Wise v Icons Worldwide Marketing Pty Ltd
[2000] FCA 1800
•8 DECEMBER 2000
FEDERAL COURT OF AUSTRALIA
Wise v Icons Worldwide Marketing Pty Ltd [2000] FCA 1800
PRACTICE AND PROCEDURE – Mareva order – whether real risk or danger of dissipation or disposal of proceeds of sale of property so that any judgment would be unsatisfied.
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 considered
Frigo v Culhaci (New South Wales Court of Appeal, Mason P, Sheller JA and Sheppard AJA, 17 July 1998, unreported) referred toMARGARET WISE and GARY RAWLYK (trading as AUSTRALIAN CANCER PREVENTION DIRECTORY) v ICONS WORLDWIDE and RAYMOND MARK SHALE
V 53 of 2000
GOLDBERG J
8 DECEMBER 2000
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 53 of 2000
BETWEEN:
MARGARET WISE and GARY RAWLYK
(trading as AUSTRALIAN CANCER PREVENTION DIRECTORY)
ApplicantsAND:
ICONS WORLDWIDE MARKETING PTY LTD
(ACN 085 288 348)
First RespondentRAYMOND MARK SHALE
Second RespondentJUDGE:
GOLDBERG J
DATE OF ORDER:
8 DECEMBER 2000
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1. The motion filed by the applicants on 21 November 2000 be dismissed.
2.The applicants pay the costs of the motion of the respondents and of Victoria Jean Shale and that such costs be paid forthwith pursuant to O 62 r 3(2) of the Federal Court Rules notwithstanding that the proceeding is not concluded.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V 53 of 2000
BETWEEN:
MARGARET WISE and GARY RAWLYK
(trading as AUSTRALIAN CANCER PREVENTION DIRECTORY)
ApplicantsAND:
ICONS WORLDWIDE MARKETING PTY LTD
(ACN 085 288 348)
First RespondentRAYMOND MARK SHALE
Second Respondent
JUDGE:
GOLDBERG J
DATE:
8 DECEMBER 2000
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
The applicants filed a notice of motion on 21 November 2000 seeking what is colloquially termed a “Mareva order” (or, as Kirby J preferred to describe it in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 412, an “asset preservation order”), restraining the respondents from disposing of their assets (except where the unencumbered value of such assets exceeds $1,700,000.00) until further order. The applicants also sought a Mareva order against the second respondent (“Mr Shale”) and his wife, Victoria Jean Shale, a non‑party to the proceeding, restraining them from selling, transferring, charging, mortgaging, disposing or dealing with the proceeds of sale of the property situated at 81 Halifax Street, Brighton, Victoria (“the property”) until further order. The applicants sought an order that Victoria Jean Shale be added as a respondent to the proceeding and that she and Mr Shale file an affidavit disclosing their assets. On the hearing of the motion, the applicants confined the relief sought to a restraint on the disposition of the proceeds of the sale of the property.
The principal proceeding relates to allegations against the first respondent Icons Worldwide Marketing Pty Ltd and Mr Shale, a director and officer of the first respondent, of breach of two agreements between the applicants and the first respondent and allegations of misleading and deceptive conduct and negligence in relation to those agreements. The applicants carry on the business known as the Australian Cancer Prevention Directory which is involved in raising awareness of cancer and risk‑factors associated with cancer. The business seeks to educate the community. The applicants proposed to publish a booklet about cancer and the reduction of the risk of contracting cancer and they negotiated with News Ltd to distribute it in August 1999. Under the agreements the first respondent agreed to provide certain licensing and marketing services to the applicants, which included obtaining sponsors and advertising for the booklet. The applicants allege that the respondents breached these agreements and that they were induced to enter into the agreements on the basis of representations which were false, as a result of which they have suffered loss and damage.
The applicants also allege that on 1 June 1999 they told the respondents that News Ltd had requested the applicants on 27 May 1999 to agree by 2 June 1999 to underwrite the distribution costs of the booklet. The respondents advised them that they should enter into this agreement if the program was to go ahead. The applicants say that the respondents omitted to tell them that the respondents had failed to obtain any sponsors or advertising (with one exception), and that it would be difficult to obtain sufficient sponsors and advertising to make the booklet viable, or to achieve sufficient revenue to meet the publication and distribution costs. The applicants allege that this omission was a contravention of s 52 of the Trade Practices Act 1974 (Cth) as a result of which they suffered loss and damage.
The applicants claim that Mr Shale was involved in the contraventions. In addition to printing costs of $386,092 for which they have been sued, the applicants have particularised and quantified their loss and damage in the sum of $1,714,400 representing loss of income from the failure of the first respondent to obtain sponsors and advertising for the booklet.
The genesis of the circumstances giving rise to the present application occurred on 1 November 2000 when the first applicant telephoned directory assistance and requested the telephone number of the first respondent. The operator informed the first applicant that there was no number listed.
On the same day, the first applicant drove past the property and saw an estate agent’s board at the front of the property advertising the auction of the property on 21 October 2000 with a “sold” sign on the board. The first applicant made enquiries at the office of the estate agent and was informed that the property had been sold at auction on 21 October for $719,500. The first applicant then drove to what she believed was the first respondent’s place of business, situated at 5/3 Male Street Brighton, and saw that the sign advertising the first respondent’s place of business had been removed from the premises.
A company search conducted by the applicants’ solicitors on 2 November 2000 disclosed that the principal place of business of the first respondent is at the property. A title search of the property conducted by the applicants’ solicitors on 3 November 2000 disclosed that Mr Shale is registered as a joint proprietor of the property with Victoria Jean Shale.
On 2 November 2000, the solicitors for the applicant wrote to the respondents’ solicitors by facsimile seeking an undertaking from Mr Shale by noon on 3 November that he would preserve his entitlement to the proceeds of the sale of the property. On 6 November the respondents’ solicitors replied saying that they had been unable to obtain instructions from Mr Shale within the time frame set. On the same day the applicants’ solicitors renewed their request that Mr Shale provide an undertaking not to disburse or dissipate his entitlement to the proceeds of the sale of the property.
On 13 November 2000, the solicitors for the respondents responded by facsimile disputing that there was any basis for an asset preservation order. They said that Mr Shale was prepared to disclose that, for personal reasons, he and his wife had elected to sell the property and they proposed to purchase a new home in the Mt Eliza area. They also said that Mr Shale was conducting the business of the first respondent from his home and that the primary telephone number for the business was a mobile telephone number. (No number is presently listed for the business in the White Pages telephone directory available on the internet). The respondents’ solicitors pointed out that the applicants had not advanced any evidence that there was a danger of default by the respondents if the judgment was adverse to them.
Mr Shale filed an affidavit in which he said that the property is the current family home of his wife and their three children. It was sold by public auction on 21 October 2000 in preparation for the family’s relocation to the Mornington Peninsula next year. Mr Shale said that early in 1999 he and his wife decided to move to the Mornington Peninsula as they thought it may offer a more wholesome lifestyle for their children through their teenage years. They looked for, and found, an appropriate school for their children on the Mornington Peninsula where their children were accepted. After the children were accepted at the school, the property was placed on the market.
Mr Shale said that the decision to sell the property had nothing to do with this proceeding, that the sale of the property was not concealed and that he and his wife have no intention of transferring any of their assets or the proceeds of sale of the house outside the jurisdiction, nor do they have any intention of leaving the jurisdiction. They are currently looking to purchase a suitable family home on the Mornington Peninsula. They had intended to bid for a house being auctioned on 25 November 2000, but because of holding orders made by the Court on 24 November 2000 they did not attend the auction. They will continue to look for a family home on the Mornington Peninsula. This evidence was not challenged.
The applicants submitted that they had a good cause of action in respect of which they had realistic prospects of success. Further, the evidence demonstrated that there was a real risk, which was not merely fanciful, that the proceeds of sale of the property might be disposed of and that any judgment obtained against the respondents might not be satisfied.
The applicants relied on the following circumstances to support their claim that there was a real risk that the proceeds of sale of the property would be dissipated:
·the sale of the property;
·the solicitors for the respondents in the proceeding were not the solicitors acting for Mr Shale and Mrs Shale as vendors of the property who also had a different solicitor acting for them when they purchased the property;
·there is no evidence that the first respondent is still carrying on business other than Mr Shale’s assertion that it is;
·the absence of a telephone entry in the White Pages telephone directory available on the internet for the first respondent suggests that it is not carrying on its business;
·there was a delay in the respondents’ solicitors responding to the letter of 2 November 2000 from the respondents’ solicitors and the respondents’ solicitors had difficulty in obtaining instructions from Mr Shale;
·the proceeding had been referred to mediation, but there had been a delay by the respondents in bringing on the mediation;
·the respondents had made an objection to the applicants’ discovery after the respondents had consented to an order for mediation. The applicants submitted that I should infer that the respondents’ solicitors had been given instructions not to have the proceeding set down for hearing if the mediation failed;
·Mr Shale and Mrs Shale had not said that they intended to purchase the new property in joint names.
The respondents submitted that the applicants’ statement of claim did not reveal a strong prima facie case, and that there was no evidence to support the applicants’ apprehension or fear that Mr Shale and Mrs Shale would dissipate the proceeds of sale of the property, so as to render any judgment obtained against the respondents ineffective.
The respondents submitted that the applicants’ case in the principal proceeding was not strong for a number of reasons. They referred to the provision in the agreement dated 23 March 1999 (cl 8.1) whereby the applicants acknowledged that they had not been induced to enter into the agreement by any representation or warranty not contained in the written agreement. They also pointed to the fact that part of the claim of contraventions of s 52 of the Trade Practices Act was based on an omission to tell the applicants on 1 June 1999 that they did not have any sponsors or advertising. They submitted that this case was weak because it was not suggested that the applicants had made any enquiry of the respondents as to how they were progressing in relation to obtaining sponsors and advertising. The respondents contended that the applicants’ case was not a good arguable case, but rather lay somewhere between being hopeless and having a rough chance of success. They pointed to the ultimatum given by News Ltd on or about 27 May 1999 and submitted that there was no nexus between the alleged omission by the respondents to provide information to the applicants and the inducement to enter into the underwriting agreement with News Ltd.
Having regard to the conclusion I have reached in relation to whether the material before me discloses a sufficient basis for granting a Mareva order, it is not necessary to form any view on the strength of the applicants’ case in the principal proceeding. For present purposes I am prepared to accept that the applicants have a good arguable case against the respondents.
The jurisdiction of the Federal Court to grant relief in the nature of a Mareva order and to extend the order to non‑parties is now unquestioned and the doctrinal basis for the jurisdiction is identified and analysed in considerable detail by the High Court in Cardile v LED Builders Pty Ltd (supra). The doctrinal basis is grounded in the power of the Court to prevent frustration of its process and to ensure the effective exercise of the Court’s jurisdiction: Cardile v LED Builders Pty Ltd (supra) at 399‑401; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 32‑33; cfMercedes Benz A G v Leiduck [1996] AC 284 at 299‑301.
I do not consider that the evidence is such as to warrant an order restraining Mr Shale and Mrs Shale from dealing with the proceeds of the sale of the property. It is important to remember the observation of the majority of the High Court (Gaudron, McHugh, Gummow and Callinan JJ) in Cardile v LED Builders Pty Ltd (supra) at 403:
“… 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 a court invited to make an order of that kind. An order lightly or wrongly granted may have a capacity to impair or restrict commerce just as much as one appropriately granted may facilitate and ensure its due conduct.”
Their Honours agreed with the tenor of what was said by the New South Wales Court of Appeal in Frigo v Culhaci (New South Wales Court of Appeal, Mason P, Sheller JA and Sheppard AJA, 17 July 1998, unreported):
“A mareva injunction … is a drastic remedy which should not be granted lightly.”
I am not satisfied that there is a danger that Mr Shale and Mrs Shale will dispose of or dissipate the proceeds of sale of the property so that any judgment obtained by the applicants against the respondents will be unsatisfied. I do not accept the applicants’ submission that the circumstances relied upon by the applicants give rise to a reasonable suspicion that the respondents have been delaying the progress of the principal proceeding in order for Mr Shale to reorganise his assets so that any trial date would be after the settlement of the sale of the property. Although there have been delays at various times on the part of the respondents in progressing the proceeding, those delays have not been inordinate. The mediation was conducted, albeit unsuccessfully, on 31 October 2000. Taken alone, these matters do not give rise a suspicion of the nature claimed by the applicants.
The circumstances which arose in early November 2000 were such as to give rise to a concern by the applicants that the respondents might be taking steps either to sell up their assets and leave the jurisdiction or to place their assets beyond the reach of their creditors. The combination of:
·the absence of a listing in the White Pages telephone directory on the internet of a telephone number for the first respondent,
·the sale of the property, being Mr and Mrs Shale’s residence,
·the closure of the first respondent’s office at 5/3 Male Street, Brighton,
·the company search showing that the principal place of business of the first respondent was at the property,
·the delay in the respondents’ solicitors obtaining instructions as to why Mr and Mrs Shale had sold the property,
·the respondents’ refusal to provide the undertaking sought by the applicants, and
·the failure by Mr and Mrs Shale to state that they would purchase any new home in joint names,
was such as to give rise to a suspicion that the first respondent and Mr and Mrs Shale might be intending to leave the jurisdiction, or taking steps to ensure that any judgment obtained against the respondents in the proceeding would not be satisfied.
An explanation has been given by Mr Shale as to why the sale of the property occurred and why the office at 5/3 Male Street, Brighton was closed down. That explanation has not been challenged by the applicants. The sale of the property was not a clandestine sale, but rather a sale by open public auction. I draw no inference adverse to Mr and Mrs Shale from the fact that they retained different solicitors on the sale to the solicitors acting for the respondents in the proceeding. Mr Shale’s explanation for the sale and his proposal to relocate his family home to the Mornington Peninsula has not been challenged.
Mr Shale filed two affidavits. In his first affidavit he did not state specifically that it was the intention of his wife and himself to purchase the property for which they were looking in joint names. I was prepared to infer that that was their intention from the contents of the affidavit and, in particular, the statement:
“We did not conceal the sale of the house and have no intention to transfer any of our assets or the proceeds of sale from the house outside of Australia, indeed outside of the jurisdiction of Victoria. We also have no intention to move to another State or outside of Victoria. We are currently looking to purchase a suitable family home on the Peninsula.”
This issue was made clear in Mr Shale’s second affidavit in which he said:
“7.The present intention of my wife and myself is to purchase a property in our joint names on the Peninsula. Since the house was sold we have had discussion with various real estate agents with offices on the Peninsula about purchasing a house including: Stockdale & Leggo; Noel Jones; Crowders; David Rew; TJ Sparks and Warlimont & Nutt.
8.We have actively been looking for a house on the Peninsula since our property sold. Another property comes up for auction this Saturday at which we are very keen to bid.”
I am satisfied that Mr Shale and Mrs Shale intend to purchase their proposed home in joint names. Although they have not offered an undertaking to do so, I am not satisfied that there is a danger that they will dispose of or dissipate the proceeds of the sale of the property. In cross‑examination Mr Shale was not prepared to undertake to use all the proceeds of the sale of the property in purchasing the new property because he did not know the price for which they would purchase the new property, although the range of prices of properties in which he was interested on the Mornington Peninsula was less than the sale price of the property. He wanted to retain the ability to deal with his own funds. I am not prepared to infer from Mr Shale’s unwillingness to give this undertaking that there is a risk that his assets will be placed beyond the reach of his creditors so that a judgment against him in the proceeding will remain unsatisfied. It is not unreasonable for Mr Shale to want to retain some flexibility with the sale proceeds of the property pending purchasing another family home.
Although Mr Shale was cross‑examined I was not invited by the applicants to disbelieve his evidence, nor was any attack made on his credibility. I accept his evidence in his second affidavit:
“… I have absolutely no intention of dissipating any of the proceeds of sale from the house or my other assets to avoid a judgment against me”.
He repeated in cross‑examination that he would not deal with his funds so as to avoid any judgment against him being unsatisfied. The applicants did not submit that I should not accept this evidence.
There was evidence from which it is open to me to infer that the first respondent has ceased carrying on business. I refer, in particular, to the closing down of the office of 5/3 Male Street Brighton and the absence of a telephone listing for the business in the White Pages on the internet. Again, these matters were explained by Mr Shale. He said that he is self‑employed as a strategic marketer and specialises in design strategies for products and people. Most of his business is referred by word of mouth and he does not require business premises as he normally has luncheon meetings or visits clients at their premises. Although he had occupied a serviced office at Moorabbin, he had leased the premises in Male Street, Brighton for the purpose of undertaking a particular project involving setting up a direct mail loyalty program for sporting personalities. He wanted that office to present differently from the presentation of the Moorabbin office and although there was some overlap in the use of the offices, he had changed his office from Moorabbin to Brighton. The project was not successful and he gave up the lease of the office and has since focused on the entertainment industry and works from his home. He uses his mobile phone and home telephone for his business but it has never occurred to him to record his mobile phone number in the telephone directory as his business comes through word of mouth.
The applicants submitted that there was no evidence as to the proportions in which Mr Shale and Mrs Shale intended to purchase another family home. Having regard to Mr Shale’s evidence I consider this matter of no consequence. He has sworn that he will not deal with his assets to avoid satisfaction of a judgment against him and, as I have already found, I accept that evidence which was not challenged.
Mr Shale’s evidence supports the conclusion I have reached that there is not a real risk that any judgment for the applicants will remain unsatisfied if no restraint is placed upon Mr Shale and Mrs Shale from dealing with the proceeds of the sale of the property. I am not satisfied that Mr Shale is seeking to put his assets out of reach of any potential creditor, nor am I satisfied that the sale of the property will have that effect.
It therefore becomes unnecessary to consider whether Mrs Shale should be joined as a party in the proceeding and whether an order should be made against her in respect of her interest in the property. The High Court made it clear in Cardile v LED Builders Pty Ltd (supra) at 405 that a Mareva order may be made against a third party, not a party to a principal proceeding, where, assuming the existence of other relevant criteria, the third party has a power of disposition over relevant assets of the potential judgment debtor.
It is also unnecessary to consider the respondents’ submission that no order should be made as any undertaking as to damages proffered by the applicants would be worthless, having regard to the assets of the applicants.
In the course of the hearing the applicants made an open offer to Mrs Shale that they would not seek any orders against her, and that they would have no objection to her being entitled to retain and deal with one half of the net proceeds of the sale of the property upon Mrs Shale undertaking:
·to abandon any entitlement to the balance of the net proceeds, unless Mr Shale died; and
·to acknowledge that Mr Shale is entitled to the whole of the balance of the net proceeds of sale.
Mrs Shale was not prepared to accept the offer or give the undertakings sought. The offer is not a matter relevant to the determination of whether the applicants have made out grounds for the making of a Mareva order. It is not for the Court to rule upon the reasonableness or otherwise of an offer made by the applicants to resolve the issues between Mrs Shale and themselves. The open offer and its rejection were not relevant to the determination of the issue of whether there is a danger that Mr Shale and Mrs Shale will dispose of, or dissipate, the proceeds of sale of the property so that any judgment obtained by the applicants against the respondents would be unsatisfied. The open offer may have become relevant if I had concluded that a Mareva order should be made against Mr Shale and Mrs Shale as it may have played a part in determining the manner in which an appropriate Mareva order should be fashioned, having regard to the fact that a non‑party to the proceeding was involved. That issue does not arise as a result of the conclusion I have reached.
The applicants’ motion filed 21 November 2000 will be dismissed. I will hear the parties as to the costs of the motion.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. Associate:
Dated: 8 December 2000
Counsel for the Applicant: Mr M A Strang Solicitor for the Applicant: Aitken, Walker & Strachan Counsel for the Respondent: Ms C Kenny Solicitor for the Respondent: Corrs Chambers Westgarth Counsel for Victoria Jean Shale: Ms C Kenny Solicitor for Victoria Jean Shale: Deacons Date of Hearing: 4 and 7 December 2000 Date of Judgment: 8 December 2000
1
0