Consolidated Constructions Pty Ltd v Bellenville Pty Ltd [2002] FCA 1513

Deputy Commissioner of Taxation for the Commonwealth of Australia v Robertson [2000] WASC 42

First Industry Corp v Goh [2002] WASC 68

Uniflex (Australia) Pty Ltd v Hanneybel, unreported; SCt of WA (White J); Library No 980465; 17 August 1998

1 PULLIN J: This is an application for a mareva order. A mareva order will not be granted unless there is a good arguable case and there is a real risk that if the remedy is not granted, the defendant would remove or dissipate his, her, or its assets. The remedy is discretionary: Perth Mint v Mickelberg (No 2) [1985] WAR 117 and Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319.

2 As a general proposition, a mareva order can be granted if the circumstances are such that there is a danger of the defendant absconding, or a danger of the assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with so that there is a danger that the plaintiff, if it gets judgment, will not be able to get that judgment satisfied: Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612.

3 Because a mareva order is an interlocutory order which, if granted, imposes a severe restriction upon a defendant's right to deal with his or her assets, it is necessary to pay close attention to the basis for the claim which is put forward. The purpose of a mareva order is to preserve the status quo, not to change it in favour of the plaintiff. The function of the order is not to provide a plaintiff with security in advance for a judgment it hopes to obtain and which it fears might not be satisfied, and it is not to improve the position of the plaintiff in the event of a defendant's insolvency.

4 Because there may be difficulties associated with quantification and recovery of damages pursuant to an undertaking which should be given by a plaintiff, it is necessary to closely consider any undertaking which is given by a plaintiff on the grant of a mareva order: Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249 at 260 and Cardile v LED Builders Pty Ltd (1999) 198 CLR 380.

5 The arguable case which the plaintiff puts up is that there was a loan by the plaintiff in the sum of $425,000 to a partnership between the plaintiff and the first defendant earlier this year. It is alleged by the plaintiff that this loan was induced by misrepresentations (indeed, fraudulent misrepresentations on the part of the second defendant are alleged in relation to that transaction).

6 There is also a claim in relation to a loan alleged to be by the plaintiff to the first defendant in relation to an amount of $504,992. Once again, it is alleged that there were misrepresentations in relation to the negotiations which led to the entry into this agreement. The plaintiff also refers to, and pleads, an indemnity agreement whereby the second and third defendants gave an indemnity to the plaintiff which would cover the claims which are made in relation to the loan agreements.

7 The plaintiff claims to have rescinded the first loan agreement by reason of the misrepresentations, and also claims to have rescinded the second loan agreement by reason of the misrepresentations.

8 I am satisfied on the materials before me that there is a good arguable case. I am also satisfied that there is a risk, and a real risk, that if a mareva order is not granted, the defendants may remove or dissipate any assets that they own. I reach that conclusion for a number of reasons.

9 First, the very nature of the case against the second defendant, which alleges serious misrepresentations, must give rise to concern about the conduct of the second defendant. The second defendant was acting on behalf of the first defendant, and his conduct is also a matter which affects the view that must be taken of the first defendant. The third defendant, who is the only valid director of the first defendant, has allowed the second defendant to conduct the affairs of the first defendant, which gives rise to a concern about the conduct of the third defendant.

10 It is also the case that the third defendant, Mrs Pallister, has purchased substantial property of an amount which is roughly approximate to the amount which has been advanced by way of loans by the plaintiff. That must give rise to a concern about whether or not there has been misuse of moneys advanced by the plaintiff for the purposes which have been agreed in relation to those advances; that those moneys have been used for some other purpose. That is an inference open on the materials before me.

11 If I am wrong about that inference being open, it is also evident that the third defendant, Mrs Pallister, has taken steps to try and remove a caveat over a property when the duplicate certificate of title for that property was given over by her as security at the time the guarantee of indemnity agreement was entered into. So an attempt made to remove the caveat must give rise to a concern about an endeavour to deal with assets which have been set aside for the purpose of security in relation to one of the transactions referred to.

12 The fact that the third defendant did not persist with her attempt to have the caveat removed is not really to the point. It is the fact that initial steps were taken to try and have the caveat removed which gives rise to the concern and which supports my finding that there is a real risk that if the order is not granted, the third defendant would, or may, dissipate assets.

13 A point has arisen in relation to the undertaking which has been offered by the plaintiff. The point is this: the plaintiff is a company incorporated in the British Virgin Islands, and the defendants say that the undertaking is therefore of no value. The defendants refer to the fact that an undertaking would constitute a civil contempt, enforceable only by the court to which the undertaking was given. Reference has been made to P S Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; (1991) 102 ALR 321. In my opinion, the position is that the plaintiff (which is bringing proceedings within the jurisdiction) is a party which has assets within the jurisdiction to satisfy the undertaking. Furthermore, these assets are assets over which the defendants have some control.

14 First, in relation to the land which was given over as security, the plaintiff has an interest in that land by way of equitable mortgage because of the deposit of the duplicate certificate of title. Secondly, the plaintiff has a chose in action in relation to the second loan or a claim for restoration of those moneys which have been paid over.

15 I am satisfied, therefore, that the plaintiff does have property to back up the undertaking which has been given, although I do think that some certainty has to be given to the value of that undertaking. What I will do is require an undertaking to be given on behalf of the plaintiff that if the amount of $504,992 is repaid by Robotek, that the money be paid into the trust account of the plaintiff's solicitors and not be dealt with without further order of the court. For those reasons, and on that condition, I am prepared to grant the relief which is sought.