Tagget v Sexton - [2009] NSWCA 91

No judgment structure available for this case.

New South Wales

Court of Appeal

CITATION: Tagget v Sexton [2009] NSWCA 91
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 19 September 2008

JUDGMENT DATE:
29 April 2009

JUDGMENT OF: Beazley JA at 1; Young JA at 93; Sackville AJA at 113

DECISION: 1. Grant leave to appeal;
2. Appeal allowed;
3. Set aside order 2 made by the District Court on 14 February 2007 and all orders made thereafter continuing and varying that order;
4. Set aside all costs orders made by the District Court;
5. Dismiss the respondent’s notice of motion in the court below;
6. Note that there is no order as to the costs of the appeal or the hearing at first instance (with the intent that the parties bear their own costs of the appeal and at first instance);
7. Stay orders 3 and 6 above for seven days;
8. Liberty to the respondent to move the District Court to assess damages flowing pursuant to the undertaking as to damages if, and only if, such application is filed on or before 30 June 2009.

CATCHWORDS: DISTRICT COURT – interlocutory relief - freezing order restraining assets of a third party – whether the District Court has jurisdiction to make such an order - DISTRICT COURT – interlocutory relief - freezing order restraining assets of a third party – whether the District Court has the power to make orders effectively making a third party a guarantor of the judgement debtor’s debt - INTERLOCUTORY RELIEF – freezing orders – extent of order – must be limited so as not to exceed what is reasonably necessary in the circumstances - COSTS - interlocutory proceedings – entitlement to appellate intervention where costs ordered at interlocutory stage

LEGISLATION CITED: Bankruptcy Act 1966 (Cth), ss 12A, 120, 121, 122, 178
Civil Procedure Act 2005, ss 5, 9, 10, 11, 90, 98, 103, 117, 118, 126, 127; Pt 8, Sch 3, cl 20
Conveyancing Act 1919, s 37A
District Court Act 1973, ss 4, 44, 46; Pt 3 Div 4, Div 8 Fair Trading Act 1987
Federal Court of Australia Act 1976 (Cth), s 23
Federal Court Rules (Cth) O 25A r 5
Rules of the Supreme Court (UK) O 36 r 39
Supreme Court Act 1970, ss 81, 91
Uniform Civil Procedure Rules 2005, rr 25.11, 25.14, 42.1, 42.7; Pts 25, 39, 40
Uniform Civil Procedure Rules (Amendment No 9) (2006)

CATEGORY: Principal judgment

CASES CITED: Attorney-General (NSW) v Mayas (1988) 14 NSWLR 342
Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2000) 204 CLR 559
Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380
Devereaux Holdings Pty Limited v Pelsart Resources NL (No 2) (Supreme Court of New South Wales, Young J, 24 July 1985, unreported)
Director of Public Prosecutions v Shirvanian (1998) 44 NSWLR 129
Ex p Hulin; Re Gillespie (1965) 65 SR (NSW) 31(FC)
Gould v Brown (1998) 193 CLR 346
Grassby v The Queen [1989] HCA 45; (1989) 168 CLR 1
Green v Schneller [2002] NSWSC 671; 29 Fam LR 346
Griffiths v Falck [2008] NSWSC 998; 220 FLR 278
Harris v Caladine (1991) 172 CLR 84
His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 38 IPR 107
LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 78 FCR 65
Parisienne Basket Shoes Pty Ltd v Whyte (1938) 59 CLR 369
Parsons v Martin (1984) 5 FCR 235
Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435
Pure Logistics v Bruce Donald Scott & Anor [2007] NSWSC 595
Reg v Forbes; ex p Bevan (1972) 127 CLR 1
Reid v Howard [1995] HCA 40; (1995) 184 CLR 1
Sleiman v Afeich & Anor (No 2) [2005] NSWSC 969
Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418
Tomlinson v Cut Price Deli Pty Ltd (Federal Court of Australia, Kiefel J, 23 June 1995, unreported)
United Telecasters Sydney Ltd v Hardy (1991) 23 NSWLR 323

TEXTS CITED: Halsbury’s Laws of England (4th ed) vol 10, para 715
K Mason, “The Inherent Jurisdiction of the Court” (1983) 57 Australian Law Journal 449
Felix F Stumpf, Inherent Powers of the Courts, (1994) National Judicial College, Reno USA
Ritchie’s Uniform Civil Procedure New South Wales, (February 2009), vol 1

PARTIES: Neil Anthony Tagget (Appellant)
Charlene Sexton (Respondent)

FILE NUMBER(S): CA 40941/07

COUNSEL: M Ashhurst SC; A Fernon (Appellant)
P Gray SC (Respondent)

SOLICITORS: Slater & Gordon Lawyers (Appellant)
Barwick Stevens Lawyers (Respondent)

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 2242/2006

LOWER COURT JUDICIAL OFFICER: McGrowdie ADCJ

LOWER COURT DATE OF DECISION: 15 August 2007

- 58 -

CA 40941/07

BEAZLEY JA
YOUNG JA
SACKVILLE AJA
29 April 2009

Neil Anthony Tagget v Charlene Sexton

Headnote

On 14 December 2006 Charlene Sexton (the respondent) received a judgment in her favour in the District Court for breach of contract and misleading and deceptive conduct under the Fair Trading Act 1987. The District Court proceedings arose out of a proposed purchase by the respondent of a rural property at Dorrigo (the Dorrigo property) from Graeme Tagget. Prior to the proposed purchase, Graeme Tagget and the respondent made an agreement allowing her to agist her cattle on the Dorrigo property. The property was unsatisfactory for that purpose and the respondent suffered substantial loss. The sale of the Dorrigo property did not then eventuate.

On 19 January 2007, Graeme Tagget, his son Neil Tagget (the appellant), Neil Tagget’s wife’s trustee in bankruptcy and Taco Properties Pty Limited (Taco Properties) entered into a number of transactions relating to several properties including the Dorrigo property and a property at Bellingen (the Bellingen property). Neither the appellant nor Neil Tagget’s wife’s trustee in bankruptcy nor Taco Properties were parties in the District Court proceedings. The effect of these transactions was to “load” the Dorrigo property with a secured debt so as to minimise the equity Graeme Tagget had in it.

On 13 February 2007 the respondent caused a bankruptcy notice to be issued against Graeme Tagget and a bankruptcy order was subsequently made against him. The following day, on 14 February 2007, the respondent, by way of notice of motion, sought restraining orders against Graeme Tagget in respect of the Dorrigo property; Taco Properties in respect of the property at Bellingen (the Bellingen property); and each of Graeme Tagget, Taco Properties and the appellant in respect of their respective assets, up to the value of $850,000. McLoughlin DCJ made ex parte orders that day restraining those parties from dealing with assets up to that value. At the hearing of the notice of motion, the respondent indicated that she proposed to make an application under the Conveyancing Act 1919, s 37A or under the Bankruptcy Act 1966 (Cth), s 121.

The orders made by McLoughlin DCJ were subsequently varied and on 15 August 2007 McGrowdie ADCJ continued the orders. The appellant sought leave to appeal from the orders made by McGrowdie ADCJ. The primary issue on appeal was whether the District Court had jurisdiction to make the orders.

Held

Issue 1: Did the District Court have jurisdiction to make a freezing or restraining order against a third party?

1. The District Court has an implied power to make a freezing or restraining order in respect of the assets of a third party where there is evidence that a judgment debtor has taken steps to alienate property to a third party, when that property would otherwise have been available for execution at the instance of the judgment creditor. Any such order can only be made in accordance with the principles in Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380: per Beazley JA (Young JA agreeing) at [64]. (Such orders are variously referred to in the judgment as mareva, restraining, freezing or asset preservation orders)

Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 (followed)
Grassby v The Queen [1989] HCA 45; (1989) 168 CLR 1 (followed)
LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 38 IPR 107 (followed)
Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435 (followed)

2. In the normal course, a freezing or restraining order, whether in respect of the assets of a party to proceedings, or a third party, should be made for a limited period, delimited either by a date or event or subject to a condition, such as the bringing of an application under the Conveyancing Act, s 37A, or under the Bankruptcy Act, s 121: per Beazley JA (Young JA agreeing) at [67].

Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 (followed)
Green v Schneller [2002] NSWSC 671; 29 Fam LR 346 (cited)

3. The District Court has the power to a freezing or restraining order against third parties provided it acts in conformity with the principles laid down in Cardile v LED Builders: per Sackville AJA (Young JA agreeing) at [152].

Cardile v LED Builders Pty Ltd

Pelechowski v Registrar, Court of Appeal

4. The District Court has the power to make orders after judgment, provided the orders are incidental and necessary to the enforcement jurisdiction (in the sense of reasonably required for, or legally ancillary to, the accomplishment of the enforcement remedies): per Sackville AJA at [149].

Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 (considered)
Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435 (followed)

Issue 2: Were the transactions the appellant entered into on 19 January 2007 liable to be impugned under the Conveyancing Act, s 37A or the Bankruptcy Act, s 121?

5. It is sufficient for the purposes of determining whether a freezing or restraining order should be made that the transactions entered into by a judgment debtor can arguably be impugned under the Bankruptcy Act, s 121. In this case, the appellant failed to establish that the trial judge’s conclusion that there was an arguable case that the transactions might be impugned under s 121 is wrong: per Beazley JA (Young JA agreeing) at [71].

Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 (considered)
Pure Logistics v Bruce Donald Scott & Anor [2007] NSWSC 595 (considered)
Sleiman v Afeich & Anor (No 2) [2005] NSWSC 969 (considered)

exceed what was reasonably necessary in the circumstances?

6. The District Court does not have the power to effectively make a third party a guarantor of a judgment debtor’s debt in circumstances where the judgment debtor has entered into transactions, either with or to the benefit of the third party so as to defraud, defeat, or delay a judgment creditor and where the third party has not received moneys or assets from the transactions: per Beazley JA (Young JA agreeing) at [77].

7. In this case, if an order was made pursuant to the Conveyancing Act, s 37A or the Bankruptcy Act, s 121 (assuming that action remained available in this case), it would need to provide for the ‘reversal’ of the transactions that occurred on 19 January 2007: per Beazley JA (Young JA agreeing) at [77].

8. An order can be made pursuant to the Uniform Civil Procedure Rules, r 25.14(5)(b) only if a process is available in the District Court itself as a result of the judgment pursuant to which the third party may be obliged to disgorge assets or contribute towards satisfying the judgment. In this case, a relevant process was not available in the District Court and the terms of r 25.14(5)(b) were not satisfied: per Sackville AJA at [141]-[144].

Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 (considered)
Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435 (followed)

Issue 4: Was there enough evidence for the trial judge to make the orders made?

9. The factual findings made by the trial judge do not justify a freezing or restraining order in the terms made. Further findings were required to establish that the principles laid down in Cardile v LED Builders were satisfied: per Sackville AJA (Young JA agreeing) at [153]-[158].

Cardile v LED Builders Pty Ltd

Tomlinson v Cut Price Deli Pty Ltd

Issue 5: Were the orders as to costs appropriately made?

10. A party is not entitled to appellate intervention merely because that party failed to make an appropriate submission when given the opportunity to do so. There are exceptions to that, such as where a pure matter of law is involved. The question of costs would not appear to be such an exception: per Beazley JA (Young JA agreeing) at [87]-[88].

Devereaux Holdings Pty Limited v Pelsart Resources NL

(No 2)

His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2)

Suttor v Gundowda Pty Ltd

CA 40941/07

BEAZLEY JA
YOUNG JA
SACKVILLE AJA

29 April 2009

Neil Anthony Tagget v Charlene Sexton

Judgment

1 BEAZLEY JA: This is an application for leave to appeal from orders made by McGrowdie ADCJ on 15 August 2007, in which his Honour continued orders restraining the disposition of property, initially made by McLoughlin DCJ on 14 February 2007. The restraining orders were sought to secure enforcement of a judgment in the sum of $426,540 that Charlene Sexton, the respondent, had obtained against Graeme Tagget in District Court proceedings No. 2242/2006.

2 The matter before the Court raises important questions relating to the jurisdiction and power of the District Court to make orders affecting the assets of third parties and the orders that are presently in force restrain a third party to proceedings in the District Court from dealing with assets to the value of $1 M. In my opinion it is an appropriate case in which to grant leave to appeal.

3 Neil Tagget, (to whom I shall refer as the appellant) is the son of Graeme Tagget. The appellant was not a party to the District Court proceedings.

4 The District Court proceedings arose out of a proposed purchase by the respondent of a rural property from Graeme Tagget at Dorrigo (the Dorrigo property). Prior to the purchase, Graeme Tagget and the respondent had entered into an interim agreement that permitted her to agist her cattle on the property. The property was not satisfactory for that purpose and she suffered substantial loss. The sale of the real estate never eventuated. The respondent brought proceedings against Graeme Tagget for breach of contract and misleading and deceptive conduct under the Fair Trading Act 1987. Judgment was entered in her favour on 14 December 2006.

5 On 14 February 2007, the respondent, by way of notice of motion, sought orders against: Graeme Tagget to restrain dealings with the Dorrigo property; Taco Properties Pty Limited (Taco Properties), to restrain dealings with a property at Bellingen (the Bellingen property); and each of Graeme Tagget, Taco Properties and the appellant to restrain dealings with their respective assets, up to the value of $850,000. Ex parte orders were made that day restraining those parties from dealing with assets up to that value. There were subsequent variations of those orders, the detail of which is not important for the resolution of the appeal. Such orders are variously referred to in the authorities and in the rules of court as Mareva orders, restraining orders, asset preservation orders and freezing orders. For present purposes, there is no reason to determine whether one term is more correct than the others and the terms are used interchangeably in the course of these reasons.

6 The Dorrigo property which had been the subject of the sale transaction to the respondent was subject to a mortgage to Perpetual Trustee Co Ltd (Perpetual Trustee). The mortgage was also secured by two other properties, the one at Bellingen, and another at Cudgera (the Cudgera property). The appellant had been a co-owner with his wife of the Bellingen and Cudgera properties, although at the time of the events in issue here, his wife’s share was held by her trustee in bankruptcy.

7 Taco Properties was first registered on 14 December 2006, the day on which judgment in the District Court proceedings was given in favour of the respondent. Graeme Tagget is the sole shareholder and director of Taco Properties.

8 On 19 January 2007, Graeme Tagget, the appellant and Taco Properties entered into a number of transactions relating to these properties. At that time, the mortgage to Perpetual Trustee was in default and Perpetual Trustee was proposing to exercise its power of sale over the Bellingen and Cudgera properties only. On 19 January Graeme Tagget and Taco Properties entered into a new mortgage transaction with First Mortgage Managed Investments Limited (First Mortgage), for a sum in excess of $1 M. That mortgage was secured over the Dorrigo and Bellingen properties.

9 Taco Properties had become the registered proprietor of the Bellingen property in the following circumstances. The appellant’s co-owner in the Bellingen property was his wife’s trustee in bankruptcy. On 19 January 2007, the wife’s trustee in bankruptcy transferred his 50 per cent interest in the property to the appellant and on the same day, the appellant transferred his then 100 per cent interest in the property to Taco Properties. The Bellingen property then became part of the security for the mortgage with First Mortgage.

10 On the same day, the appellant’s wife’s trustee in bankruptcy also transferred his interest in the Cudgera property to the appellant, who then entered into a new mortgage with Stacks Managed Investments, secured over that property.

11 The Dorrigo property was the obvious (and probably only asset) against which the respondent could seek to enforce her judgment against Graeme Tagget. The effect of the transactions on 19 January was to “load” the Dorrigo property with a secured debt so as to minimise the equity Graeme Tagget had in it. There was also a consequential benefit to the appellant, as he was able to acquire a 100 per cent interest in the Bellingen and Cudgera properties. This occurred because the Bellingen and Cudgera properties were freed from the Perpetual Trustee mortgage. This enabled the appellant to then obtain the additional 50 per cent interest in each property. He then immediately on-sold the Bellingen property Taco Properties but retained the 100 per cent interest in the Cudgera property subject only to the mortgage to Stacks Managed Investments.

12 On 13 February the respondent caused a bankruptcy notice to be issued against Graeme Tagget. A bankruptcy order was subsequently made against him.

13 On 14 February 2007, McLoughlin DCJ made the following order against the appellant:

“… [the appellant] … be restrained until further order from disposing of or dealing in any way with any of [his] money, property or other assets whether in [his] own names or not and whether solely or jointly owned up to the value of $850,000.00, other than for the following purposes:

…

II) … to pay [his] ordinary living expenses;

III) to meet [his] taxation liabilities;

14 As already mentioned these orders were subsequently varied and extended prior to the hearing before McGrowdie ADCJ.

15 McGrowdie ADCJ ordered that order 2 made by McLoughlin DCJ on 14 February (as varied) be continued until further order. On 5 November 2007, the amount in order 2 was increased to $1 M as a condition of ordering a stay of the earlier order.

16 McGrowdie ADCJ held, at 19, that he was satisfied the respondent had a reasonably arguable case for attacking the various transactions surrounding the refinancing of the Perpetual Trustee loan. His Honour further observed, at 20, that without further proceedings to impugn the transactions of 19 January 2007, the Dorrigo property was beyond the reach of the respondent. His Honour considered that the assets and liabilities of Graeme Tagget and [the appellant] were “mixed up”, “intermingled” and/or “controlled”, in the sense that those concepts were used in Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380.

17 At the time the notice of motion was heard, the respondent foreshadowed that she proposed to make an application under the Conveyancing Act 1919, s 37A. Alternatively, if a bankruptcy order was made against Graeme Tagget, she indicated that she would seek the making of an order under the Bankruptcy Act 1966 (Cth), s 121. Stated in general terms, both s 37A and s 121 make provision for the setting aside of transactions that are entered into with the intent to defraud (s 37A), or to defeat or delay (s 121) creditors.

Issues on the appeal

18 The appellant challenged the orders made by McGrowdie ADCJ on four bases:

(1) That the District Court had no jurisdiction to make the order;

(2) That the transactions entered into by the appellant on 19 January 2007 are not liable to be impugned under either the Conveyancing Act , s 37A or the Bankruptcy Act , s 121;

(3) That the extent of the restraining order exceeded what was reasonably necessary in the circumstances; and

(4) That his Honour erred in making an order for costs in favour of the respondent contrary to the principles stated in His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142.

First issue: the jurisdiction question

19 The appellant contended that there was no “action” on foot in the District Court because the proceedings, in which the respondent was awarded judgment against Graeme Tagget, had concluded. Accordingly, the District Court did not have jurisdiction to make the orders made against him. This submission was based upon the terms of the District Court Act 1973, s 46 and the decision of the High Court in Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435. It was submitted that the trial judge had erroneously assumed that the District Court had jurisdiction pursuant to the Uniform Civil Procedure Rules 2005 (UCPR), Pt 25. However, the UCPR did not extend the jurisdiction of the District Court, without a corresponding grant of power under the Act: see the Civil Procedure Act 2005, s 5(2) and there was no corresponding grant of power.

20 As Sackville AJA explains in his comments on this issue, jurisdiction and power are not necessarily discrete concepts and my reasoning on the jurisdictional/power question in this case has been aided by his Honour’s discussion.

21 The Civil Procedure Act, s 5(2) provides:

“ 5 Jurisdiction of courts

…

“ 90 Judgments generally

22 The jurisdiction of the District Court is specified in the District Court Act, Pt 3. Relevant to this case are the provisions of s 46.

23 The District Court Act, s 46(1) provides:

“ 46 Ancillary equitable relief: injunctions

24 Section 46(2) provides:

(a) the Court and the Judges shall, in addition to the powers and authority otherwise conferred on it and them, have all the powers and authority of the Supreme Court and the Judges thereof in the like circumstances,

(b) the appropriate officer of the Court shall, in addition to the duties otherwise imposed on the officer, discharge:

(c) the practice and procedure of the Court shall, so far as practicable and subject to this Act and the rules, be the same as the practice and procedure of the Supreme Court applicable in the like circumstances, and

(d) without affecting the generality of the foregoing provisions of this section, the powers, authority and duty conferred by paragraphs (a) and (b), and the practice and procedure of the Court referred to in paragraph (c) shall, subject to the rules, extend to the enforcement of any order of the Court made in connection with proceedings for the grant of the injunction.”

25 Section 46 is predicated on there being an “action in the Court”. “Action” is defined in s 4(1) as meaning:

“… action in the Court, but does not include any proceedings under Division 8 of Part 3 or under Part 4.”

26 Reference should also be made to s 44, which provides, relevantly:

“ 44 Actions

(1) Subject to this Act, the Court has jurisdiction to hear and dispose of the following actions:

(i) which, if brought in the Supreme Court, would be assigned to the Common Law Division of that Court …”

27 The District Court had jurisdiction under s 44(a)(i) to determine the respondent’s original proceedings against Graeme Tagget. The question in issue here does not, however, relate to the jurisdictional validity of those proceedings. The question is whether the Court had jurisdiction to make a restraining order against the appellant’s assets once the proceedings against Graeme Tagget had concluded. In this regard, the proceedings relevantly concluded on 14 December 2006, when judgment was given in favour of the respondent.

Pelechowski v Registrar, Court of Appeal

28 The appellant’s primary submission was that the District Court did not have jurisdiction to make the restraining orders. This submission was based upon the decision in Pelechowski.

29 In Pelechowski, the plaintiff, Rahme, had brought proceedings against Pelechowski and another, claiming a liquidated sum plus interest, pursuant to an alleged loan agreement entered into between the parties. Judgment was given in favour of Rahme in the amount claimed. Prior to the date of judgment, Rahme had filed a notice of motion seeking an order against Pelechowski and the other defendant, restraining them from dealing with their interest in specified land (the land). The restraining order was sought pending further order of the court.

30 Having entered judgment in favour of Rahme, the trial judge heard the notice of motion and ordered that Pelechowski and the other defendant be restrained from dealing with the land. His Honour ordered that the restraining order continue until further order, or payment of the judgment sum. Pelechowski was in court when his Honour made the order, although the other defendant was not.

31 Shortly afterwards, Pelechowski and the other defendant applied for a loan from a credit provider. The facility was granted and secured by registered mortgage over the land. The credit provider lodged a caveat in respect of its interest in the land. Upon becoming aware of this some months later, Rahme brought proceedings against Pelechowski and the co-defendant for contempt of court.

32 The contempt proceedings were referred to the Supreme Court and the matter was heard by the Court of Appeal constituted by Handley, Beazley and Stein JJA. Handley JA, with whom I and Stein JA agreed, considered that the restraining order made in the District Court was a Mareva injunction granted under the District Court Act, s 46. Pelechowski was found guilty of contempt of the order and sentenced to a term of imprisonment of six months.

33 Pelechowski appealed to the High Court on the basis that the District Court had no jurisdiction to make the restraining order. This argument was upheld by the Court. Gaudron, Gummow and Callinan JJ observed, at [44], that the injunctive remedy for which provision was made in s 46 was ancillary to the exercise of the District’s Court’s jurisdiction to hear and dispose of actions specified in s 44. Their Honours held, at [45], that Rahme’s legal rights in respect of which the District Court claim had been brought merged in the judgment recovered in that court. The making of the restraining order, properly categorised, was a post-judgment remedy designed to preserve the property, so that it would be available for execution or other enforcement procedures. Their Honours held that:

“An order of that nature is neither an injunction nor an injunction ‘in an action’ for the purposes of s 46.”

“Orders such as that made … by the District Court may be made by superior courts of record, yet even there they have a different basis in principle and doctrine to injunctions in aid of legal rights, titles and interests in pending litigation.”

Cardile v LED Builders Pty Ltd

34 It followed on this reasoning that the restraining order made by the District Court was not one which could be made under s 46, nor was there any other express provision in the District Court Act conferring jurisdiction on the District Court to make such an order. Their Honours then considered whether there was any implied power to make such an order.

35 Notwithstanding that the District Court is an inferior court, so its jurisdiction is that conferred by statute, their Honours accepted, at [50], that an inferior court has such implied powers as are necessary in aid of the court’s express jurisdiction. The existence of such implied powers finds its basis in the principle “that a grant of power carries with it everything necessary for its exercise”: see Grassby v The Queen [1989] HCA 45 per Dawson J at [21]; (1989) 168 CLR 1. In that case, Dawson J, who gave the lead judgment held, at [23], that an inferior court would have implied powers:

"… whenever they are required for the effective exercise of a jurisdiction which is expressly conferred but will be confined to so much as can be 'derived by implication from statutory provisions conferring particular jurisdiction’.”

36 In Pelechowski, at [51], their Honours held that the term “necessary” in this context meant a power to make orders that were reasonably required or legally ancillary to the accomplishment of the specific remedies for enforcement provided in District Court Act, Pt 3, Div 4. In this regard, “necessary” did not mean “essential”, rather, it was “to be subjected to the touchstone of reasonableness”. Their Honours then stated, at [52]:

“In the present case, an asset preservation order might properly have restrained any dealing by the judgment debtors with the Land for such period as was appropriate for the judgment creditor to move promptly to utilise the provisions with respect to writs of execution in subdiv 5 of Div 4 of Pt 3 of the District Court Act. Such an order may reasonably have been required as ancillary to the proper objective of preventing the recording of adverse dealings in the register before the recording of a writ of execution against the Land on the application of the judgment creditor. Other examples may be imagined.”

District Court Act

Civil Procedure Act

37 The order made in Pelechowski went beyond what was permissible under the implied power. Its effect was to provide additional security for payment of the judgment debt because it denied to Pelechowski and the co-defendant any ability to exercise their proprietary rights in respect of the land. Their Honours also noted, at [53], that the order had not been made subject to any undertaking on the part of Rahme expeditiously to pursue enforcement remedies under the District Court Act or the Bankruptcy Act. This was an important discretionary consideration as had been emphasised in Cardile v LED Builders.

38 The appellant contended that an order of the type made in this case against him was not an order which could be made under the District Court Act, s 46. The basis of the submission, as I understand it, was that the order went beyond what was permissible under the implied power. The appellant further submitted that an asset preservation order, even within power, could only be made against a party to proceedings. This submission raised the question of the extent of the District Court’s jurisdiction to enforce its judgments, as an implied power can exist in support of such jurisdiction.

39 Provision for the enforcement of judgments and orders is now contained in the Civil Procedure Act 2005, Pt 8. Section 103 provides that, subject to Pt 8, the procedure for enforcing a judgment or order of the court is as prescribed by the UCPR. The annotations to s 103 direct attention to the UCPR, Pt 39: “Enforcement of judgments” and UCPR, Pt 40: “Additional measures for enforcing judgments and orders of the … District Court”: see Ritchie’s Uniform Civil Procedure New South Wales, (February 2009), vol 1 at 277. Parts 39 and 40 are directed to forms of enforcement of judgments of the court. The restraining orders made here were not orders to enforce the judgment, but were made to preserve property, potentially so as to make the property subject of the restraint available for enforcement action. Restraining or freezing orders may be made under UCPR, Pt 25. However, the appellant contended that Pt 25 did not apply to proceedings brought in the District Court.

40 UCPR, Pt 25, Div 2, makes provision for freezing orders both against a party: see UCPR, r 25.11, as well as against a third party: see UCPR, r 25.14. Those rules provide:

“ 25.11 Freezing order

(1) The court may make an order (a freezing order ), upon or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.

(2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.

…

25.14 Order against judgment debtor or prospective judgment debtor or third party

(a) judgment has been given in favour of an appellant by:

(i) the court …

…

third party

(a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because:

(i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or

(ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or

in the court

41 Rule 25.14(5) essentially adopts, in regulation form, the principles and procedures discussed in Cardile v LED Builders. There is an important qualification to that which is discussed below. It is convenient to first consider Cardile v LED Builders.

42 In Cardile v LED Builders, LED had obtained judgment in the Federal Court for breach of copyright. In accordance with the available remedies in such a case, it elected for an account of profits rather than damages. Judgment on the account of profits was reserved when LED sought orders restricting Eagle Homes, the infringing party, from dealing with its realty. Later, LED sought to join the directors, as well as another company which had been set up by the directors subsequent to the commencement of the copyright infringement proceedings, and orders were sought that those parties be restrained from dealing with their assets. The restraining orders sought in the Federal Court were identified as “Mareva orders”. Emmett J, who heard the summons to join the additional parties, stated (see (1997) 38 IPR 107 at 119-120):

“The question is whether Eagle Homes [the infringing party] has control over or access to the assets of Ultra Modern [the new company] or Mr and Mrs Cardile [the directors] such that the proceeds of the sale of those assets could be applied in discharge of any judgment against Eagle Homes. There must be evidence to support a conclusion that there is a danger that the assets of the prospective respondents, which might otherwise be available to satisfy a judgment in favour of LED against the Eagle Homes, will not be available.

…

As I have indicated, I have concluded that an inference can be drawn that the declaration of the dividends and the run down of the business of Eagle Homes has been motivated by a desire to limit the funds available to meet a judgment in favour of LED. It may well be that, if an application such as that presently before me had been brought earlier, relief would have been granted which prevented the declaration of a dividend or the transfer of the business name.

...

43 The prospective actions to which Emmett J was referring included avoidance proceedings under the Conveyancing Act, s 37A: see Cardile at [6]. Emmett J was of the opinion that a Mareva order was available against a third party, where a claim against the third party related to specific property in which the defendant had asserted a proprietary interest.

44 Emmett J refused relief. An appeal to the Federal Court succeeded on the basis that relief of a Mareva type should have been granted: LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 78 FCR 65. Subsequently, upon remitter, Emmett J made orders until further order restraining Ultra Modern and Mr and Mrs Cardile from disposing of money, property, or assets other than for specified purposes, including the payment of reasonable legal expenses.

45 On appeal to the High Court, Gaudron, McHugh, Gummow and Callinan JJ noted that no authority that had been cited to the Court went so far as to support an order of the width that had been made. Their Honours stated:

Mareva

whilst it is undesirable that asset preservation orders of the

variety be left as a sui generis remedy

Mareva

CSR Ltd v Cigna Insurance Australia Ltd

prevent

protect

Jackson v Sterling Industries Ltd

the administration of justice

may, in a proper case, extend to asset preservation orders against third parties to the principal litigation

46 Later, their Honours stated:

“[56] … the general power of superior courts which is comprehended by the express grant in s 23 of the Federal Court Act is a broad one. But, as the statements of Deane J in Jackson v Sterling Industries Ltd make clear, orders made pursuant to that section (and under the general power) must be capable of properly being seen as appropriate to the case in hand.

Mareva

Jackson v Sterling Industries Ltd

;

(ii) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.” (Citation omitted)

47 The Court considered that such an order should have been made and approved a form of order. Importantly for this appeal, their Honours stated that such relief was interlocutory in nature and not final. They said:

“[76] … if not earlier then certainly upon delivery of judgment upon the account of profits and depending upon the outcome and tenor of the judgment, the appellants may move the Federal Court to dissolve or to vary the interlocutory relief by provisions including the imposition of a time constraint upon the institution in a court of competent jurisdiction of an action under s 37A of the Conveyancing Act against the personal appellants and specifying the circumstances in which the order will cease to operate. The liberty to apply might subsequently be utilised in the Federal Court to seek the variation or release of the asset preservation order in circumstances which by then have appeared. These circumstances would include the determination of the s 37A application by the court seized of the matter, or the reaching by that court at an interlocutory stage of the conclusion that the s 37A application had prospects of success which were so weak as to merit the personal appellants moving the Federal Court to vary or discharge the asset preservation order.”

48 It is apparent from Cardile v LED Builders and the UCPR r 25.14, that if the District Court was a superior court of record, it would have had express power to make a freezing order against the appellant, provided the circumstances for making the order had been made out. The appellant submitted, however, that that the District Court is an inferior court of record and did not have power to make an order against a third party, either in its implied jurisdiction or pursuant to Pt 25. In order to determine whether this proposition is correct, it is necessary to return to provisions of both the District Court Act and the Civil Procedure Act.

49 It will be recalled that the Civil Procedure Act, s 5(2) provides that nothing in the UCPR extends the jurisdiction of any court, except to the extent to which the Civil Procedure Act provides: see [21]. The appellant relied upon s 5(2) to contend that as there is no express jurisdiction in the District Court Act to make a freezing order and in particular, a freezing order against a third party, the UCPR cannot provide that jurisdiction. The appellant also denied that the District Court has power to make such an order, even if there is jurisdiction.

50 I do not consider either proposition to be correct. The Civil Procedure Act does not contain any express provision for the making of asset preservation orders or freezing orders. However, s 90(1) confers jurisdiction on the court to make such order as the nature of the case requires. Those orders may be made either at or after trial or otherwise as the nature of the case requires. Further, as is apparent from Pelechowski, the District Court has jurisdiction to enforce its judgments.

51 The Civil Procedure Act, s 103, which does not have a direct predecessor in the District Court Act provides that subject to Pt 8: “Enforcement of judgments and orders”, the procedures for enforcing a judgment or order of the court are to be prescribed by rules of court. Part 8 includes s 104-106. Sections 104 and 105 relate to judgments for possession of land and to delivery of goods respectively and are not presently relevant. Section 106 relates to judgments for the payment of money (being the type of judgment in this case) and provides that such judgments may be enforced by a writ for the levy of property, a garnishee order, or a charging order. (Prior to the enactment of the Civil Procedure Act, the jurisdiction was found in the District Court Act, Pt 3, Div 4.)

52 Section 9 makes provision for the making of rules not inconsistent with the Civil Procedure Act:

“(1) … for or with respect to any matter that by this Act is required or permitted to be prescribed by rules or that is necessary or convenient to be prescribed by rules for carrying out or giving effect to this Act.

53 Schedule 3, cl 20 provides that rules may be made for:

“… the means for, and the practice and procedure to be followed in, the enforcement and execution of judgments and orders.”

54 Section 10 provides that rules of court are taken to include the UCPR to the extent which they are applicable in that court. Section 11 provides that the UCPR prevails over any provision of any local rules, unless a contrary intention is expressly stated in the UCPR.

55 It is thus necessary to return to the UCPR, Pt 25. Part 25 is headed “Interim preservation” and makes provision for the making of freezing orders, both before and after judgment. To the extent that UCPR, r 25.11 relates to such orders against parties to proceedings after judgment, it has made express what the High Court held in Pelechowski was implied. Rule 25.11 does not, therefore, extend the jurisdiction of the District Court. Rather it provides it with a power, in specified circumstances, to preserve property in aid of execution. No challenge could thus be made to r 25.11 on the basis of being outside the rule-making power of the Civil Procedure Act insofar as it relates to the District Court.

56 However, this case is not concerned with asset preservation orders against parties, but against third parties.

57 UCPR, r 25.14 permits a freezing order to be made against a third party. As Sackville AJA points out, UCPR, r 25.14(5)(b) only provides a power to make an order against a third party where there is:

in the court

58 The Act and the UCPR are courtcentric. That is, unless there is an express reference to a specific court, for example, the Supreme Court, a reference to “the court” is to be read as a reference to the court in which the relevant proceedings are located. In this case, that is the District Court. The processes available under the Conveyancing Act, s 37A, or the Bankruptcy Act, s 121 are not processes that may only be pursued in the District Court. They are processes that may and may only be pursued in the Supreme Court or the Federal Court respectively. Accordingly, UCPR, r 25.14(5) is not a source of power for the making of an order such as was made here. This drives one back to some other basis for the making of such an order.

59 Cardile v LED Builders is authority for the proposition that a superior court has an implied power to make a freezing order against a third party, but only within the constraints expressed in the plurality judgment. UCPR, r 25.14(5) now expressly makes provision for the making of such an order, including by the District Court, but only if the court making the order is satisfied that there is a process in that court that may be available to require a third party to disgorge assets or contribute towards satisfying the judgment debt. In this case (and without commenting upon the ultimate correctness of the respondent’s claim to be able to do so) that would require impugning the transactions entered into on 19 January so as to restore sufficient equity in the Dorrigo property to make it amenable to enforcement processes. As I have said, the processes by which that is sought to be done are not available in the District Court.

60 It follows that for the order of the type made in this case by the trial judge, some other basis has to be found. This raises a question of both jurisdiction and power. In Cardile v LED Builders, their Honours in the plurality judgment considered the power to grant the orders in the Federal Court was expressly comprehended within the grant of power in the Federal Court of Australia Act 1976 (Cth), s 23. Their Honours deferred consideration of the question as to what the limitations were in this regard in the case of an inferior court and referred to Grassby v The Queen.

61 In Grassby v The Queen Dawson J observed that a superior court of unlimited jurisdiction has the general responsibility for the administration of justice. However, that did not mean that an inferior court did not have the powers necessary for the effective exercise of its judgment. As his Honour explained, at [21]-[23]:

"It is in that way that the Supreme Court of New South Wales exercises an inherent jurisdiction. Although conferred by statute, its powers are identified by reference to the unlimited powers of the courts at Westminster (and with respect to federal jurisdiction, by Ch III of the Constitution). On the other hand, a magistrate's court is an inferior court with a limited jurisdiction which does not involve any general responsibility for the administration of justice beyond the confines of its constitution. It is unable to draw upon the well of undefined powers which is available to the Supreme Court. However, notwithstanding that its powers may be defined, every court undoubtedly possesses jurisdiction arising by implication upon the principle that a grant of power carries with it everything necessary for its exercise ... Those implied powers may in many instances serve a function similar to that served by the inherent powers exercised by a superior court but they are derived from a different source and are limited in their extent. The distinction between inherent jurisdiction and jurisdiction by implication is not always made explicit, but it is, as Menzies J points out: in R v Forbes; Ex parte Bevan [1972] HCA 34; (1972) 127 CLR 1 at 7, fundamental.

…

Reid v Howard

Director of Public Prosecutions v Shirvanian

62 Grassby and Cardile v LED Builders predate the Civil Procedure Act. The Civil Procedure Act, by s 90(1), now confers on each court to which it applies the power to make orders as the nature of the case requires, “at or after trial or otherwise as the nature of the case requires”. The Civil Procedure Act, s 90(1) replicates the former Supreme Court Act 1970, s 91. There was no similar provision in the District Court Act , although the former Supreme Court Act, s 91, provided that the court’s orders were final. The Federal Court of Australia Act, s 23 is in similar, although not identical terms, to the Supreme Court Act, s 91 and the Civil Procedure Act, s 90(1). It is important, however, to understand that in Cardile v LED Builders, the plurality judgment stated that the power of the Court to make an order against a third party was encompassed in s 23. It is apparent that the jurisdiction to do so was founded in its position as a superior court. This is apparent from the reference at [56] of the plurality judgment to the general powers of superior courts comprehended by the Federal Court of Australia Act, s 23 and by their Honours reference to Grassby, at [26], in respect of the implied powers of inferior courts.

63 Notwithstanding that the Civil Procedure Act, s 90(1) now applies to the District Court, that Court nonetheless remains an inferior court. Its jurisdiction is to be found in statute. Given the operation of the Civil Procedure Act, s 5(2), s 90(1) does not operate to extend that jurisdiction. Accordingly, in this case, the jurisdiction to make an order against a third party, if such an order can be made, remains founded in the District Court’s enforcement jurisdiction. What powers does the District Court have in respect of that jurisdiction? Pursuant to s 90, it has the power to make orders as the case may require. However, such orders must be made in the exercise of the Court’s express or implied powers. As I have said, there is no express power. However, I can see no reason why a freezing order could not be made against a third party in the District Court pursuant to an implied power empowering it to do so. As Dawson J observed in Grassby at [21]-[23] (extracted at [61] above), the implied powers of an inferior court can operate to serve similar functions to those served by the inherent powers exercised by a superior court. Such powers are only possessed as a matter of necessary implication.

64 In Pelechowski, there was no express power to make an asset preservation order after action in the court. However, the Court held that an inferior court had an implied power to make such order. I see no difference in principle in there being an implied power to make an order where there is evidence that a judgment debtor has taken steps to alienate property to a third party, when that property would otherwise have been available for execution at the instance of the judgment creditor. Any such order could only be made in accordance with the principles in Cardile v LED Builders.

65 I have not, up to this point, given consideration to the operation of UCPR, r 25.14(6) (the terms of which are set at [40] above). UCPR, r 25.14(6) provides that nothing in UCPR, r 25.14 affects the power of the court to make, relevantly, a freezing order, if the court considers it is in the interests of justice to do so. It is to be immediately noted that r 25.14(6) does not provide a power to make a freezing order. Rather, its effect, or operation, is predicated upon there being a power to make such an order and otherwise informs that UCPR, r 25.14 is not the exclusive source of power to do so. The court’s power to make an order if the court considers that it is in the interests of justice to do so, must be construed in the context of such power as the court has. As I have explained above, I consider that that power is an implied power, and must be exercised within the constraints discussed in Cardile v LED Builders.

66 It follows, in my opinion, that the challenge to jurisdiction and power to make a restraining or freezing order against a third party fails.

67 One final matter should be noted about the terms of a restraining order or freezing order, whether in respect of the assets of a party to proceedings, or a third party. In the normal course such an order should be made for a limited period, delimited either by a date or event or subject to a condition, such as the bringing of an application under the Conveyancing Act, s 37A, or under the Bankruptcy Act, s 121: see Cardile v LED Builders, at [76], discussed at [47] above. The Court did not impose any such condition in this case, although subsequently the respondent commenced proceedings both in the Supreme Court under the Conveyancing Act, s 37A and in the Federal Court, seeking, inter alia, an order pursuant to the Bankruptcy Act, s 178 of requiring the trustee to do all things necessary to commence proceedings pursuant to the Bankruptcy Act, ss 120, 121 or 122, and/or the Conveyancing Act, s 37A. Given that Graeme Tagget is bankrupt, it is likely that the Supreme Court proceedings are no longer maintainable: see Green v Schneller [2002] NSWSC 671; 29 Fam LR 346 per Barrett J. I will refer to the relevance of these matters later.

Second issue: alienation of property

68 The respondent contended that even if the District Court had jurisdiction or power to make a freezing order against a third party there had been no relevant alienation of property to base an order under s 121.

69 McGrowdie ADCJ analysed the property dealings of Graeme Tagget, the appellant and other members of the family in some detail. I do not propose to repeat his analysis. His Honour found that the appellant was the primary beneficiary of the Perpetual Trustee loan. His Honour also commented upon the significant intertwining of the financial affairs of Graeme Tagget, the appellant and their companies, and referred to Cardile v LED Builders at [47] in this regard. His Honour recognised that the Perpetual Trustee loan had been repaid in circumstances where that loan had been in default and Perpetual Trustee had taken proceedings against the appellant and his wife and against Graeme Tagget.

70 His Honour found, at 13, that the effect of the refinancing of the Perpetual Trustee loan was to free the appellant from the debt owed to Perpetual Trustee. His Honour had already found that the refinancing had been undertaken substantially for the appellant’s benefit. Under the financial rearrangements, the burden of the replacement mortgage with First Mortgage was assumed by Graeme Tagget and Taco Properties and secured over the Dorrigo and Bellingen properties. As previously mentioned, Perpetual Trustee had not sought to move against the Dorrigo property, relying instead on the security it held over the Bellingen and Cudgera properties. However, under the new mortgage arrangements, the Dorrigo property became the major source of the security for the loan because it had been valued at $850,000, whereas the Bellingen property was valued between $475,000 (on a forced sale basis) and $525,000.

71 In those circumstances, his Honour considered, at 14, that the refinancing of the Perpetual Trustee loan could arguably be impugned under the Bankruptcy Act, s 121. That is sufficient for the purposes of determining whether a freezing order should be made: see Pure Logistics v Bruce Donald Scott & Anor [2007] NSWSC 595; Sleiman v Afeich & Anor (No 2) [2005] NSWSC 969. The appellant has not, therefore, established that his Honour’s conclusion that there was an arguable case that the transactions might be impugned under s 121 is wrong.

Third issue: extent of the assets preservation order

72 The appellant next contended that even if the making of a freezing order was within jurisdiction, and assuming that there had arguably been an alienation of property, the order made by McGrowdie ADCJ was more extensive than ought to have been made, having regard to the maximum amount that could be involved in s 121 proceedings.

73 The appellant contended that the maximum extent to which his property ought to have been restrained was $550,000, calculated on the following basis: $300,000, being the consideration payable or paid in respect of the transfer of the Dorrigo property from Graeme Tagget to Taco Properties; an amount of approximately $15,000 for stamp duty on the two transfers from the trustee in bankruptcy to the appellant; and an amount of $235,000, being the equity the appellant had in the Cudgera property.

74 McGrowdie ADCJ ordered that assets to an amount of $850,000 be restrained. His reasoning is found in the following passage, at 21-22:

“Here, there are dealings called into question, including the release of the [Cudgera property] as a form of security for the loan to refinance the Perpetual loan. That property has a valuation of $500,000. Also, there is a question of the consideration of $300,000 in relation to the [Bellingen property]. Further, there are some smaller amounts relating to the Perpetual loan refinancing, which were paid out of the first mortgage loans funds arguably for the benefit of [the appellant]. These include monies paid for stamp duty on the two transfers from [the wife’s trustee in bankruptcy] to [the appellant], being approximately $15,000. There are other sums in relation to stamp duty and costs also. As a result at the release of the [Cudgera property] [the appellant] was able to raise separate finance which allowed him inter alia to pay out [the wife’s trustee in bankruptcy] for the transfer by [the wife’s trustee in bankruptcy] of his share of the [Cudgera property] and the Bellingen property.”

75 His Honour observed that the judgment sum together with costs amounted to $806,445. The sum paid out to Perpetual Trustee was $839,442.89. His Honour considered that in the circumstances $850,000 was an appropriate sum. In reaching that conclusion, he acknowledged that the Court should not make orders greater than necessary.

76 The difference between the sum advanced by the appellant as being an appropriate sum and his Honour’s approach lay essentially in the treatment of the Cudgera property. The appellant said that account should only be taken of an amount representing his half interest in that property. His Honour considered that as a result of the release of the Cudgera property from the mortgage, the appellant was able to raise finance to purchase the interest of his wife’s trustee in bankruptcy in each of the Cudgera and Bellingen properties. In my opinion, no error has been demonstrated in that aspect of his Honour’s approach.

77 However, there is another question about the extent of the order. The purpose of a restraining order against the assets of a third party is, relevantly, to enable a judgment creditor to take action to set aside transactions entered into by the judgment debtor, either with or to the benefit of the third party so as to defraud, defeat, or delay a judgment creditor. In this case, if an order was made pursuant to the Conveyancing Act, s 37A or the Bankruptcy Act, s 121 (assuming that action remained available in this case), it would need to provide for the ‘reversal’ of the transactions that occurred on 19 January 2007. Those transactions related only to the three properties, that is, the Dorrigo property, the Bellingen property and the Cudgera property. There was no evidence that any moneys were paid to the appellant under those transactions. There would be no basis, therefore, under s 37A or s 121 to order moneys in the appellant’s bank account be paid back to Graeme Tagget or the original mortgagee. The order made by his Honour effectively makes the appellant a guarantor of Graeme Tagget’s debt. The Court’s implied power does not extend so far.

78 Accordingly, I am of the opinion that the orders made by the trial judge exceed the Court’s power to make such an order.

79 Nor does UCPR, r 25.14(6) provide that power. It is not immediately apparent what circumstances might justify the making of an order under this subrule. However, the Civil Procedure Act, s 5 provides that the UCPR cannot extend the power of the court except to the extent to which the CivilProcedure Act provides. There is no provision in the Civil Procedure Act that makes a third party a guarantor of a judgment debt. I should finally add, as would be apparent, that the District Court’s implied powers, should any remain in respect of the enforcement of judgment, do not extend that far.

80 The appellant also complains that the trial judge erred in failing to impose any conditions or time limits in the making of the order. His Honour considered whether he should do so but concluded that it was sufficient to leave the matter on the basis that the parties could have the matter re-listed if there was unwarranted delay in the respondent pursuing action to have the transactions set aside. I do not see that there was appealable error in this, although it is clearly not the preferable approach, as was made apparent in Cardile v LED Builders.

81 However, for the reasons I have given, the orders made by McGrowdie ADCJ were beyond the power of the District Court and should be set aside.

Challenge to costs order

82 There was also a challenge to the costs orders made by his Honour. However, as the appellant has been successful on the appeal, the costs at first instance will have to be reconsidered. However, I should state that there was no error in the costs order made by the trial judge.

83 His Honour ordered that the appellant pay the respondent’s costs of the application. The appellant contended that the order his Honour should have made was the “usual order” made in interlocutory injunction proceedings that costs either be costs in the cause or the plaintiff’s costs in the cause: see His Eminence Metropolitan Petar (No 2).

84 In His Eminence Metropolitan Petar (No 2), the Court endorsed the approach of Young J, as his Honour then was, in Devereaux Holdings Pty Limited v Pelsart Resources NL (No 2) (Supreme Court of New South Wales, 24 July 1985, unreported). The Court, at [16], emphasised that the commencing point for the consideration of any order for costs was UCPR, r 42.7. Rule 42.7(1) provides:

“The costs of any application or other step in any proceedings … are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.”

85 At [27] of His Eminence Metropolitan Petar (No 2), the Court stated:

usual order

86 The “usual” order that costs be costs in the cause or a party’s costs in the cause may have been an appropriate order to make in this case. However, the matter is one of discretion. McGrowdie ADCJ raised the question of costs at the end of his judgment, stating at 23:

“With costs, I would propose an order that [the appellant] pay the [respondent’s] costs of the present application. However, I will inquire as to whether the parties wish to be heard on that matter.

…

87 The appellant contended that notwithstanding that he was represented before his Honour and was given the opportunity to make submissions in relation to costs and did not do so, his Honour was not relieved of the obligation to consider the nature of the costs order he was making in the proceedings. It was submitted that his Honour should have had in mind that the application was, in effect, an interlocutory proceeding and accordingly, should have made the costs order that was usual in that circumstance. It was also relevant, on the appellant’s submission, that although he was represented by counsel for the purposes of taking delivery of judgment, he was not counsel who had appeared in the proceedings.

88 In my opinion, the Court should not accede to this submission. A party is not entitled to appellate intervention merely because that party failed to make an appropriate submission when given the opportunity to do so. This Court is a court of error and is not the forum in which matters that may have been overlooked at trial, in the ordinary course, be taken up. There are exceptions to that, of course. One is where a pure matter of law is involved, but even then, it is not gainsaid that a party would be entitled to raise a new point of law on the appeal: see generally Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418. The question of costs, however, is not a pure question of law. It involves a discretion: Civil Procedure Act, s 98, the exercise of which is governed, inter alia, by UCPR, r 42.1. The principles upon which those rules operate are well established in the case law.

Costs of the appeal and in the court below

89 Notwithstanding that the appellant has had a measure of success on the arguments advanced on the appeal, I would propose that each party pay his and her own costs. The appellant based its major challenge to the orders made by the trial judge on a jurisdictional point that was expressly conceded by him at trial. He has not been successful on that argument on the appeal. To the extent that he has been successful, it was not on a point that he argued. For that reason, I do not consider that he should have his costs of the appeal.

90 There is also a question of the costs in the court below. Although the appellant has been successful in having that order set aside, he has not established that the respondent may be entitled to an order relating to the Bellingen and Cudgera properties. However, as I propose that the orders made by the trial judge be set aside, I consider that the appropriate order is that there be no order for the costs of the application at first instance, with the intent that the parties bear his and her own costs of that application. Accordingly I would not disturb the order made by the trial judge.

Other matters

91 It is to be noted that the primary judge quite properly accepted an undertaking as to damages to support the restraining order. It is appropriate on the discharge of the restraining order that an order be made relating to that undertaking in the form proposed in order 8 below.

92 The orders I propose are:

Orders

1. Grant leave to appeal;

2. Appeal allowed;

3. Set aside order 2 made by the District Court on 14 February 2007 and all orders made thereafter continuing and varying that order;

4. Set aside all costs orders made by the District Court;

5. Dismiss the respondent’s notice of motion in the court below;

6. Note that there is no order as to the costs of the appeal or the hearing at first instance (with the intent that the parties bear their own costs of the appeal and at first instance);

7. Stay orders 3 and 6 above for seven days;

93 YOUNG JA: I have read in draft the reasons of Beazley JA and Sackville AJA and am indebted to them for their close analysis of the relevant facts and legal principles involved in this appeal.

94 I agree with the ultimate conclusion in each judgment and with the orders proposed by Beazley JA, however, with respect I have some reservations about some of the reasoning of my colleagues which I consider I must briefly note.

95 As to the term “jurisdiction” I would question whether “authority to adjudicate” is always an adequate synonymous expression for “jurisdiction”. Of course, I recognize that that thought comes from McHugh J in Gould v Brown (1998) 193 CLR 346, 422. However cases such as Parisienne Basket Shoes Pty Ltd v Whyte (1938) 59 CLR 369 and Ex p Hulin; Re Gillespie (1965) 65 SR (NSW) 31 (FC) show that the word “jurisdiction” may involve two distinct layers of authority.

96 I agree with Sackville AJA that there is a very real difference between authority to adjudicate and capacity to pronounce an order.

97 I also do not consider that, in view of its history and derivation, one should read too much into the text of s 90 of the Civil Procedure Act 2005. To my mind the section merely authorises the Court as consisted by the judge giving or taking the verdict to give judgment as well. Although this is now commonplace, it replaced the centuries old system of verdict being given at nisi prius and then judgment by the Full Court or its delegate. I consider it artificial to read more into the section even calling in aid its present context.

98 However neither of the above thoughts affect the result of this appeal.

99 The key matter as to the capacity of the District Court to make the order it did is the extent of its implied authority.

100 There is a distinction between inherent powers of courts and their implied powers, though there is some overlap. The position with respect to such powers differs too depending on whether the Court concerned is a superior or inferior court.

101 In his book “Inherent Powers of the Courts” (National Judicial College, Reno USA, 1994), Felix F Stumpf at p 5 distinguishes between inherent powers being powers reasonably necessary for the conduct of a court’s constitutional functions, inherent powers derived from legislative necessity and implied powers. The lastmentioned “are those that arise out of and are necessary to carry out the authority expressly granted and contemplated”.

102 Generally all superior courts have implied power to make such orders as are reasonably necessary to prevent orders made within power being frustrated.

103 Probably there is an inherent power to much the same effect.

104 In his essay, The Inherent Jurisdiction of the Court (1983) 57 ALJ 449 esp 456-7 Keith Mason QC as he then was, expresses the view, with authority, that there was no reason in principle why inferior courts do not possess most of the inherent powers held to be possessed by superior courts. I respectfully agree.

105 The District Court of NSW, even in the light of its present wide jurisdiction is still classified for present purposes as an inferior court.

106 However any implied or inherent power in an inferior court is restricted to protecting the limited jurisdiction of the Court: Reg v Forbes; ex p Bevan (1972) 127 CLR 1, 8.

107 What appears to have happened here is that immediately after the District Court’s decision in the principal litigation, a trust was created and a complex transaction entered into between related parties one practical effect of which was to minimise Graeme Tagget’s ability to meet the judgment against him.

108 Such a transaction to say the least attracts suspicion.

109 I do not intend to say anything too detailed about the operation of s 37A of the NSW Conveyancing Act 1919 or s 121 of the Bankruptcy Act 1966 (Comm) as it would not be proper to do so in the light of the fact that applications under one or both of those sections are or may be made.

110 However it would seem that the effect of a successful application would only be to reverse the transaction which may not in fact restore much to the bankrupt estate of Graeme Tagget; see eg Griffiths v Falck [2008] NSWSC 998; 220 FLR 278.

111 I thus agree with what Beazley JA says in [77] and [78] of her reasons.

112 In the circumstances, I consider the orders proposed by Beazley JA to be appropriate.

113 SACKVILLE AJA: I have had the advantage of reading Beazley JA’s judgment in draft. Her Honour has explained the facts and it is unnecessary for me to repeat the analysis. I agree with her Honour’s conclusions, but I would prefer to set out my own reasoning.

THE JURISDICTIONAL ISSUE

114 The primary Judge recorded in his judgment that all parties had adopted the position that, having regard to Part 25 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), the District Court had:

“jurisdiction to make Mareva orders notwithstanding that they relate to proceedings that have already been finalised in the court … and further that orders can be made against third parties”.

115 The claimant has now resiled from this position. His amended notice of appeal challenges the orders made by the District Court on the ground that there was no jurisdiction to make them. His argument is that Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435 (“Pelechowski”) holds that the District Court has no jurisdiction to make orders of the kind made against the appellant. Since the UCPR cannot extend the jurisdiction of the District Court (Civil Procedure Act 2005 (NSW) (“CP Act”), s 5(2)), r 25.14 does not expand the jurisdiction of the District Court. According to Mr Fernon, who appeared for the claimant, the result is that the orders made by the District Court are a nullity.

JURISDICTION AND POWER

116 In principle, “jurisdiction” and “power” are different concepts. Jurisdiction is the:

“authority which a court has to decide matters that are litigated before it or to take cognisance of matters presented in a formal way for its decision”.

Jackson v Sterling Industries Ltd

Halsbury’s Laws of England

authority to adjudicate

Gould v Brown

117 A court may have jurisdiction in a matter but lack the power to grant particular relief. A court, in the exercise of its jurisdiction, has the powers expressly or impliedly conferred on it by legislation: Harris v Caladine (1991) 172 CLR 84, at 136, per Toohey J. These include the powers that are incidental and necessary to the exercise of the court’s jurisdiction: Parsons v Martin (1984) 5 FCR 235, at 241, per curiam.

118 However, as the High Court has made clear, “jurisdiction” and “power” are not discrete concepts: Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2000) 204 CLR 559, at 590, per Gleeson CJ, Gaudron and Gummow JJ. The lines are blurred, for example, by the use of the expression “inherent jurisdiction” which “in truth is the power of a court to make orders of a particular description”: ASIC v Edensor, at 590; Harris v Caladine, at 136. Moreover, as the joint judgment in ASIC v Edensor pointed out (at 590) a single provision can enact a norm of legal liability, provide a remedy and create a curial forum to administer the remedy.

119 Pelechowski itself illustrates that jurisdiction and power are not discrete concepts. In that case, a restraining order had been made against Mr Pelechowski preventing him, until further order, from disposing of or dealing with his interest in a property. Mr Pelechowski was found to have breached the order. The issue was whether the order was valid. If so, it was capable of founding proceedings for contempt against Mr Pelechowski by reason of this breach. If the order was a nullity, the contempt proceedings had to fail.

120 The majority judgment (Gaudron, Gummow and Callinan JJ) noted that the Court of Appeal had held that the District Court “had power to grant the Mareva order against Mr Pelechowski” by reason of s 46(1) of the District Court Act 1973 (NSW) (“District Court Act”). Their Honours also noted (at [25]) that the appellant, Mr Pelechowski, had contended that:

“the order of the District Court, of which he was judged in contempt, was an order which the District Court was not empowered to make .” (Emphasis added.)

That submission was said to raise:

“questions as to the extent of the power of the District Court to grant relief of an equitable nature, whether in and of legal or equitable rights.” (Emphasis added.)

121 The joint judgment cited with approval (at [27]) the principle stated by McHugh JA in Attorney-General (NSW) v Mayas (1988) 14 NSWLR 342, at 347, as follows:

“If an inferior tribunal exercising judicial power has no authority to make an order of the kind in question, the failure to obey it cannot be a contempt. Such an order is a nullity. Any person may disregard it. Different considerations arise, however, if the order is of a kind within the tribunal’s power but which was improperly made. In that class of case, the order is good until it is set aside by a superior tribunal. While it exists it must be obeyed.”

Their Honours observed that this principle had been applied by Samuels AP (with whom Clarke and Meagher JJA agreed) in United Telecasters Sydney Ltd v Hardy (1991) 23 NSWLR 323, at 325. In their Honours’ view, (at [28]), the Court of Appeal in United Telecasters had held that:

“the District Court did not have power to order the prior restraint of a threatened contempt by a television station in broadcasting material which might identify the accused in a trial before that Court.” (Emphasis added.)

122 As the joint judgment noted, it was upon these propositions that Mr Pelechowski had founded his appeal. The question before the High Court in Pelechowski, therefore, was (at [29]) whether:

“the District Court did have the power to make the order the subject of the successful contempt proceedings. The appeal thus turns upon the statutory or other authority which supports the making of such an asset preservation order.” (Emphasis added.)

123 It will be seen that, with the possible exception of the reference to “statutory or other authority’, the joint judgment did not suggest that the issue before it concerned the jurisdiction of the District Court, as distinct from its powers. By contrast, in his dissenting judgment in Pelechowski, McHugh J identified (at [71]) the appellant’s central argument to be that the restraining order made by the District Court Judge was “a nullity because orders of that type are beyond the jurisdiction of the District Court”. The appellant had relied on:

“[a] long line of cases [that] establishes that an order made by an inferior court, such as the District Court, will be null and void if that court did not have jurisdiction to make the order.”

The “ long line of cases ” included the judgments of Samuels AP in United Telecasters , and the judgment of McHugh JA (as his Honour then was) in Attorney-General v Mayas . McHugh J observed in Pelechowski that whether a particular “ matter is within an inferior court’s jurisdiction ” is often a difficult question which necessitates “ a careful examination of the legislation from which the court’s authority stems ”.

124 Kirby J, who also dissented in Pelechowski, characterised (at [97]) the questions on the appeal as concerning the “jurisdiction and power of the District Court to make the order which the appellant disobeyed”. (Emphasis added.) His Honour understood the appellant’s principal argument to be (at [114]) that the District Court had no jurisdiction, and the District Court Judge no power, to make the purported orders.

PRINCIPAL AUTHORITIES

Pelechowski v Registrar, Court of Appeal

125 Without (I hope) repeating Beazley JA's analysis of Pelechowski, I think that the process of reasoning in that case can be summarised as follows:

District Court Act

(2) The post-judgment restraining order made against Mr Pelechowski was not within the jurisdiction conferred on the District Court by s 44(1)(a), since the plaintiff’s rights under the loan agreement had merged in the judgment (at [45]).

(3) Section 46 of the District Court Act did not “support the order in question ”, since the injunctive remedy for which it provided was ancillary to the exercise of the jurisdiction of the District Court to hear and dispose of the actions specified in s 44 (at [44]). The post-judgment order sought by the plaintiff against Mr Pelechowski was designed, at best, to preserve land as an asset of the judgment debtor so that it would be available for execution or other enforcement of the judgment (at [45]). An order of that kind was neither an “ injunction ” nor an injunction “ in an action ” for the purposes of s 46 (at [45]).

(4) Although the joint judgment did not say so expressly, their Honours seem to have concluded that s 46 conferred neither jurisdiction nor power to make the order sought against Mr Pelechowski. (McHugh J, in dissent, saw s 46 as a source of both jurisdiction and power to make the order (at [77]).)

(5) In addition to the jurisdiction conferred by s 44, Pt 3 Div 4 of the District Court Act conferred jurisdiction on the District Court to provide specified remedies for the enforcement of judgments (at [47], [48], [50]). In consequence, the District Court had an implied power to make orders which were:

“reasonably required or legally ancillary to the accomplishment of the specific remedies for enforcement provided in Div 4 of Pt 3 of the District Court Act ” (at [51]).

“In the present case, an asset preservation order might properly have restrained any dealing by the judgment debtors with the land for such period as was appropriate for the judgment creditor to move promptly to utilise the provisions with respect to writs of execution in Subdiv 5 of Div 4 of Pt 3 of the District Court Act. Such an order may reasonably have been required as ancillary to the proper objective of preventing the recording of adverse dealings in the register before the recording of a writ of execution against the land on the application of the judgment creditor. Other examples may be imagined.” (at [52]).

(7) The order sought and obtained by the plaintiff against Mr Pelechowski was not of this kind. Its effect was to give the plaintiff additional security for the recovery of the judgment debt, independently of any undertaking to pursue expeditiously the remedies provided by the District Court Act ([52]). Moreover, the order operated until payment of the verdict or further order and was not expressed to:

“operate in and of recovery of so much of the judgment debt as might be recouped upon a sale under a writ of execution”.

Cardile v LED Builders Pty Ltd

126 Pelechowski involved a restraining order made against a defendant to proceedings, not against a third party. In Cardile v LED Builders Pty (1999) 198 CLR 380 ”Cardile”, the High Court held that the Federal Court could make a Mareva order against a non-party in certain circumstances for the preservation of assets. The joint judgment of Gaudron, McHugh, Gummow and Callinan JJ identified s 23 of the Federal Court Act as the source of the Federal Court’s power. This section provides that the Court

“has power, in relation to matters in which it has jurisdiction, to make “orders of such kinds, including interlocutory orders … as the Court thinks appropriate.”

127 The joint judgment in Cardile held that the Federal Court had power to make preservation orders against non-parties to prevent the frustration of the Court’s process and to promote the administration of justice (at 400-401). The effective exercise of the Federal Court jurisdiction in the principal proceedings (which concerned a claim for infringement of copyright in building plans) could call for:

“asset preservation orders against third parties who may hold or otherwise be interested in … assets of the judgment debtor or potential judgment debtor or who may be obliged to contribute to the property of such a judgment debtor to help satisfy the judgment”. (at 401).

128 In explaining the caution that should be exercised before a court makes Mareva orders against a non-party, the joint judgment pointed out that there are significant differences between:

“an order protective of the court’s process set in train against a party to an action, including the efficacy of execution available to a judgment creditor, and an order extending to the property of persons who are not parties and who cannot be shown to have frustrated, actually or prospectively, the administration of justice”. (at 403).

129 Despite the caution required for the making of a Mareva order, their Honours rejected (at 405) a contention that

Mareva

130 Their Honours formulated principles to guide courts in determining whether to grant Mareva relief against third parties, as follows:

“such an order may, and we emphasise the word ‘may’, be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which:

(i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including ‘claims and expectancies’, of the judgment debtor or potential judgment debtor; or

ultimately enforceable by the courts

131 It will be noted that sub-par (ii) of the extract in the previous paragraph refers to “some process, ultimately enforceable by the courts”. Thus if a judgment creditor can set in motion a process against the third party to recover property or funds that can be used to satisfy the judgment debt, the criterion laid down in the joint judgment may be satisfied. That is so whether the process against the third party is to be issued in the court that gave the judgment or in some other court. Examples are proceedings against the third party under s 37A of the Conveyancing Act 1919 (NSW) (which avoids alienation of property made with intent to defraud creditors) or actions by the judgment debtor’s trustee in bankruptcy under s 121 of the Bankruptcy Act 1966 (Cth) (which is concerned with transfers of property to defeat creditors).

132 It is of some importance to note the orders actually made by the High Court in Cardile. The Case for a Mareva order against the personal appellants in Cardile rested (at 407) as the payment to them of dividends declared by Eagle Homes (the respondent at trial) in a “non-commercial exercise” designed to limit the funds available to meet a judgment in favour of the successful applicant (LED). The High Court held (at 408) that LED had a reasonably arguable case that the declaration and payment of the dividends were caught by s 37A of the Conveyancing Act. Their Honours considered (at 409) that some order should be made requiring the personal appellants to hold and keep unencumbered assets up to a reasonable value. While they accepted that a court generally should grant “the minimum relief to do justice between the parties”, their Honours made orders restraining the personal appellants from disposing of or dealing with any of their assets up to a nominated value, except for specific and limited purposes.

CURRENT STATUTORY FRAMEWORK

133 As Beazley JA points out, the statutory framework in New South Wales has changed since Pelechowski and Cardile were decided. In determining the jurisdiction and power of the District Court to make preservation orders against non-parties, it is now necessary to take into account the provisions of the CP Act and the UCPR.

134 The District Court’s jurisdiction includes the authority to hear and determine applications to enforce a judgment debt by the means specified in s 106 of the CP Act. The three means specified are a writ for the levy of property, a garnishee order and a charging order. The CP Act makes more detailed provision for each method of enforcement: Pt 8 Divs 2, 3 and 4. Some of the statutory provisions affect non-parties. Garnishee orders, for example, bind non-parties who are indebted to the judgment debtor (CP Act ss 117, 118). A charging order charges a “security interest” of the judgment debtor (such as shares) and potentially renders liable a third party who, having notice of the charging order, deals with security interest otherwise than in accordance with the directions of the judgment creditor: CP Act, ss 126, 127.

135 Section 9 of the CP Act, when read with Sch 3, cl 20, provides that the rules may make provision, in relation to all civil proceedings in respect of which a court has jurisdiction (however arising), for or with respect to:

“The means for, and the practice and procedure to be followed in, the enforcement and execution of orders.”

CP Act

136 The UCPR confers specific power on a court (including the District Court) to make “freezing orders” or “ancillary orders” against non-parties to litigation. The relevant provisions are contained in UCPR Pt 25, especially rr 25.11 and 25.14, and are set out in the judgment of Beazley JA.

137 UCPR r 25.14 was inserted by the Uniform Civil Procedure Rules (Amendment No 9) commencing on 9 June 2006. The language of r 25.14 follows very closely that of Federal Court Rules (“FCR”), O 25A r 5. The latter rule, in turn, adapts language used in the joint judgment in Cardile v LED Builders.

138 Under UCPR r 25.14, the District Court has power to make a freezing order or an ancillary order against a person other than a judgment debtor where the District Court has given judgment in favour of the applicant (r 25.14(1)(a)(i)). The District Court must, however, be satisfied that there is a danger that the judgment will be unsatisfied because:

(a) the third party holds, or is using, or has exercised or is exercising a power of disposition over assets of the judgment debtor (r 25.14(5)(a)(i)); or

(b) the third party is in possession of, or in a position of control or influence concerning, assets of the judgment debtor (r 25.14(5)(a)(ii)).

in the court

139 The formulation in r 25.14(5)(b) differs from that laid down in Cardile v LED Builders, where the joint judgment refers to “some process, ultimately enforceable by the courts”. The likelihood is that the expression “in the court” was included in r 25.14(5)(b) because the drafter followed the language of FCR, O 25A r 5(5)(b). Be that as it may, the consequence seems to be that r 25.14(5) does not empower the District Court to make an asset preservation order against a third party where a process is available only in another court (such as the Supreme Court or the Federal Court) under which the third party can be required to disgorge assets or otherwise contribute to satisfying the District Court judgment. The pressures that are not available to the District Court include proceedings under s 37A of the Conveyancing Act (which cannot be brought in the District Court) and proceedings by a trustee under s 121 of the Bankruptcy Act (likewise).

WAS THE ORDER PROPERLY MADE?

UCPR r 25.14

140 The appellant did not submit that r 25.14 is ultra vires or otherwise invalid insofar as it purports to authorise the District Court to make preservation orders against non-parties. Any such submission would encounter the difficulty that the District Court has an enforcement jurisdiction conferred by the CP Act, Pt 8. The powers conferred on the District Court are carefully circumscribed and can be characterised as reasonably required or legally ancillary to the accomplishment of the specific remedies for enforcement provided [by the CP Act, Pt 8]: Pelechowski, at [51].

141 As I have noted, an applicant who wishes to satisfy r 25.14(5)(a) must show that the third party has a power of disposition over, or is in possession of, or in a position of control or influence concerning assets of the judgment debtor. Moreover, any freezing order against a third party, can be made only for the purpose of preventing the frustration or inhibition of the Court’s processes. It is difficult to see how an order properly made under r 25.14(5)(a) could be other than an exercise of power in and of the District Court’s enforcement jurisdiction.

142 An order can be made pursuant to r 25.14(5)(b) only if a process is available in the District Court itself as a result of the judgment pursuant to which the third party may be obliged to disgorge assets or contribute towards satisfying the judgment. Although the language of r 25.14(5)(b) is truncated when compared with the language used in Cardile v LED Builders at 405-406, it is clearly intended that the available process must be capable of producing property or other assets that will “contribute to the funds or property of the judgment debtor to help satisfy the judgment”. In my opinion, an order properly made under r 25.14(5)(b) also can readily be characterised as an exercise of power in and of the District Court’s enforcement jurisdiction.

143 The primary Judge appears to have relied on r 25.14(5)(b) as the source of authority for the orders he made. He justified making the asset preservation order against the claimant on the ground that that a number of transactions related to the refinancing of the loan by Perpetual Trustees Company Ltd “arguably could be impugned in proceedings pursuant to s 37A of the Conveyancing Act and or s 121 of the Bankruptcy Act”. The difficulty is that any such proceedings would have to be brought in a court other than the District Court. A relevant process therefore was not available in the District Court, as required by r 25.14(5)(b). It follows that, insofar as His honour intended to conclude that the terms of r 25.14(5)(b) were satisfied, he was in error.

144 I should add that the primary Judge made no finding that the opponent had satisfied the terms of r 25.14(5)(a). No notice of contention has been filed suggesting that such a finding should have been made.

Implied Power

145 The inapplicability of UCPR, r 25.14 does not necessarily mean that the District Court lacked power to make asset preservation orders against the claimant. Rule 25.14(6) provides that nothing in r 25.14

‘affects the power of the court to make a freezing order … if the court considers it in the interests of justice to do so”.

146 Neither the CP Act nor the District Court Act has a provision in the same or similar terms to s 23 of the Federal Court Act. However, s 90(1) of the CP Act, which replaces an equivalent section in the Supreme Court Act 1970 (NSW) (s 81), provides as follows:

“The Court is, at or after trial or otherwise as the nature of the case requires, to give such judgment or make such orders as the nature of the case requires.”

CP Act,

147 The progenitor of s 81 of the Supreme Court Act was Rules of the Supreme Court (UK), O 36 r 39. This provided that:

“The Judge shall, at or after trial, direct judgment to be entered as he shall think right, and no motion for judgment shall be necessary in order to obtain such judgment”.

148 Order 36 r 39 was concerned with a narrow procedural issue. However, s 90 of the CP Act (formerly s 81 of the Supreme Court Act) is expressed more broadly than its progenitor, although the language is not as expansive as s 23 of the Federal Court Act. Nor surprisingly, given its origins, s 90 does not expressly authorise orders after judgment has been given (as distinct from after the trial has concluded). Nonetheless, the statutory language is apt to confer power on the District Court to make orders after judgment, provided the orders are incidental and necessary to the enforcement jurisdiction (in the sense of reasonably required for, or legally ancillary to, the accomplishment of the enforcement remedies). In any event, independently of s 90(1) of the CP Act, Pelechowski recognises that the District Court, by virtue of its enforcement jurisdiction, has an implied power to make orders of that kind ([36] above).

149 The High Court in Cardile did not need to address whether an asset preservation order made against a third party in conformity with the principles laid down in the joint judgment should always be regarded as incidental and necessary to the enforcement jurisdiction in the relevant sense. However, it seems to me that the rationale put forward in the joint judgment to support the statement of principle articulated there suggest an affirmative answer.

150 Mareva orders protect the integrity of the court’s processes, once set in motion (Cardile, at 399), including the efficacy of execution available to a judgment creditor (at 403). Orders that conform to the statement of principle in Cardile are reasonably required for the accomplishment of the enforcement remedies available to a judgment creditor in the District Court. It should make no difference whether the Mareva order is made to preserve the position pending the judgment creditor taking advantage of a process in the District Court or pending the judgment creditor taking advantage of a process in another court (such as proceedings pursuant to s 37A of the Conveyancing Act). In each case the object of the Mareva order is to preserve the status quo so as to allow the judgment creditor to take the necessary steps to make the enforcement jurisdiction effective.

151 In my opinion, therefore, the District Court has power to make asset preservation orders against third parties provided it acts in conformity with the principles laid down in Cardile.

Was the Order justified on the evidence?

152 It must be said that it is not entirely easy to follow the reasoning of the primary Judge which lead him to the conclusion that the refinancing of the Perpetual loan (referred to in Beazley JA’s judgment):

"involved a number of transactions which arguably could be impugned in proceedings pursuant to s 37A of the Conveyancing Act and/or s 121 of the Bankruptcy Act”.

The key findings made by his Honour seem to be the following:

· the 2003 Perpetual loan for a maximum sum of $910,000 (of which approximately $724,000 was apparently drawn down) was for the benefit of the claimant;

· the security for the Perpetual loan included two properties (at Bellingen and Pottsville respectively) jointly owned by the claimant and his wife and one property owned by the defendant (at Dorrigo); as the result of a series of transactions in early 2007, including declarations of trust and transfers, neither the defendant nor the claimant retained any beneficial interest in the secured properties;

· the Perpetual loan was refinanced in early 2007 with a loan of $1.075 million from First Mortgage. The borrowers under the First Mortgage loan were Taco Properties (controlled by the defendant) and the defendant himself (the security being the Dorrigo and Bellingen properties);

· the Pottsville property was not part of the security for the new loan and was separately mortgaged by the claimant to secure a loan of $265,000 for his benefit from Stacks Management;

· the Dorrigo property was valued by First Mortgage at $850,000 and the Bellingen property was separately valued at $525,000.

· upon settlement of the First Mortgage loan on 19 January 2007, some $840,000 was paid to Perpetual, this being substantially for the claimant’s benefit;

· the claimant may not have received the sum of $300,000 referred to in the transfer of the Bellingen property from the defendant to Taco, but there was a reasonably arguable case that, if the moneys were received by Taco, they might ultimately become funds available to the claimant to satisfy the judgment debt; and

· after the refinancing of the Perpetual loan, the claimant arguably had an entitlement to $300,000 and owned Pottsville, a property valued at $500,000 and subject to a new mortgage of $265,000, free from the Perpetual mortgage.

153 It is not clear from his Honour’s reasoning how the sum of $300,000 might come into Taco’s hands and thus become available to satisfy the claimant’s judgment against the defendant. Further, his Honour made findings as to the apparent affect of the transactions on the claimant’s financial position, but not on the precise extent to which the transactions diminished the assets of the judgment debtor that otherwise would have been available to satisfy the judgment debt. Presumably, the defendant, prior to the refinancing of the Perpetual Loan, had a beneficial interest in Dorrigo (a property valued at $850,000), but it is not clear whether his interest, apart from the Perpetual mortgage, was encumbered by any security (whether registered or unregistered). In any event, the claimant, on his Honour’s findings, acquired no interest in the Dorrigo property as the result of the refinancing, although he did benefit from the discharge of the Perpetual mortgage (the granting of which his Honour found was for the claimant’s benefit).

154 The primary Judge appears to have found that the $840,000 paid to Perpetual was for the claimant’s benefit, since the original Perpetual loan was for his benefit. But his Honour made no finding as to what proportion of the sum of $840,000 was attributable to the claimant’s equity in the properties owned by him or, for that matter, to any other entitlement the claimant may have had against the other mortgagors.

155 The primary Judge may have considered it unnecessary to make findings on those matters because he seems to have thought it sufficient that the assets of the defendant and the claimant had been “mixed up”. His Honour cited an observation in the joint judgment in Cardile (at 389) that:

Tomlinson [v Cut Price Deli Pty Ltd

Tomlinson

“in the application before her Honour there was a large body of evidence to support a strongly arguable case that the third party had used, and was using, the property and business of the potential judgment debtor in order to prevent access to them by the applicant.”

156 There are other difficulties with the orders made by the primary Judge. The orders do not include a condition requiring the opponent to proceed expeditiously with a claim under s 37A of the Conveyancing Act or with an application to require the defendants’ trustee in bankruptcy to institute proceedings under s 121 of the Bankruptcy Act. Nor do they impose a temporal limitation in the orders, which are expressed to apply “until further order”.

157 In my opinion, the findings made by the primary Judge do not justify asset preservation orders in the terms made by him. Further findings were required to establish that the principles laid down in Cardile were satisfied.

158 It may be that if the matter were remitted findings could be made justifying a Mareva order in some form. However, the opponent has instituted proceedings under s 37A of the Conveyancing Act in the Supreme Court and proceedings against the defendant’s trustee a bankruptcy in the Federal Court, seeking orders requiring the trustee to institute proceedings against the claimant under s 12A of the Bankruptcy Act. The opponent can seek Mareva orders in those proceedings at very short notice.

CONCLUSION

159 The claimant has failed in his challenge to the jurisdiction of the District Court. He has, however, succeeded in having the Mareva orders set aside, although he is at risk of a similar order being made in other proceedings now under way.

160 In view of the claimant’s failure on the jurisdictional question I think it appropriate that there be no order as to the costs of the application for leave to appeal and the appeal.

161 I also think that there should be no order for costs in the District Court. That Court had jurisdiction and power to make a Mareva order. Such an order is interlocutory in character. The evidence may well have justified a Mareva order, although not on the terms made, nor for the reasons given by the primary Judge. Such an order may still be made.

162 I agree with the orders proposed by Beazley JA.

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01/05/2009 - Typo - Paragraph(s) Coversheet

Citations

Tagget v Sexton [2009] NSWCA 91

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Cases Cited

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Statutory Material Cited

10

Cardile v LED Builders Pty Ltd [1999] HCA 18

His Eminence Metropolitan Petar, Diocesan Bishop of The Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2007] NSWCA 142

Byrnes v The Queen [1999] HCA 38

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CITATION:	Tagget v Sexton [2009] NSWCA 91 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	19 September 2008
JUDGMENT DATE:	29 April 2009
JUDGMENT OF:	Beazley JA at 1; Young JA at 93; Sackville AJA at 113
DECISION:	1. Grant leave to appeal; 2. Appeal allowed; 3. Set aside order 2 made by the District Court on 14 February 2007 and all orders made thereafter continuing and varying that order; 4. Set aside all costs orders made by the District Court; 5. Dismiss the respondent’s notice of motion in the court below; 6. Note that there is no order as to the costs of the appeal or the hearing at first instance (with the intent that the parties bear their own costs of the appeal and at first instance); 7. Stay orders 3 and 6 above for seven days; 8. Liberty to the respondent to move the District Court to assess damages flowing pursuant to the undertaking as to damages if, and only if, such application is filed on or before 30 June 2009.
CATCHWORDS:	DISTRICT COURT – interlocutory relief - freezing order restraining assets of a third party – whether the District Court has jurisdiction to make such an order - DISTRICT COURT – interlocutory relief - freezing order restraining assets of a third party – whether the District Court has the power to make orders effectively making a third party a guarantor of the judgement debtor’s debt - INTERLOCUTORY RELIEF – freezing orders – extent of order – must be limited so as not to exceed what is reasonably necessary in the circumstances - COSTS - interlocutory proceedings – entitlement to appellate intervention where costs ordered at interlocutory stage
LEGISLATION CITED:	Bankruptcy Act 1966 (Cth), ss 12A, 120, 121, 122, 178 Civil Procedure Act 2005, ss 5, 9, 10, 11, 90, 98, 103, 117, 118, 126, 127; Pt 8, Sch 3, cl 20 Conveyancing Act 1919, s 37A District Court Act 1973, ss 4, 44, 46; Pt 3 Div 4, Div 8 Fair Trading Act 1987 Federal Court of Australia Act 1976 (Cth), s 23 Federal Court Rules (Cth) O 25A r 5 Rules of the Supreme Court (UK) O 36 r 39 Supreme Court Act 1970, ss 81, 91 Uniform Civil Procedure Rules 2005, rr 25.11, 25.14, 42.1, 42.7; Pts 25, 39, 40 Uniform Civil Procedure Rules (Amendment No 9) (2006)
CATEGORY:	Principal judgment
CASES CITED:	Attorney-General (NSW) v Mayas (1988) 14 NSWLR 342 Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2000) 204 CLR 559 Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 Devereaux Holdings Pty Limited v Pelsart Resources NL (No 2) (Supreme Court of New South Wales, Young J, 24 July 1985, unreported) Director of Public Prosecutions v Shirvanian (1998) 44 NSWLR 129 Ex p Hulin; Re Gillespie (1965) 65 SR (NSW) 31(FC) Gould v Brown (1998) 193 CLR 346 Grassby v The Queen [1989] HCA 45; (1989) 168 CLR 1 Green v Schneller [2002] NSWSC 671; 29 Fam LR 346 Griffiths v Falck [2008] NSWSC 998; 220 FLR 278 Harris v Caladine (1991) 172 CLR 84 His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142 Jackson v Sterling Industries Ltd (1987) 162 CLR 612 LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 38 IPR 107 LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 78 FCR 65 Parisienne Basket Shoes Pty Ltd v Whyte (1938) 59 CLR 369 Parsons v Martin (1984) 5 FCR 235 Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435 Pure Logistics v Bruce Donald Scott & Anor [2007] NSWSC 595 Reg v Forbes; ex p Bevan (1972) 127 CLR 1 Reid v Howard [1995] HCA 40; (1995) 184 CLR 1 Sleiman v Afeich & Anor (No 2) [2005] NSWSC 969 Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 Tomlinson v Cut Price Deli Pty Ltd (Federal Court of Australia, Kiefel J, 23 June 1995, unreported) United Telecasters Sydney Ltd v Hardy (1991) 23 NSWLR 323
TEXTS CITED:	Halsbury’s Laws of England (4th ed) vol 10, para 715 K Mason, “The Inherent Jurisdiction of the Court” (1983) 57 Australian Law Journal 449 Felix F Stumpf, Inherent Powers of the Courts, (1994) National Judicial College, Reno USA Ritchie’s Uniform Civil Procedure New South Wales, (February 2009), vol 1
PARTIES:	Neil Anthony Tagget (Appellant) Charlene Sexton (Respondent)
FILE NUMBER(S):	CA 40941/07
COUNSEL:	M Ashhurst SC; A Fernon (Appellant) P Gray SC (Respondent)
SOLICITORS:	Slater & Gordon Lawyers (Appellant) Barwick Stevens Lawyers (Respondent)
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 2242/2006
LOWER COURT JUDICIAL OFFICER:	McGrowdie ADCJ
LOWER COURT DATE OF DECISION:	15 August 2007