Aughey v Poynter

Judgment 1HIS HONOUR: This is an application for a freezing order in aid of execution of a judgment given in the Local Court at Tamworth on 13 June 2013. The plaintiff also seeks an order for discovery of assets. 2It appears from the reasons of judgment given in the Local Court (proceedings 2012/00155081) that in that Court, the plaintiff claimed the sum of $23,873 said to be owing by the first defendant or, alternatively, a company called The Australian Touring Theatre Company Pty Ltd, in respect of the presentation of a play for which the plaintiff claimed he had the copyright. He claimed the defendant promised to make payments when the play was presented by the defendant. The plaintiff also claimed money for services he performed as an actor. 3The learned Magistrate found that the plaintiff was entitled to a sum of $8,007 consisting of royalties, a spotter's fee, a balance due for acting fees and other moneys payable for acting fees, a meal allowance and repayment of unpaid expenses. 4The orders entered in the proceedings were: "1. Verdict for the Plaintiff against the First Defendant in the sum of $8007.00. 2. The First Defendant is to pay interest on $1000.00 due as an advance against royalties from 17 May 2011 (less credit in respect of interest on any amount in fact paid on account of royalties). 3. Interest on judgment debt. 4. Costs reserved." 5The application for a freezing order made to this Court arises from the fact that two days after judgment was given in the Local Court, the plaintiff instructed his solicitor, Mr Griffin, of Morgan Ardino & Co, that he had observed that the defendant's house had been put up for sale, and there was a "For Sale" sign outside the front of the house. 6The evidence of the defendant is that contracts for the sale of his house were exchanged on or about 24 or 25 June 2013, that the contracts provide for an eight-week settlement period, and the date for completion may be brought forward to 13 August 2012. 7There is no evidence to suggest that the sale is otherwise than an arm's length sale at a proper price. It appears to have been advertised and the defendant engaged a real estate agent in the transaction. 8The plaintiff, through his solicitor, Mr Griffin, relies on a number of other matters to justify the claim for a freezing order. 9Mr Griffin deposes that, on 19 June 2013, the plaintiff made an offer to accept what Mr Griffin called "a discount on costs" if the defendant agreed to a calculation of interest and to further amounts of interest on other components of the claim. He said that for three weeks he had not received a response to that proposal. 10Next, it is said that on the defendant's own evidence he is impecunious. The defendant deposed: "I currently do not have sufficient funds to pay the judgment debt. I understand that it is open to me to make an application to pay the judgment debt by instalments. I will consider making such an application once the costs issue has been resolved." 11The defendant also deposed that: "I ... reserve the right to appeal the finding in the Local Court and any outcome of the costs hearing on August 12, 2013." 12Mr Griffin submitted that this showed that the defendant will resist execution of the judgment and what he says is the likely costs order that will be made on 12 August against the defendant. 13Next, the plaintiff relies upon the defendant's evidence that he took an overseas trip to Croatia and Indonesia for three weeks between 21 June and 13 July 2013. This, it is said, shows a willingness on the part of the defendant to deal with his assets in a way which is likely to have the effect of defeating the judgment. 14Mr Griffin also made a submission in his affidavit and in his oral submissions to me that in his defence of the civil proceedings in the Local Court, the defendant attempted to use a "corporate structure" to attempt a fraud against the plaintiff. 15The plaintiff invokes what is said to be the inherent jurisdiction of the Court to make what is now called a freezing order, a jurisdiction that it is said is preserved by r 25.14(6) of the Uniform Civil Procedure Rules 2005 and by r 25.11. Alternatively, he relies upon r 25.14. That rule relevantly provides: "25.14 Order against judgment debtor or prospective judgment debtor or third party (cf Federal Court Rules Order 25A, rule 5) (1) This rule applies if: (a) judgment has been given in favour of an applicant by: (i) the court, or (ii) in the case of a judgment to which subrule (2) applies-another court, or (b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in: (i) the court, or (ii) in the case of a cause of action to which subrule (3) applies-another court. (2) This subrule applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the court. (3) This subrule applies to a cause of action if: (a) there is a sufficient prospect that the other court will give judgment in favour of the applicant, and (b) there is a sufficient prospect that the judgment will be registered in or enforced by the court. (4) The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur: (a) the judgment debtor, prospective judgment debtor or another person absconds, (b) the assets of the judgment debtor, prospective judgment debtor or another person are: (i) removed from Australia or from a place inside or outside Australia, or (ii) disposed of, dealt with or diminished in value. ... (6) Nothing in this rule affects the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so." 16The plaintiff argues that r 25.14(1)(a) and (2) is engaged because he says that the judgment in the Local Court could be enforced in this Court on an application to punish the defendant for contempt if he fails to comply with an order for the payment of money. 17The defendant submits that this Court lacks jurisdiction to grant the relief sought because the inherent jurisdiction sought to be invoked by the plaintiff is a jurisdiction to protect the integrity of the Court's process. This includes the efficacy of execution available to a judgment creditor. But, it is said, the Local Court has the same inherent jurisdiction to protect the integrity of its processes as is sought to be engaged in these proceedings and, accordingly, it is not necessary for the Supreme Court to exercise a like jurisdiction for the administration of justice in this State (Supreme Court Act 1970, s 23). 18Alternatively, the defendant submits that the Court in its discretion should decline to exercise the jurisdiction, it being a matter which could and should be dealt with in the Local Court. The defendant submits that, in any event, the application should fail on its merits because there is no evidence from which it could be inferred that the defendant has dealt with his assets, or proposes to deal with his assets, either for the purpose or in a way which would have the effect of diminishing the assets against which execution could be levied. 19The defendant points to the fact that the plaintiff has the remedies available to a judgment creditor and that it is not the purpose of a freezing order to provide the judgment creditor with security for a judgment debt in advance of execution. 20Mr Griffin submits that the Local Court does not have jurisdiction to make the freezing orders sought in this application. 21I accept the submission of counsel for the defendant that the Local Court, being an inferior court of record, has an implied power to prevent an abuse of its process and to do that which is necessary for the exercise of the Court's jurisdiction. This includes the making of orders that would protect the integrity of the Court's processes, including the efficacy of execution available to a judgment creditor (Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [26]-[27], [42] and [79]; Pelechowski v The Registrar, Court of Appeal (NSW) (1999) 198 CLR 435 at [50]-[52]; and Tagget v Sexton [2009] NSWCA 91; (2009) 255 ALR 522 at [150] and [65]). 22Moreover, the Local Court has power under r 25.14 to make a freezing order against a judgment debtor under a judgment given by that Court in proceedings in its General Division, as distinct from in proceedings in its Small Claims Division (Uniform Civil Procedure Rules, r 1.5 and sch 1). 23Mr Griffin argued that the Local Court did not have such jurisdiction because it did not have general equitable jurisdiction or statutory power to issue injunctions. However, the jurisdiction sought to be exercised stands on different principles. He also submitted that the Local Court did not have jurisdiction under r 25.14 because: "As indicated by the subhearing [sic] to that rule [viz. r 25.14] '(cf Federal Court Rules Order 25A rule 1)' which, the plaintiff submits, should be construed to mean that only courts with an equivalent jurisdiction to the Federal Court have jurisdiction to make the orders provided." 24That is a misconstruction of the rules. The expression "cf" simply means compare (coming from the Latin "confer"). The purpose of the heading is to direct readers' attention by way of comparison to the equivalent rule in the Federal Court. That part of the heading does not affect the application of the rule in accordance with r 1.5 and sch 1. 25It does not follow that because the Local Court has jurisdiction to make the orders which are sought in this case that this Court would also not have jurisdiction in an appropriate case to make a freezing order to protect the integrity of the Local Court processes. 26There is a question though whether the Court should exercise the jurisdiction which in my view is conferred by s 23 of the Supreme Court Act, unless the circumstances are such that they come within r 25.14. If the case does come within r 25.14, then I think the Court should exercise the jurisdiction conferred on this Court by that rule so as to avoid the parties being put to delay and further expense by the same application having to be run a second time in the Local Court. That is not to say that applications such as this to this Court should be encouraged when the matters are within the jurisdiction of the inferior court. 27This Court would have jurisdiction under r 25.14 if the judgment in the Local Court is one for which there is "a sufficient prospect that the judgment will be ... enforced by the Court". 28Mr Griffin submitted that the judgment could be enforced by the Court on an application to punish the defendant for contempt if the judgment is unsatisfied. He referred to Mahaffy v Mahaffy [2013] NSWSC 245 where Garling J found that wilful disobedience of a money order of a court could constitute a contempt. Such proceedings for contempt would be commenced in this Court pursuant to Pt 55, r 6(2) of the Supreme Court Rules 1970. 29I accept that a contempt application can be a mode of enforcement of a judgment which conceptually is capable of coming within r 25.14(2). 30In this case I am not satisfied that there is "a sufficient prospect" that the judgment "will be" enforced in this court pursuant to any such application. There is simply no evidence that the defendant is likely wilfully to disobey an order for the payment of money so as to provide a basis for any such charge. Indeed on 29 July 2013 the defendant, through his solicitor, advised Mr Griffin that he was willing to put aside in his solicitor's trust account an amount representing the judgment debt of $8,176.10 from the sale of his residential property to ensure that there are sufficient funds for the payment of the judgment debt. That offer has not been taken up. 31Because I do not think that r 25.14(2) is engaged and because the application is one which the Local Court would have jurisdiction to deal with, I think I should decline to exercise the jurisdiction sought to be invoked. 32It is right to say, however, that had I taken a different view, the application would nonetheless have failed. 33The relevant principles in relation to the making of a freezing order have been discussed in a number of cases. It is sufficient to adopt what was said by Brereton J in Finn v Carelli [2007] NSWSC 261 at [2]-[5], namely: "[2] On an application for a freezing order, which now seems to be the fashionable term for an asset preservation order or a Mareva order, as a general rule an applicant has to establish, first, a prima facie cause of action against the respondent, and secondly, a danger that by reason of the respondent absconding or of assets being removed from the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the applicant, if ultimately successful, will not be able to have a judgment in its favour satisfied. Ordinarily there must be evidence of at least a more than usual danger of assets being removed or dissipated [Frigo v Culhaci NSWCA, 17 July 1998 unreported, BC9803225, although doubt as to the utility of that test was expressed by Gleeson CJ in Patterson v BTR Engineering (Australia) Ltd (1989) 18 NSWLR 319 at 321-322]. [3] The jurisdiction is now also contained in the rules of Court [see Uniform Civil Procedure Rules 2005(NSW), r 25.14]. I do not take the Rule to express any different test or contain any different requirement from those which have been described for an asset preservation order at general law. [4] It is not necessary for an applicant to show that the respondent has a positive intention of evading a judgment, and it is sufficient to show that the course on which the respondent proposes to embark is, objectively speaking, calculated to have that effect. But as the Court of Appeal made clear in Frigo v Culhaci, an applicant must establish, by evidence and not mere assertion, that there is a real danger that by reason of the respondent absconding or otherwise dealing with assets, the applicant will not be able to have its judgment satisfied. While acknowledging that there has been much debate as to the precise degree to which that has to be shown, the Court emphasised that mere assertion that the defendant was likely to put assets beyond the plaintiff's reach was inadequate, for which the Court cited Ninemia Maritime Corp v Trave GmbH & Co Kg (The Niedersachsen) [1984] 1 All ER 398, as well as Patterson v BTR Engineering. [5] It is important to bear in mind that the jurisdiction to make orders of this type was never intended simply to enable a plaintiff or judgment debtor to obtain security for its judgment in advance of execution, but was firmly founded on the jurisdiction of the Court to prevent abuses of its process by preventing a defendant or judgment debtor from embarking on a course of conduct which would have the effect of defeating the Court's jurisdiction. It also needs to be borne in mind that the mere fact that a judgment may not be satisfied for reasons of impecuniosity does not mean that there is an abuse of process. Indeed, it has been pointed out on several occasions that the prospect of impending insolvency is not a reason to grant a Mareva injunction [Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 at 558]." 34Here there is no evidence of a danger that the defendant will so deal with his assets as to diminish the assets which will be available for satisfaction of the judgment and any costs order. 35As I have said there is no evidence that there is any impropriety in relation to the listing of the defendant's property for sale. Mr Griffin submitted that there was a serious risk that the defendant was selling his property in order to conceal the funds he obtained from the sale or shift it to other persons to deprive the plaintiff of the fruits of his judgment. That is mere assertion for which there is not a shred of evidence. 36Mr Griffin sought to support the assertion by contending that the defendant and his solicitor had "refused to reply" to the plaintiff's offer of 19 June 2013 despite what he said was the Local Court's "directions" that the parties attempt to resolve outstanding issues by agreement. The Court made no such direction, although the learned Magistrate did say that she expected that the parties would attempt to reach agreement on any outstanding matters. More significantly, the defendant did not refuse to respond to the plaintiff's correspondence of 19 June 2013. The defendant was overseas for three weeks and not in contact with his solicitor and the defendant's solicitor knew of that matter and did not attempt to obtain instructions because he could not do so. 37Then it was submitted that it can be inferred that the defendant would resist execution of the judgment. The only basis for this was that in his affidavit the defendant had deposed that he understood it was open to him to apply to pay the judgment debt by instalments. He said that in the context of a statement that he did not currently have sufficient funds to pay the judgment debt. The defendant also said that he reserved the right to appeal the finding in the Local Court. 38In the course of cross-examination the defendant said that whether he did seek to appeal would depend on advice which he was to receive after the making of further orders after the matter comes back before the Local Court on the 12 August. It cannot be inferred from the fact that the defendant might take steps that are available to him to apply to pay the judgment debt by instalments or to appeal, that he would attempt to dissipate his assets or attempt to conceal them or otherwise deal with them in a way which may deprive the plaintiff of the fruits of the judgment. 39Then it was said that there was evidence that the defendant was doing just that by the fact he had taken an overseas trip for three weeks from 21 June to Croatia and Indonesia. The defendant's evidence, which I accept, was that that trip was paid for by his father and that the moneys for the trip were advanced by way of gift. Even if the defendant had used his own funds to make such a trip, it would not justify the grant of the relief sought. It was not suggested to the defendant that the trip was made for any improper purpose. A judgment debtor is not constrained from dealing with his or her assets in the usual course merely because there is an outstanding judgment. Avenues are available to a judgment creditor to obtain a writ of execution. The plaintiff has not availed himself of those avenues. 40Mr Griffin, for the plaintiff, also contended that an improper dealing with assets should be apprehended because the defendant had used a corporate structure to attempt to defraud the plaintiff. This was a serious allegation that was quite improperly made and there is no evidence for it in the materials before me. It does appear from the reasons of the learned Magistrate that the defendant argued in the Local Court that in his dealings with the plaintiff he was acting on behalf of his company, the second defendant in the Local Court. That argument was rejected. I was not referred to any finding of her Honour that the defendant had sought to use a corporate structure to defraud the plaintiff. Nor was I referred to any evidence that would justify such a contention. 41The defendant deposed that he had arranged to rent a home at Ashtonfield, which I understand to be in the Newcastle area. He deposed that he had no intention of moving from the Newcastle area or to hide any of his assets or funds and he had never intimated to the plaintiff or the plaintiff's solicitors that he was unwilling or unable to pay the judgment defendant. The defendant was cross-examined at some length, but to little purpose. He was not cross-examined on the central question of whether or not it was his intention to deal with his assets in a way that might defeat the plaintiff's claim as a judgment creditor. 42Mr Griffin for the plaintiff also contended that because there was some evidence that renovations had recently been carried out to the defendant's home that it should be inferred that the defendant spent money which could have been used to satisfy the judgment debt on those renovations. The defendant was not questioned about that matter. The evidence did not establish what renovations were made or who paid for them, but, in any event, there was nothing improper about the defendant spending his moneys, if he did, on renovations to his property in advance of selling it. 43For these reasons I would have refused the relief sought had it been a proper matter for the exercise of the court's jurisdiction. On both of the grounds advanced I will dismiss the summons. I order that the claims for relief in the summons be dismissed and I will hear the parties on costs. [Parties address on costs.] 44The defendant seeks an order for costs on the indemnity basis. 45Costs on the indemnity basis can be warranted when there is a relevant delinquency in the litigant's conduct of proceedings. Such orders are made when, in amongst other cases, a party maintains proceedings or a defence which the party should know has no real prospects of success and also where parties make irrelevant allegations of fraud or allegations of fraud not supported by the evidence and which should not have been raised. (See, for example, Degmam Pty Ltd v Wright (No 2) [1983] 2 NSWLR 354 at 358; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401; and Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233.) 46In my view, the plaintiff properly advised ought to have appreciated that the present application had no real prospects of success. The delinquency in the plaintiff's bringing the claim is exacerbated by the serious allegations of fraud raised by Mr Griffin in his affidavit and maintained in the course of oral submissions which were unsubstantiated by any evidence. 47I am seriously concerned as to the amount of costs that appear to have been generated by this application, all relating to a judgment for under $10,000 in the Local Court and a potential costs order in the Local Court. I say nothing about the size of the claim for costs made in the Local Court. Coming to the conclusions I have, it has been unnecessary to consider what realistically is the maximum amount to which the plaintiff might become entitled under the judgment and any order for costs. Having regard to the parties' respective measures of success, it is not clear what an appropriate costs order would be. 48My present concern is as to the level of costs I anticipate would have been incurred in this application. Having regard to the allegations that were raised which should never have been raised, to what I consider to be the entirely inappropriate invocation of the jurisdiction of this Court and the fact that, in my view, no application for a freezing order should have been made, either in this or any other court, it is appropriate that the plaintiff pay the defendant's costs on the indemnity basis. 49I order that the plaintiff pay the defendant's costs of the proceedings on the indemnity basis. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 August 2013