Monteleone v Cafcakis

[2008] SADC 154

District Court of South Australia

(Civil: Interlocutory Application)

MONTELEONE v CAFCAKIS & ORS

[2008] SADC 154

Reasons for the Order of His Honour Judge Clayton (ex tempore)

17 November 2008

EQUITY - EQUITABLE REMEDIES - INJUNCTIONS

The plaintiff applied for a freezing order in respect of the proceeds of sale of an allotment of land.

HELD:  There was no evidence that the defendant was about to dispose of the proceeds of the sale of the property.

Application refused.

Supreme & District Court Civil Rules 2006 6R 247, referred to.
Brew v Crouch [1998] SASC 6633, considered.

MONTELEONE v CAFCAKIS & ORS
[2008] SADC 154

1. This is a claim for a freezing order pursuant to r 247 of the Supreme and District Court Civil Rules 2006. That rule which was introduced last year, introduces a rule which applies uniformally throughout Australia on the recommendation of the Harmonisation Committee.

2. An interim order had been made on a more or less ex parte basis previously; the matter had not been fully argued. The claim for an interlocutory order pending trial was argued for the first time today.

3. The rule, that is r 247, applies if the applicant has a good arguable case on an accrued or prospective cause of action. Subr (5)(d) provides that the court may make a freezing order against a prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because first, the judgment debtor or prospective judgment debtor absconds or secondly, the assets of the judgment debtor or prospective judgment debtor are disposed of, dealt with or diminished in value.

4. The asset that this application is concerned with is a sum of money being held in a trust account. That money is the proceeds of a real estate property.

5. The approach of the court on an application such as this, as stated in Judge Lunn’s book Civil Procedure South Australia, para.6R 247.5 is that ‘The approach of the court should be to ask whether the plaintiff has a good arguable case, whether the defendant has assets over which such an injunction could be granted and, on the evidence, is there any real and legitimate concern of dissipation or secretion of assets, which may render the judgment nugatory.’

6. The text points out that ‘the purpose of the injunction is not to provide security for the plaintiff’s claim but to prevent a defendant defeating the plaintiff’s claim by disposing of its assets before judgment.’ The text states that ‘one test of the standard of proof to establish the necessary danger is whether there is more than a usual likelihood of such a danger.’

7. The question of whether the plaintiff has a good and arguable case is not easy. Mr Austin, who appeared for the plaintiff, initially said that it was a claim in contract, then he resorted to unjust enrichment. The conduct of the defendant, which gives rise to the action, is really inexcusable. But whether the cause of action is in contract, unjust enrichment or something else, for present purposes, I assume that a cause of action could be established. However, that is not the only matter.

8. As I said, the order is not to be a substitute for security. I must be satisfied that there is evidence of a real risk and legitimate concern of dissipation or secretion of assets.

9. In the next paragraph in Judge Lunn’s book, that is 6R 247.10, the text reads ‘There need be no proof of an intention to remove assets from the jurisdiction and it is enough if the court has a feeling of unease that if the plaintiff succeeded, the defendant might have so dealt with assets so as to deprive the plaintiff of the benefit of any judgment.’ An authority cited in favour of that proposition is the judgment of Bleby J in Brew v Crouch, an unreported decision of 23 April 1998, which is judgment No.S6633.

10. I think that is the question which I must address in this case. That is, do I have a feeling of unease that if the plaintiff succeeded, the defendant might have dealt with assets so as to deprive the plaintiff of the benefit of any judgment.

11. Mr Austin referred me to the defendant’s actions to date. There was his general conduct which gives rise to the cause of action. If the allegations are made out, that conduct is inexcusable. As Mr Austin said, his conduct when the caveat was lodged, was that he did not say ‘fair cop’, to borrow Mr Austin’s expression, but he warned the caveat. He also failed to participate in a settlement conference and said he had no money.

12. In my opinion, that is not a reason for making an order under r 247(5). The model litigant might have participated in the conference, but the failure to do so does not establish a likelihood that assets will be dissipated. They are two different things.

13. The order is not meant to be punishment for other behaviour. If the other behaviour shows a likelihood that the asset will be dissipated, then of course, the other behaviour is relevant. But if the other behaviour does not disclose that possibility, it is irrelevant.

14. The fact that Mr Cafcakis may be criticised for many reasons is not the test that I must apply. The order is not alternative for security.

15. The question is a difficult one. As I said it gets down to the question of whether the court has a feeling of unease that if the plaintiff succeeded, the defendant might have dealt with assets so as to deprive the plaintiff of the benefit of any judgment.

16. In my opinion there is no evidence that Mr Cafcakis is about to dispose of the proceeds of the sale of the property, other than in the ordinary course of his affairs and in my opinion, the applicant does not satisfy the requirement of r 247(5)(d)(ii) of the rules.

17. In the circumstances, the application for a freezing order is dismissed.

18. MR STEVENS:      Costs of the application?

19. HIS HONOUR:      Mr Austin?

20. MR AUSTIN:         I guess in view of the undertaking that was given in the first place that if there any costs flowing to the defendant as a result of the matter, I cannot make any submission on an application for costs.

21. HIS HONOUR:      There will be an order that the plaintiff pay the first defendant’s costs of and incidental to the application and order.