The Tubby Trout Pty. Ltd. v Sailbay Pty. Ltd.

[1993] FCA 423

THE TUBBY TROUT PTY. LTD.; DAVID MARSDEN McINTYRE and CATHRYN MARY McINTYRE v.
SAILBAY PTY. LTD.; ANTHONY JOHN WHITE; ROBERT DUNCAN McCRAE; MARCUS ROY FORD
and CHRISTOPHER HARDY GASTEEN
No. QG14 of 1989
FED No. 423
Number of pages - 10
Trusts

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Drummond J(1)

CATCHWORDS

Trusts - applicant caveated over real property of respondent - caveat withdrawn in consideration of deposit of $100,000.00 being part of proceeds of sale of that property in solicitors' trust account - term of deposit agreement that money may be withdrawn from trust account on seven days' notice - notice of intention to withdraw funds given - applicant served notice under s. 12(4) of the Trust Account Act (Qld) that ownership of funds was disputed - trust determined by expiration of seven day notice period - respondent not restrained from withdrawing funds by Trust Accounts Act.

Words and Phrases - "business, proceeding or transaction"

Trust Accounts Act (Qld) - s. 12(4)

Jackson v Stirling Industries (1987) 162 CLR 612

HEARING

BRISBANE, 4 June 1993

#DATE 4:6:1993

Solicitors for the applicants: Primrose Couper Cronin

Rudkin

Counsel for the respondents: S.S.W. Couper

Solicitors for the respondents: Gadens Ridgeway

ORDER

The Court orders that:

1. The notice of motion is dismissed.

2. The applicants to pay the respondents' costs of the notice of motion to be taxed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

DRUMMOND J This is an application for an interlocutory injunction to restrain the respondents in the action from obtaining access to a fund of $100,000.00 held in trust by its solicitors pending judgment in the action. The second respondent, who is resident in New Zealand, and the first respondent, a company incorporated in Australia, but the shareholders of which appear to be New Zealand residents, have no assets in Australia, other than the $100,000.00, with which to satisfy any judgment the applicants may obtain against them in the action.

1. Application is also made for a Mareva injunction to achieve the same result. This, however, developed into an application by the applicants for a short adjournment to gather further material as to the lack of assets of the respondents in Australia and, at the very end of the argument, for the purpose of gathering information as to the dissipation by the second respondent of assets in New Zealand where he resides.

2. I turn to the application for the interlocutory injunction first mentioned. This application, of course, depends upon the applicants making out an arguable case, in the sense of showing a serious question to be tried, as to the applicants being entitled to insist on the preservation of the fund and, once that hurdle is overcome, demonstrating that the balance of convenience favours the grant of the injunction.

3. The background to the application for this injunction lies in disputes which developed in 1988 and into 1989 between the applicants and the respondents of which this action became an element. After the action was commenced, the applicants caveated over freehold premises owned by the first respondent, on which the applicants conducted the business in respect of which the action arose, at a time when the first respondent was in the process of selling that land. Matters were resolved for the time being by a settlement agreement, the terms of which are contained in a letter of 20 April, 1989 sent by the solicitors for the respondents to the solicitors for the applicants. In return for, among other things, removing the applicants' caveat, the respondents through their solicitors gave the following undertakings and promises:
   

"(i) Our clients undertake to withhold the sum of $100,000.00 from the proceeds of sale of the premises. ...

(ii) ...

(iii) Our clients will give your clients seven (7) days notice of any one or more of the following events occurring: ...

(c) any intention on our client's behalf to withdraw from these arrangements.

(iv) The amount of $100,000.00 would be initially retained in our Trust Account and then invested in our name as Trustee for our clients but subject to and on the basis of the undertaking contained herein. Should our clients elect to withdraw from these arrangements, then after this expiration of the seven (7) day notice period to your clients, the funds will be held solely on our client's behalf and not subject to the undertaking. Your clients would, of course, in the meantime be entitled to seek such relief from the Court by way of injunctive proceedings or otherwise as they might be advised."

1. The $100,000.00 now in question formed part of a sale proceeds received by the first respondent. Even if the trust upon which the respondents' solicitors thereafter held the $100,000.00 was one which conferred on the applicants, as well as the respondents, a beneficial interest in those moneys, a matter of considerable doubt in view of paragraph (iv) in the letter of 20 April, 1989, it was a trust that was determinable at will by the respondents upon them giving seven days notice to the applicants of their intention to terminate the trust by "electing to withdraw from these arrangements."

2. On 21 May, 1993, the respondents' solicitors gave a notice effective to terminate any trust that may have been established on 20 April, 1989, upon the expiry of seven days from that date. The applicants did not move until today for the injunctive relief although the agreement of 20 April, 1989 allowed them only a period of seven days from service of the notice to do that. The reasons for that delay will be considered in more detail later.

3. On 26 May, 1993, the applicants served on the respondents' solicitors a notice under s. 12 of the Trust Accounts Act 1973 (Qld). Paragraph 5 of this notice reads:
   

"The Tubby Trout Pty Ltd gives notice under s 12(4) of the Trust Accounts Act that it was a party to the business proceeding or transaction in respect of which the sum of $100,000.00 is presently held by (the partners of) Gadens Ridgeway (the solicitors for the respondents) as trustee, and that the ownership of such funds is in dispute."

1. Section 12(4), so far as relevant, of the Trust Accounts Act reads:
   

"Where ... a trustee has received notice in writing from any person who was a party to the business, proceeding or transaction in respect of which the moneys were received that the ownership of the moneys is in dispute, the trustee shall not without the written consent of the parties make payment of any such moneys until such time as -

(b) he is advised that legal proceedings have been commenced to determine the ownership of the moneys whereupon he shall forthwith pay the moneys into the court in which the proceedings have been taken to abide the decision of the court".

1. The respondents contend that s. 12(4) of the Trust Accounts Act has no application to the $100,000.00 fund. The applicants argued that they were a party to a business, proceeding or transaction within the terms of the subsection, namely the conveyance by the first respondent of its land, and that they were such a party because of their caveat. They further argued that the $100,000.00, being part of the proceeds of the sale of the land, was moneys the ownership of which was in dispute within s. 12(4).

2. The assertions in the applicants' caveat, repeated in correspondence in 1989 that is before me, but which are all unsupported by any evidence, do not suffice to raise an arguable case that the applicants had any interest in the respondents' land, and thus, in the proceeds of sale comprising the $100,000.00. The caveat, by itself, does not provide evidence to raise an arguable case or a serious question to be tried that such was the position, nor does the fact that a caveat was lodged against transfer by the respondents of the land make the applicants a party to the transaction comprising the conveyance between the respondents and the purchasers from them. The applicants, as caveators, were not a party to the transaction comprising the conveyance in respect of which the respondents' solicitors received the $100,000.00. The parties to the transaction of conveyance were the first respondent as vendor and the third party purchaser. The applicants, far from being parties, were strangers to the conveyance. The whole purpose of the caveat was to prevent the conveyance taking place. The applicants had no rights, on the evidence, in the property conveyed. They had, on the evidence, no rights that arose out of the conveyance and, in particular, no legal or equitable claims to the money that was received by the respondents as an integral part of the transaction that involved conveying title to the purchaser in exchange for payment to the vendor respondent of the purchase price. A mortgagee from a vendor is in an entirely different position, so far as the subsection is concerned, with respect to a conveyance from a caveator. I would not grant an interlocutory injunction to restrain the respondents dealing with the $100,000.00 fund on that particular ground based upon s. 12(4).

3. The applicants also argued, in reliance upon the same statutory provision, that, whatever the source of the $100,000.00, the fund was received pursuant to a transaction within s. 12(4), namely the agreement of 20 April, 1989. That is plainly right. But the applicants have to go beyond that and show that there is an arguable case that Messrs. Gadens Ridgeway are bound by the sub-section to retain the funds following receipt of a notice. The only basis on which Gadens must retain the funds is that the settlement agreement of 20 April, 1989 requires them to do so. However, in its terms, that agreement only obliges Gadens to retain those funds until the expiry of seven days after a notice of termination. That has happened. It is common ground that any period of notice of termination provided for by the settlement agreement, as extended by later agreement, will expire at the latest by midnight tonight. I therefore decline to grant an interlocutory injunction on this basis also.

4. So far as the application in relation to the Mareva injunction is concerned, Mr. Treherne, the solicitor who appeared for the applicants, conceded that he does not have sufficient evidence available at the moment to justify the grant of a Mareva injunction that would continue the freeze on the $100,000.00 which was effected by the settlement agreement while it remained on foot. He initially sought an adjournment to obtain further evidence. The adjournment was also sought to file evidence to show that the transfer by the second respondent of a property in Australia to a company controlled by his children, which is referred to in paragraph 23 of Mr. Treherne's affidavit, was effected shortly before the trial of the action commenced. Late in the proceedings, as I have already mentioned, the applicants also sought the adjournment to gather evidence that the second respondent had divested himself of property he owned in New Zealand and which would be readily available to the applicants but for the divestiture, should they obtain judgment in the action, given the ease with which such a judgment could be registered and enforced in New Zealand.

5. A Mareva injunction never issues merely upon proof that a respondent in an action is moving assets out of the jurisdiction. Such a person is, generally speaking, entitled to deal with is own property as he chooses, unless and until there is, firstly, a judgment against him, and secondly, an attachment of that property by process of execution under the judgment. The foundation for the court's developing jurisdiction to issue a Mareva injunction is identified in the judgment of Deane J, in Jackson v Stirling Industries Ltd. (1987) 162 CLR 612 at 622, where his Honour said:
   

"Initially, injunctive orders to preserve assets were made to prevent a non-resident defendant from removing assets from the territorial limits of a court's jurisdiction so as to frustrate the effectiveness of any judgment that might be obtained ... In due course, it was perceived that a general interlocutory power to make orders preventing a defendant from disposing of his assets so as to defeat any judgment obtained in an action was an incident of the substantive jurisdiction to entertain the action and was not confined to the case where the defendant was a non-resident."

1. It is critical to a person's entitlement to a Mareva injunction that he shows that the respondent is divesting himself of assets in order to defeat any judgment that that person may obtain. I do not regard the evidence from Mr. McIntyre as to what the second respondent is said to have done in New Zealand in this regard as sufficient to entitle the applicants to an adjournment to seek evidence to establish those matters. On Mr. McIntyre's own evidence, he has long had suspicions, based on a number of things including information from his New Zealand solicitor told him. Yet, apart from mentioning these suspicions to Mr. Treherne, his Australian solicitor, a couple of months after the trial, which ended in June last, he did not take his concerns up with Mr. Treherne until today's hearing was interrupted to enable Mr. Treherne, in his closing reply to the address of counsel for the respondents, to obtain an authority from the court library. The notice that has led to this hearing was served on 21 May, 1993. If there were real concerns by the applicants as to the respondents' conduct, I would have expected that they would have provoked the applicants to alert Mr. Treherne long before today to the need to investigate the concerns which Mr. McIntyre mentioned to Mr. Treherne last year; yet nothing has been done in that regard since the notice was served on 21 May.

2. I do not think that the nature of the evidence concerning what is said to be the second respondent's actions in New Zealand, which is before me, is of sufficient cogency to entitle the applicants to the adjournment sought.

3. As to the applicants' desire to seek evidence with respect to the divesting of property referred to in paragraph 23 of Mr. Treherne's affidavit, that occurred, from what Mr. Treherne said in evidence, prior to June 1992. Since then, there had been nothing done by the respondents to bring to an end the obligations imposed on their solicitors by the agreement of 20 April, 1989 until the notice was issued and served on 21 May last. Even if the applicants were to be given an adjournment to prove what was foreshadowed here, it would not be anywhere near sufficient, in my view, to justify an inference that the actions of the respondents now complained of are being done for the purpose of defeating any judgment that the applicants may obtain in this action. The respondents have left the fund in place, from the end of the trial in June last until 21 May, when at any time in this period they could have given the requisite notice to bring the agreement in its application to the $100,000.00 fund to an end. Since giving the notice, they refrained from acting to take the fund immediately the seven day period expired and have given the applicants twice the time agreed, when the agreement of 20 April, 1989 was made, to be reasonable to allow the applicants to intervene to try to stop them following their plans. Even if the applicants were to prove the matters foreshadowed with respect to paragraph 23 of Mr. Treherne's affidavit, they could not, in my view, in the face of these considerations, show that the respondents' actions now in question display an intent to defeat any judgment that the applicants may obtain from them in the action. This conduct is now and would, even in the face of the evidence foreshadowed if it were to be available, remain in my view colourless. It is, and would remain, consistent with the respondents having a need for the $100,000.00 in connection with their own personal or business affairs. A Mareva injunction, of course, can never, even in the face of clear evidence that assets are being disposed of to avoid satisfaction of a threatened judgment, issue to prevent a respondent using his own assets for such purposes.

4. I do not think that the applicants' claim for an adjournment is made out. It would, on the material before me, not be likely to result in the picture of the respondents' actions, as it now appears, being changed in any significant way. It is of course the applicants who bear the onus of satisfying the court that there is conduct, and in particular a dealing with the $100,000.00 in question, that is being engaged in for the purpose of defeating any possible judgment they may obtain.

5. The applicants have not, in my view, in light of the contents of the letter of 25 May, 1993 which the applicants' solicitors sent to the respondents' solicitors, shown any ground either for a conclusion that they were lulled into a false position by the failure of the respondents' solicitors to respond to the service of the notice under the Trust Accounts Act on 26 May, 1993. I therefore refuse the application for the adjournment.