Davis v Turning Properties [2005] NSWSC 742 | Case summary

13 Those properties in relation to which I have indicated an approximate date are ones where the transfer itself is not dated, and I have quoted the date on which stamp duty was impressed on the transfer. 14 The plaintiff has been informed that Mr Turner never conducted any trading activities on any stock exchange, either on account of himself or anyone else. Inquiries made by the plaintiff's solicitor in the Bahamas suggest that the plaintiff is not the only person who has entrusted money to Mr Turner and his companies. The information available to the solicitor in the Bahamas is that the known exposure of the various companies sued in the Bahamas proceedings, and Mr Turner, to claims for repayments of principal alone exceeds US$12.5m. There, would, presumably, be other claims for interest and costs, or possibly for loss of contractually promised benefits. 15 The first question which arises relates to the jurisdiction of the court to make the orders which are sought. It is common ground that the legislation relating to the registration and enforcement of foreign judgments does not enable the Bahamas Mareva order to be enforced in New South Wales. The Foreign Judgments Act 1991 (Cth) contains provision in section 5(6) and (7) for recognition in Australia of non-money judgments of foreign courts, but that provision has not yet been activated by the making of the necessary type of regulation. The Foreign Judgments Act 1973 (NSW) never extended to enforcement of non-monetary judgments, and in any event has become a dead letter (Yoon v Song (2000) 158 FLR 295 at 298) and will be repealed when section 6(1) and Schedule 4 of the Civil Procedure Act 2005 come into operation. Whether the court has jurisdiction to make the order thus depends on the general law. 16 White v Verkouille (1989) 2 Qld R 191, related to a situation where a judgment had been obtained against Verkouille in a Nevada court for a sum of money, and a receiver had been appointed by that Nevada court to carry into effect the judgment. The powers conferred by the Nevada court on the receiver included authority to act by proceedings "in and of attachment, execution or foreign judgment and marshalling" of all assets belonging to Verkouille whether located inside or outside Nevada or the United States. The order conferred specific authority to take possession of money deposited to the credit of the defendant (including to the credit of Verkouille and one Gorson) with the ANZ bank. The Nevada-appointed receiver applied to the Supreme Court of Queensland for an order which sought judgment for sums of money which stood to the credit of Verkouille and Gorson with the ANZ Bank, an order that they pay that money to the plaintiff, and that they be restrained from dealing with or disposing of those moneys. 17 McPherson J considered a submission which was made that the plaintiff in the Queensland proceedings should not be recognised in the Queensland court as a receiver who was entitled to sue to recover the money in the ANZ Bank account, without first having sued and recovered judgment in Queensland for the money sum which the Nevada court had held was due. There was no Queensland statute which provided for recognition of orders of a Nevada court. His Honour held, however, that the title of the receiver to sue should be recognised. His Honour recognised that at common law the submission would succeed, but said, at 194: "In equity, for reasons said to be associated with Chancery's special responsibility for protecting the rights of foreign merchants, the position is different. Equity lends its aid to the enforcement of a foreign judgment without requiring as a prerequisite that it be made a judgment of this Court. In Houlditch v Donegal [ Houlditch v Marquess of Donegal (1834) 2 Cl & F 470; 6 ER 1232] a decree of the Chancellor of Ireland refusing an application for a receiver and an injunction to enforce an order made by the Chancery Master in England was reversed by the House of Lords. The authorities referred to by Lord Brougham, which included the well-known decision in Penn v Lord Baltimore (1750) 1 Ves Sen 444, made it clear that the foundation of the assistance afforded by courts of equity in cases such as this is the jurisdiction to act in personam against the defendant. " 18 His Honour referred to various other later cases in which the equitable jurisdiction had been involved in aid of foreign judgments for orders appointing receivers and the like. He said, at 195: "More recently, in Schemmer v Property Resources Ltd [1975] Ch. 273, 287, Goulding J. in the Chancery Division in England accepted that there are cases in which "an English court will either recognise directly the title of a foreign receiver to assets located here or, by its own order, will set up an auxiliary receivership in England". He went on to say that to do either of those things the court must be satisfied of a sufficient connexion between the defendant and the jurisdiction in which the foreign receiver has been appointed as to justify recognition of the foreign court's order. In my opinion that correctly states the principle upon which this Court acting in its equitable jurisdiction will aid in the enforcement of a foreign judgment." 19 There is no Australian decision of which I am aware, or which counsel have been able to refer me to, which deals directly with an order of a New South Wales court made in aid of a foreign Mareva order. The topic was adverted to by Bryson J in Van Shun Dyeing Factory Limited (in liquidation) v Cheung (Supreme Court of NSW, 16 July 1991, unreported). That case involved a situation where a Mareva order had been made in Hong Kong, but no proceedings existed in New South Wales which sought substantive orders from the New South Wales court. His Honour said, concerning whether the New South Wales Supreme Court could grant a Mareva order in those circumstances: "While there maybe such jurisdiction, I feel that I should proceed carefully in making ex parte orders. I should only act in that way in areas where the law is relatively clear. This is an area where difficulties have presented themselves, for example, in the United Kingdom in The Siskina , [1979] AC 210. However, the basis of jurisdiction and the legislation under consideration in detail in that case are not identical with circumstances in this State." 20 His Honour went on to refuse the relief which was sought on the basis of discretion, without deciding the question of jurisdiction. 21 In the present case, the application is not made ex-parte, and I have had the benefit of careful submissions from counsel on both sides. As well, the law has become somewhat clarified on this topic since 1991. 22 In Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, the joint judgment of Gaudron, McHugh, Gummow and Callinan JJ held that a Mareva order should not be regarded as a species of injunction. Their Honours reiterated the decision that the Court had already come to, that the basis for the jurisdiction to issue Mareva orders was the Court's power to act in the administration of justice, a power such as that conferred by section 23 of the Supreme Court Act 1970. 23 In England, the basis upon which Mareva orders are made is seen as being different (see Biscoe, Mareva and Anton Piller Orders, (Butterworths 2005) para [5.44]). If anything, though, the basis upon which English courts have regarded Mareva orders as being justified, would suggest a somewhat narrower ambit for them, than is the ambit afforded by the Australian basis. 24 In England, in Channel Tunnel Group Pty Ltd v Balfour Beatty Construction Limited [1993] AC 334, Lord Browne-Wilkinson, with whose remarks Lord Keith of Kinkel and Lord Goff of Chieveley expressed agreement, discussed the speech of Lord Diplock in The Siskina [1979] AC 210. Lord Browne-Wilkinson referred in particular to the passages at pages 254 and 256 which dealt with section 37(1) Supreme Court Act 1981 (UK) which empowered the court to "by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases where it appears to the court to be just and convenient to do so", and RSC Ord 11, r 1 which permitted service out of the jurisdiction when the writ claimed an injunction against the defendants dealing with their assets within the jurisdiction. There, Lord Diplock had said: "[Section 37], speaking as it does of interlocutory orders, presupposes the existence of an action, actual or potential, claiming substantive relief which the High Court has jurisdiction to grant and to which the interlocutory orders referred to are but ancillary ... To come within [sub-para ( i )] the injunction sought in the action must be part of the substantive relief to which the plaintiff's cause of action entitles him; and the thing that it is sought to restrain the foreign defendant from doing in England must amount to an invasion of some legal or equitable right belonging to the plaintiff in this country and enforceable here by a final judgment for an injunction."

Those remarks were made on the assumption that Lord Diplock had correctly stated the law in The Siskina [1979] AC 210, a matter concerning which Lord Browne-Wilkinson reserved his opinion. The point, for present purposes, is that in England, where Mareva orders are seen as a species of injunction, the power of the court to grant an interlocutory injunction is not restricted to cases where the court will be granting final substantive relief. 26 In Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, the four judges who wrote the joint judgment considered the basis upon which a Mareva order could be made against a person who was not a debtor to the plaintiff, at a time when the plaintiff had not recovered a final judgment against anyone connected with that person. They referred at 388, [11] to the passage in the judgment of Hope JA, with whom Glass and Priestley JJA agreed in Coxton Pty Ltd v Milne (Court of Appeal of NSW, 20 December 1985, unreported) at 13: "Without attempting to define or to limit the extent of the exception, the necessary circumstances [for the grant of a Mareva order] will exist when the affairs of a defendant sued by a creditor for an alleged debt and of the third party against whom the injunction is sought are intermingled, the alleged debtor and the disposition of its assets are effectively controlled, de jure or de facto, by the third party, the debtor's assets will be insufficient to meet the debt, the creditor, although having no vested or accrued cause of action against the third party, may become entitled to have recourse to the third party or his assets to meet his debt, and there is a danger that the third party will send his assets abroad or otherwise dispose of them." 27 They also quoted at 389, [12] from the joint judgment of Beaumont and Branson JJ in the court below in LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 78 FCR 65: "We must add that, with all respect, we cannot accept, as the primary judge appears to suggest, that it is an ingredient of the Mareva jurisdiction that the debtor has a specific proprietary interest in the third party's assets (see, for example, Mercedes Benz AG v Leiduck ([1996] AC 284 at 300) where … Lord Mustill emphasises that Mareva relief takes effect in personam only and distinguishes tracing and other such remedies protecting proprietary rights). It is sufficient, for present purposes, that the assets of the defendant and the third parties are "mixed up" and "controlled", in the sense explained by Kiefel J in Tomlinson [v Cut Price Deli Pty Ltd (unreported; Federal Court of Australia; 23 June 1995)]. 28 Their Honours own views were stated at 393, [26]: "In Jackson v Sterling Industries Ltd , (1987) 162 CLR 612 at 623 Deane J referred to the armoury of a court of law and equity to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction. By this means, the risk of the stultification of the administration of justice is diminished. Once the source of power is recognised, then, whatever may be the limitations with respect to inferior courts (see the remarks of DawsonJ in Grassby v The Queen (1989) 168 CLR 1 at 16-17 as to the powers of inferior courts enjoyed by implication) in the case of the Federal Court the power will be seen to be comprehended by the express grant in s 23 of the Federal Court Act. In National Australia Bank Ltd v Bond Brewing Holdings Ltd , [(1990) 169 CLR 271 at 277] Mason CJ, Brennan and Deane JJ described as mistaken any proposition that Mareva relief could only be obtained against the defendant to an action if there were a positive intention to frustrate any judgment. However, the presence in s 23 of the expression "as the court thinks appropriate" points to the requirement to develop principles governing the exercise of the power in such a fashion as to avoid abuse. This need, as indicated above, is at the heart of the present appeal. Meeting that need is not facilitated, and may be impeded, by continued attempts to force what has become known as the Mareva order into the mould of interlocutory injunctive relief as administered under that description by courts of equity." 29 Their Honours went on to consider various attributes of the injunction as a remedy, and limitations on the circumstances in which an injunction could be granted, before stating, at 399, [40] that a Mareva order should be seen as a remedy to protect the integrity of the processes of the Court, and not as a species of injunction. At 400, [41] their Honours quoted from the joint judgment of Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 32: "The powers of the Federal Court under s 23 of its Act are powers 'to make orders of such kinds, including interlocutory orders, as it "thinks appropriate"', as Deane J noted in Jackson v Sterling Industries Ltd [(1987) 162 CLR 612 at 622]. He added: 'Wide though that power is, it is subject to both jurisdictional and other limits. It exists only "in relation to matters" in respect of which jurisdiction has been conferred upon the Federal Court. Even in relation to such matters, the power is restricted to the making of the "kinds" of order, whether final or interlocutory, which are capable of properly being seen as "appropriate" to be made by the Federal Court in the exercise of its jurisdiction.' One limitation on the powers of the Federal Court to grant interlocutory injunctions is that those powers must be exercised for the purpose for which they are conferred. In a later passage of the judgment of Deane J in Jackson v Sterling Industries Ltd [1987) 162 CLR 612 at 623. See also Jago v District Court (NSW) (1989) 168 CLR 23 at 74, per Gaudron J] his Honour said a power to prevent the abuse or frustration of a court's process should be accepted 'as an established part of the armoury of a court of law and equity' and that 'the power to grant such relief in relation to a matter in which the Federal Court has jurisdiction is comprehended by the express grant to that court by s 23 of the Federal Court of Australia Act '. But, his Honour observed [ Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 625] orders must be framed 'so as to come within the limits set by the purpose which [the order] can properly be intended to serve'. The Mareva injunction is the paradigm example of an order to prevent the frustration of a court's process [ Rahman (Prince Abdul) v Abu-Taha [1980] 1 WLR 1268 at 1272; [1980] 3 All ER 409 at 411; Mercedes Benz AG v Leiduck [1996] AC 284 at 299, 306-307) but other examples may be found ( Gibbs v David (1875) LR 20 Eq 373 at 377-378; Hatton v Car Maintenance Co Ltd [1915] 1 Ch 621 at 624-625; Heavener v Lomes (1924) 34 CLR 306 at 326; Hannam v Lamney (1926) 43 WN (NSW) 68; Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 at 276]. The moulding of an interlocutory injunction must depend upon the circumstances of each case. As Brennan J observed in Jackson v Sterling Industries Ltd [(1987) 162 CLR 612 at 621]: 'A judicial power to make an interlocutory order in the nature of a Mareva injunction may be exercised according to the exigencies of the case and, the schemes which a debtor may devise for divesting himself of assets being legion, novelty of form is no objection to the validity of such an order.' The general principle which informs the exercise of the power to grant interlocutory relief is that the court may make such orders, at least against the parties to the proceeding against whom final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked [See Tait v The Queen (1962) 108 CLR 620]. The Federal Court had jurisdiction to make interlocutory orders to prevent frustration of its process in the present proceeding." 30 At 401, [42] their Honours imposed two qualifications on that passage: "Subject to two matters to which we shall come, this passage should be accepted as a correct statement of principle. The first matter is that, in that passage, the attention of the court was directed to orders against parties to the proceedings and against whom final relief was sought. In that situation, the focus is the frustration of the court's process. If relief is available against non-parties, the focus must be the administration of justice. The second matter is that, to avoid confusion as to its doctrinal basis, it is preferable that references to "Mareva orders" be substituted for "injunctions". 31 In particular, at 402, [48] their Honours considered the question of whether it was necessary, before a Mareva order was made, for there to be proceedings in the Australian Court: "LED's stance in this appeal is that it is not essential that the court's processes in support of which the Mareva relief is sought be confined to those set in motion upon a cause of action. That followed, it is submitted, from a passage in the speech of Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [[1993] AC 334 at 362], to which Hoffmann LJ referred in Mercantile Group (Europe) AG v Aiyela [ [1994] QB 366 at 375-376] in holding that the wife of the judgment debtor should be restrained from disposing of assets although no action had been brought against her. Lord Mustill said that the right to an interlocutory injunction which is incidental to, and dependent on, the enforcement of a substantive right usually, although not invariably, takes the shape of a cause of action. However, we do not think that his Lordship was suggesting that an order might be made against a non-party not amenable in some way ultimately to some coercive process requiring it to disgorge, or in some other way to participate in the satisfaction of, a judgment against a party." 32 Their Honours concluded, at 405, [57]: "What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word "may", be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which: (i) 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 potential judgment debtor; or (ii) 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." 33 It will be seen that this formulation leaves open the possibility of a grant of a Mareva order by an Australian court against person A, when assets of A might be able to be in practice reached, if the plaintiff obtained a judgment against some other person B, and the assets of A might be sought to be applied to recover that judgment, even if that is done by a step such as the appointment of a receiver or trustee in bankruptcy or liquidator to B or to all or part of B's property. 34 The power of the Court in New South Wales to grant an injunction is, it is now settled, based on section 23 of the Supreme Court Act 1970, which provides, "The Court shall have all jurisdiction which may be necessary for the administration of justice in New South Wales." 35 The administration of justice in New South Wales is not confined to the orderly disposition of litigation which is begun here, tried here and ends here. In circumstances where international commerce and international monetary transactions are a daily reality, and where money can be transferred overseas with sometimes as little as a click on a computer mouse, the administration of justice in this State includes the enforcement in this State of rights established elsewhere. As well, the ordinary course of administration of justice has long included a court making certain of its remedies available in aid of proceedings in another court - the old equitable remedies of a Bill of discovery, a Bill to perpetuate testimony, and a Bill to take testimony de bene esse pending a suit (Story, Commentaries on Equity Jurisprudence 13th ed 1886 para [1480] ff) provide examples of remedies being available in Chancery in aid of proceedings in another court before the other court has heard a suit. After another court has heard and decided a suit, the title of a foreign-appointed administrator of an insolvent estate to movables is recognised in Australia under the general law (Australian Mutual Provident Society v Gregory (1908) 5 CLR 615), and can provide a sufficient basis for an appointment of a receiver of immoveables within the jurisdiction (In Re Kooperman (1928) B & C R 49). 36 Biscoe, Mareva and Anton Piller Orders (Butterworths 2005) at paragraph [5.36] to [5.49] discusses the case law relating to freezing orders in aid of foreign proceedings. He suggests, at [5.36], [5.44] and [5.48], that, while Australia does not have any statutory provision equivalent to section 25 of the Civil Jurisdiction and Judgments Act 1982 (UK) in England, there is an inherent jurisdiction to make an order in aid of the enforcement of a foreign judgment in Australia, whether that judgment has yet been obtained or not. In my view that suggestion is right. 37 One consequence of a Mareva order not being a species of injunction is that, in deciding whether a Mareva order should be granted, the Court does not operate in the conceptual frame, appropriate to decisions about whether to grant an interlocutory injunction, of enquiring whether there is a serious question to be tried, and, if so, where the balance of convenience lies. Rather, the court adopts the conceptual frame used for other interlocutory decisions, of enquiring whether there is prima facie evidence of those facts which are the basis for the grant of the particular interlocutory relief in question and a reasonably arguable basis for any question of law involved: eg as to facts Wendo v The Queen (1963) 109 CLR 559 at 572-3; DPP v Alexander (1993) 33 NSWLR 482 at 493; Attorney-General (NT) v Maurice (1986) 161 CLR 475 at 491. The joint judgment in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 took this approach, enquiring what the facts of that case showed on a prima facie basis at 406 [60], and 407 [64], and saying at 408 [68] "LED has to show a reasonably arguable case on legal as well as factual matters". Examining the facts and law by reference to this standard was an essential step in the ultimate conclusion reached in the majority judgment in Cardile. Thus, it settles the Australian law on the appropriate standard of proof for grant of a Mareva order, whatever uncertainty might continue to exist about the appropriate standard of proof for other types of interlocutory order (cf Cross on Evidence, 7th Australian edition (Butterworths 2004) para [1040] - [1045]). However, when deciding whether to grant a Mareva order involves both enquiring whether the case is one in which a Mareva order could as a matter of law possibly be granted, and whether as a matter of discretion the instant case is an appropriate one in which to actually grant one, and if so, in what precise terms, there remains some family resemblance between the conceptual frame in which Mareva orders are granted and that in which interlocutory injunctions are granted. 38 In the present case, the evidence at present creates a powerful prima facie case that the plaintiff has been defrauded by Mr Turner. At present, the proceedings in the Bahamas are ones which do not seek any substantive relief. However, I am satisfied, from the intrinsic circumstances, that it is more likely than not proceedings will be begun by the plaintiff against Mr Turner and, possibly, one or more of the companies he is involved in, seeking substantive relief for recovery of the money which the plaintiff has lost. For the purposes of deciding at this stage of the investigation into the circumstances of his loss whether a Mareva order should be granted, it does not matter that the precise causes of action that will be relied on cannot be stated with any certainty. 39 It is a possibility which is well open on the evidence that all or part of the money which the plaintiff entrusted to Mr Turner has found its way into New South Wales assets of the first defendant. Even though some of the real estate of the first defendant was first acquired by the first defendant before the plaintiff paid any money to the second defendant or any of his companies, all the real estate in New South Wales is subject to mortgage, and at present the evidence does not establish what transactions there had been, or when, concerning repayment of mortgage debts. Thus it is possible that money of the plaintiff has found its way into the first defendant's equity in any of the items of real estate owned by the first defendant in New South Wales. However, in this state of the evidence, which does not rise above a realistic possibility, I will not rely on that possibility as being enough to show that there is a prima facie case that some of the plaintiff's money has found its way into the New South Wales assets of the first defendant. I take this course without deciding that that evidence is inadequate. No other way in which the basis for a Mareva order set out in para [57] (i) of Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 (para [32] above) could be made out has been suggested. 40 However, even if it were the case that no money had actually found its way into New South Wales assets, the circumstances of what appears to be a blatant fraud like the present, and the corporate structure within which the first defendant operates, are ones which in my view justify the non disposition of assets of the first defendant which might possibly be available to meet a personal right of Mr Turner to obtain the benefit of those assets. 41 It may be the case that there are personal obligations owed by the first defendant to the companies in the Bahamas, or to Mr Turner. It is quite common for groups of privately owned companies, and the owners and controllers of those companies, to have loan accounts one to the other. However on the present state of the evidence it is nothing more than a realistic possibility that there might be such obligations owed by the first defendant to the Bahamas companies, or to Mr Turner. The same can be said for any other accounts upon which money might have come to be payable by the first defendant to the Bahamas companies for Mr Turner. Without deciding it is inadequate, I will not rely on that possibility as showing that a prima facie case is made out that there are such loans or other obligations owed by the first defendant to Mr Turner or any of the Bahamas companies, to found a Mareva order on the basis set out in para [57] (ii) of Cardile v LED Builders Pty Ltd (1999) 198 CLR 380. 42 Even if there are no such bases upon which money might be owed by the first defendant to the Bahamas companies or Mr Turner, the facts, which are established on a prima facie basis, that Mr Turner has defrauded the plaintiff, and is sole director of the first defendant, and sole director and 50% shareholder in Turner Holdings Pty Ltd, are enough to give any administrator of his estate, if he were to become bankrupt, or any receiver of his assets who might be appointed to enforce a judgment given against him in the Bahamas, the practical power to reach the equity in the assets of the first defendant, for the purpose of satisfying an order of the Bahamas court against the second defendant. And a likely way in which that practical power would be exercised is by proceedings in this Court to wind up the first defendant and its parent company. 43 In White v Verkouille (1989) 2 Qld R 191, McPherson J, in the passage quoted at para [18] above, required this Court to be satisfied of a sufficient connection between the defendant and the jurisdiction in which the foreign receiver has been appointed to justify recognition of the foreign court's order. The "defendant" about whom McPherson J was there speaking was Verkouille, who had been a defendant in the Nevada proceedings, and was also a defendant in the Queensland proceedings. There is sufficient evidence of such a connection between Mr Turner and the Bahamas, in the form of his business activities there, in the form of his being involved in the administration of companies there, and, whether in his own name or through companies, having real estate (including a home) there. Mr Turner is already a defendant in the Bahamas proceedings. The principle stated by McPherson J is one which seems likely to result in the recognition in Australia of any receiver and manager of the assets of Mr Turner, who might be appointed by the Bahamas court to enforce an order of the Bahamas court against Mr Turner. Recognising the title of such a receiver to act in the name of Mr Turner to enforce his right as a contributory to seek the winding up of the parent of the first defendant, or the taking of preliminary proceedings in this Court against Mr Turner for the appointment here of the person who had already been authorised by the Bahamas court to act as receiver of his shares in the parent of the first defendant, is likely to be an essential step in using the processes of this Court to make available the assets of the first defendant to satisfy a judgment against Mr Turner in the Bahamas. Ensuring that the capacity of this Court to give the remedies which would be involved in attempts by such a receiver and manager to get the benefit of the assets of the first defendant is not lessened as a result of disposition of assets between now and the date when such remedies are sought, is within the proper scope of a Mareva order. The same is true for the other types of court process such as recognition of a bankruptcy order made in the Bahamas against Mr Turner through which, in practice, the assets of the first defendant might be reached to allow a judgment obtained in the Bahamas to be satisfied. 44 Mr Levingston, for the first defendant, points to the fact that there has been no undertaking given by the plaintiff to file any proceedings in this court, or any originating process seeking substantive relief in this court. He points to the provisions of Part 28 rule 1 of the Supreme Court Rules 1970, which provides: "(1) In an urgent case, the Court may, on the application of a person who intends to commence proceedings: (a) make any order which the Court might make in proceedings on an application for a writ of habeas corpus ad subjiciendum, (ai) make orders for the custody of minors, (aii) grant an injunction, (aiii) make an order extending the operation of a caveat under: (i) the Real Property Act 1900 , (ii) the Offshore Minerals Act 1999 , or (iii) the Offshore Minerals Act 1994 of the Commonwealth, (b) appoint a receiver, or (c) make orders under rule 2, to the same extent as if the applicant had commenced the proceedings and the application were made in the proceedings. (2) An application under subrule (1) may be made in any Division but shall, so far as practicable, be made in the Division to which the proceedings that are intended to be commenced would be assigned. (3) A person making an application under subrule (1) shall give an undertaking to the Court to file, within 14 days of determination of the application, an originating process commencing proceedings in respect of the subject matter of the application." 45 He submits that the present applicant must fit somewhere within Part 28 rule 1(1), and hence that Part 28 rule 1(3) is applicable to it. It seems to me that the preferable view is that the present proceedings do not fit within Part 28 rule 1(1). The High Court has clearly held in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 that proceedings for a Mareva order are not proceedings for an injunction, and these proceedings fit into no other category of proceedings listed in Part 28 rule 1(1) except possibly Part 28 rule 1(1)(c). Part 28 rule 2 provides: "(1) In proceedings concerning any property, or in proceedings in which any question may arise as to any property, the Court may make orders for the detention, custody or preservation of the property. (2) An order under subrule (1) may authorise any person to enter any land or to do any other thing for the purpose of giving effect to the order. (3) In proceedings concerning the right of any party to a fund, the Court may order that the fund be paid into Court or otherwise secured." 46 When these proceedings at present seek only interlocutory relief, where the order for preservation of the property of the first defendant is the sole relief claimed at present which relates to property, rule 2 is not, it seems to me, applicable. It seems to contemplate that the orders for preservation of property are a subsidiary part of the proceedings, not the whole of them. However, if I am wrong in taking that view, and the proceedings are ones to which Part 28 rule 1(3) applies, there is power in the Court to grant relief from the rules at any time. (Part 1 rule 12.) 47 In circumstances such as the present, it is, in my view, understandable that the plaintiff is not yet ready to start proceedings in this court, and requires some further investigation before it might be in a position to do so. I would grant relief from Part 28 rule 1(3) if the rule on its correct construction applied. 48 Mr Fury, for the plaintiff, makes clear that no decision has been made about whether proceedings seeking substantive relief against the first defendant will eventually be brought in this court, based on a cause of action which the plaintiff alleges against the first defendant. However, when the basis of the present order is that it is one which applies in aid of the Bahamas Mareva order, to protect the ability of this Court to eventually act in aid of any judgment recovered in the Bahamas, it is not necessary for there to be any such proceedings. 49 There is specific evidence of some intent to dispose of Australian assets, on the part of the first defendant. Mr Klinger, the Australian solicitor for the plaintiff, became aware on 17 June 2005 of an advertisement in the North Shore Times for the sale of the Hunter's Hill property of the first defendant. That sale was by tender, with tenders due to close on 27 June 2005. On 28 June 2005 Mr Klinger attended the office of the real estate agent handling negotiations for the sale of that property, and was told that the agent had not exchanged contracts, but was currently negotiating with a number of parties. He asked who was giving the agent instructions, and was informed, "Man-Ling Ing, Derek Turner's wife. She wants me to try and get more." It is agreed between the parties that, as at today, no exchange of contracts has occurred. 50 The contract for sale which the real estate agent is showing to prospective purchasers is one which nominates a 42-day completion period. Mr Levingston submits that there is insufficient risk to assets demonstrated for a Mareva order to be made today. I do not agree. It is exchange of contracts, not settlement of the sale, which could erode equity in the property if the sale were not to be at a proper value. As well, the property of the first defendant could have its equity eroded in various ways other than by exchange of this particular contract. The relevance of the present offering for sale of the property is that, before these proceedings were brought, steps were underway to realise the property. 51 The activities of Mr Turner in the Bahamas provide a further basis for concern in relation to what his intentions might be concerning his assets and those of companies he is involved in. Further, in November 2000, he was party to proceedings in this Court, in which the court declared that he had breached the Corporations Law by carrying on a securities business without a dealer's licence issued by ASIC, and made orders restraining him from dealing in securities, carrying on a futures broking business, operating an investment business, or from operating an unregistered managed investment scheme. Orders were also made requiring him to return money to his former clients. The strange documentation concerning the directorship of the first defendant, referred to at para [10] above, also creates some cause for concern. I am satisfied that there is sufficient evidence of a threat to assets to justify the making, today, of a Mareva order of the freezing type. 52 Mr Levingston submits that that order now on foot is too wide, and should not be extended. He points to evidence filed by the plaintiff that the defendants in the Bahamas proceedings have assets of US$10m, and that the first defendant has Australian assets in excess of US$12m. The implication in his submission is that when all those assets are available a freezing order would be otiose. 53 The evidence to which he points makes clear that it is based upon property title searches conducted in Australia, which are exhibited to the affidavit of the plaintiff in the Bahamas proceedings. The figure of US$12m is derived, I infer given this basis, by totalling the purchase price of the Australian properties of the first defendant, and converting that total to US dollars. Thus, it ignores the fact that those properties are all subject to mortgages. It is not known at present what amount of mortgage they are subject to. Thus, I do not accept that the evidence taken as a whole demonstrates that there is equity in the first defendant's Australian properties in excess of US$12m. The first defendant has not given any evidence of its own means or financial circumstances. 54 Further, the affidavit of the plaintiff in the Bahamas proceedings, which I have referred to, makes clear that its basis for valuing the Bahamas assets is an estimation by local real estate agents of the combined value of all the land in the Bahamas purchased by the defendants or either of them. Again, the situation concerning mortgages over that real estate is not known, so the total value of the parcels of land is not necessarily the value of the equity in them. I do not accept that the value of available assets to meet any judgment is such that no Mareva order is appropriate. 55 Mr Levingston submits, also, that the current order is framed too broadly, by preventing all business activities involving dealing with real estate, including real estate secured by mortgage. That submission has some substance. I would accept that it is appropriate to impose some monetary limitation upon the order. At this stage, I am informed by Mr Fury that the amount which his client will be seeking to recover in the Bahamas is his principal of US$4.7m, together with interest and costs. He estimates that would total of the order of US$5.5m. 56 While it would be possible for an Australian court to issue a Mareva order which prohibited a person from disposing of assets so as to reduce the value of that person's remaining assets below some figure expressed in United States dollars, in my view it is preferable not to do so. The terms of an order should make it quite clear to the recipient of the order just what the recipient is required to do, without needing to perform calculations of currency conversions and make predictions concerning fluctuations in the rates of currency conversion. In my view, it is preferable to express the limit in Australian dollars. Further, it is appropriate in framing the order to recognise the possibility of some movement in the exchange rate between the United States dollar and the Australian dollar, between today and the time when any Australian assets might ultimately be called on. 57 The current exchange rate is of the order of 75 American cents to the Australian dollar. 58 The order which the plaintiff asks for today is one which would endure only for three weeks. However, it is contemplated that at the end of that three week period further extensions might be sought. That possibility seems to be a realistic one. It would be a mistake, in my view, to deal with the possibility of exchange rate movement by looking only at the possibility of what the movement might be in the next three weeks. In my view the appropriate course is to modify the order so that, in substance, it prohibits dealings with property so as to reduce the net value of the equity in the total assets of the first defendant to a sum below $8.5m. 59 Mr Levingston also submits that the plaintiff has been dilatory in bringing on the present proceedings, and for that reason should be denied relief. He points out that the various searches of New South Wales properties of the first defendant, which were part of the evidence in the Bahamas proceedings, were carried out on 1 June 2005. I do not accept that there has been any undue delay in bringing the present proceedings. A significant part of the basis for these proceedings is the Mareva order of the Bahamas court, which was not made until 22 June 2005. It would not have been possible for these proceedings to be begun before then, in their present form. Nor do I accept that, given the type of case which a plaintiff in the present type of proceedings seeks to bring, including in particular the way in which the evidence is not readily accessible to it, there has been any undue delay since then. 60 He submits that the present order should be subjected to some additional carve out, other than for expenses incurred in the ordinary course of business and legal expenses. When the first defendant is a corporation, there is no need for the carve out commonly made in Mareva orders against natural persons, relating to ordinary living expenses. He makes no proposal for any specific other carve outs, nor is there evidence to support a need for some particular extra limitation. In those circumstances I will not impose any. However, the parties will have liberty to apply, and when and if any specific limitation is sought to be made to the order beyond that which is made at the moment, an application to do so can be considered on its merits. 61 As well, Mr Levingston submits that, because the plaintiff is a permanent resident of the Bahamas and there is no evidence of any assets within the jurisdiction, the court should require more than a personal undertaking as to damages. He submits that the appropriate order is to require the defendant's solicitor to give an undertaking as to damages, and points to the practice in the Admiralty jurisdiction whereby, under the Admiralty Rules 1988 (Cth), Rule 39(1), and Form 12, a solicitor seeking an order to arrest a ship must undertake personally to pay the fees and expenses of the marshal in complying with the application. He points to Patrick Stevedores No. 2 Pty Ltd v MV Turakina [1998] 154 ALR 514; (1998) 84 FCR 493, and Patrick Stevedores No 2 Pty Ltd v Proceeds of Sale of the vessel MV Skulptor Konenkov (1998) 79 FCR 560; (1998) 161 ALR 131 as examples of cases where such undertakings were not only required but enforced. 62 The form of undertaking which is required to be given by a solicitor under the Admiralty Rules is much more limited than the form of undertaking involved in the usual undertaking as to damages. However, it is not necessary to consider this further, because the plaintiff's solicitor declines to give any such undertaking. 63 It is, in my view, appropriate that the plaintiff's undertaking as to damages be secured. The security which is sought is in the sum of $50,000 at this stage. Providing security in that form is in principle acceptable to the plaintiff. I will, therefore, not consider further the appropriateness of the amount. The plaintiff might need a couple of days to actually provide the security, in the form of a bank guarantee, but in my view it would be appropriate to make the order now, on the basis that if a satisfactory bank guarantee is not provided to the defendant in the course of the next week for the sum of $50,000 then application to discharge the order may be made. 64 For these reasons, I shall make a Mareva order, of the general kind indicated in these reasons for judgment. * * * * * * * * * * 65 I make orders in accordance with document initialled by me dated today's date and also signed by counsel for the plaintiff and the first defendant. That document is in a form agreed to accord with the substance of the conclusions I have arrived at. These orders may be entered forthwith. **********

Davis v Turning Properties

At a glance

Court

Decision date

Before

Source

Judgment (14 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (18)

Cited By (9)