Cornock v Foster [2006] NSWSC 71 | Case summary

1245/06 PETER BERKELEY CORNOCK v GRAEME CHARLES FOSTER JUDGMENT 1 HIS HONOUR: The plaintiff in this matter is a solicitor. He acted for the defendant in proceedings brought against the defendant by his then wife, Michele Robinson. The plaintiff today seeks, in effect, Mareva orders against the defendant. 2 The plaintiff asserts that the defendant agreed to pay the plaintiff's costs and disbursements in accordance with family law proceedings and to do so out of the proceeds of sale of a property owned by the defendant and his wife at 46 Cheryl Crescent, Newport (which I shall refer to as "the Newport property"). The Newport property, it appears, was owned jointly by the defendant and Ms Robinson. 3 The plaintiff has delivered an itemised bill of costs to the defendant (see pp 41-83 of the exhibit to Mr Cornock's affidavit of 3 February 2006 and para 23 of that affidavit). No objections have been filed by the defendant to the bill and Registrar Halbert in the Sydney Family Court ordered that a preliminary assessment of the plaintiff's costs and disbursements proceed on a tax invoice of the plaintiff (see para 30 of the plaintiff's affidavit of 3 February 2006). The amount claimed is $80,924.59. 4 From the affidavits filed it appears that whilst the plaintiff was acting for the defendant, and unbeknown to the plaintiff, the defendant decided to settle proceedings with his wife with the assistance of another solicitor. The settlement is reflected in short minutes of order at pp 38-40 of the exhibits to the plaintiff's affidavit and it requires the defendant and Ms Robinson to sell the property and provides that Ms Robinson is to receive 80 per cent of the net proceeds and the defendant 20 per cent of the net proceeds of the sale of the Newport property. 5 The plaintiff is concerned that whatever amount for costs is ultimately assessed will not be paid by the defendant unless 20 per cent of the proceeds from the Newport property sale are available to meet those costs. Prompted by that concern the plaintiff sought, through the Family Court, an undertaking from the defendant that he would notify the plaintiff of the name of the solicitor and real estate agent handling the sale of the property. According to Michelle Lynette Collyer, whose affidavit of 2 February 2006 was also read in support of the summons, and who is an employed solicitor working for the plaintiff, Judicial Registrar Johnson of the Sydney Family Court, on 4 October 2005, enquired of the defendant if he would give that undertaking and the defendant said he would (see para 4 of Ms Collyer's affidavit). Notwithstanding that undertaking, the defendant has not advised the plaintiff or his staff of the name of the real estate agent or the solicitor handling the sale of the Newport property. 6 Forming part of the exhibit is a document filed in the Family Court, part of which (pp 95-96) is a "request to attend by electronic communication" and it is signed by the defendant. The date of the court event is 9 February 2006 and the defendant writes: "I will not be able to come to Australia for this case assessment due to financial constraints. I wish to appear by telephone conference. I am able to call at 2.15pm on 9 February."

The reference to "properties" is a reference to the Newport property but also apparently to a Melbourne and Brisbane property, although those properties do not expressly seem to feature in the settlement. 10 The plaintiff did file a caveat in respect of the Newport property (see pp 84-85 of the exhibit to his affidavit). That caveat describes the plaintiff as "the solicitor for the registered proprietor" and describes the registered proprietor as "indebted to the caveator for professional services and the caveator possesses a lien on the property for his professional costs and disbursements". 11 The caveat suffers from two difficulties. First, the registered proprietor was not the defendant but, rather, the defendant jointly with Ms Robinson. So it was inaccurate for the plaintiff to describe himself as "the solicitor for the registered proprietor" and to describe the "registered proprietor" as "indebted" to him. Secondly, recent authority (see Jackson v Richards [2005] NSWSC 630 per White J) points to an absence of any lien where a solicitor claims costs for acting for a defendant in Family Court proceedings. Mr Roberts, counsel for the plaintiff (who himself had appeared for the defendant in the Family Court proceedings and whose fees are included in the disbursements for which the plaintiff claims) conceded that the caveat was defective and should not have been lodged. He also eschewed any reliance on the summons filed in this court on 1 February 2006, or the affidavit of the plaintiff sworn 31 January 2006, which was also filed at that time. Instead he relied on the plaintiff's affidavit of 3 February 2006, a fresh exhibit to it, much of which is in the same form as the earlier exhibit, and an amended summons. The amended summons was, itself, defectively drawn in that words in the relief sought had been omitted and I indicated that I would give the plaintiff an opportunity to file an amended summons this morning. 12 Mr Young of counsel, who appears this morning, sought to hand up in court the amended summons and that document has been formally received by the court today. 13 The amended summons seeks a declaration that the plaintiff and defendant entered into an agreement for valuable consideration whereby the defendant would pay the professional costs and disbursements rendered by the plaintiff to the defendant in connection with the Family Court proceedings out of the proceeds of the Newport property. The plaintiff also seeks, pending hearing of that claim, an order restraining the defendant or his servant or agents from receiving his share of the proceeds to the extent of $80,924.59, which is the amount claimed in the bill of costs. The plaintiff also seeks an order that the plaintiff be entitled to register "a notification" to be registered on title in respect of orders made pursuant to the amended summons. 14 By the ancillary orders sought the plaintiff would receive the amount of $80,924.59 into his trust account and to hold that pending final determination of the amount of costs by the Family Court assessor. 15 I enquired of Mr Roberts on Friday and again of Mr Young this morning as to what was known about the current position with the Newport property. I was informed on Friday that the plaintiff had instituted investigations as to the status of the property and whether it has been advertised for sale and when the sale or auction, if by auction, is to occur, but no information was or is presently available. I find it surprising that no information is presently available, given the fact that the plaintiff knows who was acting for the wife in the Family Court proceedings - a Mr Christopher Mackay, solicitor, of Manly (see p 36 of the exhibit to the plaintiff's affidavit). It is not even clear at this stage that the sale has not yet taken place. The undertaking by the defendant to provide details of the solicitor and estate agent was given as far back as 4 October. 16 I shall endeavour to set out in basic form the principles relevant to Mareva orders. I draw these from Patrick Stevedores Operations No 2 Pty Limited v Maritime Union of Australia (No 3) (1998) 195 CLR 1, Cardile v LED Builders Pty Limited (1999) 198 CLR 380, Jackson v Sterling Industries (1987) 162 CLR 612 and from the very helpful text of Mr Biscoe QC, Mareva and Anton Piller Orders, LexisNexis Butterworths 2005: (1) Power to make a Mareva order is an inherent power of the court to prevent the abuse or frustration of the court's process ( Patrick at 400) and, in the case of third parties, the administration of justice ( Patrick at 401). (2) The Supreme Court power to make a Mareva order stems from the inherent power of the court and the statutory power of the court (see s 23 of the Supreme Court Act ) to do that which is necessary for the administration of justice. (3) A Mareva order is not granted to give the plaintiff priority or advantage over other creditors, or to stop a defendant from sliding into insolvency: Frigo v Culhaci [1998] NSWCA 393, and see Pelechowski v Registrar, Court of Appeal (1998) 198 CLR 435 at [53] and Derby & Co Ltd v Weldon (Nos 3 and 4) [1900] 1 Ch 65 at 76E. (4) The orders may be granted where there is a "danger" that by reason of the defendant's absconding or of assets being removed from the jurisdiction, or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321F. This was described by Mr Biscoe as "The heart and soul of the Mareva jurisdiction": para 6.5 supra. The "danger" has been replaced with "a real risk" by some: see Cardile per Kirby J at [122]. (5) The plaintiff must establish that he has at least "a good arguable case", or a "prima facie cause of action" or that there is "a serious question to be tried". There may be differences in the effect of the different formulations but I do not think that those differences are relevant here. (6) It is not necessary that proceedings have been commenced or even that the cause of action has accrued: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319. (7) An order can be made against a third party where "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 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": Cardile at [57]. (8) The order involves an infringement of the normal proprietary rights of a party and a third party, whether related or not, and the court should be cautious in making an order of this kind (see Cardile at 104). (9) The onus is on the party seeking the order to establish that there is a danger of frustration of the court's process, and that an order should be made. (10) It has been said that a Mareva order is directed to dispositions of property which are intended to frustrate, or to have the necessary effect of frustrating, the plaintiff in his or her attempt to seek, through the court, a remedy for the obligation to which he claims the defendant is subject: see Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264. It is not necessary for the plaintiff to establish that the defendant intends to frustrate any judgment obtained ( Cardile at [26]) but evidence of a positive intention is a relevant matter: see Ausbro Forex Pty Ltd v Mare (1986) 4 NSWLR 419 at 423. (11) It has been said that lack of information about a defendant can be enough to justify a Mareva order (see Ninemia Maritime Corp v Trave GmbH & Co KG (The Niedersachsen) [1984] 1 All ER 398 at 406 per Mustill J), and it has been said a plaintiff may be able to found its case on the fact that inquiries about the characteristics of the plaintiff have led to a blank wall: see The Irina Zharkikh [2001] 2 NZLR 801; [2001] 2 Lloyd Rep 319 at 360 per Young J (HCNZ). 17 Mr Roberts informed me that the assessment of the itemised bill, even on an uncontested basis, is likely to take at least two months. He submitted by analogy that the approach taken in Johns v Cassel (1993) FLC 92-364 that the court here could adopt an approach of producing an amount to be covered by the order by some reasonable discount, and suggested that 25 per cent discount of the $80,000 would be appropriate. 18 I am satisfied on the evidence before me that the plaintiff has a good arguable case or a prima facie case that the defendant entered an agreement to pay the plaintiff's costs and disbursements of the plaintiff acting for him in the Family Court proceedings and that the plaintiff is likely to recover a significant sum for those costs. I am not able to form a view as to the reasonableness of the claim for costs and disbursements having had no experience in matters of that kind, but given the absence of objection to the bill in the Family Court, I think it is reasonable to infer that at least 75 per cent of the amount claimed will be held to be liable. 19 On the plaintiff's sworn testimony the defendant agreed to pay the costs out of the Newport property. There is a lack of precision in the way the agreement was framed (even on the plaintiff's evidence) given that it did not limit itself to the net proceeds received by the defendant, but the conversation, coupled with the e-mail to which I have referred, establishes a good arguable case from the context that it was agreed by the defendant that he would meet his obligations from the net proceeds. The absence of writing for that aspect of the agreement may present a difficulty but there is also the aspect that the written agreement may found an entitlement to a judgment for costs enforceable out of the assets of the defendant irrespective of whether the defendant specifically agreed that the Newport property proceeds would be available. In other words, a Mareva order can be made, and usually is, without any need for agreement by the defendant as to the availability of a particular asset. Further attention would need to be given to the pleadings in that regard but the substance of this claim is already in evidence on the material. 20 I am satisfied that there is a real risk that the defendant will not meet his obligation to the plaintiff as determined by the assessor appointed by the Family Court out of the net proceeds of sale. He did not make the plaintiff aware of the settlement that he reached with his wife at the time that he embarked upon it, he has not provided information which he undertook to provide of the sale (which sale I should note was ordered to take place within three months of 5 August 2005), and he resides in Hong Kong. His assertion in the Family Court document of financial constraints gives rise to the prospect that there may be very limited assets or no assets left from which to recoup any decision on costs, other than from the Newport property. 21 I have given consideration to the fact that the plaintiff filed a caveat in circumstances in which he should have appreciated that he had no basis for asserting as against one of the joint proprietors any entitlement. The husband's agreement to that course, even if given, could not be effective as against Mrs Robinson. Mr Roberts pointed out that no relief is now sought on the alleged lien or alleged caveatable interest and that this should not be seen as a lack of clean hands. 22 I have come to the view that the plaintiff's conduct does not disentitle him to relief otherwise available. In my view, however, no orders ought to be made which inhibit in any way the sale of the Newport property or receipt by Ms Robinson of the 80 per cent share of net proceeds. 23 So far as the balance of convenience and likely prejudice to the defendant are concerned, given the plaintiff has given an undertaking as to damages against the possibility that he is not entitled to the relief sought, and the failure of the defendant to object to the bill of costs, I think the risk of any significant financial injury to the defendant pending the hearing of the matter on a contested basis is quite limited and does not stand as an impediment to the grant of interlocutory relief. 24 A question arises, however, as to the form of the orders which the court should make. As I have said the sale of the Newport property should not be inhibited in any way and I think the practical way of protecting the funds which would meet the potential costs order that the plaintiff may obtain and be entitled to enforce in a court of law is to preclude the handing over to the defendant of any moneys due to him out of the sale of the Newport property. 25 At the moment the identity of the solicitor handling the sale is not known, nor is the identity of the real estate agent handling the sale. Nor is it clear that the sale has not taken place and I do not think it is appropriate for the court to make any orders either against the defendant or third parties unless and until there is evidence before the court that the sale is yet to take place and as to who is acting for the vendors. The absence of this information makes it difficult to make any assessment of the hardship, if any, which would be placed on the third parties affected by the order and whether any orders made would be of utility. 26 I will stand the matter over for a short period to enable that information to be placed before the court in proper form. **********

Cornock v Foster

At a glance

Court

Decision date

Before

Source

Judgment (13 paragraphs)

Parties

Cases Cited (8)