Jm Properties Pty Ltd v Strata Corporation No 13975 Inc (No 2) - [2005] SADC 105

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
JM PROPERTIES PTY LTD v STRATA CORPORATION NO 13975 INC & ORS (No 2)
Judgment of Her Honour Judge Simpson
15 August 2005
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - INJUNCTIONS TO PRESERVE STATUS QUO AND PROPERTY PENDING DETERMINATION OF RIGHTS - MAREVA INJUNCTIONS - JURISDICTION TO GRANT
Applications by first defendant/plaintiff in other action and third, fourth and sixth defendants after trial for orders restraining the disposal of assets by the plaintiff/defendant company and its directors - judgment reserved but not delivered - evidence of disposal of assets since commencement of proceedings - whether in ordinary course of business - whether risk that disposal of assets will have the necessary effect of frustrating satisfaction of judgment in other action or costs orders against plaintiff/defendant company - balance of inconvenience - orders limited to meet only the requirements of immediate circumstances - Held orders should be made.
District Court Act 1991, s 8, DCR 68.02, referred to.
Devlin v Collins (1984) 37 SASR 98; Cardile and others v LED Builders Pty Ltd (1999) 198 CLR 380; Caboche v Southern Equities Corporation Ltd unreported SASC (FC) [2001] SASC 5; Taylor & Anor v Diamand & Anor (1997) 6 NTLR 64; Ausbro Forex Pty Ltd v Mare (1986) 4 NSWLR 419; RTP Holdings Pty Ltd and Anor v Roberts and Ors (No 2) [2000] SASC 390; Hayden & Ors v Tpiltzky & Ors (1997) 154 ALR 497; Earlscroft University Ltd v Brown (2003) 226 LSJS 198; Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645; Balfour Williamson v Douterluinge [1979] 2 NSWLR 884; Stewart Chartering Ltd v C&O Managements SA [1980] 1 WLR 460; Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac (UK) Ltd [1985] 3 All ER 747; Earlscroft University Ltd v Brown (2003) 226 LSJS 194 , considered.

JM PROPERTIES PTY LTD v STRATA CORPORATION NO 13975 INC & ORS (No 2)
[2005] SADC 105

The plaintiff in Action No. 1030 of 2003, JM Properties Pty Ltd (‘JM Properties’), is the registered proprietor of three units in the Renaissance Arcade in Rundle Mall, Adelaide. The three units are part of a strata plan dividing the Renaissance Arcade property into nine units. The application for the deposit of the strata plan, pursuant to section 8 of the Strata Titles Act 1988 (‘the Act’), was made by the registered proprietors on 16 September 1996.
The first defendant in the Action is Strata Corporation No. 13975 Inc. (‘the Strata Corporation’), the body corporate created under the Act on the deposit of the strata plan. The Constitution of the Strata Corporation, its articles, and its powers and duties are the subject of Part 3 of the Act. Section 19 of the Act provides for the articles of a strata corporation to be those set out in Schedule 3 to the Act, unless articles are adopted in substitution by special resolution. At a general meeting on 18 December 1996, it was resolved by unanimous resolution that new articles of the Strata Corporation be adopted in substitution for the Schedule 3 articles.
Pursuant to section 20 of the Act, the articles of the Strata Corporation are binding on the corporation and on the unit holders. The functions of the Strata Corporation are determined by section 25. They are:
(a)to administer and maintain the common property for the benefit of the unit holders and, to such extent as may be appropriate, other members of the strata community; and
(b)to administer all other property of the corporation; and
(c)to enforce the articles of the corporation.
The plaintiff became the registered proprietor of Unit 6 on about 8 August 2001, and of Units 4 and 5 on 7 September 2001 and 21 February 2002 respectively[1]. The plaintiff holds Unit 4 as trustee for the Balalis Unit Trust and Units 5 and 6 as the trustee of the J and M Balalis Family Trust.[2]
[1] Paragraph 2, Third Further Amended Statement of Claim, 11 February 2005
[2] Paragraph 1, Third Further Amended Statement of Claim, 11 February 2005
The second to seventh defendants are the other unit holders in the Renaissance Arcade.
The plaintiff claims that the general meeting and the resolution of the Strata Corporation of 18 December 1996, adopting new articles in substitution for the Schedule 3 Articles, were invalid, null and void. The plaintiff has also made an application pursuant to section 41A of the Act, on the various bases provided for by the legislation. The plaintiff seeks generally a determination that the articles of the Strata Corporation do not properly reflect the plaintiff’s obligations and liabilities to the Strata Corporation in respect of the Units the plaintiff holds.
JM Properties is the defendant in Action No. 394 of 2003. The plaintiff in that Action is the Strata Corporation, the first defendant in Action No. 1030 of 2003. The Strata Corporation seeks to recover from JM Properties Strata Corporation levies said to be owing as at 14 August 2003, in the sum of $70,814.69.
It is agreed between the parties that the resolution of Action No. 394 of 2003 depends on the outcome of Action No.1030 of 2003. The trial of that Action was heard over 18 days in February this year. Judgment was reserved on 25 February 2005 and has not yet been delivered.
Mr and Mrs Balalis are the two directors of JM Properties.
By Notice for Specific Directions filed on 29 June 2005, supported by the affidavit of Mr Berg, solicitor, sworn on 29 June 2005, the first defendant sought orders as follows:
1.That Jack Balalis and Marina Balalis be joined as Defendants in District Court Action No. 394/2003 for the purposes of the orders sought hereunder.
2.That until such time as judgment is delivered in District Court Action No. 1030/2003, the Plaintiff (whether by itself or by its agents or employees) will provide the first Defendant, Strata Corporation 13975 Inc. with written notification of any contract for sale including a copy of any contract for sale entered into by or on behalf of the Plaintiff within seven (7) days of the date of the contract and in any event within 48 hours of settlement thereof.
3.That the Plaintiff will make payment into Court of the net proceeds from any sale pursuant to a contract referred to in Paragraph 3 above forthwith upon settlement up to the sum of $250,000.00.
4.That until such time as judgment is delivered in District Court Action No. 1030/2003, the Plaintiff’s directors Jack Balalis and/or Marina Balalis (“Plaintiff’s Directors”) will provide the first Defendant, Strata Corporation 13975 Inc. with written notification of any contract for sale including a copy of any contract for sale entered into by or on behalf of the Plaintiff’s Directors within seven (7) days of the date of the contract and in any event within 48 hours of settlement thereof.
5.Subject to paragraph 3 above, that the Plaintiff’s Directors will make payment into Court of the net proceeds from any sale pursuant to a contract referred to in Paragraph 4 above forthwith upon settlement up to the sum of $250,000.00.
6.That until such time as judgment is delivered in District Court Action No. 1030/2003, the Plaintiff’s directors Jack Balalis and/or Marina Balalis (“Plaintiff’s Directors”) will provide the first Defendant, Strata Corporation 13975 Inc. with written notification of any contract for sale related to or associated with the sale of any share, asset or business connected to or conducted by COS Catering Pty Ltd and/or JM Properties Pty Ltd including a copy of any contract for sale entered into by or on behalf of the Plaintiff’s Directors within seven (7) days of the date of the contract.
7.Subject to Paragraphs 3 and 5 above, that the Plaintiff’s Directors will make payment into Court of any amount it is entitled to under the contract for sale referred to in Paragraph 6 herein (except any amount required to be repaid for any existing mortgage or charge on the relevant property) up to the sum of $250,000.00.
8.Liberty to apply to vary or discharge the order.
9.That the Parties may apply for further orders and directions.
10.That the Plaintiff pay the costs of the application.
By Notice for Specific Directions also filed on 29 June 2005, supported by affidavit of Mr Fotheringham, solicitor, sworn on 29 June 2005, the third, fourth and sixth defendants sought orders in the following terms:
ON THE Undertaking given by the third, fourth and sixth defendants by their counsel Mr S Walsh QC to abide by any order the Court or a Judge may make as to damages in case the Court or a Judge should hereafter be of the opinion that the plaintiff shall have sustained any by reason of this order which the third, fourth and sixth defendants ought to pay.
1.Within 14 days of this order JM Properties Pty Ltd disclose on oath all assets held by it, whether solely or jointly, as at the date of swearing the Affidavit.
2.Within 14 days of this order Marina Balalis and Jack Balalis disclose on oath all assets held by them, whether solely or jointly, as at the date of swearing the Affidavit.
3.Marina Balalis and Jack Balalis be restrained from disposing of, dissipating, charging, encumbering or otherwise dealing with their personal assets (including but not limited to 50 Clifford Street, Torrensville) without the written consent of the third, fourth and sixth defendants until payment by them, either jointly or severally, of the sum of $140,000 into Court or until further order.
4.JM Properties Pty Ltd be restrained from disposing of, dissipating, charging, encumbering or otherwise dealing with those assets held by it (including but not limited to units 4, 5 and 6 of the Strata Corporation No. 13975 Inc and the properties at 8 Railway Terrace, Port Elliott) without the written consent of the third, fourth and sixth defendants until further order.
5.The third, fourth and sixth defendants have the costs of this application.
The applications are brought pursuant to the inherent jurisdiction of the Court, section 8 of the District Court Act 1991 and rule 68.02 of the District Court Rules 1992.
The basis for the application of the first defendant is the disposal of a number of properties by Mr and Mrs Balalis since the commencement of proceedings, the failure on the part of Mr and Mrs Balalis to give undertakings in relation to the further disposal of assets and a concern on the part of the first defendant that there is a danger of any judgment it obtains in Action No. 394 of 2003 against JM Properties going unsatisfied. There is a further concern on the part of the first defendant in relation to the recovery of costs from JM Properties in the event it was unsuccessful in action No.1003 of 2004.
On 24 June 2004, Mr and Mrs Balalis executed a Deed of Undertaking and Guarantee in favour of the third, fourth and sixth defendants in the sum of $70,000 in respect of their costs. A variation of the Deed of Undertaking and Guarantee, increasing the amount to $120,000, was executed by Mr and Mrs Balalis in January 2005.[3]
[3] Affidavit of Mr Fotheringham affirmed 29 June 2005
No similar undertaking or guarantee has been provided to the first defendant in relation to its costs of Action No. 1030 of 2003.
The defendants say that it came to their knowledge that the following properties had been sold:
2 College Street, Glenelg (18 August 2004)
8 Avenue Road, Prospect (3 September 2004)
2 Douglas Street, Millswood (25 July 2002)
54-56 Sturt, Berri (no details available)
and that there had been inconsistency in the disclosure of assets by JM Properties and its directors.
The third, fourth and sixth defendants say that the further disposition of assets of JM Properties or of Mr and Mrs Balalis is likely to give rise to a danger of the defendants being unable to recover costs against JM Properties, should it be unsuccessful in the action, and in particular, is likely to frustrate the utility of the Deed and Guarantee, in respect of an indemnity for their costs ultimately in the sum of $120,000, given by Mr and Mrs Balalis following notice in August 2003, and again in January 2005, that an application for security for costs was to be brought against JM Properties.
In addition, there is a concern on the part of the defendant applicants, based on the history and course of the proceedings themselves, that JM Properties, and Mr and Mrs Balalis, have financial difficulties.
No issue was taken on an order being made granting relief to a defendant in relation to a claim or a potential claim against a plaintiff for costs, although in this case in any event, the plaintiff and the first defendant in Action No. 1030 of 2003, are defendant and plaintiff respectively in Action No. 394 of 2003[4].
[4] Earlscroft University Ltd v Brown (2003) 226 LSJS 194
The directors of JM Properties, Mr and Mrs Balalis, opposed the applications for orders restraining the disposition of property, but did not challenge the jurisdiction of the court to make orders of the kind sought in relation to them personally, notwithstanding that they were not parties to the actions.[5] The application to join them as parties was not pursued.
[5] Caboche v Southern Equities Corporation Ltd unreported SASC (FC) [2001] SASC 55
The applications were first heard on 30 June 2005. Counsel for JM Properties Pty Ltd and Mr and Mrs Balalis, while not accepting there was any legal obligation on them to do so, sought time to file affidavits in relation to assets held by them.
Orders were made in the interim as follows:
On the application of the third, fourth and sixth defendants:
1.JM Properties disclose on oath all assets held by it whether solely or jointly as at the date of swearing the affidavit, the affidavit to be served by 9 am on Wednesday 6 July 2005 and filed by 12 Noon on Wednesday 6 July 2005.
2.That Marina Balalis and Jack Balalis disclose on oath all assets held by them whether solely or jointly as at the date of swearing the affidavit, the affidavit to be served by 9 am on Wednesday 6 July 2005 and filed by 12 Noon on Wednesday 6 July 2005.
On the application of the first defendant:
1.JM Properties provide the first defendant with written notification of any contract for sale including a copy of any contract for sale entering into by or on behalf of the plaintiff within 7 days of the date of the contract and in any event within 48 hours of settlement thereof; that order to have effect up to and including 4.30 pm on Wednesday 6 July 2005.
2.The plaintiff’s directors, Jack Balalis and/or Marina Balalis provide the first defendant with written notification of any contract for sale, including a copy of any contract for sale entered into by or on behalf of the plaintiff’s directors within 7 days of the date of the contract and in any event within 48 hours of settlement thereof; that order to have effect up to and including 4.30 pm on Wednesday 6 July 2005.
Undertakings given by counsel for JM Properties on its behalf and on behalf of the plaintiff’s directors, Mr and Mrs Balalis, were noted as follows:
1.That with respect to property owned Mr and Mrs Balalis at Torrensville, settlement of the sale of which is to take place on Friday 1 July 2005, any proceeds from that sale are to be paid entirely to the mortgagees.
2.In relation to refinancing Units 4, 5 and 6, the refinancing will not result in any change in the equity in those properties.
3.That there will be no sale of Units 4, 5 and 6 or the business of Cos Catering Pty Ltd between 30 June 2005 and up to and including 4.30 pm on Wednesday 6 July 2005.
4.That with respect to the property at Port Elliot, any sale of that property will result in the proceeds being paid only to the mortgagees in respect of the property and in respect of legal fees already incurred.
5.Any affidavits to be filed in respect of the applications brought by the first defendant and by the third, fourth and sixth defendants are to be served no later than 9 am on Wednesday 6 July 2005 and filed by 12 Noon on the same day.
The further hearing of the applications was adjourned to 6 July 2005. Affidavits of Mr and Mrs Balalis, sworn on 6 July 2005, were filed in accordance with the orders made. Mrs Balalis says in her affidavit that she controls all aspects of the plaintiff’s finances. Mr Balalis is involved in the day-to-day running of their business, Cos Catering.
The assets disclosed in the affidavits, leaving aside furniture and personal effects, were:
JM Properties
1.Units 4,5 and 6, Renaissance Arcade (Debt of $381,000 to be refinanced)
2.3/8 Railway Terrace, Port Elliot (on the market, all proceeds to be paid to mortgagee)
Mrs Balalis
3.21 Caroline Drive, Allenby Gardens (market value $670,000)
Mr and Mrs Balalis
4.50 (or 50A) Clifford Street, Torrensville (Provisional Development Plan Consent 23/11/04 for proposed development of one detached dwelling and conversion of former church hall into residential flat building – 2 dwellings within existing building envelope)
5.one $1.00 share each in the business of Cos Catering (8 cafes) (market value between $750,000 and $1 million).
The first defendant sought orders for Mr and Mrs Balalis to provide disclosure on oath of their liabilities and those of the plaintiff.
On 6 July 2005, further orders were made in the interim, as follows:
On the undertaking given by the third, fourth and sixth defendants by their counsel to abide by any order a court or Judge may make as to damages, in case the court or a Judge should hereafter be of the opinion that the plaintiff shall have sustained any by reason of this order which the third, fourth and sixth defendants ought to pay:
Until further order:
1.Mrs M Balalis and Mr J Balalis are restrained from disposing of their assets, whether real estate or the business of Cos Catering Pty Ltd.
2.JM Properties Pty Ltd is restrained from disposing of real estate held by it, including but not limited to units 4, 5 and 6 of the Strata Corporation No.13975 Inc. save that the property situated at Unit 3, 8 Railway Terrace, Port Elliot SA may be sold, provided that the proceeds be paid only to the existing mortgagees in relation to the property and in respect of legal fees already incurred.
3.Liberty to apply at short notice.
4.The question of costs of the application is reserved.
The applications of the first defendant and the third, fourth and sixth defendants were adjourned to 27 July 2005 for further argument.
A further affidavit was sworn by Mrs Balalis on 22 July 2005 and was filed on the same day, and an affidavit sworn by Mr Balalis on 24 July 2005, was filed on 25 July 2005. The assets and liabilities of the plaintiff and of Mr and Mrs Balalis are set out in the affidavit of Mrs Balalis, and are confirmed by Mr Balalis in his affidavit.
The information more recently provided by Mr and Mrs Balalis differs in material respects from the information variously provided on other occasions to solicitors of the applicants and to the court, in that it includes properties previously not mentioned, or includes further details as to the disposition of properties.
On their own estimation, and leaving out of consideration entirely the possible outcome of Action No. 1030 of 2003 in the plaintiff’s favour, a net financial position is disclosed as at 22 July 2005 of between $1.244 and $1.494 million made up as follows:
Units 4, 5 and 6 Renaissance Arcade                  $(156,000)
3/8 Railway Terrace Port Elliott
(on the market)  $ 150,000
50 (50A) Clifford Street Torrensville
(under development)  $    70,000
               21 Caroline Drive Allenby Gardens  $ 230,000
               Cos Catering Pty Ltd
               Catering Business  $ 700,000-950,000
               Furniture and personal effects  $ 250,000_________
  $1,244,000-1,494,000

No account appears to have been taken of charges over the property of JM Properties Pty Ltd or Cos Catering Pty Ltd [6], although counsel for JM Properties submitted that the charges were limited to the liabilities referred to by Mr and Mrs Balalis.
[6] Affidavit of Mr Berg, solicitor, sworn 29 June 2005, Paragraphs 8 and 16
Over the last 12 months alone, and since Mr and Mrs Balalis first executed the Deed of Undertaking and Guarantee with respect to the costs of the third, fourth and sixth defendants, it appears that the following properties have been sold, or re-financed:
Property  Date of Transaction
2 College Street Glenelg  Settlement 20/8/04
8 Avenue Road Prospect  Settlement 6/10/04
54-62 Sturt Highway Berri  Settlement December 2004
16 Sansom Street Woodville North  Interest disposed of by private agreement             April 2005
1/8 Railway Terrace Port Elliott  Settlement 3/6/05
2/8 Railway Terrace Port Elliott  Settlement 21/6/05
7/6 Hardy’s Road Torrensville  Settlement 4/7/05
Units 4,5,and 6 Renaissance Arcade                  Refinanced 12/7/05
On 3 August 2005, Mr and Mrs Balalis brought an application, supported by a further affidavit, to vary the interim orders made on 6 July 2005, to allow for the sale of the property at 50A Clifford Street, Torrensville, for the sum of $350,000, in order to apply the net proceeds (after deduction of the associated selling expenses) to repay the monies loaned to them in respect of that land by the mortgagee, Macquarie Bank.[7] There is no explanation for the sale at $350,000, rather than the original estimate of $360,000, nor for the sale of the undeveloped block, rather than as the development which was first proposed. On 4 August 2005, a further variation was sought to allow for the proceeds to be paid to Macquarie Bank and applied not only as against the debt in respect of the property at 50A Clifford Street, Torrensville, but also to reduce debt in relation to the property at 3/8 Railway Terrace Port Elliot.[8]
[7] Affidavit of Mrs Balalis sworn 3 August 2005, Paragraph 4
[8] Affidavit of Mrs Balalis sworn 8 August 2005, Paragraphs 10 and 11
Mrs Balalis says:
·since the commencement of proceedings, JM Properties, and she and Mr Balalis, have spent monies on strata levies, litigation costs, liabilities to the Australian Taxation Office, refurbishment of four cafes owned by Cos Catering, medical expenses, Family Court legal fees, accommodation costs for Mr Balalis on account of their separation, payments to mortgagees, refinancing costs and tertiary education and living expenses for her son.[9]
·since the commencement of proceedings, JM Properties, and she and Mr Balalis, will continue to be obliged to spend large amounts of money in respect of ongoing strata levies, litigation costs, liabilities to the Australian Taxation Office and loans to mortgagees.[10]
·that the ordinary business expenses of JM Properties and Cos Catering, together with their living expenses, have generally been paid from profits of the business of Cos Catering;[11]
·that no assets have been disposed of for the purpose of avoiding a possible judgment debt;[12]
·proceeds from the sale of their assets have been spent on usual living expenses, ordinary business expenses, payment of strata levies, including those ordered by the court, payments to secured mortgagees, payments to the Australian taxation Office and payment of legal fees;[13]
·assets may have to be sold in the future to pay for some living expenses, ordinary business expenses and legal fees.[14]
[9] Affidavit of Mrs Balalis sworn 22 July 2005, Paragraph 15
[10] Affidavit of Mrs Balalis sworn 8 August 2005, Paragraphs 4 and 5; Affidavit of Mrs Balalis sworn 22 July 2005, Paragraph 15
[11] Affidavit sworn on 22 July 2005, Paragraph 17
[12] Affidavit sworn on 22 July 2005, Paragraph 19
[13] Id
[14]Affidavit sworn on 22 July 2005, Paragraph 17; and Affidavit sworn 8 August 2005
Counsel for JM Properties and Mr and Mrs Balalis asked the court to proceed on the basis that JM Properties and Mr and Mrs Balalis are not and will not be able to meet their major financial obligations, including legal fees, strata corporation levies, tax liabilities, business expenses and possibly some major living expenses, without continuing to dispose of assets. It was submitted that because the proceeds from the sale of assets have been applied to financial obligations which have arisen from the liability of JM Properties for Strata Corporation levies and the cost of the litigation, then there should be no basis for a concern that the disposal of assets has been for the purpose of avoiding a judgment debt or an order for costs.
It was also submitted that these applications for orders in the nature of Mareva orders are, in effect, applications for security for costs, which should be refused on account of the delay in bringing them.
While the applications have some factors in common with an application for security for costs, for example, an established basis for a belief that JM Properties will be unable to meet a successful defendant’s costs, they are not applications for security for costs. The third, fourth and sixth defendants abandoned applications for security for costs against JM Properties, when Mr and Mrs Balalis agreed to provide them with an indemnity in respect of any order for costs against JM Properties. The trial of the action has been heard and there is no question of the proceedings being stayed until security is furnished.
The applications are for restraining orders. Rule 68.02 of the District Court Rules 1992 provides specifically for an application for a restraining order being brought after the trial of the action. There is no authority to suggest that the applications should be refused on account of delay until after a trial. The rule and the authorities suggest otherwise.[15]
[15] Balfour Williamson v Douterluinge [1979] 2 NSWLR 884; Stewart Chartering Ltd v C&O Managements SA [1980] 1 WLR 460; Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac (UK) Ltd [1985] 3 All ER 747; Earlscroft University Ltd v Brown (2003) 226 LSJS 194
The purpose of a Mareva injunction is not to secure the plaintiff before judgment; the purpose is to restrain a defendant from removing assets from the jurisdiction or dissipating those assets.[16] The Court has an inherent jurisdiction ‘founded on the risk that a defendant will so deal with his assets that he will stultify and render ineffective any judgment given by the Court’ in the action. The jurisdiction is not exercised to prevent a debtor from dealing with his assets or from using them to pay his debts in the ordinary course of business. It is directed to dispositions which do not fall into that category and which are intended to frustrate, or have the necessary effect of frustrating[17], the remedy sought from the court, and if there is a basis for it, orders may be made against third parties to preserve the assets of a potential judgment debtor or a person who may be obliged to contribute to the satisfaction of a judgment debt.[18]
[16] RTP Holdings Pty Ltd and anor v Roberts and ors (No 2) [2000] SASC 390 per Lander J
[17] Hayden & ors v Tpiltzky & ors 154 ALR 497 at 506-507
[18] Section 8 District Court Act 1991; Devlin v Collins (1984) 37 SASR 98 at 100, 103, 111; Earlscroft University Ltd v Brown (2003) 226 LSJS 198
In my opinion, the applicants have established that there is a real risk that the assets of JM Properties and Mr and Mrs Balalis will be dealt with so that there is a danger that, in Action No. 394 of 2003, if the Strata Corporation recovers judgment, or in Action No. 1030 of 2003, in the event of the plaintiff being unsuccessful and the defendants’ obtaining orders for costs in the action, the judgment or other orders will not be satisfied.[19]
[19] Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645
I bear in mind that an order of that kind -
is bound to have a significant impact on the property of the person against whom it is made: in a practical sense it operates as a very tight ‘negative pledge’ species of security over property, to which the contempt sanction is attached. It requires a high degree of caution on the part of a court invited to make an order of that kind. An order lightly or wrongly granted may have the capacity to impair or restrict commerce just as much as one appropriately granted may facilitate and ensure its due conduct.[20]
[20] Cardile and others v LED Builders Pty Ltd (1999) 198 CLR 380 at 403
No judgment has been delivered against JM Properties Pty Ltd. There are no proceedings brought by or against Mr and Mrs Balalis personally, although they are the beneficiaries if JM Properties is successful. They have the power to dispose of its assets. Their affairs are inextricably intermingled with the financial affairs of JM Properties Pty Ltd. Should the plaintiff be unsuccessful in Action No. 1030 of 2003, an order for costs may be made against Mr and Mrs Balalis as third parties and any prior disposition of their own assets may defeat such an order. They have provided a guarantee to the amount of $120,000 in respect of the third, fourth and sixth defendants’ costs. Their assets are relevant assets on this application.
I take into account:
1.The fact that JM Properties and Mr and Mrs Balalis face difficulty in meeting financial obligations, as they currently stand, to the first defendant and to others.
2.The material lack of clarity and the inconsistency in the information provided to the applicants and to the court by or on behalf of JM Properties and its directors.
3.The disposal of or other dealing with real property belonging to JM Properties and Mr and Mrs Balalis since the commencement of proceedings.
4.Disposition of funds on account of liabilities other than those of JM Properties, that is, in respect of the liabilities of Mr and Mrs Balalis and Cos Catering.
5.While there is no evidence of dissipation of assets in order to defeat a judgment or order against JM Properties, the disposal of or dealing with assets of JM Properties and Mr and Mrs Balalis, in particular, in the last 12 months, which notwithstanding the explanations given, are such as to be likely to give rise to a real sense of unease in an ordinary sensible commercial person.[21]
[21] Taylor & anor v Diamand & anor (1997) 6 NTLR 64; Ausbro Forex Pty Ltd v Mare (1986) 4 NSWLR 419 at 424
The further disposition of assets by JM Properties Pty Ltd and/or its directors, is likely to defeat any judgment, including any order as to costs, in favour of the first defendant in Action No. 1030 of 2003 and the plaintiff in Action No. 394 of 2003, in the event that the plaintiff is unsuccessful in Action No. 1030 of 2003 and found liable to pay the sum sought by the Strata Corporation in Action No. 394 of 2003.
It is not appropriate on these applications to make any findings, or comment on, matters personal to Mrs Balalis, nor her opinion regarding the business of the Strata Corporation, and in particular, decisions made by the Strata Corporation since the trial of the action.[22]
[22] e.g., Affidavit of Mrs Balalis sworn 22 July 2005, paragraphs 22-30 inclusive
There is evidence from which an inference can be drawn of a real risk that any further disposal of assets by JM Properties Pty Ltd, or Mr or Mrs Balalis, will have the potential to defeat any judgment or order of this Court which may be made in favour of the first, third, fourth and sixth defendants, and frustrate the utility of the personal guarantee provided by Mr and Mrs Balalis in respect of a costs order if made in favour of those defendants.
The balance of convenience in my opinion favours maintaining the status quo for the time being. It is appropriate that orders should be made. The time over which any orders are to operate is to be short, that is, until judgment is delivered in Action No. 1030 of 2003. Any order made restraining the disposition of the assets in question should be strictly limited to meet only the requirements of the immediate circumstances. It is not appropriate that the orders go any further than necessary to protect the defendants in Action No.1030 of 2003 and the plaintiff in Action No. 394 of 2003, from any judgment in their favour being defeated by the prior disposition of assets by JM Properties Pty Ltd and/or Mr and Mrs Balalis. It is appropriate that the orders be expressed to reflect the minimum inconvenience which an order for asset preservation might otherwise occasion.[23]
[23] Cardile v LED Builders Pty Ltd, above at 409, 427-428
There is in fact no suggestion that the orders in terms sought would be oppressive or tie up the affairs of the plaintiff or Mr and Mrs Balalis beyond what is necessary to provide the relief sought on the applications.
It follows that I am not satisfied that an exception should be made in relation to the property at 50A Clifford Street, Torrensville. No explanation has been advanced for the sale of the property at this time. The entire proceeds are to repay the mortgagee in respect of that property, and if the property is sold, the mortgagee then requires the net funds remaining to be applied against other borrowings. There is no evidence that it is a forced sale, and no reason is given for abandoning the development plan emphasised in the earlier affidavit.
I make the following orders:
1.ON THE Undertaking given by the first defendant to abide by any order the Court or a Judge may make as to damages in case the Court or a Judge should hereafter be of the opinion that JM Properties Pty Ltd, Mr Jack Balalis and Mrs Marina Balalis shall have sustained any by reason of this order which the first defendant ought to pay:
(a)     That until such time as judgment is delivered in this action, the plaintiff, whether by itself, its agents or employees, do provide the first defendant with written notification of any contract for sale including a copy of any contract for sale of real property entered into by or on behalf of the plaintiff within seven (7) days of the date of the contract and, in any event, 48 hours prior to settlement on the contract, save in respect of a contract on the property at 3/8 Railway Terrace, Port Elliot, which may be sold if the net proceeds are to be paid entirely to mortgagees in respect of the property and in respect of legal fees already incurred.
(b)     That until such time as judgment is delivered in this action, the plaintiff’s directors, Mr Jack Balalis and Mrs Marina Balalis, do provide the first defendant with written notification of any contract for sale including a copy of any contract for sale of real property entered into by them or on their behalf within seven (7) days of the date of the contract and, in any event, 48 hours prior to settlement on the contract.
2.ON THE Undertaking given by the third, fourth and sixth defendants by their counsel Mr S Walsh QC to abide by any order the Court or a Judge may make as to damages in case the Court or a Judge should hereafter be of the opinion that JM Properties Pty Ltd, Mr Jack Balalis and Mrs Marina Balalis, and Cos Catering Pty Ltd shall have sustained any by reason of this order which the third, fourth and sixth defendants ought to pay:
Until further order:
(a)JM Properties Pty Ltd be restrained from disposing of, charging, encumbering or otherwise dealing with those assets held by it (including but not limited to Units 4, 5 and 6 of the Strata Corporation No.13975 Inc) without the written consent of the third, fourth and sixth defendants, save that the property at 3/8 Railway Terrace, Port Elliot, may be sold if the net proceeds are to be paid entirely to mortgagees in respect of the property and in respect of legal fees already incurred.
(b)     Marina Balalis and Jack Balalis be restrained from disposing of, charging, encumbering or otherwise dealing with assets whether real property or the business of Cos Catering Pty Ltd, without the written consent of the third, fourth and sixth defendants.
3.     Liberty to the parties to apply at short notice.