Newcastle Catheteterisation & Angiography Services Pty Ltd v Elscint (Australia) Pty Ltd

[1989] FCA 613

JUDGMENT No. . ........ ..... ........ ..- 413 y S9

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY	) NO. G33 of 1989
)
GENERAL DIVISION	)

BETWEEN:  NEWCASTLE CATHETERISATION
AND ANGIOGRAPHY SERVICES
PTY LIMITED

Applicant

AND :  ELSCINT (AUSTRALIA) PTY
LIMITED

First Respondent

AND :  ELSCINT LIMITED

Second Respondent

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CORAM :  Davies J. .,\'*

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DATE : 

29 September 1989

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I , I	- 1
I	- 1

PLACE : 

Sydney

,-- i; l OCT 1989  E-,

AUSTRALIA'

EX TEMPORE
REASONS FOR JUDGMENT

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proceedings but intends to bring a motion to have service on

In these proceedings an application was brought by

Newcastle Catheterisation and Angiography Services Pty
Limited against Elscint (Australia) Pty Limited and Elsclnt
Limited. Elscint (Australia) Pty Limited is a wholly owned
subsidiary of Elscint Limited, which is incorporated in
Israel. Elscint Limited has recently been served with the

it struck out and to have the statement of claim or part
thereof struck out on the basis that it does not and did not

carry on business in Australia. Thus, there will be a

substantial dispute between the applicant and Elsclnt

Limited as to whether the proceedings were properly brought against that company in whole or in part.

The subject matter of the dispute arises out of the

provision by Elscint (Australia) Pty Limited to the
applicant of catheterisation and angiography equipment for a
laboratory which was established at the Lake Macquarie
Private Hospital to carry out cardiac catheterisation and
general angiography services.

The present motion is a motion for a Mareva

injunction to prevent the first respondent, Elscint
(Australia) Pty Limited from dealing with its assets
otherwise than in the ordinary course of business and, in
particular, from transferring assets overseas to, or to the

order of, Elscint Limited.

I take the principles to be applied to be those

which were stated by the Court of Appeal of New South Wales
in Riley MCKay Pty Limited v. McKay and Anor (19821 1
N.S.W.L.R. 264, particularly at pp. 276-7. The court which
was comprised of Street C.J., Hope J.A. and Rogers A.J.A.,

said at p. 276:-

"The basis of jurisdiction is founded on the
risk that the defendant will so deal with his
assets that he will stultify and render

ineffective any judgment given by the court in
the plaintiff's action, and thus impair the
jurisdiction of the court and render it
impotent properly and effectively to
administer justice in New South Wales. As has
appeared, the jurisdiction to grant the
injunction is not to be exercised simply to
preclude a debtor from dealing with his
assets, and in particular, to prevent him from
using them to pay his debts in the ordinary
course of business. It is directed to
dispositions which do not fall within this
category and which are intended to frustrate,
or have the necessary effect of frustrating,
the plaintiff in his attempt to seek through
the court a remedy for the obligation to which

he claims the defendant is subject."

Their Honours went o n t o point out that the

jurisdiction should be exercised with caution, and then said

this at p.276:-

"A number of matters must be established in

order to entitle the plaintiff to obtain a
'Marevat injunction. As with other
interlocutory injunctions, the court will be
concerned to evaluate whether the plaintiff
has made out a sufficiently strong case to
justify the grant of the interlocutory remedy;
the court will be concerned to evaluate the
balance of convenience; and the court will
ultimately be concerned with general
discretionary considerations. These three
aspects are inter-related and overlap to a
greater or lesser extent - particularly the

first and the second."

The third element t o which their Honours referred, namely

general discretionary considerations, reflects in my
opinion their Honoursr observation that the jurisdiction is
t o be exercised with due caution and only in exceptional
circumstances where the grant of a n injunction is necessary
t o t o prevent steps being taken which may interfere with the
administration o f justice by stultifying the success o f an
applicant or plaintiff by permitting the removal of assets

to which the applicant or plaintiff must look, if there is
to be recovery of any monetary sum from the respondent or
defendant.

In this case I have looked at the affidavits which go to the question whether there is a serious questlon to be

tried. I am satisfied, on the basis of those affidavits,

that there is an arguable case that representations were made by one or more of the respondents, particularly the first respondent, that those representations led to the

acquisition of the equipment and to its installation, and

subsequently to damages suffered by the applicant.

The affidavits show sufficiently what was said as

to the needs of the persons who were installing equipment
and as to what was required of the equipment, and as to the
subsequent failure of the equipment to meet those needs or
to comply with what was stated about the equipment to show a
serious and arguable question properly to be tried by this

court.

mr J.D. Harris, counsel for the respondent, has

tendered two documents today. One is the defence which
refers to a deed of release given by the applicant to the
first respondent on 18 November 1987. He has also tendered
that deed of release. It seems to me that, in an
application such as this, it would be improper for me to
place any significant welght srmply on a document which is
tendered. Nelther of the respondents has put forward any
material to counter the evidence relled on by the applicant.
There is simply no affidavit going to the merits of the case
and it seems to me that I cannot judge the significance of
the deed of release in the absence of material dealing with
it.

On the evidence that is before me, I am satisfled

that there is a serious case to be heard and therefore that

the first matter to be established has been established.

As to the amount that may be recovered by the

applicant if the application is successful, there seems to
be no evidence, but nevertheless it is clear that the
equipment that was installed was expensive equipment and

that the damages that could be awarded would be substantial.

As to the balance of convenience, on the

applicant's part it is hlgh. The evidence establishes that
a Mr Oppenheim was sent to Australla by Elscint Limlted to

take over the management of Elsclnt (Australla) Pty Limited

at the end of 1988 and that his task was to wind down the affairs of the Australian company, to sell its business and	assets and to pay off its debts including any debts due to
Elscint Limited, and that that is the course of action he has undertaken this year.

Mr Oppenheim's evidence shows that the Australian

company is insolvent in the sense that its debts exceed the
value of its assets by far, and that it owes over $3 million
to its parent company. During the course of the year, a
number of payments have been made to the parent company.
Three payments of $100,000 each were made in the period
February to May. More recently, in the last few weeks,
after the sale of the Australian company's business to
another company, Safita Pty Limited, a further sum of

$98,000 was paid to the parent company. The Australian

company appears to be left with net assets in the form of
receivables and stock which have a value of only between
$100,000 and $200,000. It also appears from Mr Oppenheim's
oral evidence, given today, that the first respondent may
have an interest in another subsidiary of Elscint Limited
which is based in Hong Kong. The extent of that interest
and its value are unknown.

From the applicant's point of view, its prospects

of achieving practical financial success in these
proceedings have already been much reduced by the payment by
the first respondent to Elscint Limited of the sums which

now total $398,000. Very little is left in the coffers of

amount that I can say it is minimal or not worth protecting. Elscint (Australia); but the sum left is not of such a minor So from the point of view of the applicant, the

balance of convenience clearly lies in favour of the grant

of an injunction.

From the point of view of the respondent, little

has been put forward to show that there is any reason why it
should not be restrarned from paying sums to its parent
company. And, indeed, its parent company has not appeared
today to put forward any reason as to why any sums should
not remain in Australia rather than be remitted to Israel.
The solicitor for Elscint Limited appeared earlrer today
when the motion was first called on and he participated in
the hearing to the extent of obtaining drrections as to the
future conduct of proceedings between the applicant and the
second respondent. He then asked leave to withdraw and he
withdrew. The second respondent therefore does not claim
that there would be any prejudice to it by leaving in
Australia the moneys which could otherwise be paid to it by
Elscint (Australia). Those moneys are in one way or another
totally under the control of Elscint Limited as it owns all
the shares in the subsidiary company and the board of
directors and Mr Oppenheim are answerable to it.

That brings me to the more important matter,

namely whether this is the type of case in which a Mareva

injunction ought to go. Mr Harrrs submitted that a Mareva

injunction should not rssue unless steps had been taken

which were designed or carried out with the deliberate

intent of defrauding or frustrating an applrcant or
plaintiff, steps which by their nature were motivated or
actuated by a purpose of frustrating proceedings brought in

the court.

Mr Harris submitted that the evidence did not

establish any such situtation for Mr Oppenheim had been sent
to Australia last year, before the institution of legal
proceedings, specifically with an intent of winding up the
affairs of the Australian company and that was all that Mr
Oppenheim had done.

I accept that it has not been shown that any sums

have been transferred deliberately with the motivation of
frustrating the applicant's case. Nevertheless, it seems to
me that a Mareva injunction is not limited to such a case.
I prefer the view taken by the Court of Appeal in the Riley
MacKay case, cited above, that an injunction may issue where
the necessary effect of what is occurring will be to
frustrate an applicant's proceeding in this Court by

stultifying any chance of success.

That of course is precisely what is happening.

This case cannot be got on quickly. It is a complicated case. The respondents have not yet put on affidavits as to the merits. They did not comply with a direction to put on affidavits by 24 August 1989. Mr Harris asked that the

direction be amended to allow for the delivery of affidavits

by 15 December 1989 and I have ordered that they be filed
and served by 31 October and have done so in the hope that
the matter can be progressed a little faster than Mr Harris

had in mind. Nevertheless, it is clear that the case cannot

be brought on for hearing this year and it may be well into

next year before a hearing can be anticlpated. If Mr Oppenheim continues to wind up the affairs of Elsclnt (Australia) as he has been doing up to this time, the company will have no assets by the tlme this matter comes on

for hearing. There wlll then be no purpose in proceeding
against Elscint (Australia) because it will be a worthless
company. In that event, the proceedings agalnst Elscint
(Australia) will be stultified and totally frustrated as
there will be nothing to litigate about. As to Elsclnt
Limited, it is a company incorporated in Israel and claims
that it has never traded in thls country and is not sub~ect

to the proceedings in the Court.

It seems to me that a Mareva injunction should go

in a case such as this just as much as a case where fraud or
deliberate preference has been established. The alm of the
injunction is simply to maintain in Australia in the hands
of a respondent assets belonging to the respondent which may
go to satisfy the judgment should there be judgment against
the respondent. It appears to me that this is an

appropriate case in which that should occur.

The terms of the injunction should be worked out

between the parties. It is clear that certain amounts still
have to be paid.	There is a reference to wages or sums due

to one of the employees and there are, no doubt, some
ordinary debts. There is a problem of what to do about
trading stock. There is also a question of the payment of
the legal costs involved, whlch may be regarded as an
ordinary business outgoing. I think that those things ought
to be discussed. I simply have in mind that there ought not
to be a payment which is not in the ordinary course of

business and certainly not a payment by Elsclnt (Australia)

to its parent company.

On the usual undertakings and injunction, the

matter will be adjourned to a convenient date.

I certify that this and the 9

preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice Davles.

Associate:

Date:	29 September 1989
Counsel for the applicant:	Mr S. Benson
Solicitors for the applicant:	Mallesons Stephen Jacques
Counsel for the
first respondent:	Mr J.D. Harris
Solicitors for the
first respondent:	Einfelds
Date of hearing:	29 September 1989