RFD Ltd v Harris
[2008] WASCA 87
•20 MARCH 2008
RFD LTD -v- HARRIS [2008] WASCA 87
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASCA 87 | |
| THE COURT OF APPEAL (WA) | 24/04/2008 | ||
| Case No: | CACV:120/2007 | 20 MARCH 2008 | |
| Coram: | STEYTLER P McLURE JA | 19/03/08 | |
| 14 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed | ||
| B | |||
| PDF Version |
| Parties: | RFD LTD AIG EUROPE (UK) LTD AMERICAN HOME ASSURANCE COMPANY DANIEL PAUL HARRIS |
Catchwords: | Practice and procedure Refusal to extend mareva order Test for mareva order Whether material nondisclosure Turns on own facts |
Legislation: | Nil |
Case References: | Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 House v The King (1936) 55 CLR 499 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : RFD LTD -v- HARRIS [2008] WASCA 87 CORAM : STEYTLER P
- McLURE JA
- First Appellant
AIG EUROPE (UK) LTD
Second Appellant
AMERICAN HOME ASSURANCE COMPANY
Third Appellant
AND
DANIEL PAUL HARRIS
Respondent
(Page 2)
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : TEMPLEMAN J
Citation : RFD -v- HARRIS [2007] WASC 180
File No : CIV 2272 of 2006
Catchwords:
Practice and procedure - Refusal to extend mareva order - Test for mareva order - Whether material nondisclosure - Turns on own facts
Legislation:
Nil
Result:
Appeal allowed
Category: B
Representation:
Counsel:
First Appellant : Mr G R Donaldson SC & Ms K A Vernon
Second Appellant : Mr G R Donaldson SC & Ms K A Vernon
Third Appellant : Mr G R Donaldson SC & Ms K A Vernon
Respondent : Mr D R Williams QC
Solicitors:
First Appellant : DLA Phillips Fox
Second Appellant : DLA Phillips Fox
Third Appellant : DLA Phillips Fox
Respondent : Bradford & Co
(Page 3)
Case(s) referred to in judgment(s):
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
House v The King (1936) 55 CLR 499
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1
(Page 4)
1 STEYTLER P: I have had the advantage of reading the judgment of McLure JA. It reflects my own reasons for joining in the decision to allow the appeal and extend the mareva order.
2 McLURE JA: The appellants appealed from the decision of Templeman J made on 8 August 2007 dismissing their application to extend an interim mareva order made by Blaxell J. At the conclusion of the hearing, the court ordered that the appeal be allowed and extended the mareva order. These are my reasons for joining in that decision.
3 The background is as follows. On 26 March 2001 the respondent was involved in an accident (accident) in the course of his employment by Austal Ships Pty Ltd (Austal). The respondent claimed to have completely lost the use of his legs as a result of the accident. The overwhelming weight of the expert medical evidence was that there was no organic (physical) cause of his symptoms. He was diagnosed by psychiatrists as suffering from a conversion disorder which involves the conversion of an unconscious mental problem into neurological symptoms, in the respondent's case, paralysis.
4 The respondent received workers' compensation payments. In December 2002 he commenced a District Court action against the first appellant for common law damages for personal injuries said to have been suffered in the accident. In particular, the respondent claimed he suffered permanent functional paraparesis (paralysis) as a result of the accident.
5 The second and third appellants are agents for the management of claims made under policies of insurance between, inter alia, the first appellant and its insurer.
6 The first appellant admitted liability in the District Court action. On 29 April 2005 the first appellant and the respondent agreed to settle the District Court action. It was a term of the settlement that the first appellant consent to judgment in a total amount of $750,000. On 4 May 2005 judgment was entered in the District Court action for $650,000 (exclusive of workers' compensation payments) plus $100,000 costs (the judgment).
7 Austal had, under workers' compensation legislation, claimed an indemnity from the first appellant in relation to the payments of workers' compensation to the respondent. By a deed of settlement dated 18 March 2005 between the first appellant and Austal, the first appellant agreed to pay Austal $301,658 for workers' compensation which had been paid to
(Page 5)
- the respondent. The second appellant indemnified the first appellant for a significant portion of that amount. Further, pursuant to the insurers' obligation to indemnify the first appellant, the second appellant paid the judgment sum to or on behalf of the respondent.
8 Video surveillance footage showed that within five months of the judgment the respondent was walking without assistance. In September 2005 he was observed attending a paintballing session in relation to which he signed a disclaimer to the effect that he was sufficiently fit to stand the strain and exertion involved in playing paintball.
9 In these proceedings the appellants contend that the settlement agreements, judgment and payments made pursuant thereto were obtained by the fraudulent conduct of the respondent in knowingly misrepresenting in the District Court action and to the many medical experts who assessed his condition for the purposes of that action that he had, and continued to have, permanent functional paralysis. The appellants seek to set aside the settlement agreements and the judgment.
10 On 11 December 2006 the appellants applied ex parte before Blaxell J for a mareva order. The evidence relied on by the appellants was contained in an affidavit of Mark Lewis Williams, the solicitor having the conduct of the matter. Mr Williams annexed to his affidavit post-settlement medical reports from Drs Goodheart, Ker, Piirto and Terace. They supported the contention that the respondent had fabricated his symptoms prior to settlement. In other words, he had lied about his capacity to walk. Blaxell J made an interim mareva order.
11 The appellants' application to continue the interim mareva order was heard by Templeman J on 30 July 2007. Additional evidence was relied on including an affidavit of the respondent annexing medical reports from Drs Kay, Goodheart and Burvill, an affidavit of the respondent's former partner, Susan Barter and a further affidavit of Mr Williams annexing further medical evidence from Drs Goodheart, Terace, and Piirto.
12 The primary judge concluded that: (1) Mr Williams' affidavit relied on by the appellants to obtain the ex parte mareva order was misleading; (2) the appellants had failed to disclose material evidence in their ex parte application; (3) and those breaches were so serious as to warrant the immediate discharge of the mareva order.
13 The primary judge concluded that the appellants have an arguable case that the respondent acted fraudulently at some stage between March 2001 and April 2005. However, he was not persuaded there was a danger
(Page 6)
- of the respondent removing or dissipating his assets so as to prevent the appellants from enjoying the fruits of any judgment they might obtain against him. Accordingly, he dismissed the appellants' application to extend the mareva order.
14 The appellants rely on five grounds of appeal. They contend the primary judge:
(1) misdirected himself as to the correct test to be applied;
(2) alternatively, erred in the application of the test in failing to infer that there existed a risk the respondent would remove or dissipate his assets;
(3) in determining whether there existed a risk of dissipation of assets, erred in failing to have regard to the extent and seriousness of the alleged fraudulent conduct, the respondent's express resentment and anger towards the applicants and officers of the court, the respondent's failure to hold down regular employment and his failure to disclose the improvements in his condition prior to settlement;
(4) erred in finding that the appellants had failed to give disclosure of all material facts in their ex parte application;
(5) erred in finding that Mr Williams' affidavit was materially misleading.
The evidenced before Blaxell J
15 In his first affidavit dated 28 November 2006, Mr Williams said ([21] and [22]) that during the course of the District Court action the respondent was examined by a number of medical practitioners who provided medical reports, the majority of which diagnosed the respondent as having no spinal cord injury and 'a conversion (psychiatric) disorder manifesting as paralysis likely to be permanent'. He also swore as follows:
34. I believe that, in deciding to settle the workers' compensation recovery claim and [sic] the District Court action, [the appellants] acted in reliance upon:
34.1 the [respondent's] restricted mobility and disabilities as observed under surveillance and
- 34.2 the medical reports which stated the [respondent's] restricted mobility and disabilities were likely to be permanent.
I base my belief upon statements made to me by employees of [the first and third appellants] during the course of providing me with instructions to negotiate and effect the settlement.
16 Video surveillance of the respondent was undertaken at various times in the period between 9 June 2001 and 1 December 2003 (surveillance). The surveillance reports confirmed that the respondent was confined to a wheelchair.
17 Further surveillance of the respondent was conducted between October 2005 and December 2005. There was video footage of the further surveillance which disclosed that the respondent was able to walk unaided. Another firm (MGISA) was then instructed to investigate the respondent's conduct following settlement. Those investigations revealed, inter alia, that between 13 May 2005 (some two weeks post-settlement) to 9 December 2005 the respondent was observed walking and getting around without the assistance of a wheelchair.
18 After reviewing the video footage of the further surveillance Mr Williams sent the medical reports obtained before and during the course of the District Court action, the surveillance and the video footage of the further surveillance to Drs Goodheart, Ker, Piirto and Terace. Those doctors had examined and reported on the respondent's condition prior to settlement.
19 Mr Goodheart, a neurologist, examined the respondent in January 2004. He said the video footage demonstrated the respondent had made a full recovery. Having excluded any physical cause of his symptoms, there were only two possibilities for the respondent's inability to walk being that he had a conversion disorder or alternatively he was feigning his symptoms (that is, malingering). According to Dr Goodheart, the improvement within the relevant period was not consistent with symptoms secondary to conversion disorder and concluded that the respondent was deliberately fabricating his symptoms at the time he examined him in January 2004.
20 Mr Ker, a physician, said that the maximum period of five months between settlement and evidence of his restoration to normal function was not consistent with his experience of chronic functional paralysis at least in the absence of therapeutic intervention
(Page 8)
21 Dr Piirto, a psychiatrist, saw the respondent on 1 December 2003 and 1 April 2005. She said that the timing of the change in the respondent's behaviours and activities was inconsistent with a chronic conversion disorder having been present during her examinations. She concluded that the respondent did present with a conversion disorder soon after the incident in March 2001 but recovered prior to the settlement of his claim.
22 Dr Terace saw the respondent on 12 September 2001. Based on the video footage, he concluded that the respondent never had a conversion disorder.
The additional evidence before Templeman J
23 The respondent relied on medical reports from Drs Kay, Goodheart and Burvill. Dr Kay, a psychiatrist, examined the respondent on 20 February 2007 for approximately one hour. He had not previously examined the respondent. Dr Kay said a psychiatrist is no better than any other member of the community and quite possibly worse at detecting malingering (being the conscious fabrication of symptoms) and he required 'sufficient corroborative objective evidence' before he would make a 'diagnosis' of malingering.
24 The respondent instructed Dr Kay that he had been making concerted efforts before settlement to rehabilitate himself and that with the aid of his former de facto and crutches he could stand but not fully walk before his settlement. Dr Kay identified four features that struck him as being inconsistent with malingering being:
(1) the consistency of the respondent's presentation to all examining medical practitioners;
(2) the relative understatement of his symptoms;
(3) his attempts at self-rehabilitation prior to settlement;
(4) his gradual progressive albeit relatively rapid recovery post-settlement.
25 On the other hand, Dr Kay observed that in his experience the prognosis of a patient suffering from conversion disorder (otherwise known as hysteria) was generally poor. He said the respondent's subsequent cure was somewhat unexpected but not inexplicable.
26 After examining the respondent on 12 March 2007, Dr Goodheart provided a second report to the respondent's solicitors. He repeated his opinion that there were only two possible causes of the respondent's
(Page 9)
- paralysis being conversion disorder or malingering. He now said he would defer to a psychiatrist on the question whether the cause was a conversion disorder.
27 Dr Burvill, a psychiatrist, had seen the respondent on 24 June 2003 and, 27 June 2003, and prepared a report dated 10 July 2003. He saw the respondent again on 27 March 2007. In his earlier report Dr Burvill concluded that clinically the respondent appeared to have a conversion disorder but that he did not fulfil all the DSM-IV diagnostic criteria for that condition. One of the essential criteria is that there be psychological factors operative at the time of the onset of the symptoms which can reasonably be said to be associated with the commencement of the condition. Such psychological factors had not been identified by other professionals who had seen the respondent nor was Dr Burvill able to establish them.
28 The respondent's instructions to Dr Burvill in 2007 were that (1) he then had no symptoms of his former paraparesis; (2) it took quite a while for him to be able to walk which was a slow, steady process; (3) at the time of settlement he was still relying heavily on his wheelchair for mobility but could take a few steps unaided; (4) following settlement he slowly improved to the point where he could walk without relying on the wheelchair; and (5) non-reliance on a wheelchair had taken 12 months from when he first began his efforts to walk.
29 Dr Burvill described the major feature of the respondent's emotional state as being his intermittent anger directed at a wide variety of people including the medical profession in general and a number of doctors in particular, people who had allegedly profited from his injury and the judge who had granted the mareva order. The psychiatrist noted a somewhat a paranoid flavour to his accusations against those to whom he directed his anger.
30 Dr Burvill said the history given to him did not include a sudden miraculous improvement in the respondent's walking following settlement of the case which would strongly support the accusations that the respondent was malingering. Dr Burvill concluded that there was nothing in the respondent's history (being his efforts and determination to rehabilitate himself and his slow and gradual improvement before and following settlement) to negate the original diagnosis of conversion disorder. Dr Burvill agreed with Dr Kay that malingering is an extraordinarily difficult diagnosis to make in the absence of strong corroborative objective evidence.
(Page 10)
31 The respondent's affidavit was sworn on 12 April 2007. He annexed all reports prepared by medical practitioners from the date of the accident. The respondent said that prior to settlement he received treatment in the form of physiotherapy, hydrotherapy, magnetic therapy and from June 2004 his partner provided massage and physical manipulation of his legs at home on a daily basis. His evidence is that: (1) at various times prior to settlement he employed the use of callipers and a walking frame in an effort to mobilise in a manner that could be described as rudimentary walking; (2) from about June 2004 onwards he was using callipers and a walking frame to manipulate and exercise his legs on a daily basis; (3) at some stage in 2004 he experienced sporadic instances of tingling and burning-type sensations in the soles of his feet; (4) in about late February 2005 he was able to take one or two steps with the assistance of his partner but without the use of callipers or a walking frame; (5) he could not recall when he began to be able to take steps without assistance (although it was before settlement); (6) it was not until July or August 2005 that he was able to stand without assistance after which he made significant progressive improvement.
32 After receipt of the respondent's affidavit the appellants obtained further reports from Drs Goodheart, Terace and Piirto.
33 In his third report Dr Goodheart said that at the consultation with the respondent on 12 March 2007 he had specifically asked the respondent questions concerning the progress of his improvement in lower limb function in 2004 and 2005. Dr Goodheart said the respondent was very vague and could not give him the detail that now appears in the respondent's affidavit. He also said that a conversion disorder is a psychiatric diagnosis and he was not aware of any physical therapies that would improve patients with conversion disorder. As to the four points listed by Dr Kay, Dr Goodheart said at his consultations on 5 January 2004 and 12 March 2007 the respondent's neurological symptoms were inconsistent; that the respondent's attempts to prove an organic component to his leg weakness as late as September 2003 were inconsistent with the diagnosis of conversion disorder; and that the respondent's anger towards his treating medical practitioners was inconsistent with a developing conversion disorder.
34 Dr Terace maintained his opinion that it was more likely than not that the respondent never had a conversion disorder and was malingering from the outset.
(Page 11)
35 Dr Piirto said that at her examination of the respondent on 1 April 2005 (his last examination prior to settlement) the respondent communicated to her that his physical status had not changed with respect to lower limb sensation and mobility. He did not refer to any of the matters to which he deposes in his affidavit. Her opinion was that at some stage after the accident the respondent began to consciously feign his symptoms and was malingering.
Ground 1
36 The primary judge held that the appellants had to demonstrate first, that there was a serious question to be tried and secondly, that there was a danger of the respondent removing or dissipating his assets so as to prevent the appellants from enjoying the fruits of any judgment, relying on Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1, 46.
37 The primary judge identified what the appellants in this case had to demonstrate and was not purporting to exhaustively state the grounds on which a court has power to grant a mareva order. It is the case that the High Court in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 held that the doctrinal basis of a mareva order differs from the doctrinal basis of an injunction. An injunction protects a claimant's legal or equitable rights whereas a mareva order against a party to a action is to prevent the frustration of the court process (Cardile [31], [42]). However, there is nothing in Cardile that is inconsistent with the test applied by the primary judge in this case. I would dismiss ground 1.
Grounds 2 and 3
38 As the decision from which the appellants appeal is discretionary, the appellants must demonstrate that the primary judge made a material error of law or fact: House v The King (1936) 55 CLR 499, 504 - 505. A failure to take into account a relevant (mandatory) consideration is an error of law: House (505).
39 The primary judge concluded that the conduct complained of by the appellant in the action against the respondent is irrelevant to an assessment of the risk or danger of the respondent removing or dissipating his assets unless the appellants demonstrated a strong prima facie case or a strong case. That is erroneous. The strength of the case does not cease to be relevant to an assessment of the risk of dissipation simply because it does not reach the stated threshold. The strength of the case is a relevant factor to be considered together with all other relevant factors in assessing
(Page 12)
- the risk of dissipation. Further, the primary judge made no reference in his reasons to other matters relied on by the appellants bearing upon an assessment of the risk, including the nature and extent of the alleged fraudulent conduct, the direct relationship between the alleged fraudulent conduct and a significant proportion of the respondent's assets (most of the funds from the settlement of the District Court action were used to purchase real property) and the respondent's anger described in Dr Burvill's report. These matters are relevant and should have been taken into account in assessing the risk. I infer the primary judge failed to take them into account. These errors enliven this court's jurisdiction to set aside the primary judge's decision and re-exercise the discretion afresh.
40 The evidence as it stood before Templeman J relating to the alleged fraudulent conduct, albeit incomplete, is in my view a weighty factor in the assessment of the risk of dissipation of assets. The respondent's evidence, supported by his former partner, of his lengthy slow and progressive recovery is prima facie positively inconsistent with what he told Dr Piirto in April 2005 and the MGISA surveillance report (matters not adverted to by the primary judge). Further, the detail in the respondent's affidavit was not supplied in response to Dr Goodheart's request for such information during his March 2007 consultation. The opinions of Drs Kay and Burvill depend on the truth of the respondent's evidence as to his recovery.
41 The primary judge expressed grave reservations about the admissibility of the opinions of Dr Terace and Dr Piirto on the ground that they were purporting to express opinions on the ultimate issue. He had no similar reservations about the admissibility of the opinions of Drs Kay, Goodheart and Burvill. It is not appropriate in these proceedings to rule on the admissibility of the evidence. It is sufficient to note that there are exceptions to the ultimate issue rule particularly in cases involving expert medical opinion evidence. Moreover, whether or not a person had a conversion disorder is a matter for the expert opinion of psychiatrists having regard to, inter alia, the diagnostic criteria for the condition, the types of therapies to which it is responsive and non-responsive and the expected rate and course of recovery.
42 Dr Burvill's evidence that at no time did the respondent satisfy all of the diagnostic criteria for a conversion disorder provides some support for the appellants' case. Further, the expert evidence relied on by the respondent is qualified in some material respects and answered (for the present) by the further reports of Drs Goodheart, Piirto and Terace. The evidentiary conflicts cannot be resolved. However the appellants' case
(Page 13)
- cannot be described as weak. It is inappropriate at this interlocutory stage to say anything further as to the strength of the appellants' case.
43 Another relevant factor impacting on the risk of the respondent dissipating his assets is the fact that the claimed fraudulent conduct would involve considerable effort and inconvenience and is of a particularly serious kind. A person who engaged in deception of that kind in order to obtain compensation is more likely to take steps to protect the fund. It is also relevant that there is a direct connection between the settlement funds paid to the respondent and one of his significant assets, as is the respondent's expressed anger against those associated with this action, which anger has a paranoid flavour. I was satisfied that the appellants had demonstrated an arguable case and that there was a real risk of the respondent removing or dissipating his assets so as to prevent the appellants from enjoying the fruits of any judgment in the action. I would uphold grounds 2 and 3.
44 Although it is not strictly necessary to determine grounds 4 and 5, I propose to address them.
Grounds 4 and 5
45 The trial judge found at [30] that Mr Williams' statement in [22] that the majority of the medical reports diagnosed the respondent as having a conversion disorder manifesting as paralysis 'likely to be permanent' was misleading. However, the term 'medical reports' in [22] is defined in [21] of Mr Williams' affidavit which states:
During the course of the District Court action:
21.1 the defendant was examined by a number of medical practitioners (medical practitioners)
21.2 I obtained or was provided with medical reports prepared by the medical practitioners (medical reports) and
21.3 I read the medical reports.
46 I understand the medical reports referred to in [22] are those defined in [21.2], being medical reports of examinations of the respondent conducted during the course of the District Court action which commenced on 13 December 2002. In making his finding that the statement in [22] was incorrect and misleading, the primary judge expressly relied on 12 medical reports. Those medical reports do not support the finding for the following reasons. First, and most
(Page 14)
- significantly, 11 of the 12 reports were dated prior to the commencement of the District Court action. Secondly, nine of the reports were given by medical practitioners who were not psychiatrists and at a time when an organic cause of the paralysis was still regarded as an option by some at least. Thirdly, there were two reports of Dr Terace dated 24 September 2001 and 3 March 2002 which identified the uncontroversial fact that the usual prognosis for a conversion disorder is recovery. The respondent persisted with his representation of permanent functional paralysis until the end of April 2005 by which time the chronic nature of the symptoms were demonstrated. Fourthly, the only report relied on after the commencement of the District Court action was that of Dr Piirto dated 1 December 2003. The primary judge failed to refer to her assessment that the respondent's prognosis was poor by virtue of, inter alia, the 'chronicity of his profile'. Indeed, on my assessment a majority of the medical reports obtained after the commencement of the District Court action do support the conclusion that the paralysis was likely to be permanent. Moreover, it is reasonable to make an assessment on the issue of permanency after there is medical consensus as to the cause of the condition and sufficient time has elapsed to draw inferences from the chronic nature of the condition.
47 The evidence relied on by the trial judge is not in my view capable of supporting the finding that [22] of Mr Williams' affidavit is misleading. I would uphold ground 5.
48 The primary judge's conclusion that the appellants failed to disclose all material facts is based on the omission to provide the medical reports on which he relied to conclude that [22] of Mr Williams' affidavit was misleading. It is apparent from my reasons in relation to ground 5 that the primary judge attached more significance to those reports than is justified. In any event, they were supplied to Drs Goodheart, Terace and Piirto for the purpose of obtaining their reports which were put before Blaxell J. That is sufficient disclosure for the purpose of the mareva application. I would uphold ground 4.
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