McNamara Business & Property Law v Kasmeridis (No 2) - [2006] SASC 167

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
MCNAMARA BUSINESS & PROPERTY LAW v KASMERIDIS (No 2)
[2006] SASC 167
Judgment of The Honourable Justice Gray
14 June 2006
PROCEDURE - JUDGMENTS AND ORDERS - ENFORCEMENT OF JUDGMENTS AND ORDERS - EXECUTION AGAINST PROPERTY - OTHER WRITS AND MODES OF EXECUTION - CHARGING ORDERS
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - INTERLOCUTORY INJUNCTIONS - INJUNCTIONS TO PRESERVE STATUS QUO AND PROPERTY PENDING DETERMINATION OF RIGHTS - MAREVA INJUNCTIONS
PROCEDURE - COSTS - RECOVERY OF COSTS
Application by the plaintiff for a charge over the defendants’ property - costs previously awarded to the plaintiff but not taxed - consideration of charging orders and the Enforcement of Judgments Act 1991 (SA) - whether the plaintiff a judgment creditor - held plaintiff not a judgment creditor until costs are an asertained sum and an allocatur issued - application dismissed.
Further application by the plaintiff for a Mareva injunction restraining the defendants from dealing with their assets - consideration of Mareva injunctions - whether costs order is sufficient to invoke the court's jurisdiction - consideration of jurisdiction of court - held the court has jurisidiction - no risk of the defendants’ assets being dissipated established - application refused.
Enforcement of Judgments Act 1991 (SA) s 3, s 8; Judgments Act 1838 (UK) (1 & 2 Vict c. 110); Administration of Justice Act 1956 (UK) s 35; Charging Orders Act 1979 (UK) s 1; Enforcement of Judgments Act 1978 (SA); Enforcement of Judgments Bill 1978 (SA); Supreme Court Rules r 68.03, r 89.02, r 101.18; Legal Practitioners Act 1981 (SA) s 42, referred to.
Widgery v Tepper (1877) 6 Ch.D 364; A & M Records v Darakdjian [1975] 1 WLR 1610; Ezkiel v Orakpo [1997] 1 WLR 340 ; Graham Holder & Ors v APC Supperstone & Ors [2000] 1 All E.R 473; Andersons Solicitors v Schigulski (2004) 88 SASR 1 ; Mareva Compania Naviera SA v International Bulk Carriers SA [1975] 2 Lloyd’s Rep 509; Zucker v Tyndall Holdings plc [1993] 1 All ER 124; Jet West Ltd and another v Haddican and others [1992] 2 All ER; Devlin v Collins (1984) 37 SASR 98; McNamara Business & Property Law v Kasmeridis [2004] SASC 336; McNamara Business & Property Law v Kasmeridis (2005) 92 SASR 382, considered.

MCNAMARA BUSINESS & PROPERTY LAW v KASMERIDIS (No 2)
[2006] SASC 167
Civil
GRAY J

This is an application by a firm of solicitors for a charge preventing their clients, the defendants, from dealing with real property. It is also an application for a Mareva injunction restraining the defendants and a related corporation from disposing or dealing with money, property or assets up to the value of $100,000.
This matter has a long history. The background facts may be summarised as follows.
In early 2004, Harry and Vicky Kasmeridis, the clients and respondents, engaged the appellant, McNamara Business & Property Law, a firm of solicitors, to act on their behalf in an application to set aside a default judgment entered in proceedings in the Magistrates Court.
On 5 February 2004, the solicitors wrote to the clients enclosing a copy of the terms of engagement and schedule of fees, which together comprised their proposed retainer agreement. On 9 February 2004, Mr Viscariello, the practitioner within the solicitors’ firm with conduct of the matter, had a telephone conversation with Mr Kasmeridis during which, according to the affidavit of Mr Viscariello, Mr Kasmeridis orally accepted the retainer agreement. Mr and Mrs Kasmeridis did not acknowledge their acceptance of the retainer agreement in writing by signing the document.
On 24 February 2004, the solicitors rendered an account to the clients for $20,613.50 (inclusive of barrister’s fees and disbursements). On 23 April 2004, the clients applied, pursuant to section 42(1) of the Legal Practitioners Act 1981 (SA), for a taxation of the solicitors’ costs.
On 28 June 2004, in response to a direction from this Court, the solicitors filed a bill of costs in taxable form. That bill was prepared using rates set out in the schedule of fees contained in the retainer agreement. On 13 July 2004, the clients filed a notice of dispute in relation to the amounts claimed in the bill of costs. They submitted that the Court should refuse to tax the bill of costs that had been lodged, and should instead direct the filing of a bill of costs prepared in accordance with the appropriate scale pursuant to the Supreme Court Rules.
On 6 August 2004, a Master held that the retainer agreement was not concluded in writing and therefore did not fall within the terms of section 42(6) of the Legal Practitioners Act.
The solicitors appealed to a single Judge of this Court. The appeal was dismissed.[1] The solicitors then appealed to the Full Court. This appeal was allowed.[2] The matter was remitted to the Master for further hearing and determination. The issue of costs of the Full Court appeal was adjourned until the primary claim to costs had been finalised.
[1] McNamara Business & Property Law v Kasmeridis [2004] SASC 336.
[2] McNamara Business & Property Law v Kasmeridis (2005) 92 SASR 382.
The clients then sought special leave to appeal to the High Court. On 10 February 2006, special leave was refused. Costs were awarded to the solicitors. The order of the High Court has not been sealed. The bill of costs referable to the High Court application has not been prepared. The solicitors have not made any claim on the clients for a lump sum with respect to the High Court costs.
The underlying dispute in regard to the legal fees arising from work performed by the solicitors for the clients is still to be heard by a Master. During the hearing of this application, I was informed, and it was not challenged, that the clients had paid $12,000 to the solicitors with respect to the professional work that had been undertaken.
Charging Order
Section 8 of the Enforcement of Judgments Act 1991 (SA) provides:
(1)A court may, on application by a judgment creditor, charge property of a judgment debtor with a judgment debt or part of a judgment debt.
(2)Where the court makes an order under subsection (1), it may make ancillary or consequential orders—
(a)requiring registration of the charge; or
(b)prohibiting or restricting dealings with the property subject to the charge; or
(c)providing for the sale of the property and the application of the proceeds of sale; or
(d)relating to any other incidental or consequential matters.
A judgment creditor is defined in section 3 as including:
a person to whom the benefit of a monetary judgment has passed (by assignment or in any other way).
The solicitors now seek a charging order against property of the clients. Supreme Court Rule 89.02 relevantly provides:
(1)A charging order under Section 8 of the [Enforcement of Judgments Act] is to be sought by an application in the proceedings in which the judgment was obtained.
(2)Any order made under Section 8 of the [Enforcement of Judgments Act] is to be served by the judgment creditor on each of the judgment debtor and any person directly interested in the property charged personally.
Counsel for the solicitors submitted that the solicitors are a judgment creditor. Counsel submitted that when an allocatur is issued for the High Court costs it will have the effect of, and will be enforceable in the same manner as, a judgment of the Court for the amount of the allocatur.[3] Consequently, the allocatur will be enforceable under the Enforcement of Judgments Act thereby permitting the solicitors, as judgment creditor, to obtain a charging order over the defendants’ property. Counsel for the solicitors contended that a charging order could be made prospectively to cover the costs of the Full Court hearing.
[3] Supreme Court Rules 1987 (SA), r.101.18 provides:
(1)Upon the completion of a taxation of costs a taxing officer, and subject to any restrictions from time to time imposed by the Chief Justice, the Registrar, may sign the allocatur indorsed upon the bill of costs pursuant to Rule 101.09 (4) or an allocatur in such other form as he thinks proper.
(1a)The allocatur is to include any amount for interest up until its date which is allowed under Section 114 (2) (b) of the Supreme Court Act 1935.
Allocatur to have the effect of a judgment
(2)An allocatur when duly signed in accordance with subrule (1) above and sealed by the Court shall have the effect of, and be enforceable in the same manner as, a judgment of the Court for the amount of the allocatur.
The Legislative History
The genesis of section 8 of the Enforcement of Judgments Act lies in the common law writ of elegit where a judgment creditor could realise his or her claim against the assets of a judgment debtor by placing a charge over the land that enabled the judgment creditor to recover the rents and profits from the land before obtaining any sale of it. In 1838, the Judgments Act 1838 (UK) was enacted, providing that a judgment was to operate as a charge on the real property of a judgment debtor.[4]
[4] 1 & 2 Vict c. 110.
In Widgery v Tepper,[5] James LJ, with whom Baggallay and Cotton LJJ concurred, in discussing charging orders under the Judgments Act 1838, observed:[6]
The authorities are sufficient to shew that a charging order cannot be given except for an ascertained sum, and not for costs, charges, and expenses, until they have been taxed. The necessity of an ascertained sum has been settled by numerous authorities; the necessity of the costs being taxed is clear from the case of Jones v Williams.
[5] Widgery v Tepper (1877) 6 Ch.D 364.
[6] Widgery v Tepper (1877) 6 Ch.D 364 at 369 (footnotes omitted).
Section 35(1) of the Administration of Justice Act 1956 (UK) abolished the writ of elegit. The section relevantly provided:
The High Court or a country court may, for the purpose of enforcing a judgment or order of those courts respectively for the payment of money to a person, by order impose on any such land or interest in land of the debtor as may be specified in the order a charge for securing the payment of any moneys due or to become due under the judgment or order.
In A & M Records Inc and Others v Darakdjian and Anor,[7] an application was made by plaintiffs for a charging order against the defendants’ property pursuant to section 35(1) of the Administration of Justice Act 1956 (UK). An order for costs had been previously made in favour of the plaintiffs against the defendants but the costs had not been taxed. The plaintiffs became apprehensive that the defendants were about to sell certain property and that the sale would deprive them of any prospect of recovering their costs and so accordingly, applied for a charging order. In refusing to grant the charging order, Walton J observed:[8]
There is no doubt at all, one would imagine, from a reading of the words as they stand and without any reference to prior decided cases, that the costs are indeed included in the words “payment of any moneys due or to become due under the judgment or order.” It is perfectly true that the costs are never mentioned in the order, but one gets a certificate subsequently as to the amount of the costs, and then the order and the certificate together tell one what the sum due is. So I think that there is no difficulty about seeing that costs must be covered by section 35(1) [of the Administration of Justice Act 1956 (UK)].
But can one impose a charge before there is an ascertained sum, or before, in the case of costs, the costs have been taxed? My answer to that is clearly in the negative, and I arrive at it primarily from the point of view that this is quite clearly a section for the enforcement of judgments or orders; it is not a section designed to impose in any way a penalty or disability on the judgment debtor because he has to pay a sum. If it were not restricted to ascertained sums but could be imposed for any sums which are unascertained at the date of the imposition of the charging order, for example, sums due under an inquiry as to damages, or even merely, without going outside the boundaries of the present case, in respect of unascertained costs, it seems to me that the most alarming results would follow. It would mean, in substance, that the charge having been imposed, the asset, whatever it was, on which the charge was imposed, was in the hands of the judgment debtor completely sterilised, because he could not dispose of it or raise money upon it in any way, since it would be utterly impossible for the intending purchaser or lender of money-mortgagee-to know what the amount of the equity remaining in the debtor might or might not finally turn out to be. It would be an absolutely crushing burden upon the judgment debtor.
[7] A & M Records v Darakdjian [1975] 1 WLR 1610.
[8] A & M Records v Darakdjian [1975] 1 WLR 1610 at 1612-1613.
In 1974, the Law Reform Committee of South Australia produced a report relating to the reform of the law on execution of civil judgments. It was their recommendation that the old writs of execution be removed and replaced with simplified statutory writs of execution and enforcement procedures. One of the enforcement procedures recommended was the enactment of equivalent legislation to sections 34 and 35 of the Administration of Justice Act 1956 (UK), providing the court with the power to impose a charge on the land of a judgment debtor.[9]
[9] Law Reform Committee of South Australia, Relating to the Reform of the Law on Execution of Civil Judgments, Report No 13 (1974) at 3-6.
In 1978, the Enforcement of Judgments Bill 1978 (SA) provided that a person who obtained a judgment in their favour for the payment of moneys could make an application for a charging order over the judgment debtor’s property. The Bill lapsed and was revised later in the same year. The Bill, after a number of amendments, was subsequently passed as the Enforcement of Judgments Act 1978 (SA), but was never proclaimed.
In 1979, section 35(1) of the Administration of Justice Act 1956 (UK) was repealed and replaced by section 1 of the Charging Orders Act 1979 (UK), which relevantly provides:
Where, under a judgment or order of the High Court or a county court, a person (the “debtor”) is required to pay a sum of money to another person (the “creditor”) then, for the purpose of enforcing that judgment or order, the appropriate court may make an order in accordance with the provisions of this Act imposing on any such property of the debtor as may be specified in the order a charge for securing the payment of any money due or to become due under the judgment or order.
The amendment did not change the established principle that a charging order cannot be given except with respect to an ascertained sum. Consequently, a charging order in the United Kingdom cannot be made for untaxed costs.[10]
[10] Ezkiel v Orakpo [1997] 1 WLR 340 at 346, Graham Holder & Ors v APC Supperstone & Ors [2000] 1 All E.R 473.
In 1991, the Enforcement of Judgments Act 1978 (SA) was redrafted as the Enforcement of Judgments Act 1991 (SA) which came into operation on 6 July 1992.
It is clear on the United Kingdom authorities that a charging order cannot be made for a costs order that has not been taxed. As section 8 of the Enforcement of Judgments Act 1991 and its counterpart, section 1 of the Charging Orders Act 1979 (UK), share the same genesis, there is good reason to follow the United Kingdom authority. It also accords with the plain meaning of the legislation.
The submission that the solicitors are judgment creditors should be rejected. Sections 3 and 8 of the Enforcement of Judgments Act 1991 should not be interpreted so as to include an order for costs that has not yet been ascertained. A party with the benefit of an order for costs to be taxed will only be a judgment creditor once an allocatur has been issued.[11] An allocatur has not been issued with respect to the High Court order for costs. The Full Court had not yet made any order for costs.
[11] Andersons Solicitors v Schigulski (2004) 88 SASR 1 at 2.
Mareva Injunction
A Mareva injunction may be ordered where there is a threat that assets may be removed from the jurisdiction or there is a risk that the assets may be dissipated within the jurisdiction.[12] Supreme Court Rule 68.03 sets out the criteria for a Mareva injunction:
[12] Mareva Compania Naviera SA v International Bulk Carriers SA [1975] 2 Lloyd’s Rep 509.
(1)Where a plaintiff applies to the Court for an injunction restraining the defendant, his servants or agents, from removing the defendant’s assets from the jurisdiction or disposing of the same the application must show:
Jurisdiction
(a)     that he has a substantive cause of action justiciable within the jurisdiction to which the injunction sought is ancillary;
Good arguable case
(b)     that he has a good arguable cause of action;
Danger of removal of defendant’s assets from the State
(c)     that there is a danger that the defendant’s assets may be removed from the jurisdiction or disposed of;
Danger that any judgment may not be satisfied
(d)     that there is a danger that judgment will go unsatisfied if the defendant’s assets are removed from the jurisdiction; or
(e)     that the plaintiff may be unable to satisfy his judgment by execution if the defendant’s assets are removed from the jurisdiction.
Defendant may apply to modify or discharge a “Mareva” injunction
(2)A defendant may apply to the Court to modify or discharge an order made under subclause (1) hereof if the operation of such order is shown to cause an injustice to the defendant such that it is proper to modify or discharge the order.
“Mareva” injunction as between defendants and third and subsequent parties
(3)The provisions of this Rule apply also as between co-defendants claiming indemnity or contribution inter se, as between a defendant and a third party, and as between third and subsequent parties.
Counsel for the solicitors submitted that this Court should grant a Mareva injunction with respect to the clients. Counsel contended that the solicitors had obtained an order for the costs of the special leave application. Counsel contended that the solicitors had a reasonable expectation to be awarded the costs of the appeal to the single Judge and the costs of the Full Court proceedings. Counsel further submitted that the clients have sold or reorganised their assets so as to make it difficult for the solicitors to recover any cost orders made and to be made against them. Counsel submitted that there was the risk of the clients continuing to arrange their financial affairs so as to make it difficult for the solicitors to recover their costs.
Counsel for the clients submitted that the application was misconceived. Counsel contended that an expectation of a costs order is insufficient to invoke the Court’s jurisdiction for the granting of a Mareva injunction. Furthermore, it was said that the criteria for the injunction could not be satisfied, as there was no evidence that the clients had dissipated or would dissipate their assets in response to the outcome of any legal proceedings. Counsel for the clients claimed that an affidavit filed on behalf of the clients provided a satisfactory explanation of the financial transactions, said by the solicitors to provide evidence of the dissipation of the clients’ assets.
Order for Costs
In Zucker v Tyndall Holdings,[13] Neill LJ observed:[14]
In the present context, however, one has to consider what is meant by the phrase ‘cause of action’. As I understand the present law, it is that a Mareva injunction cannot be granted unless there is an existing cause of action which can be immediately enforced.
[13] Zucker v Tyndall Holdings plc [1993] 1 All ER 124.
[14] Zucker v Tyndall Holdings plc [1993] 1 All ER 124 at 131.

In the present proceedings, the underlying cause of action is a claim for professional fees – a claim in contract. The pursuit of that cause of action, if successful, may lead to an order for costs. Further, the plaintiff claimed an entitlement to costs of the appeal to the single Judge and the appeal to the Full Court. The High Court costs await taxation.
In Jet West Ltd v Haddican,[15] Donaldson LJ concluded that a Mareva injunction could be granted in support of a costs order prior to taxation of costs:[16]
[A] Mareva injunction can be granted or can be continued in support of any judgment or order of the court for the payment of money, whether or not the exact sum which will be payable has been quantified at the date of the order and the date at which the Mareva injunction is sought.
[15] Jet West Ltd and another v Haddican and others [1992] 2 All ER 545.
[16] Jet West Ltd and another v Haddican and others [1992] 2 All ER 545 at 548.
Donaldson LJ reasoned that if the court has the power to continue the Mareva injunction after judgment, in aid of its execution, then it is within the court’s inherent jurisdiction to grant a Mareva injunction after an order for costs has been made.[17]
[17] Jet West Ltd and another v Haddican and others [1992] 2 All ER 545 at 547-548.
The court has a wide power to grant Mareva injunctions provided there is a real risk that a defendant might dispose of assets or take them out of reach of execution before a plaintiff can obtain a judgment and execute upon it.[18] In the present proceedings, the underlying claim for professional fees, the claim for costs of the appeals and in particular the High Court order for costs operate to enliven this Court’s jurisdiction to grant a Mareva injunction.
[18] Devlin v Collins (1984) 37 SASR 98.
Risk of the Assets being Dissipated
Counsel for the solicitors submitted that there was a real risk that the clients would reorganise their assets so as to avoid satisfying judgment.
In support of their application, counsel for the solicitors pointed to a number of financial transactions said to demonstrate that there was a real risk of disposal of assets in a way to frustrate a possible judgment. These transactions involved the clients transferring their family home into the name of a company of which Mr Kasmeridis is the sole director and shareholder. A further transaction involved the sale of a small investment property. Another transaction involved the sale of a property previously used as the business premises for the earlier referred to company.
In an affidavit filed by Mr Kasmeridis, reasons were advanced for each of the above transactions. The first transaction occurred after refinancing and following financial advice. The second related to a small investment property that was no longer needed. The proceeds were used for business purposes. The third transaction was the result of the company ceasing a part of its business operations and no longer requiring the premises.
Counsel for the solicitors placed reliance on the fact that Mr Kasmeridis was named as defendant to a number of proceedings. Documents produced demonstrated this to be so. However, no attempt was made to establish that Mr Kasmeridis was an outstanding judgment debtor. The mere fact that Mr Kasmeridis may be involved in other litigation is not sufficient to allow adverse inferences to be drawn, whether considered alone or with any other material before the Court.
There is no reason not to accept the explanations for these financial transactions given by Mr Kasmeridis. The transactions are not out of the ordinary. They appeared to be ordinary personal or commercial transactions. The transactions do not allow the drawing of an inference that the clients were engaging in the dissipation of their assets or a removal of their assets from the reach of the solicitors.
The application for a Mareva injunction is refused.