Sterling Industries Ltd v Nim Services Pty Ltd

Re: STERLING INDUSTRIES LIMITED
And: NIM SERVICES PTY LIMITED and ORS.
No. G281 of 1984
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.

CATCHWORDS

Practice and Procedure - application for order that respondent provide security for any judgment recovered by applicant in pending proceedings - evidence of disposal and concealment of assets to avoid consequences of judgment - injunction to restrain dealing with assets thought to be an insufficient remedy - jurisdiction of Federal Court of Australia and of courts of general jurisdiction to make such an order - whether making of order would amount to pre-trial attachment - discretionary considerations - whether making of order would tend to oblige respondent to incriminate himself - whether alternative remedies available to applicant.

Federal Court of Australia Act 1976, s. 23

Trade Practices Act 1974, ss. 52, 87

Supreme Court Act 1970 (N.S.W.), ss. 16, 23

Bankruptcy Act 1966, ss. 120, 121

HEARING

SYDNEY

#DATE 23:4:1986

ORDER

Order that the Second Respondent provide security in the sum of $3,000,000 in such manner and form as the parties may agree or, in default of agreement the Court or its Registrar may approve.

The time for compliance with Order number 1 shall be not later than 2.30 p.m. on Friday, 2 May 1986.

The security provided in compliance with Order number 1 hereof is not to be released except by the consent of the parties or the further order of the Court.

Order that the First, Second and Fourth Respondents pay the Applicant's costs of and incidental to the substituted notice of motion filed on 14 April 1986. Liberty to the Applicant to apply to a Judge of the Court on 3 days' notice for an order that such costs be assessed in the sum of $35,950. The costs of the motion of 10 April 1986 are reserved.

Stand over the Application for the appointment of a Receiver in respect of the Eighth Respondent with liberty to the Applicant to restore on 24 hours' notice to the Eighth and Ninth Respondents.

Stand over the Application for the appointment of a Receiver in respect of the Eleventh Respondent with liberty to restore on 24 hours' notice to the Second and Fourth Respondents and the Solicitors on the record for the Tenth Respondent.

Stand over the Application for the appointment of a Receiver in respect of the First Respondent with liberty to the Applicant to restore on 24 hour's notice to the Second Respondent and the Solicitors on the record for the Tenth Respondent.

In the event that Order 1 be not complied with, order the Second Respondent to file and serve on the Applicant's Solicitors at or before 10.00 a.m. on 9 May 1986 an affidavit deposing to his present assets and liabilities, whether such assets are owned by himself alone or jointly with any company trust or individual, and whether such liabilities are his alone or for which he is jointly and severally liable. This order is made without prejudice to or effect on the Applicant's right to take such proceedings for the enforcement of Order 1 as it may be advised.

Order that until further order the Second Respondent by himself, his servants or agents be restrained from spending, giving away, encumbering or otherwise dealing with so much of the sum of $4,300,000.00 as was on or about 21 February 1986 held in safety deposit boxes numbered 936, 1442 and 1443 at the Westpac Banking Corporation's branch at 260 Queen Street, Brisbane, as now remains in his possession, custody or power, except in so far as he does so for the purpose of providing the security ordered to be provided pursuant to Order 1.

Order that until further order the Second Respondent by himself, his servants and agents be restrained from spending or giving away, or mortgaging, encumbering or otherwise dealing with any assets acquired with, any part of the sum of $4,300,000.00 as was on or about 21 February 1986 held in safety deposit boxes numbered 936, 1442 and 1443 at the branch of the Westpac Banking Corporation, 260 Queen Street, Brisbane except in so far as he does so for the purpose of providing the security ordered to be provided pursuant to Order 1.

Direct that service of these Orders and any notice given pursuant to leave granted under Orders 5, 6 and 7 hereof upon the Second and Fourth Respondents effected by telex, or telegram or facsimile document transmission to Gillshannen & Luton, Solicitors of Brisbane and Norton Smith & Co., Solicitors of Sydney, be deemed sufficient service on those Respondents of those orders and such notice for the purposes of Order 37 of the Rules. Such service shall be deemed to have been effected 24 hours after such telex, telegram or facsimile document is despatched.

Direct that service of these Orders and any notice given pursuant to leave granted under Order 5 hereof be effected on the Eighth and Ninth Respondents by telegram to those Respondents at the property "Moorabool", Toogoolawah, Queensland, and by telegram, telex or facsimile document transmission to Norton Smith & Co., Solicitors of Sydney.

Motion for dissolution of injunctions granted against the Eighth and Ninth Respondents be dismissed with costs.

Liberty to all parties to apply on 24 hours' notice.

NOTE: Settlement and entry of orders is dealt with in Order 36 of

the Federal Court Rules.

JUDGE1

To be dealt with are a number of applications made by notices of motion. Most of the applications are collected in a document entitled "Substituted Notice of Motion" which was filed during the course of the hearing. That notice of motion seeks orders that:

The first, second and fourth respondents, to whom I shall refer as the Jackson interests, pay into court the sum of $3,000,000 as security for the payment of any judgment and/or costs which may be ordered to be paid by them or any one of them in these proceedings.

The second respondent, John William Jackson, pay into court the sum of $3,000,000, that order being sought alternatively to the first.

A receiver be appointed over the assets and undertaking of the eighth respondent, Edith Pastoral Company Pty Limited.

A declaration be made in terms of paragraph 4 of the substituted notice of motion. This part of the application was not proceeded with, but it concerned a transaction entered into by the ninth respondent, Mrs. E.M. Jackson. That was the reason for her joinder.

The company, Edith Pastoral Company Pty Limited, and its assets be preserved pending determination of the application and the payment of any judgment which may be recovered by the applicant against the first, second and fourth respondents.
In a separate notice of motion the applicant also seeks an order for the appointment of a receiver over the assets and undertaking of another company, Jackson Holdings Pty Limited, which has been joined as an eleventh respondent in the principal application.
In the course of the reasons which I am about to read it will be necessary for me to express views about the evidence, about witnesses and about parties. Some of these views will be expressed tentatively; others will take the form of actual findings. Because of other proceedings which are pending, inclulding criminal proceedings involving Mr. Jackson, it ought to be understood that I have made only such findings as are necessary for the disposal of the motions now before me and that no finding that I make will have relevance in other proceedings where the parties are not the same, where a different standard of proof applies and where different issues are involved. Normally it would be undesirable to proceed to determine a matter of this kind in advance of the determination of criminal proceedings, but the urgency of the matter is such that the course has to be adopted of disposing of these motions now. In order to do so it is necessary that findings be made.
The principal contest between the parties in the present applications concerns so much of them as seeks an order for the provision of security or the payment into court of the sum of $3,000,000. In the result, as I understand the application, the order is sought against Mr. Jackson alone and not against the first or fourth respondents. Injunctions were earlier granted against the eighth and ninth respondents restraining them from dealing with assets. Those injunctions have been continued. Thus the applicant did not need to apply for orders to this effect, but senior counsel for those respondents has applied to have those injunctions dissolved. Thus the question as to whether it is appropriate that they continue arises for decision.
There is no question but that to grant the principal relief which the applicant seeks would represent a further extension in the short history and development of Mareva injunctions, a history which began in England in 1975; see Mareva Compania Naviera SA v. International Bulkcarriers SA, noted in (1980) 1 All ER 213.
An initial question concerns the prospects of success the applicant has in the principal application it makes which is for an order that the first to fourth respondents or alternatively the fifth to seventh respondents or all such respondents be adjudged liable to pay to the applicant damages in the sum of approximately $3,000,000. The causes of action relied upon are based on s. 52 of the Trade Practices Act 1974 and also comprise a number of attached causes of action, including an action for fraud against the first, second, third and fourth respondents. The principal action is fixed for hearing next Monday, 28 April. If it is defended, it will occupy approximately three weeks in hearing time. There will no doubt be an interval after the conclusion of the hearing before judgment is delivered. I should add that I am not the judge assigned to hear the principal application.
The causes of action, which the applicant claims to have, arise out of the sale to the applicant by the first respondent, NIM Services Pty Limited, of two taverns, one in Sydney and one in Newcastle, for prices which totalled $2,850,000. The fifth respondent carried on business as a real estate agent under the name Marden and Associates. The sixth and seventh respondents are alleged to have been at all material times directors of the fifth respondent. NIM Services Pty Limited retained Marden and Associates as its agent for the purpose of the sale of the taverns. The second and fourth respondents, that is to say Mr. and Mrs. Jackson, have been at all material times directors of the first respondent, and the third respondent, Mr. Kaden, was at all material times an employee of Mr. and Mrs. Jackson, or at least that is the allegation.
The essence of the applicant's case is that it was misled as to the profitability of the two taverns because it relied upon bankings made to the credit of the vendor's account when it was carrying on the businesses. It is claimed that the bankings were not the actual takings and that substantial additions to them from sources other than the businesses had been made so that instead of the picture being one of substantial gross profit, it was one of loss or, for some periods, one of very small profits. No real issue about these facts apparently arises. There is no question that the bankings were, as the applicant says, inflated by the addition of cash moneys from sources other than the takings from the businesses.
The case which the applicant makes is that in those circumstances it ought to be inferred that the first respondent and those acting for it, namely the second, third and fourth respondents, intended a purchaser such as the applicant, to think that the bankings were the takings. In the absence of any statement to the contrary, this is what such a purchaser would be led to believe. If these facts be established, it would seem to me, that, to say the least, the applicant has good prospects of success in its claim.
Having considered the whole of the evidence which there is on the question and also the submissions of counsel which did not include any submissions on this part of the case, I have no hesitation in saying that the applicant has established, on the material which is before me, that it has good prospects of obtaining a judgment against the first and second respondents and, possibly the third and fourth respondents as well, in a sum of approximately $3,000,000, the damages figure being based upon the prices at which the applicant subsequently sold the two taverns. I do not develop my reasons for these conclusions further because it is unnecessary to do so, particularly in the absence of submissions from counsel for the respondents about them. In any event, to do so may have some prejudicial effect, or may be thought to have some prejudicial effect, in relation to the principal proceedings which are to commence on Monday next.
The next evidentiary matter to be referred to is evidence which there is that the Jackson interests, particularly Mr. Jackson, feared that the first two respondents, that is to say, the vendor and himself, and possibly others, would be likely to be adjudged liable to pay a very large sum of money. He sought advice from solicitors and accountants. Documents produced from the accountants' file show that Mr. Jackson sought advice about these matters in July 1985 or perhaps a little earlier.
I do not need to refer to the detail of the documentation which there is, but it establishes that after the advice was given, there began a wholesale divestiture of assets owned up to that time by the first respondent and Mr. and Mrs. Jackson. The progress and extent of this can be seen from a summary of the transactions about which there is evidence, which summary is exhibit V. A copy of exhibit V is attached to these reasons. The effect of this evidence is that, by 12 November 1985, when certain undertakings were given this Court (Evatt J.) by counsel on behalf of the Jackson interests that they would not dispose of their assets until the hearing of the principal application was concluded, the divestiture was still continuing, but had to a large degree apparently been accomplished. The undertaking was given as one of the conditions imposed upon the grant of an adjournment of the principal hearing of the proceedings for contempt proceedings. The adjournment was sought on the ground of Mr. Jackson's ill health, he being said to be suffering from glandular fever.
The applicant alleges that the evidence discloses that the first and second respondents, and perhaps others, are in clear breach of these undertakings, and has instituted proceedings to have such respondents dealt with for contempt of court. Those proceedings have been deferred for the time being and I say no more about them.
By February 1986, as the summary shows, the only assets remaining were motor cars said to be worth $140,000. Even these were intended to be dealt with, but, so far as the evidence discloses, that had not occurred, at least by the end of February.
The next matter to be referred to concerns certain activities of Mr. Jackson in relation to a sum of $4.3 million in cash. It is common ground that the principal sum making up this money consisted of borrowings from two finance companies, A.G.C. (Advances) Limited and National Westminster Finance Australia Limited. The money was borrowed in or about the month of November 1985, and was for a time deposited with a merchant bank, then known as Wardleys Australia Group, but later to change its name to the Hong Kong Bank of Australia Limited. The money was deposited in the names of two companies controlled by Mr. Jackson. The company borrowing the money was Jackson Holdings Limited which, by the time of the loan transactions, had replaced the first respondent as trustee of the Jackson Family Trust.
Eventually, on 21 February 1986, Mr. Jackson arranged for the money to be delivered to him in cash. A firm, Armaguard, which is a trading name for Mayne Nickless Limited, delivered the money from the Reserve Bank to one of the Brisbane branches of Westpac Banking Corporation. In the presence of Mr. Rogers of Armaguard and of Mr. Jackson the money was placed in three safe deposit boxes at the bank, one of which Mr. and Mrs. Jackson had had for some time. The remaining two were newly acquired. They were in Mr. Jackson's name. According to Mr. Rogers, whose evidence I accept, there was nothing else in any of the boxes when the money was placed in them. From records kept by the bank it is established that each of the boxes was subsequently opened. Upon the basis of statements made by Mr. Jackson to the police, I find that on these various occasions there was removed from the boxes the entirety of the moneys which had been deposited therein. These were taken by Mr. Jackson to his home.
On 17 March 1986 Mr. Jackson made a complaint to the Brisbane Police. He claimed to have been defrauded in three transactions in which he had paid over a total of $4.35 million in cash to a Mr. Carl Jorgensen in exchange for stones which Mr. Jorgensen claimed to be diamonds but which were in fact cubic zirconia, having a value of no more than about $2,000.
On the basis of Mr. Jackson's statements I find:

1. He himself was not an expert in diamonds.

2. He was, however, a businessman of considerable experience who

claimed to have, or to control, assets with a net worth exceeding $11 million.

He took no steps to have any of the stones handed to him by

Mr. Jorgensen valued or checked by any person experienced in identifying diamonds, either at the time each transaction took place or subsequently, until each of the transactions was complete and the entirety of the $4.35 million had been paid over.

A period of about a day separated each transaction. No steps

were taken to have the stones received after the first or second transactions identified as diamonds before any subsequent transaction took place.

No record of the transactions was kept or made by Mr. Jackson

or any person on his behalf; no receipt for the money was obtained; no diary entry was kept. There is even today no book entry recording them, nor is there any record of Mr. Jorgensen's address.

Those being the facts of the transaction which Mr. Jackson alleges took place, one has to say that it seems a somewhat improbable one. Not only is that so because it would involve a man of Mr. Jackson's business experience in parting with a very large sum of money without any ability to check the genuineness of what he was receiving. It is also asking a little too much to believe that a confidence man as wily as Mr. Jorgensen must have been, assuming he exists, would return not once but twice to the scene of his first crime once he had received a sum in excess of $1 million for valueless stones, as Mr. Jackson alleges he did on the first occasion. It seems unlikely that he would have risked possible arrest by returning for yet another attempt to obtain further money. He could hardly have believed that Mr. Jackson would not have had the first consignment of stones examined by an expert in between the time of the first and second visits.
Mr. Jackson's story must have impressed the police officers who interviewed him in much this way. They began an investigation into the matter. As a result of the publicity that ensued an extraordinary coincidence took place. It is common ground that the Jacksons travelled to Hong Kong at the end of February 1986 by Cathay Pacific Airlines. Another passenger on the aircraft, who has given evidence, noticed them in the check-in queue and in the aircraft. He noticed them particularly because, according to him, Mr. Jackson pushed in to the top of the queue. Later the witness saw Mr. Jackson in a jeweller's shop in the Haiphong Road in Hong Kong. Trays of cubic zirconia were in the window. The witness and his wife visited the shop twice within a short period. When they returned to make their second visit, an assistant was replacing a tray of cubic zirconia in the window. Information received through Interpol confirmed purchase of cubic zirconia by a man of similar description to Mr. Jackson but named Burton. The purchase was made on 28 February 1986 and 1 March 1986 from a jeweller's shop in the Haiphong Road, Hong Kong. Delivery was taken on 3 March.

In evidence are two statements by Mr. Jackson to the police and the record of a lengthy interview of him by the police recorded on tape. Mr. Jackson's solicitor was present at the interview. It is unnecessary to refer to the detail of them. It is enough to say that, particularly in the record of interview, there are revealed a number of matters which, singly and together, suggest strongly that Mr. Jackson's account of the transaction with Mr. Jorgensen is false.
Counsel for the Jackson interests declined to call any evidence in reply to that relied upon in the applicant's case. When he came to address, senior counsel for the Jackson interests made no submissions concerning the facts of the matter. He restricted his submissions to submissions dealing with the jurisdiction and power of the court to make the order sought, and to submissions going to the exercise of its discretion. In those circumstances I have no hesitation in accepting the evidence upon which senior counsel for the applicant relies. In reaching that conclusion I have taken into account that the police in Brisbane have charged Mr. Jackson with misappropriating $4.3 million, the property of the company, Jackson Holdings Limited. During the course of the hearing counsel sought a stay of these proceedings pending the outcome of the criminal proceedings. I refused the application because, in my view, the requirements of justice overall necessitated that this application be dealt with as quickly as possible. Any delay would be likely completely to defeat its purpose. The matter, on the view of the authorities which I took, called for an exercise of my discretion. It seemed to me that the balance plainly required the refusal of any stay; see McMahon v. Gould (1982) 1 ACL.C. 98 and Cameron's Unit Services Pty Limited v. Whelpton & Associates Pty Limited (1984) 59 ALR 754.
But having refused it, I should, when having regard to the failure of Mr. Jackson to give evidence, bear in mind that on counsel's advice he may have preferred to maintain his right to silence and not expose himself to cross-examination by counsel for the applicant in this case. His failure to give evidence ought not therefore be given the same weight or significance as would have been the case if no criminal proceedings were pending. Nevertheless, it is a factor. In any event, the important thing is to take account of the evidence which has been called. It establishes, in my opinion, that the story about Mr. Jackson's purchase of stones from Mr. Jorgensen was false. I make it clear, as I attempted to do at the outset of this judgment, that that is a finding made purely for the purposes of these proceedings between these parties.
What follows from that conclusion? The $4.3 million went in three consignments to Mr. Jackson's home. In the absence of evidence to the contrary it should be inferred that he still has control of it or has acquired assets which represent it. That is indeed shown in respect of part of it, namely, a sum of $540,000. Without going to the detail of the evidence, there is uncontested evidence from which it should be inferred that property bought in the name of the eighth respondent, Edith Pastoral Commpany Pty Limited, was acquired with this money. Edith Pastoral Company Pty Limited is a company which is controlled by the Jackson interests. The ninth respondent, Edith Mary Jackson, is Mr. Jackson's mother.
In different factual circumstances there may have been a question as to whether or not the money was Mr. Jackson's money, but the evidence establishes that he has treated it as his own. It was he who secured its withdrawal and lodgment in safe deposit boxes in his and his wife's names. Subsequently he took it to his house. An analysis, such as senior counsel for the applicant undertook designed to show that the moneys were in fact Mr. Jackson's, or those of the first respondent, is not necessary. For the purposes of this case, presumptions of innocence and regularity, coupled with the absence of any contrary evidence, lead to the inference that the money is property which is available to satisfy any judgment which the applicant may recover. The very actions of Mr. Jackson in endeavouring to conceal with money re-enforce me in concluding that that inference should be drawn. I should add that the assumption underlying the charge laid by the police, namely that the money was the property of Jackson Holdings Limited, is not accepted by the applicant. I do not wish to say more about this matter than that, on the evidence before me, the question is, to say the least, an open one. On the one hand the money was borrowed in the name of Jackson Holdings Limited. But against that, it stood in the names of various companies thereafter and was finally used by Mr. Jackson as if it were his own. Over all those companies Mr. Jackson exercised such control that it would have been a simple matter for him to transfer the property in the money to himself. There is no evidence to the contrary and, for the purposes of these proceedings, it is the inference which should be drawn.
Senior counsel for the Jackson interests made a number of submissions. He challenged the jurisdiction of this Court to make Mareva orders at all. It was decided by Ellicott J. (as he then was) in Hiero Pty Limited v. Somers (1983) 47 ALR 605 that the Court does have such jurisdiction. Ellicott J. thought that the source of the jurisdiction was the provisions of s. 23 of the Federal Court of Australia Act 1976 and s. 87 of the Trade Practices Act. I am in respectful agreement with his conclusion, although I would be inclined myself to base the source of jurisdiction substantially, if not entirely, on s. 23 of the Court's statute.
Counsel's submissions to the contrary relied, as might be expected, on the limited nature of the Court's jurisdiction, its lack of inherent jurisdiction and the generally wide powers which a court of general jurisdiction has as exemplified by s. 23 of the Supreme Court Act 1970 (N.S.W.), the words of which satisfied the Court of Appeal in Riley Mackay Pty Limited v. Riley (1982) NSWLR 264, that the Supreme Court of New South Wales had the requisite jurisdiction. Nevertheless, s. 23 of the Federal Court of Australia Act confers wide powers. It is true that they are confined in that they only arise in relation to matters in which the Court has jurisdiction, but it has jurisdiction in the principal application, partly because of the Trade Practices Act, and partly because of the accrued jurisdiction which the court has. So, s. 23 of its Act is in play.
The section is not a provision which should be read in a narrow or restricted way. In my opinion, it is necessary that a court such as this should have in its armoury the weapon of the Mareva injunction. The words of s. 23 are ample enough to embrace such jurisdiction. If this were not the case, the Court's processes, like those of courts of general jurisdiction, could be defeated by conduct such as is here disclosed.
However the difficult problem in this case is whether the general Mareva injunction power which, since 1975 courts of general jurisdiction have decided they have, extends to an order that a respondent provide security in circumstances where failure to comply with the order may expose him to punishment for contempt of court and thus imprisonment. I have reached the conclusion, having considered a number of authorities, that the jurisdiction exists. The jurisdiction is designed to confer power on the court to do what is reasonably necessary to achieve the securing of a defendant's or respondent's property against the day when judgment may be recovered, in circumstances where it is shown that, through activities of the defendant or respondent involving divestiture, disposal, concealment or sending out of the jurisdiction of assets, that may not be the case.
When the court comes to exercise its discretion the question is, what will be the minimum likely to achieve that end? If the orders here sought are that minimum, it seems to me that there is no reason associated with a court's jurisdiction why the orders should not be made. There are nevertheless serious questions as to the way in which the court should exercise its discretion. Those questions I defer for the moment in order to deal with other submissions.
As I say, a number of authorities were referred to in argument. It is true that none of them deals with facts similar to those in question here. None of them is authority for the proposition that an order of the kind here sought is appropriate. But in Ballabil Holdings Pty Limited v. Hospital Products Limited (1985) 1 NSWLR 155, Glass J.A. said (p. 163) that the question there to be decided, namely, whether the court could grant an injunction to restrain a local company from dealing with assets outside the jurisdiction, was without authority. He decided that the court did have such jurisdiction. In the course of his reasons he said:-

"There is however a more fundamental answer which is based upon the manner in which the common law evolves. Whenever a doctrine or principle is extended or developed it comes about because the factual situation under consideration stands outside the scope of the doctrine or principle as presently defined. The extension or development of necessity requires a redefinition of the doctrinal basis. Before the first extension it could have been argued that Mareva relief was so defined as to be available only against foreign defendants. Before the second extension it was available only to prevent removal of assets. As presently defined Mareva relief does not apply to foreign assets. If it did, no extension of doctrine would be needed. If it is to be developed in accordance with the dictates of logic and commercial reality ... its purpose could rationally be redefined so as to go beyond conduct which frustrates the local judgment and extends to conduct which frustrates the plaintiff in the pursuit of his remedy".

The question here is not quite as bereft of authority as was the question which arose for decision in the Ballabil Holdings case. In C.B.S. United Kingdom Limited v. Lambert (1983) 1 Ch 37, the Court not only made orders restraining the defendants from dealing with their property, it ordered them pending the trial to deliver up to the plaintiffs' solicitors certain motor cars shown to be in their possession. Senior counsel for the Jackson interests said that the C.B.S. case was to be distinguished from the present because there the Court inferred that the motor cars had been purchased from profits unlawfully made from the infringements of copyright for which the defendants were sued. Counsel relied upon the following passage from the judgment of Lawton L.J. who delivered the judgment of the Court. His lordship said (p. 44):-

"... the court should be slow to order the delivery up of property belonging to the defendant unless there is some evidence or inference that the property has been acquired by the defendant as a result of his alleged wrong-doing. In the present case, for example, the inference is that the motor vehicles which the defendants own could only have been purchased out of the proceeds of sale by the defendants of articles which infringe the plaintiffs' copyright. The inference is also that, if the defendants are forewarned or left in possession of the motor vehicles, those vehicles will be sold and the proceeds of sale dissipated or hidden so that the plaintiffs would be deprived not only of damages but also of the proceeds of sale of infringing articles which belong to the plaintiffs".

The action for recovery of profits in the C.B.S. case was no less an action in personam than the action here. To the extent that the case is different from this one, it is only because the defendants in the C.B.S. case were thought by the Court not to have had any source of money available to them for the purchase of the motor cars except their unlawful dealing. That is not established here in relation to any particular assets of the respondents. But the fact is the applicant has, on the findings I have made, good prospects of success in an action in which it claims to have been defrauded of a sum in excess of $2 million, a sum which was part of that paid to the first respondent when the taverns were sold.
Furthermore, Lawton L.J. was careful to say that the court should be slow to order the delivery up of property. Plainly his lordship there recognized that the court had jurisdiction to make that order. Obviously what his Lordship said was said for the purposes of and in the context of the case which he had to decide. Nothing that he said suggests that there is no jurisdiction or power to do what the applicant here seeks. His Lordship's words do, therefore, provide some support for the applicant's case. It follows that the fact that the circumstances of this case may require the court to go further than was the case in the C.B.S. matter does not involve its doing so being wrong or the C.B.S. case being of no assistance in guiding this court in what it should do.
In addition to submitting an absence of jurisdiction whether on the more particular ground associated with the limited nature of this Court's jurisdiction or on the more general grounds referred to, counsel for the Jackson interests relied on some further submissions of substance and on a number of discretionary matters. The submissions of substance were:

(a) The orders sought would, if granted, be tantamount to pre-trial attachment.

(b) The orders sought would be tantamount to requiring a defendant to give security, a course the courts have never entertained.

The first of the submissions was the subject of extensive discussion by the Court of Appeal in New South Wales in the Riley McKay case, see pp. 272-276. The Court was especially obliged to consider the matter because of the provisions of s. 16(3)(c) of the Supreme Court Act 1970 (N.S.W.) which provides that no writ of foreign attachment shall be issued after the commencement of the Act. In the course of giving reasons for its conclusion that an order restraining a defendant from dealing with assets pending trial was not an attachment of those assets, the Court referred at length to the decision of the English Court of Appeal in Cretanor Maritime Co. Limited v. Irish Marine Management Limited (1978) 1 WLR 966 where Buckley L.J. said (p. 973):-

"... it is, I think, manifest that a Mareva injunction cannot operate as an attachment. 'Attachment' must, I apprehend, mean a seizure of assets under some writ or like command or order of a competent authority, normally with a view to their being either realised to meet an established claim or held as a pledge or security for the discharge of some claim, either already established or yet to be established. An attachment must fasten on particular assets. They need not, I think, be particularised in the writ or order under which the attachment is effected, but the attachment of a particular asset cannot take place unless and until it has in some manner fastened on that asset. A Mareva injunction, however, even if it relates only to a particularised asset ... is relief in personam. It does not effect a seizure of any asset. It merely restrains the owner from dealing with the asset in certain ways. The asset (for example, the aircraft in the case referred to) might be said to have been in a sense arrested, but only in a loose sense. All that the injunction achieves is in truth to prohibit the owner from doing certain things in relation to the asset. It is consequently, in my judgment, not strictly accurate to refer to a Mareva injunction as a pre-trial attachment".

Counsel for the Jackson interests relied, of course, on the nature of the order here sought. It would require the lodgement of the sum $3 million or appropriate security in such a sum. But the applicant does not seek the deposit of any specific $3 million or the giving of any particular asset as security. What the applicant submits is that the only order appropriate to protect it against the disposal or concealment of assets otherwise likely to occur is an order that security be provided. Any other order is likely to be valueless. No seizure or attachment of any particular asset is involved any more than it is when a party to litigation is required, as is often the case, to provide security for costs of for the amount of a judgment being taken on appeal.
In my opinion the applicant's submissions should be accepted. My acceptance of them avoids the need to consider the question whether it is relevant at all to determine whether an order of the kind sought would amount to an attachment. There is no provision similar to s. 16(3)(c) of the Supreme Court Act in the Federal Court of Australia Act. However, that alone may not have been enough to overcome the problem presented by the submission. In the circumstances it is unnecessary to express any view and I do not.
In support of the second submission counsel relied on Accidental and Marine Insurance Company v. Mercati (1866) LR 3 Eq. 200, and Re Travelodge Australia Limited (1978) 21 ACTR 17. Those cases provide support for the proposition that in ordinary circumstances a defendant will not be required to give security whether for costs or otherwise. That is certainly the general position, but the question here is whether the relief, which has become known as a Mareva injunction, should nevertheless extend to the making of an order for the giving of security in an appropriate case. I have already decided that the Court has jurisdiction to make such an order. I have also said that there is a difficult question to be decided concerning the way in which the Court should exercise its discretion. Those being my views, it is my opinion that the submission now under consideratiion begs the question which this application raises for decision. The submission certainly raises important general considerations, but it does not itself provide any answer to the applicant's case.
In support of his submission that the relief should be refused on discretionary grounds, senior counsel for the Jackson interests raised a fundamental point. In his submission the making of an order that Mr. Jackson bring into court the sum of $3 million would require him to incriminate himself. That would be because the very payment of the money would tend to establish that, contrary to the account given to the police, he did not part with $4.3 million for comparatively worthless jewellery, with the consequence that his story to the police was false. This in turn would tend to establish that he was concealing the money and had himself appropriated it from the company which the police allege was the owner of it, that is Jackson Holdings Limited. As I have earlier noted, it is not the applicant's case that the money was the property of Jackson Holdings Limited.
In support of his submission, counsel for the Jackson interests referred to the decisions of the Court of Appeal and the House of Lords in Rank Film Distributors Limited v. Video Information Centre (1982) AC 380. That was a case where an Anton Piller order (Anton Piller KG v. Manufacturing Processes Limited (1976) Ch 55) obliged defendants to give immediate discovery and answers to interrogatories relating to the supply and sale of films said to be infringing copies of films the copyright in which was owned by the plaintiffs.
The Court of Appeal and the House of Lords decided that the defendants were entitled to rely on the privilege against self-incrimination by discovery or answering interrogatories, since, if they complied with the orders, there was a real and appreciable risk of criminal proceedings for conspiracy to defraud being taken against them. In the course of his judgment in the Court of Appeal, Bridge L.J. (as he was) said (pp. 415-416):-

"What then is the efect, in relation to the practice of making Anton Piller orders in copyright cases, of the conclusion that a copyright pirate may be entitled to claim privilege from incriminating himself? Clearly it cannot be to inhibit the making of ex parte orders requiring defendants to permit the immediate search for and seizure of infringing copies. Section 18 of the Copyright Act 1956 gives to the copyright owner proprietary rights in such copies and owners seeking to enforce proprietary rights whether by final or interlocutory order to recover their own property cannot be defeated by any claim of privilege. But very different considerations apply to those parts of an Anton Piller order which require the person to whom the order is addressed to give forthwith to the person serving the order answers to specified questions and disclosure of relevant documents. It has long been the practice of judges hearing oral evidence to warn witnesses who are in apparent danger of incriminating themselves that they are entitled to claim privilege from self-incrimination. It would not be practicable, in my judgment, to embody an effective warning of that kind in a typical peremptory Anton Piller order in such terms as to ensure that the recipient of the order fairly understood his position, what he was required to do and what were the options open to him. It must follow, I think, that the only satisfactory practice will be, when the court invited to make an Anton Piller order can see from the strength of the applicant's evidence that the proposed defendant is in danger of self-incrimination, to abstain from making any order ex parte requiring immediate answers to questions or disclosure of documents".

Templeman L.J. (as he then was) said (p424):-

"The plaintiff in copyright proceedings relating to films or records seeks an order for instant discovery and interrogatories against the defendant not so much for the purpose of proving the extent of liability of that defendant as for the purpose of obtaining information which will enable the plaintiff to trace and to take proceedings against third parties involved with infringing copies. The legitimate anxiety of the plaintiff to obtain information about third parties and to act against third parties with speed and secrecy has only arisen in recent years as a result of developments in technology and travel facilities which enable infringers of copyright to copy and distribute films and records with great ease, little expense and ample profit. There is no reason to think however that Parliament in 1956 foresaw or intended that the doctrine of self-incrimination would need modification to deal with the peculiar difficulty which has now arisen in the path of owners of some forms of copyright".

In the course of his speech in the House of Lords, Lord Wilberforce referred to the privilege against self-incrimination and said (p. 442):-

"This has been too long established in our law as a basic liberty of the subject ... to be denied".

He continued (pp. 442-443) to deal with attempts by counsel for the plaintiffs to reconcile the privilege against self-incrimination with the requirements of an Anton Piller order and the desirability that it be made in the form in which the order under appeal had been made. Amongst other things, his Lordship said (pp. 442-443):-

"Mr. Nicholls (of counsel for the plaintiffs) was therefore obliged to suggest that even granting this, the courts had power positively to decide in a particular case, as the counterpart of the obligation to disclose, that any matter which is compulsorily disclosed as the result of the court's process should be inadmissible in evidence. But I cannot accept that a civil court has any power to decide in a manner which would bind a criminal court that evidence of any kind is admissible or inadmissible in that court. Certainly a criminal court always has a discretion to exclude evidence improperly obtained if to admit it would unfairly prejudice a defendant. But to substitute for a privilege a dependence on the court's discretion would substantially be to the defendant's detriment. That the civil court has not the power to declare evidence inadmissible is strikingly shown by section 31 of the Theft Act 1968 which contains an express provision by which a person is obliged to answer questions put in proceedings for the recovery of property and to comply with orders made in such proceedings and which states that no statement or admission so made shall be admissible in evidence against the person concerned in proceedings for an offence under the Act. Infringement of copyright is not theft, so this section cannot be invoked.

The appellants' submission amounts to a request to the courts, by judicial decision, to extend this statutory provision to civil proceedings generally, or at least to these proceedings. But this, in my opinion, the courts cannot do".

Notwithstanding that that was his Lordship's view, the solution rejected by the House of Lords was the solution adopted by the majority of the New Zealand Court of Appeal in Busby v. Thorn - E.M.I. Video Programmes Limited (1984) 1 NZLR 461; see especially per Cooke J. at p 471 and per Bisson J. at pp 487-488.
An initial distinction between the present case and the Rank case is that here the applicant does not seek an order requiring Mr. Jackson to swear an affidavit or answer interrogatories. But, in the submission of counsel for those interests, the payment into court of part of the very moneys which Mr. Jackson admittedly received from the safe deposit boxes must be a factor which would be relevant for the Crown to prove in the prosecution against him. It will have been observed that neither the Court of Appeal nor the House of Lords thought it necessary to disturb so much of the Anton Piller order in that case as required the defendants to permit access to their premises and the seizure of films which infringed the plaintiffs' copyright. Yet presumably the very fact that the films were in their possession and the circumstances surrounding their seizure would have been relevant and admissible evidence in any prosecution. Perhaps the difference was that those facts existed objectively and independently of anything which the defendants were obliged to say in answer to an interrogatory or produce by way of discovery.
A further point of distinction lies in the peremptory and ex parte nature of an Anton Piller order. In this respect it is to be observed in the passage quoted from the judgment of Bridge L.J. (p. 416) that he was careful to say that the court should abstain from making any order ex parte requiring immediate answers to questions or disclosure of documents.
Nevertheless, I do not think that those poionts of distinction are sufficient to overcome the general thrust of counsel's argument which is that a payment into court by Mr. Jackson pursuant to an order that he do so will cause him to do an act which may tend to incriminate him. But what I think does overcome the argument is the fact that the applicant does not seek the payment in of any specific money in the sense of it being identified with the $4.3 million of which Mr. Jackson took delivery. What is wanted is a payment of $3 million or satisfactory security in lieu thereof. Really it is the latter which is sought. If an order is to be made, I think that is the form which it should take. Many forms of compliance with it would be available, a bank guarantee requiring no deposit of money being one example which comes to mind. If this were provided, the fact that it was would not provide a prosecutor with any evidence of Mr. Jackson's guilt of the crime with which he has been charged or any charge which one can imagine. It should be made clear that on the evidence the sum of $4.3 million is by no means the only sum of money which it may be accepted Mr. Jackson has, or has control of. His applications to the finance commpanies towards the end of last year showed, as I have earlier said, that the Jackson interests had assets exceeding in value some $11 million.
Counsel for the Jackson interests submitted that a general order was not permissible because the way in which Mareva relief was intended to operate was to restrain the defendant dealing with particular assets. It was only because the $4.3 million was, on the facts I have found, shown to be likely to be in Mr. Jackson's possession or control that relief of this kind would be contemplated. That is no doubt true, but that does not involve any orders to be made requiring the payment into court of money necessarily identified as the money or part of the money delivered in cash to Mr. Jackson by Armaguard. It may be that money or it may not, or it may be, as I have said, that security will be provided in some other way. Whether it is or not, is entirely a matter for Mr. Jackson.
That Mareva relief may be general is established in a number of authorities, including the Ballabil case earlier referred to and also T.D.K. Tape Distributor (U.K.) LImited v. Videochoice Limited (1985) 3 All ER 345; cf. Z Limited v. A - Z (1982) 1 QB 558. It all depends upon what the circumstances require. The fact that many Mareva injunctions have been specific as to particular assets is only because the court, upon the evidence before it, becomes aware of particular assets and of steps likely to be taken to deal with them.
Two other matters relied upon in relation to the exercise of discretion were that to make the order would have the effect of placing Mr. Jackson in double jeopardy and that there were alternative remedies available to the applicant which were adequate to protect it. The first of these matters, as I understood it, was based on the proposition that any refusal by Mr. Jackson to comply with the order would expose him to the risk of being dealt with for contempt; thus he was exposed twice to punishment for the same unlawful conduct. I do not perceive that the unlawful conduct, if that is what it is, is the same. If an order is made, Mr. Jackson has the choice of complying with it or not. If he does not, the circumstance that he may be punished for contempt has nothing to do with any unlawful taking of the $4.3 million from Jackson Holdings Limited, if indeed it was taken from that company. That involves an entirely different matter.
The suggested alternative remedies are said to be available on the basis that once judgment is entered bankruptcy and winding-up proceedings may follow with the consequent likelihood of liquidators or trustees in bankruptcy taking possession of property and applying to avoid transactions. But time may defeat many such remedies. The doctrine of relation back and the date when a winding-up commences often prevent the undoing of transactions such as have been entered into in this case. The adjournment secured by the Jackson interests on 12 November 1985 must have gone a long way to achieving such result. It is true that there are other provisions of the Bankruptcy Act 1966 which apply in company liquidations as well as in bankruptcies. I instance s. 120 dealing with settlements of property and s. 121 dealing with fraudulent dispositions of property which may not have the same time constraints, but from one's experience one is aware of the difficult task which a trustee or a liquidator has in gathering evidence and in discharging the various onuses which rest upon him in any such proceedings. It seems to me that, if the applicant is otherwise entitled to the relief it claims here, the fact that transactions may be undone in the event of ultimate bankruptcy or winding-up provides no answer to the case for relief which is made.
All I have so far said points to the case for relief of the kind sought having been made out, but there remains a fundamental question. The only sanction for breach of the order sought will be punishment for contempt. It would today be only in very exceptional circumstances that a court would visit a failure to pay money or provide security with imprisonment. The law does not authorize the imprisonment of debtors. That was long ago abolished. If the applicant now had judgment, the court would not imprison Mr. Jackson for non-payment of the judgment debt. Why, it may be asked, should it take the course of exposing him to the risk of imprisonment before judgment has been recovered. The answer given by the applicant, whose counsel acknowledges the drastic nature of the order sought, is that no other relief which the Court can provide will be likely to safeguard assets that ought in conscience be available for the satisfaction of the judgment the applicant expects to recover.
It is the very extraordinary and unusual circumstances of the case and the systematically and blatently fraudulent conduct of Mr. Jackson which the applicant submits call for an order of the extreme kind here claimed. None of these considerations go, I think, to the Court's jurisdiction. They go to the exercise of its discretion.
The evidence satisfies me that the applicant's fears are well-founded. Mr. Jackson's conduct establishes, not only his intention, but also his determination, to deprive the applicant of the benefit of the judgment it expects to recover. Nothing that has emerged in the course of the hearing leads me to think that he is likely to waiver from his chosen course. He is determined to avoid the consequences of judgment if he possibly can. I thus agree with counsel for the applicant that nothing short of an order such as he seeks will prevent the continued divestiture and concealment of assets which began with the advice given in July last year. To refuse the order is to stand by and see the Court's processes frustrated by fraudulent conduct. It is in those circumstances that I have reached the conclusion that I should accede to the application.
One factor I have taken into account in reaching this conclusion is the granting of the application for the adjournment of the hearing on 12 November last. The ground of the application was the ill health of Mr. Jackson who was said to be suffering from glandular fever. He may have been; but in the light of the facts now known it would seem likely that the application was in truth made to gain further time in which to continue the restructuring of companies and trusts holding assets originally held by the Jacksons or the first respondent, NIM Services Pty Limited. Thus, not only the applicant and its advisers, but also the Court, were misled. That reinforces me in my conclusion that only an order of the most Draconian kind will have any effect.
In concluding this part of the judgment I would add that only a little over ten years ago neither Mareva injunctions nor Anton Piller orders existed. The increasing resourcefulness of those attempting to avoid their obligations, the ease with which money can be moved from one country to another, the ease with which people themselves can travel, and advances in technology convinced the courts in England that new remedies were required. The orders I mention are now everyday affairs - twenty Mareva injunctions a week are granted in London. The law on these matters has been picked up and applied in Australia. A reading of a number of the cases discloses the need the courts have had to mould and extend the jurisdiction they have devised. In my opinion the order to be made here is but a further step in the process that continues to evolve. Not to advance the process would be to stultify the jurisdiction and open the way to those anxious to avoid their obligations by devising ways around the jurisdiction as it is exercised at a given time. Unless the courts are prepared to extend and mould the jurisdiction to take account of events as they transpire, the jurisdiction will cease to have its effect. I agree with both counsel that the order is an extreme one and one which certainly would only be made in the most extreme circumstances. Nevertheless, as I say, I am satisfied that this case requires it.
It remains to deal with the application to dissolve the Mareva injunctions granted against the eighth and ninth respondents, and with the application to appoint a receiver over the assets and undertaking of the eighth respondent, Edith Investments Pty Limited, and of Jackson Holdings Limited. I am satisfied that the injunctions should not be dissolved. The principal matter relied upon by counsel on behalf of those respondents was that an injunction should not be made if it restrains a party against whom principal relief is not claimed. That is usually the case, but there are exceptions. These were referred to in the decision of the New South Wales Court of Appeal in Coxton Pty Limited v. Milne (20 December 1985 - as yet unreported). There, in the course of his reasons, Hope J.A. specified a number of conditions which, if met, would make it appropriate to grant Mareva relief against a party in respect of whom no principal relief was sought. He said (p. 13):-

"Without attempting to define or to limit the extent of the exception, the necessary circumstances will exist when the affairs of a defendant sued by a creditor for an alleged debt and of the third party against whom the injunction is sought are intermingled, the alleged debtor and the disposition of its assets are effectively controlled, de jure or de facto, by the third party, the debtor's assets will be insufficient to meet the debt, the creditor, although having no vested or accrued cause of action against the third party, may become entitled to have recourse to the third party or his assets to meet his debt, and there is a danger that the third party will send his assets abroad or otherwise dispose of them".

In my view, notwithstanding submissions to the contrary by counsel for the Jackson interests, each of those conditions is met by the applicant's case. I do not go to the detail of my reasons for that conclusion; it is enough to say that the evidence satisfied me, and I repeat that no submission in relation to the evidence was relied upon by counsel, that each condition has been fulfilled. The fact that the evidence establishes that $540,000 which provided the purchase money for the pastoral property which is the eighth respondents principal asset and that the ninth respondent, who lives on the property, is Mr. Jackson's mother, provide a sufficient indication of the factual position.
There is then the question of whether a receiver should be appointed over the assets and undertaking of Edith Investments Pty Limited. In counsel's submission the Court has no power to make such an order. Apart from relying upon the absence of any express power to appoint a receiver conferred upon this Court by its statute, counsel also relied on the general uncertainty which there is about this matter in courts of general jurisdiction. An analysis of the judgments of the Court of Appeal in New South Wales in the Ballabil case shows that the matter is not free from doubt, although Priestly J.A. in his judgment, with which I am inclined to agree, thought the power did exist (p. 165).
Having given the matter due consideration, I have decided that I will not, at least at this stage, accede to the application. The existing injunctions restrain any dealing with the pastoral property, which appears to be the company's principal asset. The company also has stock and plant, and that is the reason why the applicant wishes a receiver appointed, but I think, bearing in mind that the order for the provision of security will be made and that the company is restrained from dealing with its principal asset, that, particularly because of the doubts about the matter which there are, the order should not be made, at least at this time.

There remains the question of the appointment of a receiver over the assets and undertaking of the company, Jackson Holdings Limited. This morning I was informed by counsel for A.G.C. (Advances) Limited that a receiver has been appointed by his client. I was also informed that the lease of the premises in which a restaurant is conducted contains a provision which entitles the landlord to terminate the lease in the event of the appointment of a receiver. That provision does not apply in the case of the appointment by A.G.C. (Advances) Limited of a receiver because of a special agreement between the parties. There being a receiver already, and there being the problem adverted to by counsel, it seems to me that it is inappropriate, on the application of the applicant here, to appoint, at least at this stage, yet a further receiver, and I will not make that order.
I propose to stand this matter over for a short time, preferably until a time later today, to enable the parties to consider what I have said. When the matter comes back into the list, I direct counsel for the applicant to bring in short minutes of order to give effect to my decision.
I indicate that, in addition to the orders I have proposed, I would be prepared to give consideration to making orders providing for a more specific restraint in relation to the sum of $4.3 million, for the filing by Mr. Jackson of an affidavit as to his assets and liabilities, and for the answering by him of appropriate interrogatories as to his property dealings and affairs. Such a course may bring in its train some of the problems referred to in the Rank case, but no affidavit or answer to interrogatories need be made without the advice of counsel and solicitors. There will thus be adequate opportunities for Mr. Jackson to be advised of his rights and the privileges he may claim from answering questions. That, as I have earlier pointed out, was not the case in Rank.

(Later on 23 April 1986 his Honour made orders in terms of those which appear as a preface to these reasons for judgment).

[1986] FCA 152

23 APRIL 1986