Multispan v Portland (No 3)

[2001] NSWSC 1049

CITATION:	MULTISPAN v PORTLAND (NO 3) [2001] NSWSC 1049
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	SC 2869/00
HEARING DATE(S):	30/10/01
JUDGMENT DATE:	16 November 2001
PARTIES :	Multispan Constructions No 1 Pty Limited - First Plaintiff Stipo Lovrinovic - Second Plaintiff Vlatko Rasic - Third Plaintiff Mark Komadina - Fourth Plaintiff Stipo Kasalo - Fifth Plaintiff 14 Portland Street Pty Limited - First Defendant CVC Communication & Technology Pty Limited - Second Defendant Broadway Developments Pty Limited - Third Defendant Ronald Charles Dunkley - Fourth Defendant St Helens Broadway Pty Limited - Fifth Defendant Sam Zdrilic - Sixth Defendant Gavin Solomon - Seventh Defendant
JUDGMENT OF:	Barrett J

COUNSEL :	Mr M. Komadina (director) - First Plaintiff Mr A.M. Colefax - First to Third Defendants Mr G.L. Turner - Sixth Defendant
SOLICITORS:	Coudert Brothers - First to Third Defendants Alan Brown & Company - Sixth Defendant
CATCHWORDS:	EQUITY - injunctions - Mareva relief following judgment - available to prevent frustration of judgment pending exercise of judgment creditor remedies - not a substitute for execution - not to be form of security - order that assets not be dealt with except in narrowly defined ways or otherwise as allowed by judgment creditor refused
CASES CITED:	Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 Commissioner of State Taxation v Mechold Pty Ltd (1995) 30 ATR 69 Patterson v BTR Engineering Australia Limited (1989) 18 NSWLR 319
DECISION:	Sixth defendant's claim for relief refused

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IN THE SUPREME COURT REVISED
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

FRIDAY, 16 NOVEMBER 2001

2869/00 - MULTISPAN CONSTRUCTIONS NO 1 PTY LTD v 14 PORTLAND STREET PTY LTD & ORS (NO 3)

JUDGMENT

HIS HONOUR:

1 The sixth defendant, Mr Zdrilic, as cross-claimant, has been awarded a verdict against the defendant to the cross-claim, being the first plaintiff, Multispan Constructions No.1 Pty Ltd (which I shall call “Multispan No.1”), in a sum of $1,894,000 together with interest to the date of judgment, on the basis set out in reasons for judgment previously delivered by me.

2 As a judgment creditor, Mr Zdrilic now seeks orders of a Mareva kind to restrict disposal and movement of assets of Multispan No.1. Mr Zdrilic makes this application on the basis of an apprehension that assets which will otherwise be available to meet his judgment may be dissipated.

3 This apprehension has been aroused by awareness of a number of transactions involving units in Multispan No.1's Wollstonecraft development which exhibit unusual features suggestive of lack of arm's-length dealing. One was a transaction in which a bank officer was sold, for $83,000, a unit which was afterwards sold for $200,000 following cancellation of the initial sale. The evidence shows that the element of concession of something like $117,000 was related to some nebulous service apparently rendered by the bank officer. Any cold hard commercial pretext for effectively giving away that amount of company resources was not shown.

4 In addition, there is evidence of a number of transactions in which units in the Multispan No.1 development have been deployed in a way calculated to facilitate the raising of money by the company now called Multispan Group Pty Ltd. That company is not related to Multispan No.1 in any way which might support an inference or finding that enhancement of its interests is to the benefit of Multispan No.1. The evidence also shows that Multispan No.1 made its property assets available in such transactions in a way which caused them to bring home potentially - and I say potentially because it is not clear that the transactions were ever completed or crystallized - proceeds significantly less than the true value of those assets as indicated by selling prices of units in the development on the open market. When I say significantly, I mean in the order of $100,000 for one home unit at least.

5 There is thus evidence that assets of Multispan No.1 have been committed to arrangements which, on their face, are at odds with the interests of that company, viewed, as it must be at this stage, as the embodiment of the interests of its creditors.

6 All this is sufficient to justify a degree of apprehension about possible dissipation of assets. It is reasonably clear, I think, that those in charge of the affairs of Multispan No.1 may again be tempted to use its assets for purposes not related to its own separate interests as a separate legal and commercial entity with a separate body of creditors.

7 I turn now to the basis of the Mareva jurisdiction. In doing so I begin with a statement of Brennan CJ and McHugh, Gummow, Kirby and Hayne JJ in Patrick Stevedores Operations No. 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1, that the Mareva order:

“exists not to create additional rights but to enable a court to protect its process from abuse in relation to the enforcement of its orders. It is neither a species of anticipatory execution, nor does it give a form of security for any judgment which may ultimately be awarded.”

8 In Patterson v BTR Engineering Australia Limited (1989) 18 NSWLR 319, Gleeson CJ said that the remedy is discretionary:

“...but it has been held that in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant and secondly, a danger that by reason of the defendant's absconding or of assets being removed out of the jurisdiction, or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.”

9 The foundation of the jurisdiction in apprehension of dissipation of assets is underlined in subsequent decisions, not the least of them, of course, being the decision of the High Court in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 where it is emphasised that the frustration of the processes of the court is the central matter with which the jurisdiction is concerned.

10 In this case Mr Zdrilic already has a judgment. He is therefore entitled to the reasonable assistance of the court in protecting it from frustration by improper removal or dissipation or secreting away of the assets of Multispan No.1. The Mareva jurisdiction may be invoked in that connection. A number of the authorities to that effect are collected in Commissioner of State Taxation v Mechold Pty Ltd (1995) 30 ATR 69. But that is not to say that the court will make orders giving Mr Zdrilic some hold over those assets which will amount to a de facto security for his judgment debt. The most the court will do is to put in place stabilising measures which preserve the asset base rather than putting any part of it under the thumb of a particular creditor. Even then, the scope and duration of protection will be conditioned by the fact that, as a judgment creditor, Mr Zdrilic is in a position to move immediately to the normal remedies available to enforce judgments. That should be his logical remedy and any Mareva-type relief should be ancillary to it.

11 I am not prepared to make the orders Mr Zdrilic seeks. What he seeks is a blanket order restraining, until further order of the court, all disposals of and dealings with assets of Multispan No.1 with three exceptions: one exception for rates, taxes and statutory charges applicable to the assets; a second exception for payment of moneys secured to the first, second and third defendants in these proceedings by their mortgage of the Wollstonecraft property; and a third exception for anything else Mr Zdrilic himself is prepared to allow.

12 This, to my mind, would make the order a de facto security for Mr Zdrilic of indefinite duration. The third element would enable him to exert an unwarranted degree of influence purely as a means of bringing to bear pressure to be paid. There would be a subjection of all the assets of Multispan No 1 to his control. That is too powerful a position to contemplate for someone who should move sooner rather than later to the ordinary remedies available to judgment creditors.

13 On my understanding the only assets of any consequence remaining in Multispan No.1 are the few unsold units at Wollstonecraft plus, of course, proceeds of sale as units are sold. Given the nature of the concern about dissipation, an application which might be entertained is one for an order that no such unit be sold for less than a specified price without the leave of the court, with the price in each case being an amount seen to be a realistic one, that is, not too high to prevent sensible commercial dealing by Multispan No.1 and not too low to mean that the resources which should come in to service creditors will not be protected in a proper way. But that might be complicated if, as appears from the appearance announced by Mr Pritchard this morning, there are third parties claiming existing rights in those units or some of them.

14 As Mr Zdrilic's claim for relief currently stands it does not succeed and the orders he seeks will not be granted.

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Last Modified: 11/20/2001