Redville Holdings Pty Ltd v Four Fingers Pty Ltd

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: REDVILLE HOLDINGS PTY LTD -v- FOUR FINGERS PTY LTD [2007] WADC 25

CORAM: KEEN DCJ

HEARD: 23 FEBRUARY 2007

DELIVERED : Delivered Extemporaneously on 27 MARCH 2007 typed from tape and edited by his Honour Judge Keen

FILE NO/S: CIV 2542 of 2006

BETWEEN: REDVILLE HOLDINGS PTY LTD (ACN 077 760 582)
Plaintiff
AND
FOUR FINGERS PTY LTD (ACN 102 366 343)
Defendant

Catchwords:

Mareva order - Principles - Risk of dissipation of assets

Legislation:

Nil

Result:

Application dismissed

Representation:

Counsel:

Plaintiff: Mr T O Coyle
Defendant: Mr J B Blackburn

Solicitors:

Plaintiff: Lavan Legal
Defendant: Carlo Primerano & Associates

Case(s) referred to in judgment(s):

Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Eng Mee Yong v Letchumanan [1980] AC 331
First Industry Corp v Goh & Ors [2002] WASC 111
National Australia Bank v Bond Brewing Holdings Ltd (1990) 169 CLR 271
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 8 WAR 183
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Perth Mint v Mickelberg (No 2) [1985] WAR 117
Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264
Santos v Glowtime Pty Ltd [2000] WASC 58
Scanlan v Greenport Nominees Pty Ltd [2001] WASC 233
Z Ltd v A‑Z and AA-LL [1982] 1 All ER 556

Case(s) also cited:

Ansai Pty Ltd v Hak Nominees Pty Ltd [2006] WADC 179
Beach Petroleum NL v Johnson (1992) 7 ACSR 203
Bell Wholesale Co Ltd v Gates Export Corp (1984) 2 FCR 1
Cameron's Unit Services Pty Ltd v Kevin R Whelpton & Associates (Aust) Pty Ltd (1986) 13 FCR 46
Commodity Ocean Transport Corp v Basford Unicorn Industries Ltd ("The Mito") [1987] 2 Lloyd's Rep 198
Consolidated Constructions Pty Ltd v Bellenville Pty Ltd [2002] FCA 1513
Construction Engineering (Aust) Pty Ltd v Tambel (Australasia) Pty Ltd [1984] 1 NSWLR 274
Cool Sonic International Inc v Cool Sonic Research Pty Ltd (in liq) [1999] VSC 344
Erolen & Anor v Baulkham Hills Shire Council & Ors (1993) 10 ACSR 441
FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd (2000) 22 WAR 241
Frigo v Culhaci (1998) NSWSC 393
Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49
Hayden v Teplitzky (1997) 74 FCR 7
Hiero Pty Ltd v Somers (1983) 68 FLR 171
His Grace Metropolitan Petar & Ors v Macedonian United Society of Western Australia Incorporated & Ors [2007] WASC 19
Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189
Memutu Pty Ltd v Lissenden (1983) 8 ACLR 364
Mott v Mount Edon Gold Mines (Aust) Ltd (1993-1994) 12 ACSR 658
Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft GmbH (The Niedersachsen) [1984] 1 All ER 398
Official Receiver of the State of Israel v Raveh (2001) 24 WAR 53
Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435
R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59
Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd (1992) 57 SASR 180
Sanko Steamship Co Ltd v DC Commodities Australasia Pty Ltd [1980] WAR 51
Satcom Business Exchange Pty Ltd v BCCC Pty Ltd [2001] WASC 126
Slack v Leeds Industrial Co-operative Society Ltd [1923] 1 Ch 431
Taylor v Diamand & Zikos Developments Pty Ltd (1997) 6 NTLR 164
Uniflex (Australia) Pty Ltd Hanneybel [2000] WASC 231
Warren Mitchell Pty Ltd v Australian Maritime Officers Union (1993) 12 ACSR 1
Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16
Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542

KEEN DCJ: In this matter the plaintiff seeks a Mareva or asset preservation type order over funds and property belonging to the defendant, Four Fingers Pty Ltd. Full details of the orders sought and the scope of those orders are set out in the summons of the plaintiff dated 21 December 2006. I will not go into the scope of that at this stage.
The proceedings themselves involve a claim by the plaintiff for moneys said to be due and owing arising out of the sale by the plaintiff to the defendant of the Olive Tree Restaurant in West Perth. Specifically the plaintiff is claiming what can only be described as interest on the balance of the purchase price and as at the date of the writ, that sum was claimed to be $93,484.27. The statement of claim which was filed in support of a writ in this matter sets out that the contract for the sale of the restaurant from Redville Holdings Pty Ltd to Four Fingers Pty Ltd was in the sum of $450,000, subject to finance.
The plaintiff pleads a variation to that contract whereby it is said that the plaintiff would provide vendor finance if the defendant was unable to obtain finance elsewhere. The terms of that vendor finance were that the balance was to be fully paid within five years of settlement on the contract and essentially that the defendant would pay interest on the balance outstanding from time to time at the rate charged by St George Bank with the plaintiff on its account with the bank on that sum outstanding. That was to be done by the defendant in reality assuming the liability to make interest payments on that facility and, as was pleaded in par 6.2.2 of the statement of claim, as between the plaintiff and the defendant any portions of interest payments made by the defendant under the facility that were in excess of the interest payable on the balance of the purchase price were to be credited to the capital.
I note that initially it occurred to me that the way in which the matter was pleaded, raised an issue of uncertainty as to the amount of interest payments but it was explained to me that the interest was in fact to be calculated on the rates charged on the balance owing, although the balance owing to the bank itself might be higher, so that any excess payment over the interest on the balance owing under the contract for sale would then be put towards capital. So to the extent that it may have had some problems with uncertainty as to interest rate, the interest rate was fixed by reference to the interest rate charged by St George Bank.
By its amended defence dated 12 February 2007, in essence, the defendant denied the variation in the terms alleged and as pleaded by the plaintiff, agreed that the balance of purchase money was to be paid within five years but said that the payments in respect of that were to be interest free. Whilst the defendant admitted making the payments to the St George Bank account, it denied that those payments were of interest and pursuant to the variation as alleged by the plaintiff. The defendant by its defence avers that it has paid in full the moneys owing under the contract of sale and denies there is any balance owing.
Put simply, the issues in this matter seem to boil down in its, simplest terms to "Was the defendant to pay interest on the outstanding purchase moneys or not?" because as I expressed it to Mr Coyle, it does not matter which way you express it, what the plaintiff is in fact saying is that there is interest payable on the balance of the purchase price.
I was given a great deal of case law and argument on the law and the principles to be applied in relation to Mareva type orders. It appeared to me from those arguments that there is no issue that because such an order has a significant impact upon the property of the person against whom it is made, it carries with it a high degree of caution and being a drastic remedy should not be granted lightly. Cardile v LED Builders Pty Ltd(1999) 198 CLR 380.
Further, it seemed to me that there was no issue that the plaintiff must show that it has a sufficiently arguable cause of action. Although Mr Coyle did indicate that it is not necessary, and I accept this principle, that the plaintiff shows it has somewhat better than a 50 per cent chance of success, all that is necessary is that there should be a good arguable case. Then there are the questions of balance of convenience and how that is affected by the issues relating to the strength or weakness of the plaintiff's case.
It is not part of my role at this interlocutory level to try to determine between the disputed facts as revealed by the affidavit material before me. However, and it is acknowledged by both sides, that should not detract from the need to view that evidence critically in considering these two essential issues. I was referred to the well‑known case of Eng Mee Yong v Letchumanan [1980] AC 331 which has been cited with approval on numerous occasions where it was said at p 341:
"Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be. In making such order on the application as 'may think just' the judge is vested with a discretion which he must exercise judicially. It is for him to determine in the firsts instance whether statements contained in affidavits that are relied upon as raising a conflict of evidence upon a relevant fact have sufficient prima facie plausibility to merit investigation as to their truth."
What did become an issue on the principles to be applied was in relation to the risk of dissipation of the assets of the defendant. The plaintiff's case is that it is not necessary to prove that the purpose of the conduct in question is to frustrate the satisfaction of a judgment. The plaintiff says that it is enough that that is the result of the conduct. The plaintiff cited National Australia Bank v Bond Brewing Holdings Ltd (1990) 169 CLR 271 and other cases in support. They are set out in par 8 of the plaintiff's outline. In other words, the plaintiff says intention is not a relevant issue and that the NAB case contains obiter to support that proposition.
The defendant's position on the other hand is that the plaintiff must prove that there was a real risk that the defendant will dissipate the assets and will do so with the intention or purpose of frustrating the judgment. The plaintiff relies on Perth Mint v Mickelberg (No 2) [1985] WAR 117, being a decision of the Full Court of the Supreme Court of Western Australia, and other cases set out in its written submission.
The plaintiff further argued that a number of the Western Australian cases referred to, including Scanlan v Greenport Nominees Pty Ltd [2001] WASC 233, Santos v Glowtime Pty Ltd [2000] WASC 58; First Industry Corp v Goh & Ors [2002] WASC 111, were all cases where there was found to be no risk of dissipation and, therefore, they did not assist the defendant because it was not necessary for them to go on to consider the question of whether or not the intention was to dissipate or to frustrate the judgment. All of those cases followed the Perth Mint case. So I am now left with the competing arguments: that I am bound by the obiter in the High Court in the National Australia Bank case and which has found some expression of support, and I put it no higher than that, in the Cardilecase, and the other, that I am bound by the Perth Mint case, said by the plaintiff to contain obiter as to the need to show intention.
For the purposes of these reasons it is not necessary for me to examine in detail all of the cases before me. It seems to me that if the National Australia Bank case does contain obiter, albeit from a very high source, and there seems to be no dispute between the parties that that was what it was, and if the statement in the Perth Mint case is in fact part of the ratio of that case then I would be found to follow the Perth Mint case. If the Perth Mint case contained obiter on the issue of intent then the question arises as to what weight I should give to that line of authority. It might well depend upon what the facts were in which the obiter was expressed.
In the National Australia Bank case the High Court was considering the appointment of receivers and managers and the necessity, for an undertaking as to damages. It was in the context of that application that the Full Court of the Supreme Court of Victoria had made comments and expressly emphasised:
"That there was no attempt at any stage in the present case to make a Mareva-type case of apprehended danger of dissipation of assets."
In my view, that comment was clearly obiter. It left open the question for another time. In Cardile at p 303 the Court made reference, albeit in passing, to the National Australia Bank comments but in the context of an application for an order pursuant to s 23 of the Federal Court Act which refers to the Court acting as it thinks appropriate, and went on to say that that was in relation to "the development of principles governing the exercise of the power in such a fashion as to avoid abuse".
In my respectful opinion, this does not elevate the obiter but the addition of the words "as to avoid abuse" does suggest to me that their Honours were keeping it open, that there would or might still be required something more than just the effect of the conduct being to dissipate the assets.
On the other hand in the Perth Mint case Burt CJ at p 118 had this to say:
"Such an order will be made when it appears to the Judge 'to be just or convenient that such an order should be made'.
Essentially, the appearance of that justice or convenience will depend upon the apparent strength of the plaintiff's case and upon it being shown that if the order is not made there is a real risk or likelihood that the defendant in the action will remove his assets from the jurisdiction or will deal with them within the jurisdiction so that and with the intention that should the plaintiff obtain judgment it will be a barren judgment which will remain unsatisfied. I would, with respect and with one reservation, adopt and apply to this case what was said by Kerr LJ in Z Ltd v A‑Z and AA-LL [1982] 1 All ER 556 at 572."
His Honour the Chief Justice then set out a short passage from what Kerr LJ had said which I need not repeat here. In the same case Wallace J noted at p 122 of the judgment the absence of evidence to establish intent, and Pidgeon J at p 124 referred to the intention and conspiracy to put the assets beyond execution, which was an undoubted reference to the need for intention.
So the question arises: was that obiter? Mr Coyle for the plaintiff says all of that was obiter because it was not necessary for the Court to go on to decide the need for intention. In that case the Chief Justice canvassed the evidence said to show that Brian Mickelberg would dissipate the assets with the intention of leaving a barren judgment and noted that since the conviction was quashed one could not safely infer an intention to place the property beyond the reach of the appellant.
I do not deduce, to the same extent as suggested by Mr Coyle, that the case was one where there was no risk of the assets not being dissipated. In the context of that case, in my opinion, it was part of the ratio of the decision that there was no intention inferred but was it necessary to go into the question of intention? His Honour had adopted what was said in Z Ltd v A‑Z and AA-LL [1982] 1 All ER 556 and by so doing it became necessary for the ratio of the case to have, as part of the ratio, a consideration of an intention of the kind described.
That decision has been followed in this state in a number of cases, Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 8 WAR 183, Santos, Scanlan, and is consistent with decision elsewhere, for example, Gleeson CJ as he then was in the New South Wales Court of Appeal, in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319; and the cases referred to therein including Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 and others there where has been reference to organising one's assets to frustrate a judgment, and for example, see also Frigor v Culhaci in the New South Wales Court of Appeal, delivered 17 July 1998, where reference is made to the unscrupulous defendant seeking to make himself judgment proof.
In all the circumstances I am satisfied that intention on the part of the defendant is, on the weight of authority, required to be shown and that that was part of the ratio in the Perth Mint case and, therefore, I must follow it. Even if I was wrong on that and it was just a matter of obiter, I would prefer to follow the Perth Mint case. It specifically deals with a Mareva-type order in distinction to that in the National Australia Bank case.
I now come to deal with the disposition of the application. Mr Blackburn says that there are five matters which I should consider: the first is whether or not there is a good arguable case; the second as to whether or not there is cogent evidence to show that there is a real risk of dissipation of the assets; the third, whether or not there is cogent evidence to show that that would occur, with the intention to frustrate the judgment; the fourth being the balance of convenience, and the fifth being the undertaking as to damages.
The evidence of the plaintiff was by affidavits from Mr Ian David Brain, sworn on 20 December 2006 and 15 February 2007. That first affidavit exhibited correspondence between the plaintiff's solicitors and the defendant and the defendant's solicitors, finally claiming the sum said to represent the balance due. That was denied and there was also an allegation that the restaurant had been placed on the market for sale and the plaintiff sought an undertaking to keep the proceeds and not to dissipate $120,000 from those proceeds. No such undertaking was given by the defendant.
The plaintiff asked me to infer from the lack of explanation from the defendant and presumably the failure to give the undertaking that the proceeds are at risk. There is nothing in those affidavits of Mr Brain that takes the matter, or that issue, any further. Specifically the defendant argues that there is no evidence to show that there is a real risk of dissipation. Also, there is no evidence to show that the purpose of the sale is to render the judgment unsatisfied or incapable of being satisfied. I agree with Mr Blackburn's analysis of the evidence.
As far as I can see from that evidence, there is nothing in the evidence by way of cogent evidence that the assets will be dissipated. Nor is there anything in the evidence to show that there is an intention to avoid any judgment. In Neat Holdings Ipp J analysed correctly, with respect, what was said in Perth Mint. In that case his Honour said at page 185:
"40.Mareva injunctions are directed against dispositions which are intended to frustrate or have the necessary effect of frustrating the plaintiff in his attempts to seek an appropriate remedy through the courts: see State Bank (Vic) v Parry (unreported, Supreme Court, WA, Library No 7408, 22 November 1988.
45.The plaintiff is, accordingly, required to establish an intention on the part of the defendant to dispose of his assets so as to defeat the claims of creditors and to ensure that any judgment obtained by the plaintiff would be unsatisfied: see Perth Mint v Mickelberg (No 2); State Bank (Vic) v Parry.
50.In the present case, it is not disputed that the first of the requirements has been met; that is, there is sufficient evidence to show that there is the required prospect that the plaintiff would recover judgment against Karajan and Mr Unbehaun.
What is in issue, however, is whether there is an intention on the part of Karajan or Mr Unbehaun to dispose of his assets (assisted, presumably, by Karajan and Mrs Unbehaun) with the effect of defeating the claims of creditors and the plaintiff in particular."
Similarly, in Scanlan at par 79 Hasluck J noted that the applicants bore the burden of proof on those matters. Bearing in mind that the cases show that relief of this kind is to be granted with caution (Cardile), I am not satisfied that the plaintiff has demonstrated either that there is a real risk of dissipation of the assets nor the intention to do so. On that basis alone I would dismiss this application.

However, I have regard to the question of whether the plaintiff has demonstrated a good arguable case. In support of the variation alleged by the plaintiff, the plaintiff says that the test is fairly low. I do not agree. Those words appear to be at odds with "good arguable case" and what was said in Cardile, that is, that it is a remedy that should not be granted lightly.
The plaintiff says firstly that to grant vendor finance interest free is inherently unlikely; secondly that there is evidence in the form of a schedule exhibited as IB6 to the affidavit of Mr Brain sworn on 20 December 2006 which referred to interest paid through St George Bank, and further that that schedule was produced for the defendants.
As to the first of those points, that is to say whether or not it is inherently improbable, I accept that in an ordinary arm's-length transaction such as this interest-free finance would not be the norm. However, much depends upon all the circumstances, some of which is alluded to in Mrs Davies's affidavit sworn 6 February 2007. However, it is not possible for me to make findings in regard to these matters and I do not do so but in trying to give some weight to the assertions of both sides, I have had regard, on the authority of Eng Mee Yong, to the written materials that are before the court at this stage.
Mrs Davies deposed that the ANZ Bank was financing the purchase of the freehold through Blue Bay Pty Ltd and required confirmation of the vendor finance to be granted by the plaintiff to the defendant in respect of the sale of the restaurant business. Following on from that Mr Brain provided in a letter, which was exhibited to Mrs Davies' affidavit as PLD3, which sets out details of the loan and included the words "interest to be charged Nil".
I digress to say that Mr Brain's affidavit of 20 December 2006 in relation to that document said he did not recall having seen it previously and denied informing Mr and Mrs Davies that interest would not remain owing on the balance of the purchase price as provided by the variation as he alleges. He does not say that he did not sign the document. He merely says he does not recall having seen it previously. Significantly, in my view, Mrs Davies deposes that in August 2005 she telephoned Mrs Brain and asked for a copy of the document which was provided.
The inconsistencies that might be perceived between Mr Brain saying that he did not recall the document and his wife supplying it have not been explained but again it is significant that the copy of the document that Mr Brain exhibits to his first affidavit would appear to be the same as the document that was sent to Mrs Davies in a thermal fax form, and coming through in that form, it contained some changes in the way of tabulation of the material contained in it. That just suggests, and no more than suggests, that the original of that document was always in the possession of the plaintiff.
Thirdly other documents have been prepared and these are the Verschuer Edward documents. These documents were prepared by those solicitors for the plaintiff in order to document the vendor finance. They comprise a sale agreement, a deed of guarantee and indemnity and a debenture together with a form of mortgage under the land titles legislation. Neither of the first two documents mentions interest in respect of the vendor finance referred to, and the third, being the debenture, refers to the sum of $225,000 payable on 30 November 2007 without interest. The mortgage document itself also refers to there being no interest. Mr Brain's answer to those formal documents is that he did not read them carefully before signing them.
So, on the one hand we have document PLD3 which came from Mr Brain and is a contemporaneous document. When I say "contemporaneous", it is close to the time of the contract. On the other hand is the document IB6 this is relied upon by Mr Brain and being a schedule of payments made by the defendant into the St George Bank. Mr Brain says, or his counsel says that that serves and could serve at trial as an acknowledgment of debt and I accept that that is so. As to what weight I can give it at this stage, I have to have regard to all of the surrounding evidence.
What I do have is evidence from a Mrs West, a bookkeeper, by affidavit sworn on 5 February 2007. She prepared that document on the instructions of Mr Brain. There is a dispute from Mr Brain about that and also from Ms Davies which I cannot determine on the evidence before me. I cannot determine the complete background to the document or Mr Brain's assertion that it came from or somehow found its way on to Mr Davies's computer.
In his affidavit evidence Mr Brain gives a printout of what appears to be the properties section in relation to that document showing on whose computer it appears. That is somewhat vague evidence in relation to the computer and about which I can have little regard at this level of inquiry. When putting that in the balance against the direct evidence of Mrs West when considering the probabilities at this stage of the matter, (and I use the word "probabilities" in the sense referred to in Eng Mee Yong), I find that the evidence of Mrs West is more compelling than that of Mr Brain in relation to the information on the computer.
So in relation to whether or not the plaintiff has made out a good arguable case, it seems to me, testing the evidence before me as critically as I am able, that the evidence of the plaintiff is to a large extent contradicted by the written documentation and whilst that may be dealt with at trial, at this level of inquiry, there is that contradiction and I am left with an uneasy feeling in relation to the strength of the case.
That leads me on to the balance of convenience. I note that such an order as this is not to be used to secure a prospective judgment and that an individual should be at liberty to employ its resources as it sees fit unless restrained. That was what was said in Scanlan's case and I think it reflects a general view in relation to orders of this nature. The balance of convenience may well vary with the strength of the plaintiff's case. If the plaintiff's case is strong then it may be that it will not take much to shift the balance of convenience in its favour and vice versa.
Here I have noted that the plaintiff's case, having regard to the documentary evidence, whilst clearly arguable, appears to be weak. I have heard nothing to suggest that the balance of convenience should be swayed in favour of the plaintiff to secure a possible injunction as opposed to allowing the defendant to employ its resources as it wishes.
Finally I have been provided with undertakings as to damages in respect of the asset preservation orders, one given by Westhaven Nominees Pty Ltd, being a stranger to these proceedings, in the usual form and the other being given by Mr Ian David Brain personally. At this stage I am not in a position to say whether or not those undertakings are sufficient to support the injunction. I have left it open, should it be necessary for the parties to argue that further at a later stage, but today it is not necessary for me to go into the undertaking any further because for all the reasons I have expressed in these oral reasons I would dismiss the plaintiff's application for the order sought.

[2007] WADC 25

27 March 2007 typed from tape and edited by his Honour Judge Keen