Official Receiver of State of Israel v Raveh
[2001] WASC 72
•20 MARCH 2001
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: THE OFFICIAL RECEIVER OF THE STATE OF ISRAEL in his capacity as LIQUIDATOR NORTH AMERICA BANK LIMITED (IN LIQUIDATION) -v- RAVEH [2001] WASC 72
CORAM: MURRAY J
HEARD: 16 MARCH 2001
DELIVERED : 16 MARCH 2001
PUBLISHED : 20 MARCH 2001
FILE NO/S: CIV 1360 of 2001
BETWEEN: THE OFFICIAL RECEIVER OF THE STATE OF ISRAEL in his capacity as LIQUIDATOR NORTH AMERICA BANK LIMITED (IN LIQUIDATION)
Plaintiff
AND
GAD RAVEH
DefendantBIARA PTY LTD
Intervener
Catchwords:
Practice and procedure - Interlocutory injunctions - Asset preservation order - General principles - Power to make order when no proceeding pending - Proceedings instituted in State of Israel may lead to final judgment - Proposal to register that judgment in Supreme Court of WA
Legislation:
Foreign Judgments Act 1991 (Cth), s 5, s 6
Foreign Judgments Regulations 1992 (Cth) Reg 3, Reg 4 and Schedule
Result:
Application dismissed
Representation:
Counsel:
Plaintiff: Mr R L Le Miere QC & Mr A J McLean
Defendant: Mr J Gilmour QC & Mr M G Pendlebury
Intervener: Mr D M Stone & Mr D R Kilpatrick
Solicitors:
Plaintiff: Corrs Chambers Westgarth
Defendant: Clayton Utz
Intervener: Williams & Hughes
Case(s) referred to in judgment(s):
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334
Chew v Satay House of WA Pty Ltd, unreported; SCt of WA; Library No 970570; 29 October 1997
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd's Rep 509
Mercedes Benz AG v Leiduck [1996] AC 284
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1
Siskina v Distos Compania Naviera SA [1979] AC 210
Case(s) also cited:
Brereton v Milstein [1988] VR 508
Castlemaine Tooheys Limited v South Australia (1986) 161 CLR 148
Construction Engineering (Aust) Pty Ltd v Tambel (Australasia) Pty Ltd [1984] 1 NSWLR 274
Deputy Commissioner of Taxation v Ahern [1986] 2 Qd R 342
Deputy Commissioner of Taxation v Sharp (1988) 82 ACTR 1
Glen Holdings Pty Ltd v AGC (General Finance) Ltd, unreported; Full Court SCt of WA; Library No 930366; 2 June 1993
Patterson v BTR Engineering (Aust) Limited (1989) 18 NSWLR 319
Perth Mint v Mickleberg & Ors (No 2) [1985] WAR 117
Republic of Haiti v Duvalier [1989] 1 All ER 456
Santos & Associates v Glowtime Pty Ltd [2000] WASC 58
Thodos (1995) 6 JBFLP 101
MURRAY J: The application before the Court is in form one for an interlocutory injunction sought by the plaintiff in his capacity as liquidator of the North America Bank Ltd (In Liq). The plaintiff sought an order that the defendant be restrained from removing from WA, or in any way disposing of or dealing with or diminishing the value of, any asset situated here, whether in his own name or not and whether solely or jointly owned, up to the value of US$8M. In particular, it was sought to have the order cover shares or interests held by the defendant directly or indirectly in thirteen nominated companies and the entity identified as the Interlaken Trust.
The application by summons was supported by a writ endorsed with a claim for such an injunction in final form. An interesting aspect of the relief sought, both endorsed on the writ and the subject of the chamber summons, was that an item of property sought to be covered were certain choses in action as they were described, comprising the defendant's causes of action the subject of two nominated proceedings, actions CIV 2114 of 1999 and CIV 1185 of 2000 instituted in this Court "or any consideration received by the defendant directly or indirectly, or by any entity controlled by or on behalf of the defendant, in compromise of or in relation to the Supreme Court proceedings". As will appear, in the final analysis it was unnecessary that I determine the appropriateness of making an order of the type sought in relation to the defendant's contingent interest in property which might be derived from a settlement of those actions, or whether in advance of any such interest accruing, it might be appropriate to make an order in respect of the choses in action which were the subject matter of the actions or, more strictly, the defendant's interest therein.
The writ issued two days before I heard the application. Senior counsel for the defendant had been briefed only shortly before I heard it. The defendant was unready to place before me information which would be concerned with the discretionary judgment the Court might make as to whether or not to make an order in the terms sought or in terms like those sought. I was invited to hear argument in relation to jurisdictional questions. I did so, but I think that more properly the argument could only be said to relate to jurisdictional questions in the sense that it was concerned with whether the Court might in the circumstances exercise its discretionary power to make an order in the terms sought.
As to that issue I heard full argument, not only from the parties, but also, by leave, from an intervener, the mortgagee of the defendant, Biara Pty Ltd, who therefore had an interest in the outcome of the proceedings to the extent that they might have an impact upon the process of settlement of the two actions identified in this application, which process I was informed was at "a sensitive stage", but which might ultimately result in the defendant being credited with what I was told might be "a very large sum of money indeed", sufficient apparently, so the implication was, to exceed the US$8M which was advanced as the extent of the plaintiff's interest in the property of the defendant. After hearing argument I dismissed the application. These are my reasons for so doing.
The defendant was, and is alleged by the plaintiff still to be, indebted to the North America Bank Ltd. In October 1985 the Bank and the defendant entered into an agreement, the terms of which are not presently material, for the payment to the Bank of the sum of US$3.9M plus compound interest at the rate of 16 per cent per annum. It would appear that having paid about US$1M, the defendant defaulted. Meanwhile, the Bank had been wound up. The plaintiff is its liquidator.
The defendant fell into default in 1993. He entered into negotiations with the plaintiff as a result of which the defendant was required to make an affidavit making complete disclosure of his assets and income. On the basis of the defendant's apparent incapacity to discharge his indebtedness, he and the plaintiff agreed to compromise the debt. They entered into an agreement dated 12 August 1993 by which the plaintiff accepted a sum of US$750,000 to be paid in six instalments commencing on 12 August 1993 and ending on 30 June 1997 in complete satisfaction of the currently outstanding debt. The compromise was honoured.
The agreement provided in cl 8.1 that should it transpire that in his affidavit the defendant had made any statement as to his assets or worth which was materially untrue (and by "material" was meant a difference that would have caused the plaintiff not to make the agreement had the true situation been known), then the whole amount of the debt owing at the time of the agreement, together with accrued interest since that time, would revive and become immediately payable. Interestingly, the agreement, cl 5.5, appears to have the effect that if the plaintiff should institute proceedings to recover the debt in full and obtains judgment, the defendant is not to defend any proceedings to enforce that judgment taken outside Israel, including in Australia, and he is obliged to agree to the making of any such enforcement order. By cl 12 it is provided that the agreement is governed by the law of Israel.
A newspaper report of a property dispute in which the defendant became involved in Israel in 1998 prompted the plaintiff to seek and obtain leave from the District Court of Jerusalem to investigate whether it might be the case that the defendant was in breach of the compromise agreement by reason of the falsity of statements made in the 1993 affidavit and, as affidavit evidence before me shows, by September 2000 the plaintiff had formed the conclusion that he should seek the leave of the District Court to commence an action against the defendant to recover what was then owing in respect of the original debt and in those proceedings to seek a Mareva injunction.
Such an order was made by the Tel Aviv ‑ Jaffa District Court on 24 December 2000. The order was made against the defendant and his wife. It is extremely broad in the definition of the "assets" to which it applies. It would clearly include any interest of the defendant in connection with the subject matter of the two actions to which I have referred above and assets or rights in various nominated companies and the Interlarken Trust are specifically mentioned. The order is in the form of a world‑wide Mareva injunction, applying to property or rights "of every nature and kind, whether in Israel or in Australia or elsewhere".
I have read the English translation of the reasons for decision of Zapat J in support of the grant of the relief sought. They cover two particular matters, being the defendant's interests in a nominated company and in a particular trust fund in respect of which his Honour concludes that prima facie sufficient evidence had been adduced to show that the plaintiff had good prospects of succeeding in his claim and on which the Court might "base the finding that in his statement on the eve of signing the agreement, [the defendant] gave a false description of the state of his assets, there being a significant difference between the situation described in the statement and the reality." The Court therefore made the order in the terms to which I have referred.
Meanwhile, in October 1999, the defendant as a plaintiff commenced proceedings in the action CIV 2114 of 1999. Certain of the defendants in that action later commenced the proceedings in CIV 1185 of 2000 against various parties, including the defendant as a fifth defendant. They are related proceedings. I am satisfied that settlement negotiations are proceeding in respect of them and if they are settled it may be upon terms which would provide a substantial financial benefit to the defendant and entities associated with him.
The Supreme Court Act 1935 (WA), s 25(9) provides a general power for the Court to make various orders, including interlocutory orders, if and when and in terms that the Court thinks to be "just or convenient". That grant of power provides a statutory foundation for the exercise of a jurisdiction to make an interlocutory injunction or order, but of course it says nothing about the terms of, or the circumstances in which, such an order should be made and it is often said that the Court has an inherent jurisdiction as both a court of law and equity to make orders, including interlocutory orders, in aid of its general jurisdiction.
The general principles governing that form of interlocutory order for the preservation of assets which is often described as a Mareva injunction after the case in which this form of order was first made: Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd's Rep 509, are usefully discussed by the High Court in Jackson v Sterling Industries Ltd (1987) 162 CLR 612, at 617 ‑ 618, 619, 621, 623 and 641.
A Mareva injunction or assets preservation order is one made as part of the statutory or inherent jurisdiction of the court, not as a substantive remedy or process in its own right, but as an ancillary remedy to prevent a party frustrating the substantive judicial process of the court in relation to the pursuit of a cause of action before the court. It is not a process of anticipatory execution or a process designed to give a party security for the recovery of a judgment which may not yet have been obtained and may indeed never be obtained.
So the remedy will not be granted, consistently with that statement of principle, unless the ordinary tests for the grant of interlocutory relief are met, the need for the applicant to demonstrate a serious question or fairly arguable case that it will ultimately obtain the final relief which is sought, in particular a judgment for a debt or damages, and that what is described as the balance of convenience establishes the need or desirability to make the interlocutory order rather than simply leaving the applicant to pursue the substantive claim to the point of final judgment and then to enforce that judgment.
Further, for a Mareva order or injunction to be made there will need to be established some additional ground for the making of the order than merely that the defendant may become a judgment debtor. That ground will lie in the establishment of the likelihood that the defendant might divest itself, or otherwise deal with its assets in a way which is deliberately designed or calculated to have the capacity to defeat the final process of the court by frustrating the enforcement of any judgment which may be obtained. The order may be fashioned to meet the particular circumstances of the case and the nature of the anticipated danger as well as to provide for the defendant the subject of such an order to be able to have access to its property for reasonable purposes pending the final judgment. The point is to be made that such an order acts in personam against the party or entity which is subjected to it, hence, it may be made to apply to the proprietary interests of that party or entity whether they may be situated within or outside the territorial jurisdiction of the court making the order.
The principles so stated have been reaffirmed in later decisions of the High Court: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 and, with respect to the making of an order restraining the disposition of assets by a third party, Cardile v LED Builders Pty Ltd (1999) 198 CLR 380. In so stating the law, High Court referred to a number of English decisions and in particular, and recently, that of the House of Lords in Mercedes Benz AG v Leiduck [1996] AC 284, before finally approving as a correct statement of principle what was said by a majority of the High Court in Patrick Stevedores at 32. In Cardile a majority of the Court added at 401 the observation that in Patrick Stevedores:
"…the attention of the Court was directed to orders against parties to the proceedings and against whom final relief was sought. In that situation, the focus is the frustration of the court's process." (My emphasis)
As I understand the applicable principles for the grant of a Mareva order, it is right to focus upon the making of an order in appropriate circumstances in aid of a party who is seeking final relief, the order being of an interlocutory character to operate against a party who would so behave as to seek to frustrate, or in a way calculated to have the tendency to frustrate, the final process of the court and the enforcement of its orders. In focusing upon that aspect of the matter, I put to one side of course, for present purposes, the additional or somewhat different elements of the grounds for the making of such an order against a third party, a stranger to the action in which the order may be made.
In my opinion to state the matter in that way is consistent with general principle recognised in other contexts. In Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 the House of Lords was concerned with an arbitration agreement in respect of disputes concerned with the construction of the Channel Tunnel which provided for arbitration in Belgium. It was held that the English courts should, in reliance upon a general power to grant interlocutory relief, issue an order staying proceedings brought in English courts seeking an injunction to prevent the suspension of work pending the arbitration proceedings. No such injunction should be granted because there were no arbitration proceedings on foot, but merely an agreement to submit the dispute to arbitration abroad.
Lord Mustill, with whom the other members of the House agreed, referred to general principles in respect of the power to grant an interlocutory injunction under a statutory power expressed in similar terms to s 25(9) of the Supreme Court Act. At 362 his Lordship said that:
"…the right to an interlocutory injunction cannot exist in isolation, but is always incidental to and dependent on the enforcement of a substantive right, which usually although not invariably takes the shape of the cause of action. If the underlying right itself is not subject to the jurisdiction of the English court, then that court should never exercise its power under s 37(1) by way of interim relief." (My emphasis).
In my opinion the same view was expressed in the context of a Mareva injunction by the majority of the Privy Council in Mercedes Benz at 303. The Mercedes Benz case turned on the capacity under O 11 r 1 of the Rules of the Supreme Court of Hong Kong to serve out of the jurisdiction substantive proceedings initiated against the defendant in Hong Kong. Only if that was possible could the jurisdiction of the Hong Kong court be enlivened in proceedings against the defendant which might produce a final order which might be frustrated by the defendant dealing with his assets out of the jurisdiction in Monaco. The capacity to serve out of the jurisdiction not being established, it was held that a Mareva injunction could not be issued out of the High Court of Hong Kong. At 303 their Lordships said:
"If the argument for Mercedes is correct, it must follow either that throughout the life of O 11 the extra‑territorial jurisdiction of the English court has extended to a sui generis form of relief which nobody knew to exist, or that the jurisdiction will suddenly gain an extra dimension at the moment, if it arrives, when a Mareva injunction in aid of foreign proceedings is recognised as a permissible exercise of the power to grant an injunction."
The Board was not called upon to finally decide the question. The ratio of the case turns on the capacity to serve out of the jurisdiction, but it seems to me that obiter a clear view was expressed.
There is a line of such cases which follows the decision of the House of Lords in a case which was also concerned with a question of service out of the jurisdiction, Siskina v Distos Compania Naviera SA [1979] AC 210. If the establishment and enforcement of the underlying right upon which the plaintiff's cause of action relies is capable of being the subject of proceedings in this Court, then it will not be an impediment to the grant of a Mareva order that no such proceedings have in fact been issued and that none are pending in the court, particularly where such proceedings may be imminent. The terms of a Mareva order may be fashioned to ensure that the court's substantive processes in aid of the establishment of the underlying right or cause of action relied upon by the applicant for the injunction are pursued with expedition: see generally the judgment of Parker J in Chew v Satay House of WA Pty Ltd, unreported; SCt of WA; Library No 970570; 29 October 1997 at 12 ‑ 13.
But that seems not to be the position in this case. Here the plaintiff proposes no more to invoke the jurisdiction of this Court than, if a final judgment is obtained in the District Court of Israel, to have the judgment registered here. He proposes to proceed under the Foreign Judgments Act 1991 (Cth) in relation to the money judgment which would be obtained in Israel. Section 5(1) of that Act provides that if the Governor‑General is satisfied that there will be substantial reciprocity of treatment in relation to the enforcement in a foreign country of money judgments given in Australian superior courts, then the regulations may provide that the Act extends, in relation to the foreign country, to "money judgments given in the superior courts" of that country. By s 5(2) the regulations may specify which courts of which countries are superior courts for the purposes of the Act and by s 5(4) it is made clear that the enforceable money judgment must be one which is final and conclusive (at least subject to appeal), and given in a superior court of a country in relation to which the Act extends.
Regulations 3 and 4 of the Foreign Judgments Regulations 1992 (Cth) provide for the countries to which the Act will extend and the courts within those countries which are taken to be superior courts for the purposes of the application of the Act. There is a Schedule which specifies both those matters and it is sufficient for present purposes to say that item 14 of the Schedule makes the Act applicable to the State of Israel and, among other courts, the District Courts of that State.
That being the case, by s 6(1) of the Act a judgment creditor may apply to an appropriate court within Australia to have the judgment obtained in Israel registered in the court. By s 6(2), in this case the appropriate court would be the Supreme Court of WA. By s 6(7), upon registration a registered judgment has for the purposes of enforcement the same force and effect and the same proceedings may be taken as if it was a judgment of this Court.
The difficulty in my opinion for the plaintiff in this case is that the only procedure involving this Court would be the application to register the judgment. In such a case under s 6(3) of the Act, the Supreme Court "is to order the judgment to be registered." The outcome would be a final order which would have no other connection with the processes of this Court and which would be made in no sense in reliance upon an underlying right or cause of action pursued in this Court. The enforcement processes which might follow upon registration would in no sense be for the purpose of enforcing the recognition by this Court in its final order of any such underlying right or cause of action.
In the factual circumstances to which I have referred, no such substantive proceedings could be issued out of this Court to enforce or sue upon the compromise agreement in respect of the debt incurred in Israel. A Mareva order, as I have said, in my opinion rests upon the foundation of principle that it is not to enforce foreign process, but to operate upon a defendant who seeks to evade or acts in a way calculated to defeat the enforcement in this Court of a substantive right pursued by the plaintiff in this Court. It is not to the point, in my view, to consider whether or not the world‑wide Mareva order obtained in Israel would be efficacious against the Western Australian property of the defendant. In my opinion the order may not be replicated in this Court as an exercise of the power to grant interlocutory relief because it has, and can have, no connection with the enforcement of a substantive right in proceedings taken by the plaintiff in this Court.
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