J & J Bone Pty Ltd & Ors v Quick Sign Shops (Australia) Pty Ltd & Ors Biscen Pty Ltd & Ors v Temsign Pty Ltd
[1996] FCA 522
•5 Jan 1996
LIMITED DISTRIBUTION
CATCHWORDS
PRACTICE AND PROCEDURE - Mareva injunction - no point of principle involved.
J & J BONE PTY LTD & ORS v. QUICK SIGN SHOPS (AUSTRALIA)
PTY LTD & ORS
No. WAG 77 of 1995
BISCEN PTY LTD & ORS v. TEMSIGN PTY LTD & ORS
No. WAG 102 of 1995
CARR J.
PERTH
5 JANUARY 1996
IN THE FEDERAL COURT )
OF AUSTRALIA )
WESTERN AUSTRALIA )
DISTRICT REGISTRY ) No. WAG 77 of 1995
GENERAL DIVISION )
BETWEEN :J & J BONE PTY LTD
(ACN 067 501 633)
First Applicant
JOHN FRANKLYN BONE and
JANE KATE BONE
Second Applicants
AND: QUICK SIGN SHOPS (AUSTRALIA)
PTY LTD (ACN 059 983 185)
First Respondent
LISA JANE BAILEY and SARA ANNE BAILEY
Second Respondents
HANS KROONENBERG
Third Respondent
No. WAG 102 of 1995
BETWEEN: BISCEN PTY LTD
(ACN 060 843 245)
First Applicant
IAN STUART HUNGERFORD and
DARELLE CHRISTINE HUNGERFORD
Second Applicants
CLAIRE MICHELLE DARCY and
GRAHAM JAMES DARCY AS
TRUSTEES FOR THE C.M. DARCY
TRUST
Third Applicants
CLAIRE MICHELLE DARCY and
GRAHAM JAMES DARCY
Fourth Applicants
DARREL WAYNE DONOVAN and
PATRICIA ANNE DONOVAN
Fifth Applicants
MILLDON HOLDINGS PTY LTD
(ACN 066 779 726)
Sixth Applicant
PAUL DAVID COCHRANE
Seventh Applicant
AND:TEMSIGN PTY LTD (ACN 059 983 185) AS TRUSTEE FOR THE QUICK SIGN SHOPS (AUSTRALIA) UNIT TRUST
First Respondent
LISA JANE BAILEY
Second Respondent
SARAH ANNE BAILEY
Third Respondent
RODINGA PTY LTD (ACN 009 040 788) TRADING AS KROONENBURG MUMFORD & ASSOCIATES
Fourth Respondent
JOHANNES JACOABUS KROONENBURG
Fifth Respondent
APPLICANTS' NOTICE OF MOTION FILED 13 DECEMBER 1995
ORDERS
JUDGE MAKING ORDER: CARR J.
DATE: 5 JANUARY 1996
WHERE MADE: PERTH
THE COURT ORDERS THAT:
The first, second and third respondents be restrained and an injunction is hereby granted restraining them whether by themselves or by their servants or agents from disbursing the funds held in bank account No. 260237709 at the Australia and New Zealand Banking Group Limited's branch at 940 Hay Street, Perth until further order.
The orders made on 13 October 1995 be further varied as follows:
(a)In paragraph 1(a)(i) delete the reference to Certificate of Title Volume 1627 Folio 026;
(b)Delete paragraph 1(c) and insert in lieu thereof:
"(c) the second and third respondents be permitted to mortgage, charge or sell or cause to be sold the Land subject to the following conditions:
(i)that they give to the applicants written notice at least 21 days before the proposed settlement of such transaction particularising the nature of the transaction, the amount which it is anticipated will become available to the second and third respondents as a consequence of such settlement and the manner in which it is proposed that such amount shall be disbursed;
(ii)in the event that the applicants in applications Nos. WAG 77 and WAG 102 of 1995 and the first and second and third respondents are able to agree upon the disbursement of the above amount an appropriate consent order shall be filed;
(iii)in the event that the abovementioned parties are unable to agree upon disbursement of the above amount then all monies to which the second and third respondents would otherwise be entitled at settlement shall forthwith be paid into the Australia and New Zealand Banking Group Limited account referred to in paragraph 1 of the orders made on 5 January 1996 and not withdrawn until further order."
(c)delete paragraph 1(d) and (e) and 2 and in lieu of paragraph 2 insert:
"2.each of the parties have liberty to apply to vary or discharge these orders on 7 days written notice to the other parties".
(d)add the following paragraph 2A:
"2A. in the event that Bowquest Pty Ltd proposes to mortgage, charge, sell or caused to be sold its interest in the Land comprised in Certificate of Title Volume 1484 Folio 400, the first and second respondents shall:
(a)give written notice to the applicants at least 21 days before the proposed settlement of such transaction particularising the nature of the transaction, the amount which it is anticipated will become available to Bowquest Pty Ltd as a consequence of such settlement and the manner in which it is proposed that such amount shall be disbursed;
(b)take all reasonable steps to ensure that at settlement there shall be repaid to the first and second respondents the sum of $83,654.26 being the amount of Bowquest Pty Ltd's indebtedness to the Commonwealth Bank of Australia which the second and third respondents discharged on or about 1 December 1995 and forthwith pay that sum into the Australia and New Zealand Banking Group Limited account referred to paragraph 1 of the orders made on 5 January 1996 and shall not withdraw that amount until further order."
The second and third respondents pay the applicants' costs of the motion.
NOTE:Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT )
OF AUSTRALIA )
WESTERN AUSTRALIA )
DISTRICT REGISTRY ) No. WAG 77 of 1995
GENERAL DIVISION )
BETWEEN :J & J BONE PTY LTD
(ACN 067 501 633)
First Applicant
JOHN FRANKLYN BONE and
JANE KATE BONE
Second Applicants
AND: QUICK SIGN SHOPS (AUSTRALIA)
PTY LTD (ACN 059 983 185)
First Respondent
LISA JANE BAILEY and SARA ANNE
BAILEY
Second Respondents
HANS KROONENBERG
Third Respondent
No. WAG 102 of 1995
BETWEEN: BISCEN PTY LTD
(ACN 060 843 245)
First Applicant
IAN STUART HUNGERFORD and
DARELLE CHRISTINE HUNGERFORD
Second Applicants
CLAIRE MICHELLE DARCY and
GRAHAM JAMES DARCY AS
TRUSTEES FOR THE C.M. DARCY
TRUST
Third Applicants
CLAIRE MICHELLE DARCY and
GRAHAM JAMES DARCY
Fourth Applicants
DARREL WAYNE DONOVAN and
PATRICIA ANNE DONOVAN
Fifth Applicants
MILLDON HOLDINGS PTY LTD
(ACN 066 779 726)
Sixth Applicant
PAUL DAVID COCHRANE
Seventh Applicant
AND:TEMSIGN PTY LTD (ACN 059 983 185) AS TRUSTEE FOR THE QUICK SIGN SHOPS (AUSTRALIA) UNIT TRUST
First Respondent
LISA JANE BAILEY
Second Respondent
SARAH ANNE BAILEY
Third Respondent
RODINGA PTY LTD (ACN 009 040 788)
TRADING AS KROONENBURG MUMFORD
& ASSOCIATES
Fourth Respondent
JOHANNES JACOABUS KROONENBURG
Fifth Respondent
CORAM: CARR J.
PLACE: PERTH
DATE: 5 JANUARY 1996
EX TEMPORE REASONS FOR JUDGMENT (LIMITED DISTRIBUTION)
Introduction
This is a motion on notice whereby the applicants in Application No. WAG 102 of 1995 seek to restrain the first respondent, Temsign Pty Ltd ("Temsign"), the second respondent Ms Lisa Jane Bailey and the third respondent Ms Sarah Anne Bailey ("the Bailey sisters") whom I shall collectively describe in these reasons as "the respondents" from disbursing certain funds amounting to approximately $50,000 held in a bank account number 260237709 with Australia and New Zealand Banking Group Ltd at its 904 Hay Street, Perth branch. This order is sought in terms that would impose such a restraint until 7 days after compliance with directions for discovery and inspection including inspection of the documents relating to the respondents' proposed disbursement of the funds "or further order". The Court also has before it a similar notice of motion filed in application No. WAG 77 of 1995 to which the above respondents are parties and in which J & J Bone Pty Ltd and its directors Mr John Franklin Bone and Mrs Janis Kate Bone, its directors, are applicants.
The motions arise out of the fact that on 13 October 1995 I made orders in the form of a Mareva injunction. Those orders were made on the application of the applicants in both sets of proceedings (i.e. the present proceedings and the proceedings brought by Mr & Mrs Bone and their Company) to restrain Temsign from dealing with any of its assets other than in the ordinary course of business. I shall return to the details of the orders in a moment. The applications for the Mareva injunction were fairly vigorously opposed by the respondents and on 10 October 1995 I published my reasons for granting the relief sought by the respective applicants in both proceedings. I incorporate by reference those reasons which were published on 10 October 1995 and which I shall refer to as my "earlier reasons". At the time when those interlocutory motions were heard, the respective applicants were concerned that Temsign was about to engage in an expansion of its business into the State of Queensland. The applicants' concern was that, in all the circumstances, this would amount to a speculative enterprise placing the assets of the respondents at risk of dissipation. Part of the applicants' reasoning was based on the fact that it appeared that Temsign's business activities in Western Australia were not profitable and that accordingly a similar result would be achieved in Queensland. It appeared at that time (and still appears to be the case) that Temsign does not have any significant assets of its own. The Bailey sisters at that stage were the registered proprietors of two properties. One property ("the East Perth property") was estimated to be worth between $220,000 and $240,000 and was unencumbered. The other property ("the Subiaco property") was estimated to be worth $230,000 with encumbrances then estimated at about $138,000.
There was a third property ("the West Leederville property") which was relevant. The West Leederville property was and is registered in the name of a company called Bowquest Pty Ltd ("Bowquest").
The Bailey sisters own all of the shares in Bowquest.
In summary, the orders which I made on 13 October 1995 were to the following effect:
Temsign was restrained from dealing with any of its assets other than in the ordinary course of business conducted within and restricted to Western Australia and to pay reasonable legal expenses;
The Bailey sisters were restrained from mortgaging or charging either the East Perth or Subiaco properties save and except in accordance with the terms of the orders and from disposing of mortgaging or charging or otherwise dealing in any manner with the share capital of Bowquest;
The Bailey sisters were permitted to mortgage, sell or cause to be sold the East Perth and Subiaco properties and were ordered to hold the money advanced upon any such mortgage and the net proceeds of any sale, in an interest bearing account to be agreed upon by the solicitors for the parties. Those monies were referred to as "the Funds";
The Bailey sisters were entitled to draw from the Funds interest accrued or the sum of $15,000 per annum whichever was the greater to be paid by equal monthly instalments in advance;
The Bailey sisters were entitled to draw from the Funds such money as they might from time to time;
(i)see fit to advance or otherwise make available to Temsign for the purposes of Temsign's ordinary course of business conducted and restricted to Western Australia subject to giving first 7 days notice in
writing of their intention to do so to the solicitors for the applicants or;(ii)require for reasonable legal expenses.
All parties were given leave to apply to vary or discharge the injunction within 48 hours.
Since those orders were made, the Subiaco property has been sold for an amount which after commission and adjustment of rates and taxes resulted in net proceeds of approximately $226,000. Out of that amount the mortgagee, Commonwealth Bank of Australia, required an amount of approximately $153,000 to be repaid to it. Of that latter amount $83,654.26 represented monies charged against the Subiaco property but to be applied in the reduction of the monies owing by Bowquest and secured against the West Leederville property. There then remained a sum of $73,100.06 which has been paid into the bank account at the Australia and New Zealand Banking Group Limited, referred to above. I should note that, contrary to the above orders, the sum of $73,100.06 was paid not into an interest-bearing account agreed upon by the solicitors for the parties. It was paid first into the Bailey sisters' account at the Commonwealth Bank of Australia and then transferred to their account at the Australia and New Zealand Banking Group Limited, referred to above. As will be seen this was not the only breach of those orders on the respondents' part. I return to the narrative of events which have taken place since the Mareva injunction was granted.
Early last month the respondents' solicitors gave notice to the applicants' solicitors that they intended to disburse all of the sum standing to the credit of the Australia and New Zealand Banking Group Limited account. In round figures, some $32,000 was to be expended in settling Temsign's supply bills, nearly $29,000 for accountant's fees and approximately $28,000 for legal fees. There was also reference to wages outstanding of some nearly $5,000.
The matter came before me on an urgent basis on 15 December 1995 and I made an order enabling $15,000 of the monies held in the Australia and New Zealand Banking Group Limited account to be disbursed. The matter came before me again briefly on 22 December 1995 when I made an order enabling a further $8,000 to be disbursed from those funds. Accordingly there remains cash at bank of approximately $50,000. When the matter came before me yesterday, counsel for the respondents informed me that his clients simply sought orders which will enable them to pay legal bills in the amount of approximately $50,000, of which $30,664 was outstanding for services rendered to 27 November 1995 and $20,000 was anticipated by way of further legal accounts. It appears that the respondents have already paid approximately $37,000 for their legal representation in these matters.
The Applicants' Contentions
The applicants in application No. WAG 102 of 1995 seek orders that would direct the respondents to give discovery of all documents relevant to the disbursement of these funds and an order restraining any further payment until that has been done.
Mr Ryall, counsel for the applicants in application WAG 102 of 1995, explained that his clients sought discovery and inspection not merely of the various legal bills, but access to all financial records from which it would be possible to establish whether there is any real need for the respondents to have access to those monies. Mr Hotchkin, counsel for Mr & Mrs Bone and their company in application WAG 77 of 1995, submitted that there were so many inconsistencies within the respondents' affidavits and Ms Sarah Bailey's oral evidence and the respondents' solicitor's letter dated 3 January 1996 to Messrs Michell Sillar McPhee, that without access to bank statements and the like it would not be possible to know whether Ms Bailey is telling the truth. On behalf of his clients, Mr Hotchkin sought orders that no further funds be disbursed from the proceeds of sale of the properties until the respondents disclose further their financial position.
The Respondents' Contentions
Mr M P Cornes, counsel for the respondents referred me to an affidavit which he swore on 15 December 1995 and an affidavit sworn by Ms Sarah Bailey on 20 December 1995. He also referred to the contents of his firm's letter dated 3 January 1996 to Messrs Michell Sillar McPhee. In summary, Mr Cornes said that when taken cumulatively, the affidavits filed by the respondents amounted to substantial disclosure of their assets and liabilities and their income and expenditure. Mr Cornes submitted that there had been substantial disclosure of the reasons why the respondents need the money in the Australia and New Zealand Banking Group Limited account. Mr Cornes pointed out that the documents which the applicants wish to inspect in relation to the Mareva injunction would not be discoverable in the substantive proceedings. As to the fact that the net proceeds of sale of the Subiaco property had been paid into his clients' bank account rather than into a bank account agreed upon by the solicitors for the parties, my note (in the absence of a transcript) of what Mr Cornes said was that he could not "for the life of me see how it is important".
Mr Cornes submitted that there were no restrictions in the Mareva injunction on the Bailey sisters using their personal funds or indeed other sources of funds for their Queensland expansion. Nor was there any requirement that Temsign had to use its own assets before the Bailey sisters could make advances to the company for the purposes of its business. Mr Cornes further submitted that the affidavit evidence filed on behalf of the respondents showed that there were no other funds available to pay the legal costs. In any event, so Mr Cornes submitted, the terms of the Mareva injunction were such that the respondents were at liberty to pay their legal expenses without reference to the applicants in either matter. At this stage I should perhaps interpolate that the wording of the orders made on 13 October 1995 referred to payment of "reasonable legal expenses" by both Temsign and the Bailey sisters. Nothing has been placed before the Court to itemise or even to give a general justification of legal expenses amounting to $67,664 to 27 November 1995. As at that date I note that the interlocutory proceedings in these matters had not reached the stage where discovery and inspection of documents had been given by the parties.
Mr Cornes submitted that any requirement for further disclosure of the respondents' income and expenditure and their assets and liabilities would be "oppressive and unfair" and would amount to treating them as if they were judgment debtors. This was
a matter to which I referred in my earlier reasons. Mr Cornes said that it would be inappropriate to require such disclosure in view of the fact that the applicants were business rivals of the respondents.
Further, Mr Cornes submitted that there were no substantial inconsistencies between the various affidavits filed on behalf of his clients either within those documents or when compared with the contents of his firm's letter of 3 January 1996. To the extent that there might be such inconsistencies, Mr Cornes sought and obtained leave to call Ms Sarah Bailey to give oral evidence. The applicants opposed that course but I granted leave. Ms Bailey gave evidence and was cross-examined. I return below to that matter. Before doing so, I think that it is appropriate to say something about the legal principles applicable.
As I observed in my earlier reasons, a Mareva interlocutory injunction is granted to preserve the status quo, in so far as that relates to the respondents' property pending ascertainment of the rights of the parties. Its purpose is not to create security for the applicants. If the applicants become judgment creditors then they must take their chances with the other creditors, if any, of the respondents. The purpose of the interlocutory injunction is, so far as is possible in the circumstances, to prevent the frustration of the Court's process. As I also mentioned in my earlier reasons, the respondents to these applications do not dispute that the applicants have shown a prima facie cause of action. The issue at the time when I gave those reasons was whether the applicants had established that there was a real risk of the dissipation of assets and, if so, the extent to which any relief should be moulded to accommodate the reasonable requirements of Temsign's business, to enable the Bailey sisters to meet their personal expenditure and to enable all of the respondents to meet their reasonable legal expenses of these proceedings. I held that there was a real risk of dissipation of assets particularly in respect of the Queensland venture. The relevant status quo, as I understand the authorities, is usually that which existed at the time when the originating proceedings were initiated, although delay in applying for interlocutory relief may, on occasion, require reference to a later period.
The approach which I propose to bring to deciding the motions in each of these applications is to consider, what, if any, changes have occurred in the circumstances of the respondents since 10 October 1995 (when I delivered my earlier reasons) and whether any further factual material has emerged which might assist in deciding how to maintain a reasonable balance between the frustration of the Court's process which may result from dissipation of the respondents' assets, and the reasonable requirements of Temsign's business and the Bailey sisters to meet personal expenditure and pay their reasonable costs.
At the earlier hearing, the applicants' evidence was that the combined monthly expenditure of the respondents exceeded their monthly income by some $14,801. The applicants also presented a tabulation calculated on the basis that those of the applicants who had ceased making royalty and loan repayments under the franchise arrangements were to resume such payments. Even those tabulations showed a monthly excess of expenditure over income of $6,641. Those figures were not challenged by the respondents. In an affidavit sworn by Ms Sarah
Bailey on 20 December 1995, Ms Bailey states that since September 1995, Temsign's income has decreased to less than approximately $7,500 per month from which must be paid monthly expenses totalling $14,306. On the face of it, this would appear to represent an improvement in the sense that the monthly loss has been reduced by some $8,000. Nevertheless there appear to be substantial debts outstanding in respect of Temsign's business. The Bailey sisters also have substantial recurrent monthly outgoings. In my earlier reasons I expressed the view that the respondents had not been sufficiently forthcoming about their business affairs and financial arrangements. This included certain corporate rearrangements involving the first respondent which I detailed in those reasons. The respondents have chosen not to deal with that issue in their subsequent affidavits.
There is one particular matter which has concerned and influenced me in reaching the decisions which I have made in respect of these motions. I refer to the receipt and disbursement by the respondents of an amount of $100,000 to which I referred at pages 14 and 15 of my earlier reasons. Mr & Mrs Bone and their company apparently gave up possession of the Mt Lawley sign-making business to Temsign. As Ms Sarah Bailey explained in her second of two affidavits sworn on 26 September 1995, that business was sold for $100,000 to her parents or to a company controlled by her parents. In that affidavit Ms Bailey said that Temsign and the Bailey sisters had paid the following amounts:
(a)to Messrs Barker Gosling the sum of $10,000 in respect of outstanding accounts for work done by them in respect of the application brought by Mr & Mrs Bone and their company;
(b)a further $17,500 to Messrs Barker Gosling in respect of their further estimated costs in respect of both the above applications;
(c)wages to a named employee at the rate of $550 per week;
(d)shopfittings for the Claremont store $3,300; and
(e)tax liability on sale $15,000
Total: $46,350
Ms Bailey said in her affidavit that by the end of September 1995 (i.e. within the next four days) the abovementioned respondents would have spent the remaining approximately $50,000 on supply bills and insurance "which are due and payable on 30 September 1995. Further funds will be necessary to meet September supply bills and wages due 31 October 1995. These will total at least $20,000".
On 3 January 1996 Messrs Barker Gosling wrote to the solicitors for the applicants in application No. WAG 102 of 1995 with a copy of that letter being sent to the solicitors for the applicants in No WAG 77 of 1995. In that letter Messrs Barker Gosling described what had been done with the sum of $100,000 received on 19 September 1995 and made payable by cheque to Temsign Pty Ltd. The letter states that the cheque was deposited in Temsign Pty Ltd's Commonwealth Bank of Australia account on that day. The letter continues:
"Pursuant to our client's normal arrangement on the sale of a franchise outlet the sale proceeds were then transferred that day to a bank account in the name of Mactor Pty Ltd as trustee for the Food-West Trust".
I pause here to make two comments. First, this was not a normal sale. It is apparent from Ms Bailey's affidavit that her parents purchased the Mt Lawley business to assist the respondents financially. Secondly in her first affidavit sworn on 26 September 1995 Ms Bailey swore:
"Mactor Pty Ltd is Trustee for the Citadel Trust and this Trust is not connected in any manner with Lisa or I, although Mactor Pty Ltd previously was."
In her oral evidence given yesterday, Ms Bailey was asked to explain why this sum of $100,000 was so treated. She described the process as something which was organised in co-operation with her accountant Mr Kroonenberg who is the third respondent in application No. WAG 77 of 1995 and the fifth respondent in application No. WAG 102 of 1995. My note of her description was that this was "running the money through the accounts", that because the respondents have a tax loss company the fee is taken for that reason. Ms Bailey said that this was how it has always been done in the past and that was how she and her sister took loan monies out to buy their houses. Ms Bailey's oral evidence included a statement that she and her sister never differentiated between business expenditure and personal expenditure. As Ms Bailey put it "it's always been gelled together". When asked to explain how (in paragraph 6 of the second affidavit which she swore on 26 September 1995) she deposed to the fact that the respondents had paid out of the sum of $100,000 an amount described as "tax liability on sale $15,000" whereas it now appeared that no such tax had been paid but a fee of $12,500 had been taken, Ms Bailey confirmed that her intention was to refer to the 12½ per centum fee. She said "I was not sure of the amount at the time; it was just an approximation". In relation to the discrepancy with the proposed further expenditure out of the sum of $100,000 as at 26 September 1995 and the actual expenditure described in her solicitor's letter of 3 January 1996, Ms Bailey's response was that circumstances had changed and that she had "probably miscalculated quite a bit". She added that at the time she had forgotten about the American Express and other accounts. It emerged from Ms Bailey's evidence that at the time when she swore
her affidavits on 26 September 1995 the Bailey sisters had the sum of approximately $87,500 in cash which was kept by Ms Sarah Bailey in drawers at her home. In cross-examination she admitted that she took the money out of the bank so that it would not be frozen by a Court order. It will be recalled that although the application for the Mareva injunction was filed and an ex parte order made on 15 September 1995, the matter did not come back to this Court until 26 September 1995.
I return to Messrs Barker Gosling's letter detailing the disbursement of the $100,000:
"The sum of $12,500 was retained by the trustee as its standard 12.5 per centum service fee and the balance of $87,500 was then transferred to our clients as beneficiaries of the trust and deposited in their Commonwealth Bank joint account. The sum of $87,500 was subsequently withdrawn by them on or about 20 September 1995 and has been used to meet the following expenses:
(i)monies paid to Barker Gosling in respect of outstanding accounts and on account of their and counsel's further fees in Federal Court actions WAG 77 and 102 of 1995 - $32,500 paid between 21 September 1995 and 9 November 1995.
(ii)$5,195.35 paid in September 1995 for American Express joint account in names of L & S Bailey - this related mostly to their Singapore business trip expenses.
(iii)$8,511.24 paid in September 1995 in respect of their American Express joint account - this related mostly to various personal expenses but some Temsign W.A. business expenses were included. Our clients would use their American Express card where possible to pay for expenses in order to accumulate free airfare points.
(iv)$8,000 paid in December 1995 in respect of their American Express joint account - this related mostly to our clients' flights to and from Brisbane, accommodation in Brisbane, and furniture for Lisa Bailey's Brisbane unit.
(v)$55 paid in November 1995 in respect of their American Express joint account - personal expenses.
(vi)the sum of $23,800 was deposited into the Quick Sign Shops W.A. bank account to meet miscellaneous Temsign W.A.
business expenses such as wages for Lance Shaw, Lisa and Sarah Bailey, supplies, car repayment etc. as and when they fell due. The sum of $5,000 was deposited on 5 October 1995, a further sum of $5,000 on 18 October 1995, the sum of $5,300 on 24 October 1995, the sum of $5,000 on 26 October 1995 and the sum of $3,500 on 3 November 1995.(vii)the sum of $3,350 was paid as bond on the Brisbane unit and rent since 20 October 1995,
(viii)the sum of $750 was incurred to transport Lisa Bailey's car to Queensland. This was paid on or about 3 November 1995.
(ix)the sum of $350 on or about 25 October 1995 to A-Mart Bed and Bedding for household furniture.
(x)the sum of $5,000 was paid to the mortgagor [which I take to be a reference to the mortgagee] of the McCourt Street West Leederville property on 2 January 1996 in respect of the mortgage repayments owing for the month of December 1995 and January 1996."
As I have mentioned earlier, one of the matters which caused me to grant the interlocutory relief in October 1995 was the speculative aspect of Temsign's proposed expansion into Queensland at a time when the Western Australian operations were running at a substantial loss. From the above it can be seen that the respondents have so organised their affairs that an asset of Temsign has been sold for $100,000 and out of those monies a total of $12,100 has been expended on matters relating to the conduct of business in Brisbane. I refer to the amounts of $8,000, $3350 and $750 specified above. Furthermore, an additional sum of $12,500 has been paid to Mactor Pty Ltd without what I consider to be a satisfactory explanation. I am most concerned that $100,000 of Temsign's money has been disbursed over such a relatively short period and that Temsign apparently is, on the respondents' evidence still desperately in need of funds. A comparison of Ms Bailey's account of the actual and proposed disbursement of the $100,000 in her affidavit of 26 September 1995 and the details in
her solicitor's letter of 3 January 1996 also discloses some discrepancies which, again, I do not consider have been satisfactorily explained. For example, Ms Bailey in her affidavit said that the sum of $3,300 had been paid for fitting-out the shop at Claremont and to pay a tax liability on the sale of $15,000. Neither of these items appear in the later account of the disbursements. When one looks, for example, at the sum of $8,511.24 paid to American Express in September 1995 which is described as relating "mostly to various personal expenses" I have gained the impression of a situation in which funds which represent the proceeds of Temsign's Mt Lawley business were being applied for non-business purposes at a rate which was scarcely appropriate to the financial condition of the Temsign business to which I have referred above. I see the manner in which the sum of $100,000 was treated as being inconsistent with maintaining the status quo and inconsistent with the spirit of the orders made concerning the Queensland venture. In the latter respect, it seems to me that at least $12,100 of monies which belonged to Temsign have, instead of being used in its W.A. business, been channelled into the Queensland venture indirectly through the Bailey sisters.
In her affidavit sworn on 20 December 1995 Ms Sarah Bailey disclosed the fact that on 25 November 1995 she caused a cheque to be drawn on Temsign's bank account in the sum of $1379.86 in payment of the lessor's legal costs and stamp duty on the lease of the Brisbane shop. Ms Bailey swore "I will make arrangements for the sum of $1379.86 to be paid back into the account within the next 7 days. I am hopeful that my parents will lend me the money". It is clear from the Ms Bailey's solicitors' letter of 3 January 1996 and from her oral evidence that when she swore that affidavit she
had at least $5,000 in cash in hand. Instead of honouring the commitment made in her affidavit by using that cash, an amount of $5,000 was paid on 2 January 1996 to the Commonwealth Bank of Australia in respect of mortgage repayments. On its own that incident might not be of tremendous importance. However, taken cumulatively with the following other matters:
.the payment of the net proceeds of the Subiaco property not into an account agreed by the solicitors but into the Bailey sisters personal account;
.the syphoning off of $12,500 out of the proceeds of sale of the Subiaco property in so-called service fees from the proceeds of Temsign's sale of its Mt Lawley business;
.the manner in which the balance of those proceeds was held and disbursed in cash;
.the fact that the Bailey sisters did not disclose in their affidavits filed in September 1995 that at that time they had approximately $87,500 in cash and, as emerged in Ms Sarah Bailey's oral evidence, other amounts of cash;
.the use of at least $12,100 of what had been Temsign's money for the Queensland venture
have led me cumulatively to the conclusion that there is a real risk that if the applicants obtain judgment against the respondents neither they nor any other creditors will have their debts satisfied, due to dissipation of funds in the meantime.
The applicants seek discovery and inspection of all documents relevant to the Mareva injunction. However, in my view this would add unnecessarily to the legal costs of all the parties. Discovery and inspection of documents in respect of the issues raised within the applications themselves will probably be quite time consuming and costly. In my view, having regard to all the circumstances of this matter, the proper course is to put the onus on the respondents to come forward with appropriate evidence to justify further access either to the balance remaining in the Australia and New Banking Group Limited account or any proceeds from the sale or mortgaging of the East Perth or West Leederville properties. I do not accept Mr Cornes' submissions that the respondents have provided sufficient information concerning their assets and liabilities and the income and expenditure of Temsign and the Bailey sisters. An attempt was made to elicit some supplementary evidence concerning the various trusts when Ms Bailey gave oral evidence. However, the state of the evidence is, in my opinion, unsatisfactory. I regard such information as being of central importance in a matter such as this. It goes to the heart of the question whether any of the respondents will have any assets to satisfy any judgment which the applicants may obtain. The respondents have chosen not to disclose the relationship between the businesses and the various trusts mentioned in the documentation, including the Food-West Trust of which Mactor Pty Ltd is apparently trustee. Ms Bailey, in her oral evidence, disclaimed detailed knowledge and gave evidence to the effect that she left all this to her accountant Mr Kroonenberg.
I have formed the conclusion on the evidence which the parties have seen fit to put before me, that a balancing of their respective interests requires me to make some modifications to the orders already made. Furthermore, in the unusual circumstances of the present matter, by which I refer to the matters which have emerged since 13 October 1995, I consider that the Court has a duty of its own motion to take such steps as it feels necessary to ensure that its processes are not abused. First there should be no further payments out of the Australia and New Zealand Banking Group Limited's
account until further order. Secondly I consider that in the event of the mortgaging or sale by Bowquest of the West Leederville property or any other dealing with that property, there should be orders which will compel the Bailey sisters as directors of that company to cause Bowquest to repay to the Bailey sisters (by deposit into the Australia and New Zealand Banking Group Limited account) the sum of approximately $83,000 which they applied (at the direction of the Commonwealth Bank of Australia) in reduction of the amount secured on the West Leederville property. Thirdly, in the event of any proposed dealing with that property or the East Perth property, whether by mortgage, charge, sale or otherwise, the respondents should be obliged to give at least 21 days notice to the two firms of solicitors for the applicants prior to the settlement of the proposed transaction or transactions. As Bowquest is not a party to these proceedings orders will be made that the Bailey sistrers cause these matters to be attended to.
I certify that this and the preceding twenty-two (22) pages are a true copy of the Reasons for Judgment of Justice Carr.
Associate:
Date: 21 June 1996
Counsel for the Applicants in
Application No. WAG 77 of 1995: Mr M.C. Hotchkin
Solicitors for the Applicants in
Application No. WAG 77 of 1995: Messrs Hotchkin Hanly
Counsel for the Applicants in
Application No. WAG 102 of 1995: Mr C.J. Ryall
Solicitors for the Applicants in
Application No. WAG 102 of 1995: Messrs Michell Sillar McPhee
Counsel for the Respondents: Mr M.P. Cornes
Solicitors for the Respondents: Messrs Barker Gosling
Date of Hearing: 4 and 5 January 1996
Date of Judgment: 5 January 1996
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