Wily v O'Brien
[2006] FMCA 941
•4 July 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WILY v O'BRIEN | [2006] FMCA 941 |
| BANKRUPTCY – Where applicant seeks substantive relief under s.120 of the Bankruptcy Act 1966 (Cth) – interlocutory injunction – requirements for Mareva-type order to be made against a party to an action – where applicant seeks liberty to impose a caveat on the title of property of the respondent. |
| Bankruptcy Act 1966, ss.30, 120, 139ZQ, 139ZR |
| Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 Donnelly v Porteous [2001] FCA 345 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [No3] (1998) 72 ALJR 873 Clout v Anscor Pty Ltd [2000] FCA 727 Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49 Pearce v Waterhouse [1986] VR 603 |
| Applicant: | ANDREW HUGH JENNER WILY |
| Respondent: | CHRISTINE MAY O'BRIEN |
| File Number: | SYG1364 of 2006 |
| Judgment of: | Barnes FM |
| Hearing date: | 27 June 2006 |
| Delivered at: | Sydney |
| Delivered on: | 4 July 2006 |
REPRESENTATION
| Solicitors for the Applicant: | Bizannes & Associates |
| Solicitors for the Respondent: | Bowles Lawyers |
ORDERS
The application for interim orders is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG1364 of 2006
| ANDREW HUGH JENNER WILY |
Applicant
And
| CHRISTINE MAY O'BRIEN (FORMERLY KEYES) |
Respondent
REASONS FOR JUDGMENT
On 8 October 2004 Anthony Joseph Twomey was made bankrupt upon the acceptance of his debtor’s petition. Andrew Hugh Jenner Wily, the applicant in these proceedings, was appointed as trustee of his bankrupt estate.
On 11 May 2006 the trustee filed an application pursuant to s.120 of the Bankruptcy Act 1966 (Cth) (the Act) seeking declarations that a transaction between the bankrupt and the respondent in these proceedings, Christine May O’Brien (formerly Keyes), dated
28 November 2002 involving property at 7 Dublane Court, Narangba, Queensland (the “Queensland property”) was void against the applicant; that the applicant as trustee of the bankrupt estate of Mr Twomey was entitled to the proceeds of sale of the Queensland property sold 18 November 2003 and received by the respondent; and that the applicant was entitled to an equitable charge on the property jointly owned by the respondent and Dean Andrew O’Brien at
33 Terrance Avenue, Albury, New South Wales (the “Albury property”) as well as an order that the respondent pay to the applicant the sum of $165,000 together with interest from 18 November 2003 to the date of judgment and costs.
In addition the applicant sought interim orders: either an order restraining the respondent from disposing of her interest in the Albury property pending finalisation of the suit or, in the alternative, an order that the applicant be at liberty to impose a caveat on the title of the Albury property co-owned by the respondent. These proceedings concern the application for interim orders.
Relevantly, in an affidavit sworn on 10 May 2006 the trustee contends that a transaction between Mr Twomey and Ms O’Brien relating to the Queensland property acquired by Mr Twomey on 22 November 2000 for $123,000 falls within s.120 of the Act. The Queensland property was transferred to Ms O’Brien on 28 November 2002 for a nominated price of $133,000. It is claimed that the bankrupt received nil moneys. On 18 November 2003 Ms O’Brien sold the property for $275,000. It is said that she realised a net profit of $165,000, none of which was ever paid to the bankrupt. Thereafter Ms O’Brien and Mr O’Brien purchased a property in Golflinks Terrace, Albury subject to a mortgage to a building society. Moneys realised from the sale of the Queensland property were said to be applied towards the mortgage. That property was sold and Mr and Ms O’Brien purchased the Albury property as joint tenants subject to a mortgage to Hume Building Society Limited.
The trustee seeks first to restrain the respondent on an interim basis from disposing of her interest in the Albury property pending finalisation of the s.120 proceedings. It was contended for the trustee that there was, arguably, a void transaction, that the respondent (who had been the subject of an examination) was aware of the allegation that she did not pay the bankrupt any part of the moneys received in relation to the Queensland property and that the transaction in issue took place within the two year period prior to the bankruptcy. On that basis it was contended that the interim order sought should be granted as a “holding operation” to preserve the assets pending resolution of the s.120 application. It was pointed out that the Albury property was a significant asset held in the joint names of the respondent and her husband. It was submitted that the balance of convenience favoured the grant of an injunction, as it was more appropriate that the trustee have the security of a caveat or a restraint. The solicitor for the trustee indicated that his client was prepared to give an undertaking as to damages.
Mr Bowles for the respondent characterised the order sought as in the nature of a Mareva order, referring to the principles considered in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 and Donnelly v Porteous [2001] FCA 345. It was not disputed that the applicant had an arguable case in the action based on s.120 of the Bankruptcy Act 1966. However in relation to the first order sought it was contended that the applicant had not established that there was a real risk of dissipation or removal from the jurisdiction of the relevant assets or that the balance of convenience required that such an order be made. It was submitted that, apart from a claim that the order would provide comfort to the trustee as security or a “holding operation”, the issue of risk had not been addressed by the applicant and that there was no evidence before the Court of any risk, real or otherwise, that the respondent intended to dissipate her assets or remove them from the jurisdiction. It was pointed out that if the respondent had been inclined to engage in such action she had had ample opportunity to do so, having been examined in December 2005 and put on notice as regards the claim by the trustee. It was contended that, on the contrary, the respondent had at all times made herself available to accept service and comply with legal documentation and to produce documents to the trustee. It was also pointed out that the transcript of the examination annexed to the affidavit of the applicant sworn on 10 May 2006 disclosed that the respondent was married with a young child. It was contended that she had strong connections to her home and to the jurisdiction. Further, despite the concession for the purposes of the application for interim orders that the trustee had an arguable case, the trustee’s claim would be contested at the final hearing.
On this basis it was contended that this was not a case in which it was appropriate to grant an interim injunction of the nature sought, as there was no evidence before the Court as to a risk such as to warrant the making of the order. Moreover it was contended that there would be some embarrassment and possible ramifications for the respondent with the mortgagee of the Albury property if the orders sought (in particular the order in relation to a caveat) were made. The main reason advanced by the trustee, that such orders would provide some comfort, was said to be insufficient to establish that the balance of convenience favoured the grant of the order sought.
In Cardile a distinction was drawn between injunctions sought against parties and those sought against non-parties (see Gaudron, McHugh, Gummow and Callinan JJ at [27] – [44]). Unlike the situation in Cardile, this is a case in which relief is sought against a party. Where a Mareva-type order is sought against a party to the proceedings against whom final relief is sought “the focus is the frustration of the Court’s process” (see Cardile at [42] referring to Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [No 3] (1998) 72 ALJR 873 at 885 per Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ at [64] and Clout v Anscor Pty Ltd [2000] FCA 727).
It is clear that a Mareva-type order should not be made lightly (Donnelly v Porteous at [8]). I accept (as was accepted by Stone J in Donnelly v Porteous at [9] and see Drummond J in Clout v Anscor Pty Ltd [2000] FCA 727 at [6]) that for a Mareva-type order to be made against a party to an action the applicant must show first that he has an arguable case that he will obtain a judgment against the party (referred to in Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49 at 49 as “good arguable case” and in Pearce v Waterhouse [1986] VR 603 at 605 as a “sufficiently realistic prospect of success in the proceedings”. Secondly, as Stone J suggested in Donnelly v Porteous at [9] the applicant must show “that refusing the order would involve a real risk that a judgment or award in his favour would remain unsatisfied because of the concealment or dissipation of assets” by the respondent. In Clout v Anscor Drummond J expressed this as a requirement that the applicant “must demonstrate by evidence that there is a real risk that, unless restrained, the respondent will deal with its assets so as to frustrate enforcement of that judgment” (at [6]). Further, the applicant must show that the balance of convenience requires that such an order be made: Pearce v Waterhouse at 607. Moreover, as Drummond J stated in Clout v Anscor at [6], in granting any interlocutory relief, including a Mareva order, the Court “should generally grant the minimum relief necessary to do justice between the parties”.
On the basis of the evidence presently before me I am not satisfied that this is a case in which I should make an interlocutory order restraining the respondent from disposing of her interest in the Albury property pending finalisation of the suit as sought by the applicant. While it is conceded that the applicant has an arguable case in the s.120 proceedings, it has not been established that refusing the order would involve a real risk that a judgment in favour of the trustee would remain unsatisfied because of concealment or dissipation of assets by the respondent or that unless restrained she would deal with the Albury property (or any proceeds) so as to frustrate enforcement of such a judgment. This is not a case in which there is any evidence before the Court as to any such intention on the part of the respondent, despite the fact that she participated in an examination in December 2005. This can be contrasted with the “inconstancy of intention” said to have been exhibited during the examination of the respondent in Donnelly v Porteous (at [18]) which led the Federal Court to accept, on the evidence before it, that there was a strong possibility that the respondent in that case may deal with the properties in question in a manner inconsistent with preserving the assets, or their proceeds, in a form accessible to the trustee.
Nor is there any evidence of any action taken by the respondent to impede the trustee in obtaining satisfaction of any such judgment. There is no evidence before the Court of any dissipation of assets by the applicant or of any conduct by or on her behalf such as to raise concerns that the assets represented by the Albury property would be dissipated or that there would be concealment by the respondent so that there would be a real risk that a judgment in favour of the trustee in the substantive proceedings would remain unsatisfied. (cf Clout v Anscor where there was evidence before the Court as to a course of conduct by the respondent). The claims about the nature of the transaction between Mr Twomey (the bankrupt) and Ms O’Brien and the subsequent property transactions are not such as to establish, either alone or in combination with the other evidence before me, that there is a real risk that unless the relief sought is granted the respondent will act to ensure that the Albury property will not remain available to the trustee to satisfy any judgment he may obtain in the proceedings.
In all the circumstances I am not persuaded that the balance of convenience lies in the making of the orders sought in order to provide security to the trustee. I note in this respect that the respondent owns the property in question as joint tenant with Mr O’Brien.
The alternative interim order sought by the applicant is expressed as an order that the applicant “be at liberty to impose a caveat on the title of the property co-owned by the respondent” at Albury.
However the solicitor for the applicant has not established that the Court has power to make such an order. Initially reference was made to the powers of the Official Receiver under s.139ZQ and 139ZR of the Bankruptcy Act 1966. It was subsequently conceded by the solicitor for the trustee that these provisions “did not quite fit” as the trustee in question was not the Official Receiver. No other basis on which this Court could make such an order was put before the Court. There was no suggestion for the applicant that the general power in s.30 of the Act would provide a basis for such an order. For the respondent it was submitted that no caveatable interest arose and that lodgement of a caveat may have serious consequences for the respondent in relation to her mortgage, but that in any event there were no provisions in the Bankruptcy Act to provide a basis for the making of such an order. It has not been established that the Court can or should make the alternative order sought on an interim basis.
Accordingly the application should be dismissed. I will hear submissions in relation to costs.
I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Barnes FM
Associate:
Date: 4 July 2006
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