant, will have an indefeasible interest in that property. She is not a party to the present action and any judgment recovered in the present action would not be a judgment enforceable against her.
There is authority for the proposition that the purchase of property by a defendant as a joint proprietor with his wife is a disposition of an interest in favour of the spouse sufficient to warrant the grant of a Mareva order. Such decisions include First Industry Corporation v Goh [2002] WASC 68, and a decision of Heenan J in Fantasia v Otho Pty Ltd, unreported; SCt of WA; Library No 980054; 13 February 1998. As with all cases, careful attention needs to be given to the particular facts, and I draw no more from those two decisions for the present occasion than that they are demonstrations of the principle, otherwise obvious in itself, that such disposition of a joint interest will represent a diminution in the estate of the party making it which, depending upon the context, may give rise to an inference which would support the grant of Mareva relief.
It seems to me in the present situation that such an inference is justified in this case, and that this transaction is by itself sufficient to warrant the continuation of the Mareva order.
Perhaps, however, the question of whether or not the inference is sufficient to extend the Mareva order is not the correct way to approach these proceedings. Rather, the plaintiff contends that the Mareva order should never have been granted because reliance could never be placed upon the contents of the affidavit of Mr Botes set out in the passages which I have previously indicated. The submission is that if the order had never been made no question of the significance of subsequent events would arise for examination. It does not seem to me to be necessary to dwell on any potential significance in the order of approach to the factors which are relevant to the determination of this application because I am satisfied that the affidavit of Mr Botes, including the parts to which objection was taken, was admissible and remains admissible and sustain the grant of the Mareva relief.
Put another way, the affidavit is complemented and reinforced by the events relating to the sale and purchase of the two properties which I have mentioned. Either alone or in combination with each other, those two sets of events would be sufficient to sustain the Mareva order and to prevent the grant of a variation as sought by the first defendant.
It is, however, necessary for me to address the substance of the objections which were made by the first defendant to the use of the Botes affidavit. It can be said that, in pars 6 to 18 in the Botes affidavit, there is a series of matters sworn to relating to the conduct of Mr Botes on previous occasions in 1999 which, as a matter of inference, lead to a conclusion that unless restrained there is a risk that he may deal with his assets in such a fashion as to obstruct, render more difficult or jeopardise the enforcement of any judgment which may eventually be obtained by the plaintiff in these proceedings.
The objection is not over whether or not the contents of the affidavit justifies such an inference. It is to whether or not the content of the affidavit is admissible at all because, so it is submitted, there are covenants in a deed which prevent its use for this or any other similar purpose. The deed referred to is a settlement deed dated 31 August 2001, made between the present plaintiff and two other associated corporations and the defendant. It is a deed which purports to settle on terms, which need not be mentioned, a dispute between the plaintiff and Mr Mostert arising out of allegations identified in the deed, set out at length in Sch 1. These are essentially, although not in every respect identical with, the allegations contained in the Botes affidavit relied upon to support the inference of the existence of a risk of dealing with the first defendant's assets in a manner which may defeat or obstruct any eventual judgment in these proceedings.
The point raised by the first defendant in reliance upon this deed is that the deed itself concludes all rights and mutual obligations or liabilities said to arise from those previous allegations of misconduct by the first defendant and converts them into certain monetary rights specified under the deed.
The particular provisions of the deed which have this effect, so it is submitted, are: cl 1.1, which defines the allegations which, as I have already said, are contained more fully in Sch 1 of the deed; cl 1.3(a) which contains and describes the extent of the mutual releases granted by the deed; cl 1.4 which includes the recitals as part of the deed; cl 3.1 which effects the releases which the deed contemplates; and cl 19 which provides that the deed may be pleaded and tendered as an absolute bar and defence to any proceedings brought or made by another party in breach of the terms of the deed.
I should also mention that there is cl 11 which contains an undertaking that each party will keep the terms of the deed confidential, the only exceptions being that a party might disclose the terms of the deed (a) to any professional advisers on receipt of an undertaking from that person to keep the terms confidential and, (b), to comply with any law or requirement of any court.
As I understand the submissions for the first defendant the overall effect of this deed is to discharge Mr Mostert from any liability whatsoever in respect of the designated allegations and to provide an answer which may be pleaded as a complete bar to any proceeding brought in breach of the terms of the deed, a term which I take to mean any proceeding brought to advance, vindicate or enforce claims in respect of which the identified allegations were made. Further, the provision of confidentiality contained in cl 11 is relied upon for a contractual obligation restraining any use of the deed by the plaintiff and, in particular, the use employed by the narration of the allegations in the Botes affidavit.
A number of things need to be said about the effect of this deed. First, there is nothing in the deed to prevent the plaintiff proceeding with the present action which advances claims and allegations quite different to, and separate from, the allegations which were the subject of the deed. For that reason the settlement deed cannot be pleaded as a bar or a defence to the plaintiff's present action. The converse of that proposition is that the present action is not one brought by the plaintiff or by any other person in breach of the terms of the deed and the deed itself is not a ground for restraining or restricting the prosecution by the plaintiff of the present action. That being so I am satisfied that there is nothing in this deed insofar as it contains provisions releasing the first defendant from liability said to arise out of the allegations so defined, which prevents the use of the Botes affidavit on the Mareva application.
The reason for this is that the use of the material in the Botes affidavit is not a use which seeks to advance or enforce the original allegations in order to satisfy the claims which were the subject matter of the deed of settlement. Rather, the use of the affidavit is to relate matters of history which have no bearing whatever on the existence or the effect of that deed, but rather which are facts or materials which, as I have already remarked, may lead to an inference that unless restrained the first defendant may deal with his assets in a manner which may subvert the effective enforcement of any judgment obtained in these proceedings.
That then brings me to the confidentiality provisions in the deed contained in cl 11. Because of their precise terms, there is nothing which obliges the plaintiff to keep confidential anything other than the terms of the deed. However, on the present application and without finally determining the matter, I am prepared to read the terms of the deed as including the allegations, and hence the first defendant contends that the use of the allegations by the repetition of the substance of them in the Botes affidavit constitutes a breach of the confidentiality provision in the deed.
I am unable to accept that submission even if, as a matter of construction, that were to be the effect of the deed. However, it seems to me that the true construction of the deed does not produce any such result because one of the exceptions to the obligation of confidentiality is that a party may disclose the terms of the deed to comply with any law or requirement of any court. That seems to me to mean that a party to the deed may disclose part or all of its terms if that is material to the disposition of some matter in issue before a court, either as a matter of final or interlocutory relief.
However, there are more fundamental reasons for concluding that such a confidentiality provision cannot prevent the use of the allegations in the Botes affidavit in support of the application for Mareva relief. These are that contractual provisions which have the effect of excluding the jurisdiction of a court or preventing a person or a party from adducing evidence to a court or preventing a party from prosecuting or starting a prosecution or from giving evidence at trial are unenforceable because they infringe the rules of public policy.
This is an example of how a contract will be rendered unenforceable, to the extent of which its provisions may have any or all of those effects, notwithstanding that otherwise the contract may be efficacious. The authorities in support of this well‑known doctrine include the decision of the High Court of Australia in A v Hayden (1984) 156 CLR 532 (the ASIO case), and Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410.
Accordingly, I do not consider that if, contrary to my earlier conclusion, cl 11 of this deed of settlement purported to prevent the use of the allegations such as utilised by the Botes affidavit as a matter of covenant between the parties, that this can be enforced or relied upon in these proceedings.
Accordingly, I am satisfied that the material in the Botes affidavit was properly before the court when the Mareva order was granted on 23 December 2003 and that the grounds raised by the first defendant do not justify or warrant a variation or discharge of the order. Accordingly, this application to discharge or vary the Mareva order made on 23 December 2003 will be dismissed.