Oaklex P/L & Feros v Quilare P/L
[1996] QSC 200
•25 October 1996
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane Writ No.1468 of 1994
Before the Hon. Mr Justice Mackenzie
[Oaklex P/L & Feros v. Quilare P/L & Ors.]
BETWEEN
OAKLEX PTY LTD ACN 010 566 953
First Plaintiff
AND
THEODORE JOHN FEROS
Second Plaintiff
AND
OUILARE PTY LTD ACN 011 071 864
First Defendant
AND
CORPORATE BROKING SERVICES PTY LTD
ACN 009 611 330
Second Defendant
AND
EAGLECHART PTY LTD ACN 010 855 286
Third Defendant
AND
JOHN ASHLEIGH FILLMORE
Fourth Defendant
AND
STEPHEN JOHN O'KEEFE
Fifth Defendant
AND
GRAHAM FREDERICK McLAREN
Sixth Defendant
AND
FRANCO ITALO QUARANTINI
Seventh Defendant
JUDGMENT - MACKENZIE J.
Judgment Delivered 25 October 1996
CATCHWORDS: INJUNCTION - Mareva injunction - action for breach of fiduciary duty - recent sale of first defendant's business - statement by directors that they have not decided what will be done with the proceeds of the sale -plaintiffs fear dissipation - whether a Mareva injunction should be granted to restrict the use of the proceeds of sale.
Counsel:H. Fraser QC with him D. Savage for the first and second plaintiffs.
R. Wensley QC with him A. Crowe for the first to fifth defendants.
R. Litster for the seventh defendant.
Solicitors: Dunhill Madden Butler as town agent for Quinn & Company for the first and second plaintiffs.
T.F. Wardrobe as town agent for McLaughlins for the first to fifth defendants.
Nicol Robinson Kidd as town agent for Hickey Lawyers for the seventh defendant.
Hearing date: 18 September, 1996
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane
Writ No.1468 of 1994
Before the Hon. Mr Justice Mackenzie
[Oaklex P/L & Feros v. Quilare P/L & Ors.]
BETWEEN
OAKLEX PTY LTD ACN 010 566 953
First Plaintiff
AND
THEODORE JOHN FEROS
Second Plaintiff
AND
OUILARE PTY LTD ACN 011 071 864
First Defendant
AND
CORPORATE BROKING SERVICES PTY LTD
ACN 009 611 330
Second Defendant
AND
EAGLECHART PTY LTD ACN 010 855 286
Third Defendant
AND
JOHN ASHLEIGH FILLMORE
Fourth Defendant
AND
STEPHEN JOHN O'KEEFE
Fifth Defendant
AND
GRAHAM FREDERICK McLAREN
Sixth Defendant
AND
FRANCO ITALO QUARANTINI
Seventh Defendant
JUDGMENT - MACKENZIE J.
Judgment Delivered 25 October 1996
This is a motion for a Mareva injunction. The action in which the application is brought involves a transaction in which shares in the first defendant owned by the first plaintiff were disposed of without the knowledge or approval of the second plaintiff who was a director of both companies at the time of the transaction. He resigned as a director about a fortnight after the transaction, having been induced to do so, he says, on the basis he was not taking an active part in the company. The second and third defendants are companies which subsequently held the majority of shares in the first defendant. The fourth and fifth defendants were directors of the first defendant only. The sixth defendant who died in 1995 and the seventh defendant were directors of the first plaintiff and the first defendant.
When the second plaintiff became aware in December 1991 of the share transaction he had his accountant make investigations and negotiations concerning the transaction were held without success. On 15 September 1994, not long after negotiations finally broke down, the writ was issued. The action has progressed a substantial distance towards being ready for trial. To the extent that it is submitted that there has been undue delay, I am not satisfied that that is so.
The Statement of Claim relies on various breaches of fiduciary duties and seeks a declaration of trust with respect to the shares, or compensation for them. The present application seeks an injunction against the first to fifth defendants restraining them from in any way encumbering disposing of pledging or otherwise dealing with the present proceeds of sale of the business of the first defendant, subject to the exception that they are entitled to pay, from the proceeds of sale, arms length secured and unsecured creditors of the first defendant. The catalyst for the application was the sale of the first defendant's business for $M5.2. The contract has been partly performed. At the time of the hearing one payment which was concerned with the transfer of property was expected to take place about the end of September 1996 and another payment of about $500,000 is to be paid in June 1997. An interim Mareva injunction in similar terms to that sought in the present proceedings was granted on 26 August 1996.
The applicants' concerns are that if funds generated from the sale of the first defendant's business are distributed amongst those claiming an entitlement through their shareholdings in the first defendant, the funds will be dissipated in such a way as to make recovery of damages from the first defendant impossible and from the other defendants difficult. It was conceded for the purposes of the application that the plaintiffs can establish a prima facie case but the submission was made that they had not established the requirements for a Mareva injunction. There was no real dispute about the applicable principles. It was accepted that Northcorp. Limited v. Allman Properties (Australia) Pty Ltd (1994) 2 Qd.R 405 set out the relevant test having regard to the issues before me.
It is in my view unnecessary to go in detail to all of the issues which were adverted to in the affidavits read before me. On the view I take, in the absence of any assurance that moneys or assets into which the moneys are converted will remain of such a character as to allow a judgment to be recoverable from or through the first defendant an injunction should be granted. In the absence of any such assurance, as long as the position continues to be that no decision has been taken about what to do with the money, there is a real risk that the asset may be dissipated in the relevant sense, which is likely to prevent recovery (Northcorp). I accept that there is force in the respondents' submission that the notion of dissipation is not the same as the every day business activity of changing one form of asset to another. There is also some force in the proposition (deposed to by Mr O'Keefe) that there are difficulties in having to obtain court approval for particular investment proposals to proceed from the points of view of negotiating the deal and preserving commercial confidentiality. However while at least two proposals, expected to return 30 per cent minimum, were under investigation by him he felt unable to divulge to the court in what manner and by what entity the proceeds of the sale of the business would be used. This is important in an application of this kind. The lack of assurance that it would not involve dissipation of assets in the proper sense was to my mind a negative feature of the case made by the respondents. The statement in Mr O'Keefe's affidavit "at this stage the first to fifth defendants have not yet in fact decided what we intend to do with the funds the subject of this application," is ambiguous and not of great assistance in resolving in favour of the respondents the question whether there is a real risk of dissipation. In putting the matter that way I have not forgotten that the onus lies on the plaintiff. It is merely an application of the principle that the absence of satisfactory evidence to rebut an applicant's prima facie case may strengthen an inference sought to be drawn by the applicant. I am satisfied that, as the matter stands, the applicants have made out a case for a Mareva injunction. The question whether it should have been limited to a certain sum has been considered. However if the applicants claim is taken at its highest and the component of interest is taken into account the figures before me do not have sufficient precision to enable me to fix an upper limit. I should add that I do not necessarily accept the propositions put forward by the respondents as to the calculation of damages.
I will grant an injunction in terms of para. 1 and 2 of the Notice of Motion. I propose to give liberty to apply. As to costs I order the first to fifth defendants to pay the applicants' costs to be taxed.
The orders are as follows:-
Upon the first and second plaintiffs giving the usual undertaking as to damages.
Subject to para. 2 hereof, the first to fifth defendants be restrained from in any way encumbering, disposing of, pledging or otherwise dealing with the present proceeds of sale of the business of Quilare Pty Ltd payable pursuant to a written contract dated 1 July 1996 (Exhibit "D" to the affidavit of John Watson Quinn filed herein) until judgment herein or earlier order.
Notwithstanding para. 1 hereof, the first to fifth defendants are entitled to pay, from the said proceeds of sale, arms length secured and unsecured creditors of Quilare Pty Ltd.
Liberty to apply.
The first to fifth defendants are ordered to pay the first and second plaintiffs' costs of and incidental to the motion to be taxed.
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