Westpac Banking Corporation v Hilliard
[2001] VSC 187
•8 June 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 2127 of 2000
| WESTPAC BANKING CORPORATION | Plaintiff |
| v | |
| ROY CHARLES HILLIARD | First Defendant |
| and | |
| INFORMATION AGE TRAVEL PTY LTD | Second Defendant |
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JUDGE: | McDonald J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 28, 29 and 31 May 2001 |
DATE OF JUDGMENT: | 8 June 2001 |
CASE MAY BE CITED AS: | Westpac Banking Corporation v Hilliard and Ors |
MEDIUM NEUTRAL CITATION: | [2001] VSC 187 |
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Mareva type order - order made on ex parte application against person not a party to proceedings – application to set aside orders – non-disclosure of material facts - consideration of all facts before the court on application – order discharged.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. Strong | Mallesons Stephen Jaques |
| For the Defendant | Mr P. Hayes QC | Rudstein Kron |
HIS HONOUR:
The proceeding before the court is brought in the proceedings wherein Westpac Banking Corporation is plaintiff and Roy Charles Hilliard and Information Age Travel Pty Ltd are defendants. The proceeding has been brought by summons issued on behalf of Margaret McCready. She is not a party to the proceedings between the plaintiff and the defendants. By a summons filed on behalf of Ms McCready on 10 April 2001 she seeks the discharge of a Mareva order made in the proceedings on 19 February 2001, which order directly effects her in that it prevents her from receiving moneys, other than the sum of $75,000, which are the proceeds of the sale of a property situate and known as Unit 801, Level 8, 469 St Kilda Road, Melbourne (“Unit 801”) which property had been sold by her. At the time of the sale Ms McCready was the sole registered proprietor of Unit 801.
On 20 December 2000 the plaintiff commenced its proceedings against the defendants by issue of a writ on that day. By the plaintiff’s endorsement on the writ the plaintiff claimed against the defendants damages pursuant to the Fair Trading Act (Vic) and/or the Trade Practices Act 1974 (C’th) and for fraudulent misrepresentation. By the endorsement on the writ the plaintiff alleged that it operated bank accounts in the name of Stephen Vizard, Sarah Vizard and entities in which Stephen Vizard is a director and/or shareholder, including Performing Arts Investments Pty Ltd and Performing Arts Services Pty Ltd referred to collectively as the “PAS Group”. It is alleged that during the period from or about July 1991 until or about 7 October 2000 Hilliard was employed as a book-keeper by Performing Arts Services Pty Ltd and during that period and in his employment he was authorised to sign cheques up to a limit of $10,000 per cheque drawn on accounts maintained by the plaintiff on behalf of the companies in the PAS Group. It is alleged that in or about 2 February 1996 Hilliard, without the consent of the PAS Group, forwarded to the plaintiff a letter purporting to increase, from $10,000 to $50,000 per cheque, the authority of Hilliard to sign cheques and to arrange payment on behalf of the PAS Group utilising funds in the PAS Group bank accounts maintained by the plaintiff. It is alleged that the plaintiff was induced by the purported authority, as Hilliard intended it to be, to honour cheques signed by Hilliard and drawn on accounts of the companies within the PAS Group in excess of the limit of $10,000 per cheque. It is alleged that some of such unauthorised drawings were paid to and accepted by the second defendant of which company Hilliard was a director and shareholder. It is alleged that the second defendant at all times knew that it had no right to receive any of the unauthorised drawings from the plaintiff. It is alleged, that as it was reasonably entitled, the plaintiff admitted liability to the PAS Group for honouring cheques which constituted unauthorised drawings. In the alternative it is alleged that by sending the letter, Hilliard falsely represented to the plaintiff that he had the authority of the PAS Group to sign cheques in excess of $10,000 per cheque and that in respect of cheques payable to the secondnamed defendant, that it was entitled to such cheques and that acting on such false representations the plaintiff honoured such cheques.
On 20 December 2000 on an ex parte application made on behalf of the plaintiff and on the plaintiff giving an undertaking as to damages that may be suffered by the defendants, Mareva orders were made against Hilliard and the second defendant. Also orders were made as follows:
“2.[That] until 4.00 pm on 4 January 2001 or further order the Registrar of Titles be restrained from proceeding with or registering any dealings over the land being Unit 801, Level 8, 469 St Kilda Road, Melbourne, namely the land described in Certificate of Title Volume 10320 Folio 737.
4.That until 4.00 pm, 4 January 2001 or further order Margaret McCready by herself, her servants, agents or howsoever otherwise be restrained from disposing of mortgaging, charging, selling, diminishing, assigning or dealing in any way whatsoever with the land and property being Unit 801, Level 8, 469 St Kilda Road, Melbourne.
6.[That] by 10:15 am, on 29 December 2000 Margaret McCready make, file and serve an affidavit relating to the ownership and beneficial entitlement to the land and property being Unit 801, Level 8, 469 St Kilda Road, Melbourne.”
At the time of the making of the aforesaid orders the court had before it four affidavits sworn respectively by Stephen William Vizard, David Warner, Leon Zwier and Trevor John Stanley McMahon. In his affidavit sworn 19 December 2000, Vizard deposed, inter alia, to the following matters:- Hilliard commenced his employment with the PAS Group in or about July 1991 and remained in that employment until 17 October 2000. During that time and in his employment, save for a cheque book that Vizard’s wife, Sarah, operated from time to time, Hilliard alone wrote up cheques for the PAS Group and for Vizard and his wife. Hilliard was authorised by the PAS Group, Vizard and his wife to sign cheques on behalf of the PAS Group, Vizard and his wife up to $10,000 in value. He was authorised to transfer funds between accounts maintained by the PAS Group or in relation to investments with the plaintiff, however, Hilliard was never authorised to draw any cheques on any accounts of the PAS Group in excess of $10,000. Shortly after Hilliard commenced employment, Vizard wrote a letter to the plaintiff enclosing signing authorities which authorised Hilliard, inter alia, to sign cheques on specified accounts. In that letter Vizard informed the plaintiff that cash or travellers cheques had to be signed by either himself or his wife and that save for cheques being transferred between accounts or investments with the plaintiff any cheque drawn on the PAS Group accounts in excess of $10,000 had to be signed by Vizard. In July 2000 Hilliard told Vizard that he wished to resign nominating a date which was agreed upon, being that he would leave in mid-October 2001. After being so advised Vizard made enquiries and took steps which resulted in one Stephens, a certified practising accountant and former bank manager, being employed with the PAS Group. After commencing employment Stephens commenced a full reconciliation of the PAS Group assets register and in November Stephens informed Vizard that he could not reconcile some of the assets on the asset register. On examining the asset register Vizard found that there were six assets referred to in the register as being purchased in 1996 and that neither he, his wife or the PAS Group had ever purchased such assets. Those assets were entered in the asset register at a cost totalling $657,900. Following this, further enquiries were conducted by Stephens and Vizard during which Vizard found that files and documents relating to the PAS Group were missing which led him to believe that the missing bank records and other primary documents had been destroyed by Hilliard.
Exhibited to the affidavit of Vizard was a letter addressed to Stephen New, an officer of the plaintiff, dated 2 February 1996. That letter read:
“I would like to change the level at which Roy Hilliard is authorised to sign cheques and arrange payments on behalf of the Performing Arts Services Group. Until further notice, the new level is to be $50,000, maintaining the exceptions of inter-group transactions and payments to stockbrokers.”
That letter was purportedly signed by Vizard as a director of Performing Arts Services Pty Ltd. Vizard deposed that neither he nor the PAS Group had ever authorised Hilliard to draw cheques up to an amount of $50,000 on the accounts of the PAS Group and that neither he nor the PAS Group had ever authorised the plaintiff to pay cheques with a face value greater than $10,000 without Vizard’s authority to do so. He further deposed:
“The suspicious letter appears to have been signed by me. However I certainly never gave Hilliard the authority to draw cheques up to an amount of $50,000.
The signature on the suspicious letter is different from my usual signature. The suspicious letter was first given to me in December 2000 by David Warner [an investigation accountant engaged by Vizard on 22 November 2000]. David Warner has told me that he obtained the suspicious letter from Westpac.”
In the affidavit sworn by Trevor McMahon he deposed that he was the Senior Manager, Group Fraud Control Vic/Tas of the plaintiff and that since 5 December 2000 he had been conducting an investigation into accounts being those various customer accounts of the plaintiff managed by the Westpac Private Bank for companies associated with Stephen Vizard which he identified collectively as the Performing Arts Group. He deposed that such accounts were managed on behalf of Westpac Private Bank by Steven New and John Aitken. He deposed that on 2 February 1996 the plaintiff had received an authority purportedly from Vizard authorising Hilliard to write cheques on behalf of the companies associated with Vizard for amounts up to $50,000; that he had been informed by Vizard that he had not executed the authority and that in reliance upon the authority the plaintiff had effectively transfer of funds directed by cheques signed by Hilliard of a face value greater than $10,000. He deposed that he had ascertained that to the time that he had sworn his affidavit, that between September 1995 and June 1996 cheques totalling approximately $280,725 had been misdirected to companies associated with Hilliard. He deposed that on 18 December 2000 the plaintiff had admitted liability for all such unauthorised drawings. He further deposed that he had been informed by Aitken and believed that:
“(a)Hilliard has a mortgage to Westpac securing a property situated at Unit 801, 469 St Kilda Road, Melbourne, Certificate of Title Volume 10320 Folio 737 (‘the property’).
(b)The registered proprietors of the property were Hilliard and Margaret Lloyd McCready until January 1998 at which time Hilliard disposed of his interest in the property in favour of McCready. The transfer was effected for the stated consideration of ‘love and affection’…
(c)Settlement of the property is due sometime in February 2001.”
A copy of the transfer of land was exhibited to the affidavit of McMahon.
On 21 December 2000 a further order was made in the proceedings on an ex parte application made on behalf of the plaintiff. Again an undertaking as to damages, which may be suffered by the defendants, was given on behalf of the plaintiff. Mareva orders were again made against the defendants. Instead of the period provided by the order made on 20 December 2000 restraining the defendants and others from performing acts and doing matters until 4 January 2001 the period was extended to 29 January 2001. Again, Mareva orders affecting Ms McCready were made as follows:
“2.[That] until 4.00 pm on 29 January 2001 or further order the Registrar of Titles be restrained from proceeding with or registering any dealing over the land being Unit 801, Level 8, 469 St Kilda Road, Melbourne, namely the land described in Certificate of Title Volume 10320 Folio 737.
4.That until 4.00 pm, 29 January 2001 or further order Margaret McCready by her self, her servants, agents or howsoever otherwise be restrained from disposing of mortgaging, charging, selling, diminishing, assigning or dealing in any way whatsoever with the land and property being Unit 801, Level 8, 469, St Kilda Road, Melbourne save that the property may be sold on terms that the net proceeds (that is net of mortgage repayments and sale costs) be placed into a trust account in the name of the solicitors for the plaintiff and Margaret McCready until further order.
6.That by 10.15 am, on 10 January 2001 Margaret McCready, file and serve an affidavit relating to the ownership and beneficial entitlement to the land and property being Unit 801, Level 8, 469 St Kilda Road, Melbourne.”
On 11 January 2001 there was filed an affidavit sworn by Ms McCready on 10 January 2000. That affidavit was made and filed in accordance with the order made on 21 December 2000. In that affidavit she deposed that it was made on her own behalf and that she was also authorised by Hilliard to make the affidavit on his behalf. She exhibited to that affidavit a statement which she deposed set out the jointly owned assets and liabilities of herself and Hilliard, assets solely owned by Hilliard, assets solely owned by her, the history of property ownership and the entitlements that they had in various companies and trusts which were detailed in statements attached to that exhibit. Under the heading “Property History” within the exhibit there was stated, inter alia:
“Paid deposit of $10,000 on 801 Park Central, 469 St Kilda Road on 9 June 1995, remainder of balance of 10 percent for $40,500 in 1995. Purchase price of apartment $500,005. Apartment initially in joint names, subsequently transferred to my name to ‘balance out’ the fact that the apartment was being used as security for a loan to initiate Roy’s investment portfolio with Westpac Private Bank.
…
Sold apartment 801 Park Central, 469 St Kilda Road in October 2000 for $640,000. After settlement of the mortgage for the factory and Roy’s loan was to be paid into my superannuation fund.”
On 11 January in the proceedings again on an ex parte application made on behalf of the plaintiff and again on the plaintiff giving an undertaking as to damages that may be suffered by the defendants, Mareva orders were made against Hilliard and second defendant. An order in its form deleted the order restraining the Registrar of Titles as previously referred to. Again Mareva orders were made by paragraphs 3 and 5 thereof, affecting Ms McCready, which orders were in the same terms as that ordered on 21 December 2000. Although the orders by their form were stated to be obtained, “ex parte” there was filed with the court minutes of consent orders which varied the orders made on 21 December 2000 which minutes were signed by solicitors for the plaintiff and solicitors for Hilliard and the second defendant.
On 29 January 2001 further orders were again made in the proceedings. As appears from those orders, the plaintiff and the defendants were represented before the court. Ms McCready was not represented. As appears from such orders the plaintiff gave an undertaking as to damages that may be suffered by the defendants. On this occasion as on 20 and 21 December 2000 and 11 January 2001 no undertaking was given by the plaintiff as to damages that may be suffered by Ms McCready. On 29 January 2001 extensive undertakings were given to the court on behalf of the second defendant. By paragraph 1 of the orders made that day it was ordered that the orders made on 21 December 2000 and varied by further orders made on 11 January 2001 be vacated. By paragraph 2 of the orders made on 29 January 2001 Mareva orders were made against Hilliard which included that he be restrained until 19 February 2001 or further order from disposing of mortgaging, charging, selling, diminishing, assigning or dealing in any way whatever with any assets jointly owned by him and Ms McCready.
By paragraph 3 of the orders made that day it was ordered:
“That until 4.00 pm on 19 February 2001 or further order that the amount of $377,771.26 being the net proceeds of the sale of the land and property being Unit 801, Level 8, 469 St Kilda Road, Melbourne, be maintained in National Australia Bank BSB 083-091, account number 49-615-1899 in the names of the solicitors for the plaintiff and Margaret McCready.”
On 19 February 2001 further orders were made in the proceedings. On that day the plaintiff gave an undertaking as to damages that may be suffered by the defendants or any of them or Ms McCready by reason of the orders made that day. On that occasion Ms McCready was represented by counsel before the court. On that day orders were made by consent. It was ordered that the orders made on 29 January 2001 be vacated. Mareva orders were made against Hilliard which included an order restraining him from disposing, mortgaging or dealing in any way with any asset jointly owned by him and Ms McCready. It was further ordered by paragraph 3:
“That until further order the amount of $379,136.08 being the net proceeds of the sale of land and property being Unit 801, Level 8, 469 St Kilda Road, Melbourne (less the sum of $75,000 to be released within seven days by the plaintiff to Margaret Lloyd McCready) be maintained in the National Australia Bank BSB 083-091, account number 49-615-1899 in the names of the solicitors for the plaintiff and Margaret McCready.”
By her summons Ms McCready seeks to have discharged this last referral to order, made by consent, on 19 February 2000.
When regard is had to the orders made on 21 December 2000, although it is not specifically stated by the same, it is apparent, when regard is had to their form and to their contents that it was intended that the orders made on 20 December 2000 be vacated and that the orders made on 21 December 2000 stand in their place. That such is the case is also apparent from the order made on 29 January 2001 vacating the orders made on 21 December 2000 and 11 January 2001.
As appears from the summons of Ms McCready and the Mareva order made on 19 February 2001, that which Ms McCready now seeks to be discharged, is an order made by consent on 19 February 2001. However, I was informed by senior counsel for Ms McCready that the consent order made on that occasion was made without prejudice to Ms McCready being able to contend that the initial order should not have been made by the court and that the order made on 19 February was to be treated for all purposes as if it was an ex parte order. Counsel for the plaintiff informed me that he substantially accepted that position and that the order made on 19 February was to be regarded as a holding order. He informed me that it was not intended to change the position of the parties and it was not intended to put Ms McCready in a position were she was not able to advance whatever argument she wished to make as to why the original order should not stand. The order made on 21 December 2000 restrained Ms McCready from dealing with the property, Unit 801, save that it provided that it may be sold on terms that the net proceeds, being net of the mortgage repayments and sale costs, be placed in a trust account in the names of the solicitors for the plaintiff and Ms McCready until further order. The order made on 19 February 2001, other than permitting the release to Ms McCready of $75,000, ordered that the net proceeds of sale of Unit 801 were, until further order, to be maintained in a bank account in the names of the solicitors for the plaintiff and Ms McCready. It is that order that I treat as being made on 21 December 2000 not by consent but by an ex parte application made on behalf of the plaintiff.
By Further and Better Particulars furnished by the plaintiff at the request of the first defendant and filed with the court, the plaintiff has identified the amount which it alleges constituted unauthorised drawings made by the first defendant and paid to the second defendant. The particulars as provided included drawings of amounts less than $10,000 and amounts in excess of that sum during the period 16 July 1993 to 21 June 2000. They total $1,324,701.28. There is a further amount thereafter in the sum of $43,209. Of the amounts alleged by the plaintiff to be unauthorised drawings and paid by it during that period to the second defendant, being amounts in excess of $10,000, they total $1,037,561.28. By reference to such particulars it appears that it is alleged that the first unauthorised drawing paid to the second defendant and by the plaintiff exceeding $10,000 occurred on 15 June 1995. It further appears that during the period from 9 June 1995, the date on which Unit 801 was acquired, to 21 June 2000 that it is alleged that unauthorised drawings were paid to the second defendant totalling $1,084,701.28 of which $1,037,561.28 exceeded $10,000.
On behalf of Ms McCready it was submitted that the Mareva order affecting her and made on 19 February 2001 ought to be discharged for two substantial reasons. The first, was that in seeking and obtaining the “ex parte order” as at 21 December 2000 the plaintiff failed to discharge the duty that it had to the court to put before it all facts material to its determination as to whether such Mareva order ought to be made by the court against Ms McCready. Secondly, it was submitted that having regard to the facts and the circumstances as existing, even to the present time, the court, in exercise of its discretion, should not make or continue against Ms McCready the order presently restraining her. It was submitted that the order should be discharged.
In Thomas A. Edison Ltd v Bullock[1] it was held by Isaacs J that on an ex parte application to a court for an interlocutory injunction, there is imposed on the applicant a duty to bring before the court all facts material to its decision whether such injunction should be granted and that the failure to bring material facts before the court is a ground for such injunction to be dissolved. At p. 681 of this judgment his Honour said:
“Dalglish v Jarvie 2 Mac. and G 231, a case of high authority, establishes that it is the duty of a party asking for an injunction ex parte to bring under the notice of the court all facts material to the determination of his right to that injunction and it is no excuse for him to say he was not aware of their importance. Uberrima fides is required, and the party inducing the court to act in the absence of the other party, fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all material facts which the party would have presumably brought before the court in his defence to that application. Unless that is done, the implied condition upon which the court acts in forming its judgment is unfulfilled and the order so obtained must almost invariably fall. I add the word ‘almost’ in deference to such exceptional case as Holden v Waterlow 15 W.R. 139.”
[1](1913) 15 CLR 679.
In Town and Country Sport Resorts (Holdings) Pty Ltd and Ors v Partnership Pacific Ltd[2], the court (Davies, Gummow and Lee JJ.) at p. 543 said:
“Any party who seeks the granting of an injunction on an ex parte basis has a duty to place before the court all relevant matters including such matters which would have been raised by the respondent in his defence if he had been present.”
After reference to that said by Issacs J in Thomas A. Edison Ltd v Bullock (as I have previously referred to) their Honours continued:
“The rationale behind the principle is clear; it is of utmost importance in the due administration of law that courts and the public are able to have confidence that an ex parte order has been made only after the party obtaining it has complied with its duty to disclose all relevant facts.”
[2](1988) 20 FCR 540.
In Lloyds Bow Maker Ltd v Britannia Arrow Plc[3] Glidewell LJ at p. 1343 after citing and referring to a number of authorities, at p. 1341-43, said that he accepted the proposition of law advanced by counsel, at p. 1341 that:
“A party who seeks relief ex parte is under a duty to the court to make the fullest disclosure of all material facts. He must disclose any defence he had reason to anticipate may be advanced. If he does not comply he will be deprived of the fruits of his order without consideration of the merits and irrespective of whether, had he made such disclosure, he would or would not have obtained the order. It matters not whether the non-disclosure is deliberate or innocent. The court may allow a limited latitude for a slip, but only where the parties seeking relief has corrected the error quickly.”
[3][1988] 1 WLR 1337.
However, his Lordship added at P. 1343-4 that:
“… even though a first injunction is discharged because of material non-disclosure the court has a discretion whether to grant a second Mareva injunction at a stage when the whole of the facts, including that of the original non-disclosure, are before it and may well grant such a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed.”
In Brink’s Mat Ltd v Elcombe[4] Ralph Gibson L.J. at p. 1356-1357 set out seven enumerated principles applicable as requiring full and fair disclosure of all material facts to a court by a party making an ex parte application to the court for a Mareva order and the effect of the failure to make such disclosure. Without citing the authorities cited and referred to by his Lordship, in his judgment, I set out the seven principles. They were:
[4][1988] 1 WLR 1350.
“(1)The duty of the applicant is to make a ‘full and fair disclosure of all the material facts’.
(2)The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisors.
(3)The applicant must make proper enquiries before making the application … the duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional fact which he would have known if he had made such enquiries.
(4)The extent of the enquiries which will be held to be proper and therefore necessary must depend on all the circumstances of the case including –
(a)the nature of the case which the applicant is making when he makes the application; and
(b)the order for which application is made and the probable affect of the order on the defendant; and
(c)the degree of legitimate urgency and the time available for making of the enquiries.
(5)If material non-disclosure is established the court will be ‘astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure… is deprived of any advantage he may have derived by the breach of duty’.
(6)Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to issues which were to be decided by the judge on the application. The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty of the applicant to make all proper enquiries and to give careful consideration to the case being presented.
(7)Finally, it is ‘not for every omission that the injunction will be automatically discharged. A locus poenitentia may sometimes be afforded’… the court has a discretion notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order or to make a new order on terms…”
In the affidavits of Ms McCready sworn 9 April 2001 and 24 May 2001 she deposed to the following facts relevant to her application before the court:
¨ Ms McCready and Hilliard are partners and they have lived in a defacto relationship for some 16 years.
¨ In June 1995 Hilliard and Ms McCready entered into a contract to purchase Unit 801 for $505,000. The unit was contained in a new development and they purchased it “off the plan”. The unit was purchased by them jointly. An initial deposit of $10,000 was paid in June 1995 and a further sum of $40,500 was paid in August 1995. The moneys for the deposit were withdrawn from the joint bank account held by Ms McCready and Hilliard with the plaintiff at its private bank branch at Collins Street. They purchased the property for the purpose of providing them with a home and also as an investment. Settlement of the purchase of property was due in early 1997.
¨ At the time of the purchase Ms McCready and Hilliard proposed to raise the balance of the purchase price from the sale of various shareholdings, from other moneys that they had accumulated and from the sale of their existing home at Seymore Road, Elsternwick, which was owned by them jointly.
¨ From or about the time of the purchase sales of shares were made and the proceeds banked with the plaintiff. By early 1997 they had accumulated a substantial sum to put towards the balance of the purchase price and had invested it in term deposits.
¨ In or about September 1996 Ms McCready and Hilliard sold their home at Seymore Road, Elsternwick from which they received in March 1997 a net sum of $314,488. Part of the proceeds of that sale were applied to discharge a mortgage held over that home to the plaintiff which secured a loan to Gemhaven Pty Ltd for its purchase in 1995 of factory premises at Moorabbin. Gemhaven was the trustee of a unit trust in which Ms McCready and Hilliard held two thirds of the units. At the time of the purchase Hilliard and Ms McCready contributed $100,000 and borrowed $150,000 from the plaintiff. That borrowing was secured by the plaintiff by means of a mortgage held over their Seymore Road property. On the sale of Seymore Road Ms McCready and Hilliard discharged the mortgage debt. Following that discharge they were left with about $188,786. That sum was banked in their joint account with the plaintiff to be used for the purchase of Unit 801.
¨ Settlement of the purchase of Unit 801 took place in April 1997. Ms McCready and Hilliard applied moneys invested in term deposits and the proceeds of the Seymore Road property to pay the balance of the purchase price. The property was registered in their joint names.
¨ As a result of being informed by Hilliard, Ms McCready was aware that the PAS Group of companies and Vizard banked with the plaintiff and in particular with what was known as the ‘Westpac Private Bank’. Prior to 1995 Hilliard informed Ms McCready that the manager of the Westpac Private Bank, John Fyffe, had invited Hilliard to bank with it. At the time they discussed the matter but decided not to change their banking arrangements. At that time they banked with the plaintiff at its William Street and Elsternwick branches. However, in 1995 Hilliard and Ms McCready moved their banking across to the Westpac Private Bank after an invitation to do so was repeated by the then manager of the Westpac Private Bank, Brian Anthony. During the course of Hilliard’s employment with the PAS Group of Companies Ms McCready became aware that Hilliard had become friendly with Steven New a manager of the PAS Group of accounts with the Westpac Private Bank. New became their bank manager looking after their joint affairs and they became reliant on the Westpac Private Bank and followed advice given to them from time to time.
¨ In 1997 Hilliard informed Ms McCready that New had told him about a broad range of financial services provided by the plaintiff through the Westpac Private Bank which were marketed under the name “Westpac Personal Portfolio Services” (“Portfolio Services”). In or about mid-June 1997 Ms McCready and Hilliard met with New to specifically discuss the Portfolio Services. During that meeting they described to New their assets, income and expenditure. They discussed with New that their assets should be consolidated and an investment plan developed so as to provide future financial security for them in what they thought was to be their retirement. New advised Hilliard and Ms McCready that they would require a minimum of $500,000 to take advantage of the Portfolio Services and he referred them to John Laughlan of Westpac Financial Services to discuss specifics.
¨ On or about 25 June 1997 Ms McCready and Hilliard met with Laughlan, they described their financial assets and what they were trying to achieve in terms of making plans for their retirement. Laughlan confirmed that they required $500,000 in order to join the Portfolio Services. He recommended to them that such sum be made up from the amount standing to credit in their joint account and that they borrow a sum of $300,000 from the plaintiff. Laughlan proposed, that the bank facility of $300,000 be secured over Unit 801 of which they were the joint proprietors. Laughlan advised that Hilliard should be the sole borrower of the bank facility to facilitate a tax deduction for him rather than to have the tax deduction spread between both of them. During this discussion Laughlan was told that they were interested in maintaining some equality in the distribution of their joint assets.
¨ It had always been a concern of Ms McCready that there be some equality maintained in the distribution of joint assets with Hilliard. She had been divorced and although living in partnership with Hilliard she had not married him.
¨ During the meeting with Laughlan, Ms McCready discussed her superannuation. It was spread over a number of funds and Laughlan suggested that it be consolidated into a Westpac superannuation fund. Laughlan said that the sum of $100,000 could be paid from their joint account into her new superannuation fund with the plaintiff. Following that meeting she received that which was headed "Portfolio Presentation, prepared for Mr R.C. Hilliard and Ms M.W. McCready, 22 July 1997, Wealth Creation Portfolio."
¨ Ms McCready reflected on the proposal and was concerned as to the provision of security for the loan of $300,000 on Unit 801 as she would have no interest in Hilliard’s investment with the Portfolio Services. Although their relationship was a long-term and permanent one she considered that there was a considerable disparity in their asset position and contribution and felt uncomfortable about it. Ms McCready and Hilliard had always managed their affairs on the basis that their assets would be divided equally should they ever separate. She informed Hilliard that if Unit 801 was to be used as security for the loan of $300,000, for his benefit, and that moneys from their joint account were also to be applied, she thought that it would be appropriate for Unit 801 to be transferred to her name solely. She informed Hilliard that if they were to separate without such transfer being made he would be in the position of having an asset worth some $500,000 as well as having an interest in Unit 801 as one of the joint proprietors. She informed him that she was not happy being in that position. Hilliard said he understood and suggested that they raise the matter with the plaintiff.
¨ A short time later Hilliard and Ms McCready met with New and at least one other bank officer. It was Ms McCready’s recollection that that meeting took place either in July or August 1997. Ms McCready informed New that she wanted Unit 801 to be transferred into her name solely and that she wanted that which she referred to as a “lien over Hilliard’s investment portfolio to protect her interests and her equity”. She informed New that Hilliard was happy with this decision and New discussed the matter with Hilliard. New said that he did not see any problem and used the words “notice of charge” rather than “lien”. New said that Hilliard’s interest in Unit 801 could be transferred to Ms McCready on the basis of “love and affection”. New said that the plaintiff would prepare the Notice and that McCready should contact her solicitor to prepare a transfer.
¨ Ms McCready would not have agreed to the arrangements and would not have consented to Unit 801 being mortgaged to secure the loan to Hilliard and the use of their joint bank account had Unit 801 not been transferred to her absolutely.
¨ On 4 September 1997 a contribution of $100,000 to Ms McCready’s superannuation fund was made. On 15 September 1997 the plaintiff charged Ms McCready and Hilliard various loan fees, stamp duty was charged and on 30 September 1997 the sum of $200,000 was transferred from their joint bank account to the Portfolio Services in Hilliard’s name. Hilliard entered into a loan agreement with the plaintiff which was secured against Unit 801. By a “Notice of Charge over Westpac Personal Portfolio Service” dated 8 September 1997 addressed to Westpac Financial Services Ltd, Ms McCready gave notice that Hilliard had charged to her the Westpac Personal Portfolio Service portfolio registered in the name of Hilliard for the purpose of securing the accommodation granted by Ms McCready at Hilliard’s request. Pursuant to that document Hilliard authorised Westpac Financial Services Ltd to hold the portfolio subject to that charge until such time as written notification of the release had been given by Ms McCready.
¨ Solicitors for Ms McCready prepared documents to transfer to her, Hilliard’s interest in Unit 801. This was done with the knowledge of the plaintiff.
¨ Early in the year 2000 Ms McCready and Hilliard agreed to sell Unit 801 and for Hilliard to resign his employment. They intended to reside in rental accommodation at least until they could find a more modest and suitable home that they wished to purchase.
¨ Unit 801 was sold for the price of $640,000 less approximately $20,000 for costs. Ms McCready had intended to pay the proceeds of the sale after discharging the mortgage to the plaintiff which secured Hilliard’s loan, into her Westpac superannuation fund, at least in the short term. This had been recommended to her by one Wilson, a manager of Westpac Financial Services during a discussion that Ms McCready had with him on 7 December 2000. It was her intention to draw on the superannuation by way of an allocated pension which she planned to use to meet her share of living expenses.
¨ Ms McCready is presently engaged in home duties. By profession she is a qualified social worker. In later times she has become self-employed as an independent consultant working in the field of management and organisational reviews. Her marriage was dissolved in the mid-1970s. Since the mid-1990s she has progressively reduced her consultancy work and over the last few years she has reduced her work hours to engage in voluntary work.
¨ From the sale of Unit 801 and with the agreement of the plaintiff $75,000 has been released to Ms McCready. A sum of approximately $200,000, from the purchase price, was applied to extinguish the outstanding loan of Hilliard to the plaintiff. The remainder of the purchase price is held in the bank account as provided by the order made on 19 February 2001.
Ms McCready has further deposed that she has been prejudiced by not having access to the moneys, being the balance of the sale price of Unit 801 after taking into account costs and after the plaintiff had discharged the mortgage that it held over that property which secured the loan to Hilliard. She deposed by her affidavits that she had planned to use part of the proceeds of the sale of Unit 801 to contribute to the purchase of a new and smaller and less expensive home for their retirement. She deposed that in consequence of the orders made her long-term planning and financial security have been placed at risk and her plans are presently suspended as a result of the order made on 19 February 2001. Ms McCready and Hilliard reside in rented accommodation. The joint bank account held by Ms McCready and Hilliard is the subject of a preservation order made against Hilliard with respect to property jointly owned by him and Ms McCready.
In cross-examination Ms McCready agreed that the transactions which took place with the plaintiff in 1997 were part of a long-term retirement plan with Hilliard. She agreed that from their joint account some $100,000 went into her superannuation fund, $200,000 went into Hilliard’s portfolio, a further $300,000 was borrowed by Hilliard and that his investment taking into account the borrowing was some $500,000 whereas hers was $100,000. She agreed that the transfer of Unit 801 to her was by way of “balancing up” the equation. She agreed that in May 2000 there was transferred to her superannuation fund from the Portfolio moneys of Hilliard $200,000. She agreed further that there had been a further draw down from the moneys borrowed by Hilliard and secured by the mortgage over Unit 801, in the sum of $173,000. This was invested in their joint names in a fund identified as Seacom. This investment was identified by her in exhibit MLM1 to the affidavit sworn by her on 10 January 2001 as a “speculative investment, share options in an unlisted company“. In respect of this joint investment Hilliard was restrained from dealing with it by orders made on 19 February 2001.
As appears from exhibit TJSM3 to the affidavit sworn by Trevor McMahon sworn on 3 May 2001 and filed in the proceeding on behalf of the plaintiff, the account of Hilliard with the Bank of Melbourne (the plaintiff), which was secured by the mortgage over Unit 801 was overdrawn on 15 May 2000 in the sum of $64,009.51. On that day a further draw down in the sum of $173,609.75 was made against the account. It was then overdrawn to the sum of $237,619.32. This account was closed on discharge of the mortgage over Unit 801 in January 2001. The sum credited to that account on 15 January 2001 and entered – “Final Loan Repayment” was $197,604.61.
In the application before the court there was filed on behalf of the plaintiff an affidavit sworn by Desmond Ryan on 18 April 2001. He is an accountant employed by PKF Chartered Accountants. In December 2000 PKF was retained by the plaintiff to examine and report upon transactions recorded in the bank statements of Hilliard, Ms McCready and the second defendant. He prepared reports relevant to those matters. Ryan deposed that he had read the affidavit of Ms McCready sworn on 10 January 2001 and an affidavit sworn by Hilliard on 19 February 2001 together with exhibits to those affidavits. By reference to the matters stated in Ms McCready's affidavit he deposed that they had assets which had an approximate cost price or prices in amounts set out in his affidavit which included, “net sale proceeds St. Kilda Road - $378,000“, “superannuation contributions - $599,771“ and “investment portfolio (Hilliard) - $295,000“. He deposed that their assets totalled some $2,008,876,000.
In cross-examination Ms McCready was referred to that deposed by Ryan as to the assets of Hilliard and herself and she agreed that broadly speaking they had between them assets of about $2,000,000. She was asked what she proposed to do with the funds the subject of the order made 19 February 2001, if her application was successful. She said that she would put the sums into her superannuation and purchase a small property probably in the country with the intention of living there.
It is convenient at this point to refer to evidence given in cross-examination of David Warner and Desmond Ryan. As referred to an affidavit was sworn by Warner on 19 December 2000. He deposed that he was an insolvency accountant employed by Carson McLellin PPB. He deposed as to ASIC searches made by him and the tracing of cheques payable to the second defendant. He had been instructed by Vizard to investigate the concern of the Performing Arts Services Group with the fact that within its asset register there were entries in respect to which the principals had no knowledge. In cross-examination he said that he had prepared an affidavit which was sworn by him for the purpose of being used before Mr. Justice Beach in this court. He was asked –
“You had not at that time traced any of the money that you had looked at out of the Performing Arts Services Group into the St. Kilda Road property had you?“
He replied –
“Into the St. Kilda Road property specifically?“
He was asked –
“Yes“.
He replied –
“I don't believe so, no“.
Warner was further asked –
“At no time had you done an exercise which led you to conclude that moneys were taken from PAS, into the property in St. Kilda Road, correct?“
He replied –
“I can't make a direct trace into the property, no.“
In re-examination Warner was asked –
“Mr. Warner, Mr. Hayes asked you a question, that whether you had done an exercise showing that moneys from the Vizard Group could be traced into the property, and you said, no: do you know where those moneys went? “
The witness replied –
“No“.
Desmond Ryan was also cross-examined on his affidavit sworn on 18 April 2001. He was asked by senior counsel for Ms McCready –
“In your affidavit – you are not in a position, I suggest, to conclude that any particular money went out of the PAS Group directly into the St Kilda Road property, are you?“
He replied –
“No, no I'm not, no. “
He was further asked –
“You're not able to suggest, are you, that show, trace the moneys that went out of PAS into the St Kilda Road property? “
He replied –
“I can not. “
The first matter to be addressed is whether, on 20 and/or 21 December 2000 the dates on which the initial ex parte applications were made to the court for Mareva orders against Ms McCready, there had been a full and fair disclosure by the plaintiff of all material facts relevant to those applications. That which had been disclosed to the court relevant to the property of Unit 801 was that Hilliard had a mortgage to the plaintiff securing that property, that the registered proprietors of the property had been Hilliard and Ms McCready until January 1998 at which time Hilliard had disposed of his interest in the property in favour of Ms McCready and that the transfer effected stated the consideration was “love and affection“. The court was further informed by Warner's affidavit that “settlement of the property is due some time in February 2001“.
That which was not disclosed to the court by the plaintiff at the time that ex parte applications were made were the facts within the knowledge of the plaintiff by its employees that the transfer of Hilliard's interest in Unit 801 to Ms McCready had been made in circumstances in which Hilliard joined the plaintiff's Portfolio Service which required him to deposit with the plaintiff $500,000, which he provided in part and to the extent of $200,000 from the joint account that he held with Ms McCready and that as to the remaining part by way of a loan facility provided by the plaintiff in the sum of $300,000 to be secured over Unit 801; that Hilliard was advised by the bank officer Laughlan that to facilitate a tax deduction he should be the sole borrower; that Laughlan was advised during discussions that Hilliard and Ms McCready were interested in maintaining some equality in the distribution of their joint assets; that there had been discussion with a bank officer with respect to Ms McCready drawing $100,000 from the joint bank account to be paid into a superannuation fund with the plaintiff; that Ms McCready in a meeting with bank officers including New informed them that she wanted to have Unit 801 transferred into her name solely and that she wanted that which she referred to as a “lien“ over Hilliard's investment portfolio to protect her interests and her equity; that the bank officer, New, said that Hilliard's interest in Unit 801 could be transferred to Ms McCready on the basis of “love and affection“; that between 4 September 1997 and the transfer of Unit 801 into Ms McCready's name solely, $100,000 was withdrawn from the joint bank account of Hilliard and Ms McCready and paid into the superannuation fund of Ms McCready and that the sum of $200,000 was transferred from the joint account into Hilliard's Portfolio Service; that the borrowings of $300,000 by Hilliard was secured by a mortgage given by Ms McCready to the plaintiff over Unit 801; that Unit 801 was transferred into Ms McCready's name solely; that Ms McCready took a charge over Hilliard's Portfolio Services and that an employee of the plaintiff had been informed by Ms McCready that it was her intention in the short term to pay the net proceeds of the sale of Unit 801, into her Westpac superannuation fund.
Pursuant to s. 37(1) of the Supreme Court Act 1986 the Court is empowered to grant an interlocutory injunction if it is “just and convenient to do so”.
Pursuant to R. 38.01 of the Court's (General Civil Procedure) Rules it is provided –
“The court may grant an injunction at any stage of a proceeding or in the circumstances referred to in r.4.08, before the commencement of a proceeding. “
In turn R. 4.08 provides –
“In an urgent case, the court may, on the application of a person who intends to commence a proceeding and upon his undertaking to commence the proceed within such time as the court directs, make any order which the court might make if the applicant had commenced the proceeding and the application were made in the proceeding. “
At the time that the ex parte applications for Mareva orders were made against Ms McCready in these proceedings the questions to be addressed by the judge hearing that application were first whether there was a serious question to be tried as to whether the asset of Ms McCready comprising her interest in Unit 801 could be available to satisfy a judgment against Hilliard or the second defendant in favour of the plaintiff and secondly whether there was a danger of such assets being dealt with by Ms McCready so that the court's process would be frustrated – Cardile v Led Buildings Pty Ltd[5]
[5][1999] 198 CLR 380 – Gaudron, McHugh, Gummow and Callinan JJ. at p.389-90.
In Cardile[6] in the joint judgment of Gaudron, McHugh, Gummow and Callinan JJ. their Honours drew a distinction between a Mareva order being made against a party to a proceeding as compared to such an order being made against a person who is not a party to the proceeding and drew attention to the caution that must be exercised by a court before granting such relief against a person not a party to the proceedings. At p.403 in their judgment they said –
“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. It has been truly said that a Mareva order does not deprive the parties subject to its restraint either of title or to possession of the assets to which the order extends. Nor does the order improve the position of claimants in an insolvency of the judgment debtor. It operates in personam and not as an attachment. Nevertheless those statement should not obscure the reality that the granting of a Mareva order is bound to have a significant impact on the property of the person against whom it is made: in a practical sense it operates as a very tight 'negative pledge' species of security over property, to which the contempt sanction is attached. It requires a high degree of caution on the part of the court invited to make an order of that kind. An order rightly or wrongly granted may have the capacity to impair or restrict, just as much as one appropriately granted may facilitate and ensure its due conduct. “
[6]At p.403.
At p.405 of their judgment in Cardile their Honours, although holding that the granting of Mareva relief against a person not a party to the proceedings should not be limited to cases in which the third party holds or is about to hold or dissipate or further dissipate property beneficially owned by a defendant in the substantive proceedings, they added however –
“Nevertheless it will be rare case in which Mareva relief would be granted if such situation does not exist. “
In Cardile[7] their Honours enunciated the principles which should guide courts when considering whether a Mareva order should be made against a person not a party to the proceedings before the court. They said –
“What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise 'may' be appropriate assuming the existence of other relevant criteria and discretionary factors, in circumstance 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 (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. “
[7]Gaudron, McHugh, Gummow and Callinan JJ. at p.405-6.
In my view from the material furnished on behalf of the plaintiff to the judge entertaining the ex parte applications brought against Ms McCready that which had been disclosed to the court relating to the property in respect of which the plaintiff sought a Mareva order against Ms McCready, Unit 801, was that until January 1998 Hilliard and Ms McCready had been joint proprietors of that property, that Hilliard had transferred his interest in the property at that time for the stated consideration of “love and affection”, that Hilliard had a mortgage over the property to the plaintiff, that the property had been sold and settlement was due in February 2001. Such matters were material to the court exercising its jurisdiction as to whether a Mareva order relating to that property should be made against Ms McCready. However, that disclosed to the court failed to make a full and fair disclosure of the facts known to the plaintiff material to the applications. Had a full and fair disclosure of the facts known to the plaintiff and material to the application been made such facts would have informed the court that the transfer of Unit 801 to Ms McCready was to keep in balance the interests which she had in the property with that of her partner Hilliard; that Hilliard borrowed $300,000 from the plaintiff which was to be secured by a mortgage to be granted by Ms McCready over Unit 801, that the consideration stated in the transfer for “love and affection” had been suggested by an officer of the plaintiff; that in addition to that consideration Ms McCready had consented to the loan of $300,000 being secured by a mortgage to the plaintiff over the unit; that both Hilliard and Ms McCready had sought the advice of the plaintiff relating to their financial affairs; that they had acted on the advices given; that the plaintiff was aware that the property was being sold and that Ms McCready had informed the plaintiff of her intentions as to the disposition of the net proceeds of sale after the mortgage to the plaintiff had been discharged from the proceeds of that sale. In my view when one has regard to the facts as known to the plaintiff, but not disclosed to the judge hearing the ex parte applications, rather than it being seen that Ms McCready had become “mixed up“ in the property of Hilliard it would have been seen that she was seeking to keep separate and equal her interest in property with that of Hilliard. In my view the matters known to the plaintiff and not disclosed by the plaintiff to the judge hearing the ex parte applications were material to the exercise of his discretion on the applications before him. Such failure of the plaintiff to make a full and fair disclosure of material facts known to it provides good reason for an order being made discharging the Mareva order made against Ms McCready on 19 February 2001. However, the question now to be addressed is whether when one has regard to all facts and circumstances now before the court, the Mareva order made against Ms McCready on 19 February 2001 should be allowed to continue or an order in similar terms should be made against her.
On behalf of the plaintiff it was submitted that in the event of the court determining that there had been non-disclosure by the plaintiff of facts known to it and material to the decision of the court that a Mareva order should be made against Ms McCready on the ex parte applications of the plaintiff, nevertheless the present Mareva order against Ms McCready should remain and not be discharged. In making such submission on behalf of the plaintiff reliance was had to the second category of circumstances identified by the joint judgment in Cardile[8] (to which I have previously referred) which may give foundation to a Mareva order being made against a person not a party to the proceedings in which the order is sought. It was submitted that there existed two distinct processes which may result in Ms McCready being “obliged to disgorge property or otherwise contribute to the funds or property” of Hilliard to help satisfy a judgment that may be obtained by the plaintiff against him in these proceedings. The first process relied on has its foundation in the provisions of s. 120(1), (2), (4) and (5) of the Bankruptcy Act 1966. Such sub-sections of section 120 of the Act provide –
[8]At p. 405-6.
“Transfers that are void against trustee
(1)A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferors’ bankruptcy if:
(a)the transfer took place in the period beginning five years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and
(b)the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.
Transfers that are void
(3)Despite sub-s. (1), a transfer is not void against the trustee if:
(a)the transfer took place more than two years before the commencement of the bankruptcy; and
(b)the transferee proves that, at the time of the transfer, the transferor was solvent.
Refund of Consideration
(4)The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for the transfer that is void against the trustee.
What is Consideration
(5)For the purposes of sub-ss. (1) and (4), the following have no value as consideration:
(a)…
(b)…
(c)…
(d)the transferee’s love or affection for the transferor.”
It was submitted on behalf of the plaintiff that there exists a reasonable expectation that the present proceedings by the plaintiff against the defendants can be prosecuted to judgment against them before the end of the year 2002. It was further submitted that when regard is had to the assets of Hilliard as disclosed by reference to Exhibit M.L.M.1, to the affidavit of Ms McCready sworn 10 January 2000 and to the Further and Better Particulars of the plaintiff’s Statement of Claim, which allege that Hilliard has between 16 July 1993 and 21 June 2000 misappropriated $1,324,701.28, it is likely that he will not be able to satisfy a judgment of $1,037,561.28. That latter sum is that now claimed against him by the plaintiff in these proceedings and being the amount in respect of which the plaintiff alleges that it has honoured cheques in excess of $10,000 signed by Hilliard on bank accounts of the “PAS Group”. It was submitted that it was likely in such events that bankruptcy proceedings would be commenced against Hilliard within the period of five years from the transfer by him to Ms McCready of his interest in Unit 801, which event occurred in January 1998. It was further submitted that when regard was had to the assets of Hilliard as presently known and the allegations contained in the plaintiff’s Further and Better Particulars that it is likely that it will be difficult for Ms McCready to establish under s. 120(3)(b) of the Bankruptcy Act that Hilliard was solvent at the time that he transferred to her his interest in Unit 801. It was submitted that in such circumstances it was likely that the transfer by Hilliard of his interest in Unit 801 to Ms McCready in January 1998 will be held to be void against the trustee of the estate of Hilliard in bankruptcy proceedings brought against him and she may in such circumstances be obliged to contribute to the assets of Hilliard available to satisfy the judgment of the plaintiff against him.
It is not necessary when reliance is sought to be had to the second category of circumstances identified in the joint judgment in Cardile, as the foundation of making a Mareva order against a person not a party to the proceedings, to establish that circumstances relevant to s. 120(1) of the Bankruptcy Act will certainly occur in the future. It is sufficient at this time in the proceedings to establish that a process such as that available under s. 120 of the Bankruptcy Act “may be available to the judgment creditor as a consequence of a judgment against …[a] potential judgment debtor[9]]”. Even if such proceedings were available in the future on the appointment of a trustee in bankruptcy of the estate of Hilliard such contribution that Ms McCready may be obliged to contribute to the funds of Hilliard would not be the whole of the net proceeds of the sale of Unit 801, as that transferred by Hilliard to her in January 1998 was his half share in Unit 801. Accordingly on the facts as known in this case, that may in the future lead to Ms McCready being obliged to contribute to the funds available to help satisfy the judgment of the plaintiff against Hilliard, when viewed from the standpoint best to the plaintiff they could not support a Mareva order being now made against Ms McCready with respect to the whole of the net proceeds of the sale of Unit 801. The present Mareva order against Ms McCready applies to the whole of the net proceeds of the sale of Unit 801 less an amount of $75,000 released to her from the proceeds of the sale. Further on the submissions made on behalf of the plaintiff they do not take into account that by agreeing to have the loan of $300,000 to be made to Hilliard by the plaintiff secured by a mortgage to the plaintiff over Unit 801 she gave valuable consideration for the transfer by Hilliard of his interest in Unit 801 to her. The submissions made on behalf of the plaintiff cannot support the continuance of the Mareva order against Ms McCready in its present form.
[9]Cardile – Gaudron, McHugh, Gummow and Callinan JJ. at p.405.
Submissions were also made on behalf of the plaintiff relevant to whether Ms McCready may be entitled to an equity of exoneration having regard to the fact that after Hilliard had transferred to her his share of Unit 801 she mortgaged the same to the plaintiff to secure the loan of $300,000 made by it to Hilliard. In particular counsel referred to Parsons and Parsons v McBain[10] in which it was held by the court (Black CJ and Kiefel and Finkelstein JJ.) that the doctrine of equity of exoneration is not limited to dealings between a husband and wife but had wider application. For reasons hereafter expressed it is not necessary in these proceedings to determined whether this doctrine has application to this case and if so what its affect would be on any contribution that Ms McCready may be required in the future to contribute to the fund to discharge any judgment that the plaintiff may recover against Hilliard on the case as advanced on behalf of the plaintiff.
[10][2001] FCA 376 (5 April 2001).
The second process which was raised by counsel on behalf of the plaintiff which he submitted may be available to the plaintiff to satisfy part of any judgment that it may seek to recover against Hilliard or to reduce any loss and damage that it may have suffered, as claimed in these proceedings, had as its foundation the submission that in the event of moneys allegedly misappropriated by Hilliard, and being the subject of these proceedings, being able to be traced through the accounts of the second defendant so as to provide moneys which contributed to the purchase of Unit 801 then in such circumstances the net proceeds of the sale of Unit 801 as held by Ms McCready would be subject to an equitable charge on principles enunciated in Re Diplock[11]. However, it was frankly conceded by counsel for the plaintiff that such process was “somewhat speculative”. Having regard to the evidence before the court on this application such a process, at this time, could be regarded as no more than merely speculative. This is particularly so when regard is had to the evidence of Warner and Ryan as previously referred to which was, that from their respective investigations, they had been unable to trace any of the moneys allegedly misappropriated by Hilliard into funds used for the purchase of Unit 801. It was further conceded by counsel for the plaintiff that at present there exists no evidence on which proceedings could be instituted by the plaintiff against Ms McCready. In such circumstances I put to one side this process as it provides no proper foundation for a Mareva order being made against Ms McCready in the circumstances of this case with respect to the net proceeds of the sale of Unit 801.
[11][1948] Ch. 465 at 524-5.
Although in the future in the event of the plaintiff in these proceeding recovering judgment against Hilliard circumstances may occur which by application of s. 120 of the Bankruptcy Act Ms McCready may be obliged to contribute to the funds or the property of Hilliard available to satisfy such judgment, it does not follow that a Mareva order should be made against Ms McCready with respect to the net proceeds of the sale of Unit 801. It is necessary to carefully weigh discretionary considerations before any such order is made. On 21 December 2000 it was ordered that by 10.15 am on 10 January 2001 Ms McCready should make, file and serve an affidavit relating to the ownership and beneficial interest of Unit 801. On 10 January 2001 Ms McCready swore an affidavit complying with such order and exhibiting to the same schedules which set out in detail the financial affairs and dealings of herself and Hilliard relevant to the proceedings. On the evidence before the court on this application I am not able to conclude that at any time relevant to the proceedings Ms McCready had planned to dissipate the property being the net proceeds of the sale of Unit 801 in such manner as to frustrate the process of the court. Further, on the evidence before the court in these proceedings I am unable to conclude that Ms McCready has planned to dissipate such portion of the net proceeds of the sale of Unit 801 as she may in the future be required to contribute or disgorge pursuant to proceedings brought under s. 120 of the Bankruptcy Act in the event of Hilliard becoming bankrupt in the future.
In evidence Ms McCready said that if the present Mareva order was discharged she would put the funds into her superannuation fund and purchasing a property in the country in which to live. I found that Ms McCready was a straightforward witness. I generally accept the evidence given by her in these proceedings. I am satisfied that when arrangements were being made for Hilliard to take advantage of the plaintiff’s portfolio services and to provide to Hilliard the sum of $500,000 so as to be able to take advantage of such services that Ms McCready was concerned to protect for her benefit an equality of assets as between herself and Hilliard. Notwithstanding that she and Hilliard have been partners together for some 16 years they have not married. Ms McCready has sought to maintain her independence financially and to that extent has sought to maintain an equal financial balance between herself and Hilliard. The transfer by Hilliard of his share in Unit 801 to Ms McCready while the property was to be mortgaged to the plaintiff to secure the loan of $300,000 provided by the plaintiff to Hilliard, provided to Ms McCready some continuing equality in the property which they had jointly owned and which had not at a time relevant to these proceedings been the subject to any charge or mortgage. The security provided to the plaintiff by the mortgage over Unit 801 owned solely by Ms McCready enabled the plaintiff to discharge the debt owed by Hilliard to it on his account. Any risk, that at present may exist, that if Ms McCready recovers the net proceeds of the sale of Unit 801, she may dissipate such funds in such a way as to frustrate the process of the court, is in my view very small indeed. From the evidence given by Ms McCready she appeared to me to be more concerned about securing her own future particularly by purchasing a house in which to live. If a Mareva order was to continue against Ms McCready with respect to half the net proceeds of the sale of Unit 801 it is likely that she would be prevented from doing that which she planned, that is to acquire a house in which to live and to reasonably support herself. From the time that the plaintiff provided a financial facility to Hilliard for $300,000, which was secured by a mortgage granted to the plaintiff over Unit 801, in circumstances that Hilliard transferred his interest in the unit to Ms McCready the plaintiff has known that Ms McCready sought to provide some independent security for herself in the future. From investigations to date it can not be shown that any money which may have been misappropriated by Hilliard found its way into the acquisition of Unit 801.
I am satisfied that at present there exists circumstances which may in the future lead to a serious question being tried, namely, whether, in respect of the net proceeds of the sale of Unit 801 recovered by Ms McCready, part of the same should be available to contribute to the funds or property of the estate of Hilliard from which any judgment that may be entered in the future in these proceedings against him may be satisfied. However, I am not satisfied that the proceeds of the sale of the property are likely to be dealt with by Ms McCready in such a manner as to frustrate the court’s process.
The conclusion that I have reached is that the discretion of the court to be exercised pursuant to s. 37 of the Supreme Court Act should not be exercised so as to continue the present Mareva order against Ms McCready as made on 19 February 2001 nor should any other Mareva order be made against her in like terms but for a sum equivalent to half of the net proceeds of the sale of Unit 801. Accordingly it is ordered that paragraph 3 of the orders made on 19 February 2001 in these proceedings be discharged.
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