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[2013] WASC 339
General information, not legal advice.
Supreme Court of WA
2013-09-12
Pritchard J
Original judgment source is linked above.
(This judgment was delivered extemporaneously on 13 August 2013 and has been edited from the transcript.)
1 PRITCHARD J: The plaintiff has brought an action against the defendant seeking orders which include:
(i) a declaration that the defendant holds on trust for the plaintiff property and money which the plaintiff alleges was wrongfully taken or diverted from it, and proceeds gained by the defendant from the sale or disposal of the plaintiff's property;
(ii) damages for alleged conversion of the plaintiff's property by the defendant;
(iii) equitable compensation arising from breaches by the defendant of duties of trust and confidence she is said to have owed to the plaintiff; and
(iv) an account of the profits received by the defendant.
2 The causes of action alleged by the plaintiff are said to arise from conduct of the defendant whilst she was employed by the plaintiff between April 2009 and April 2011.
3 Nineteen criminal charges have now been laid against the defendant arising from the same conduct. No evidence was adduced as to the stage at which those criminal proceedings have reached. However, the present civil action has been stayed pending the resolution of those criminal proceedings.
4 The plaintiff has applied for a freezing order to prohibit the defendant from removing from Australia or disposing of, dealing with, or diminishing the value of her assets in Australia up to an unencumbered value of $1.1 million, which is less than the estimated damages the plaintiff seeks from the defendant in this action.
5 The application was made on notice to the defendant, who was represented by counsel at the hearing of the application, and who opposed the application. Counsel for each of the parties was of the view that the stay of the civil action did not preclude the plaintiff from bringing the present application for a freezing order, which is designed to protect the processes of the Court in enforcing its judgments. I have dealt with the matter on that basis.
6 For the reasons outlined below, I have decided that the plaintiff's application for a freezing order should be granted. I will hear from counsel in due course in relation to the precise terms of the orders which should be made.
7 In these reasons for decision, I deal with five matters:
1. The Court's jurisdiction to make freezing orders.
8 The plaintiff relies on the Court's jurisdiction to make freezing orders under O 52A of the Rules of the Supreme Court 1971 (WA). The purpose of a freezing order is to prevent the frustration or inhibition of the Court's process by seeking to meet a danger that a judgment, or prospective judgment of the Court, will be wholly or partly unsatisfied.[1] A freezing order may be made under O 52A r 5 against a prospective judgment debtor, arising from a cause of action in the Court, if certain requirements are met, namely:
(i) The applicant must have a good arguable case on an accrued or prospective cause of action that is justiciable in the Court;
(ii) The Court must be satisfied having regard to all of the circumstances that there is a danger that the prospective judgment will be wholly or partly unsatisfied because, amongst other things, the prospective judgment debtor may abscond, or because the assets of the prospective judgment debtor may be disposed of, dealt with, or diminished in value;
(iii) Given that a freezing order is a discretionary remedy, if the other prerequisites are made out, the balance of convenience must favour the grant of the freezing order.
2. The issues in dispute and the evidence relied upon by the plaintiff in support of the application. (a) The issues in dispute
9 The defendant did not dispute that the plaintiff had a good arguable case, having regard to the authorities in relation to the relatively low threshold that that test involves.[2]
10 The only issues in contention between the parties were whether, on the evidence relied upon by the plaintiff, it could be said that there was a danger that a prospective judgment against the defendant would be wholly or partly unsatisfied because the defendant may abscond, or because the assets of the defendant may be disposed of, dealt with, or diminished in value, and whether the balance of convenience favoured the grant of the freezing order.
11 In support of its application, the plaintiff relied on an affidavit of Mr Paul Williams sworn 9 August 2013, an affidavit of Mr Alwyn Duke sworn 9 August 2013, an affidavit of the defendant sworn 21 December 2012, and an affidavit of Mr Graeme Harwood (the defendant's husband) sworn 6 December 2012 in related proceedings (which involve an action and counterclaim between the defendant's husband and the plaintiff).
12 The defendant did not file any affidavits in opposition to the application, but submitted that the evidence relied upon by the plaintiff was not sufficient to establish a danger that any prospective judgment against the defendant would be wholly or partly unsatisfied. The defendant further submitted that on the basis of the evidence relied upon by the plaintiff, the balance of convenience did not support the making of the freezing orders.
(b) The evidence relied upon by the plaintiff in support of its application for a freezing order
13 The evidence relied upon by the plaintiff was to the effect that the defendant was employed as the accounts administrator for the plaintiff's business and, in the course of her employment, she was able to view and reconcile the plaintiff's bank accounts, communicate with the plaintiff's bank on its behalf, carry out tasks related to the plaintiff's banking, and had use of an email address for the plaintiff's business.
14 In his affidavit, Mr Duke deposed that the defendant asked him to sign an authorisation for an EFTPOS machine in the plaintiff's name to be installed at a shop which Mr Duke believed would be operated as an outlet of the plaintiff's business. Mr Duke signed that authorisation and believed that the EFTPOS machine would deposit funds from the sale of the plaintiff's stock to one of its bank accounts. Mr Duke's understanding was that the plaintiff's bank required proof that the bank account nominated for the EFTPOS machine belonged to the plaintiff, and believed that the defendant used the plaintiff's email address to confirm that that was so. According to Mr Duke, it turned out that the account linked to the EFTPOS machine was not the plaintiff's account, and over six months or so, more than $365,000 was deposited into that account. Mr Duke stated that he believed that that account was conducted by the defendant.
15 Mr Duke also claimed that, during the course of her employment, the defendant processed and caused the plaintiff to pay invoices from her husband (who was also employed by the plaintiff) in relation to false expense claims, and that her husband had been charged with fraud in relation to a number of these claims. The plaintiff claims that the defendant knew or ought to have known that these claims were false, and that she knowingly assisted her husband to defraud the plaintiff.
16 Mr Duke deposed that the plaintiff's claim for damages against the defendant encompasses the following:
(i) approximately $450,000 worth of stock and sale proceeds which were allegedly misappropriated by the defendant and Mr A;
(ii) a further amount of $315,000 in sale proceeds allegedly taken by the defendant and Mr A; and
(iii) fees and expenses paid to Mr A totalling approximately $690,000.
17 The total amount of these claims is approximately $1.455 million which, as I have already observed, is more than the amount referred to in the freezing order now sought by the plaintiff.
18 Mr Duke also deposed that this action, and the civil proceedings brought against the plaintiff by the defendant's husband, were stayed by consent in view of the pending criminal proceedings against the defendant and her husband, in return for an undertaking provided by the defendant in March 2013 (the undertaking). The undertaking was in terms that the defendant would 'not enter into a contract for sale of, transfer, encumber or further encumber, or otherwise deal with' a property in Reserve Street Bicton of which the defendant is the sole registered proprietor (the Bicton property) or cause, allow or permit any transfer, encumbrance, or dealing with the Bicton property unless she had given the plaintiff's solicitors 14 days written notice of her intention to do so.
19 Mr Duke deposed that he is aware that the defendant is the sole registered proprietor of the Bicton property, and also has a half interest in a factory unit at Unit 3, 13 Beale Way, Rockingham.
20 Mr Duke also deposed that he believed that the Bicton property had a value of $2 million as a result of a kerbside appraisal conducted by a real estate agent earlier this year, and that the defendant's solicitor had told his solicitor that the current value of a mortgage over the Bicton property was $300,000.
21 Mr Duke also deposed that he believed that the defendant and her husband had the means, ability and motive to abscond as their passports had not been surrendered as a condition of their bail, and that the defendant's husband has business interests in Cambodia.
22 Finally, Mr Duke deposed that he had become aware that the defendant had applied for finance with which to purchase a factory unit at Unit 2, 13 Beale Way, Rockingham (the Rockingham property), and had volunteered or agreed to provide the Bicton property as additional security for that loan. Mr Duke deposed that he believed that the defendant had done so without providing the plaintiff with notice of her intention to do so in accordance with the undertaking.
23 In his affidavit, Mr Williams deposed that he had made inquiries which revealed:
(i) that the estimated sale price of the Bicton property was $2 million;
(ii) that the title of that property was subject to a first registered mortgage to Bankwest which was stamped at $1 million;
(iii) that the defendant asserted that the current balance of the mortgage was $300,000;
(iv) that the defendant and her brother had agreed to purchase the Rockingham property for $265,000; and
(v) that some time prior to 19 July 2013 (which was when unconditional finance approval was received for a loan of $265,000) the defendant volunteered or agreed to provide the Bicton property as additional security for a loan for that amount.
24 The plaintiff also relied on the affidavits sworn by the defendant and her husband, in relation to their applications to stay the civil proceedings, insofar as they deposed that there were criminal proceedings against them, and that the defendant's husband had borrowed $50,000 from family members and had taken out a loan to pay his legal expenses.
25 The 19 offences with which the defendant has been charged include nine offences of intent to defraud, nine offences of stealing as a servant, and one offence of causing detriment to a person by fraud. The defendant denies these criminal charges.
26 There are two bases for the plaintiff's claim that there exists a danger that a prospective judgment against the defendant would be wholly or partly unsatisfied because the assets of the prospective judgment debtor may be dealt with or diminished in value.
27 First, counsel for the plaintiff contended that the defendant had every reason to dissipate the value of the Bicton property to cash and to abscond, given that she and her husband's passports had not been surrendered as part of their bail conditions, and that the defendant's husband had business interests in Cambodia.
28 I am not persuaded that the plaintiff has established, on this basis, that there is a danger that a prospective judgment against the defendant would be unsatisfied. The affidavit sworn by the defendant's husband on 21 December 2012 indicates that the defendant and her husband are both employed, and that they have two children, one of whom is at school. Furthermore, the defendant owns real property in Western Australia. She clearly has significant links to Western Australia. There is no evidence suggesting that the defendant is taking any steps to leave the jurisdiction or to sell her assets. In these circumstances, I am not satisfied that there exists a danger that any prospective judgment would be unsatisfied by virtue of the defendant absconding.
29 The second basis upon which counsel for the plaintiff contended that there was a danger that a prospective judgment against the defendant would be unsatisfied was that the evidence supported the conclusion that the assets of the defendant may be disposed of, or dealt with or diminished in value. This submission was based on three considerations.
30 The first derived from the circumstances of the alleged offending. In this respect, counsel for the plaintiff pointed to the alleged dishonesty on the part of the defendant, the fact that the alleged offending took place over a lengthy period of time and involved a significant amount of money, and the fact that the alleged offending by the defendant involved misleading a bank. In other words, counsel for the plaintiff relied effectively on the fact that there was a good arguable case, and on the circumstances of that alleged offending, to support the conclusion of a danger that the prospective judgment debt against the defendant would be unsatisfied by virtue of a diminution in the value of the defendant's property.
31 The second consideration relied upon by counsel for the plaintiff was that there was equity in the Bicton property, and that the plaintiff could access that equity by seeking a further loan secured by an additional mortgage over that property.
32 The third consideration relied upon by counsel for the plaintiff was that the defendant had not complied with the undertaking she had given to provide notice to the plaintiff's solicitors of her intention to encumber the Bicton property. He submitted that the evidence suggested that the defendant had an ability to draw down on her mortgage without the plaintiff's knowledge.
4. Whether the evidence supports the conclusion that there is a danger that any prospective judgment against the defendant would be wholly or partly unsatisfied
33 Counsel for the defendant submitted that the plaintiff had complied with her undertaking because she had not yet entered into any agreement with a bank to provide the Bicton property as security for the loan over the Rockingham property, and had provided 14 days' notice to the plaintiff's solicitors of her intention to do so. Counsel for the defendant submitted that this demonstrated that the defendant had no intention of diminishing the value of her assets so as to frustrate any judgment that might be obtained. There was no evidence that the defendant had in fact yet encumbered the Bicton property by providing it as a security for the loan in respect of the Rockingham property.
34 I accept that the fact that the defendant provided notice in accordance with the undertaking militates to some extent against the conclusion that the defendant may diminish the value of her assets so as to frustrate any prospective judgment debt against her. However, that leaves the question of what can be made of the alleged dishonesty of the defendant in relation to the alleged criminal conduct with which she has been charged, combined with the available equity in the Bicton property. Counsel for the defendant submitted that the evidence did not support the conclusion that there existed a danger of dissipation of the assets.
35 The interests of justice may support the granting of a freezing order to prevent the dissipation of assets in the hearing of an action even though the risk of dissipation is less probable than not.[3] As for the evidence to establish the risk of dissipation, it is rarely the case that there is any direct evidence to establish a danger of dissipation of assets. It is more often the case that the Court will be invited to draw the inference that a danger exists having regard to other conduct of a party. In this respect, it is well established that in determining whether there is a danger of a party disposing of assets in order to defeat a judgment, the court is permitted to consider the evidence adduced by the applicant to establish its claim to the substantive relief sought. In Patterson v BTR Engineering (Australia) Ltd[4] at [326], Meagher JA observed:
Normally proof of the first ingredient alone [i.e. a good arguable case against the defendant] will not suffice; normally one cannot infer a risk of dissipation of assets from the mere fact that the plaintiff has a prima facie cause of action. In normal circumstances this is particularly so in cases like the present, where there is no evidence at all what the defendant's assets are. However, in exceptional cases (of which the present is unfortunately one) one can infer the existence of the latter ingredient partly or wholly from proof of the former. This may well be the situation in all cases where the plaintiff's prima facie case against the defendant involves proof of gross dishonesty.
36 The present case is one which I think is very much a borderline case. The only evidence before me in relation to the case against the defendant is that which I have outlined. That evidence is wholly untested. The criminal charges are denied by the defendant. Nevertheless, the allegations involve serious dishonesty on the part of the defendant, a large sum of money, and alleged offending on numerous occasions over a lengthy period of time when the defendant occupied a position of considerable trust in her employment for the plaintiff. Although it is not entirely clear that the alleged offending involved the direct deception of a bank, in the sense that the bank itself was deceived as to the actual account where the money was going, the allegations involve the defendant providing information to a bank to facilitate her defrauding the plaintiff. I do not attempt to make any findings as to the strength of the criminal case against the defendant, nor would it be appropriate that I do so.
37 Nevertheless, I find myself in the position where, as Milden J in Mitchell v Saengjan[5] observed:
[T]hese factors together give rise to such a feeling of unease that I consider that there is sufficient danger that the defendant will deal with, in some fashion, her assets in such a way that the plaintiff, if it were to succeed in this action, will not be able to have the judgment satisfied.
38 Although this appears to be one of those cases where the risk of dissipation may be less probable than not, I am nevertheless satisfied that there exists a danger that any prospective judgment against the defendant will be wholly or partly unsatisfied because the assets of the defendant may be dealt with or diminished in value.
5. Whether the balance of convenience favours the making of freezing orders
39 The starting point is that the balance of convenience favours the making of freezing orders because, without such orders, there is a risk that any prospective judgment will be unsatisfied. Counsel for the defendant submitted that the balance of convenience weighed against the making of the orders because if the defendant were unable to offer the Bicton property as additional security for the loan in respect of the Rockingham property, she would be unable to perform the contract for the purchase of that property and may suffer damage as a consequence. There are, however, two difficulties with that submission.
40 First, the orders sought do not seek to prohibit any dealings with the defendant's property, but only dealings with that property which would diminish its value to less than $1.1 million. The defendant submitted that there was no evidence that the value of the Bicton property is as much as the $2 million which the plaintiff contends, as it was based merely on a kerbside valuation by a real estate agent, the report of which was not in evidence. However, there was no evidence by the defendant as to the value of the Bicton property either, and no evidence as to whether there is really a prospect that if the freezing order is made the Bicton property cannot be used as security for the loan in respect of the Rockingham property.
41 There was also no evidence as to whether alternative options for finance might be available. In this respect, I note that the defendant is purchasing that property as a tenant in common with her brother, and that the Rockingham property is itself being offered as the first security in respect of the loan for the purchase of that property.
42 Secondly, if it appears that the defendant is liable to suffer damages as a result of the existence of the freezing order, that contingency may be accounted for by a requirement that the plaintiff offer some security for the freezing order. For the reasons I have given, it does not presently appear that the defendant will suffer any such damage, but that can be addressed in due course if necessary.
43 Finally, in assessing the balance of convenience, I note two additional considerations.
44 First, counsel for the defendant submitted that the defendant has no plans to dispose of or further encumber the Bicton property or other property. In addition, subject to any encumbrance on the defendant's property leaving equity to the value of $1.1 million, the order sought by the plaintiff does not seek to prohibit the defendant from further encumbering her property, at least to that limited extent. In this sense, it is not apparent that the making of the freezing order would have any present material impact on the defendant.
45 Secondly, consistent with the usual form of freezing orders, the freezing order sought in this case does not, by its terms, seek to prevent the defendant from paying her ordinary living expenses and her reasonable legal expenses. In that sense, it is not apparent that the freezing order would have any material adverse effect on the defendant's ordinary activities or the defence of the criminal charges against her.
46 The balance of convenience favours the making of the freezing order sought by the plaintiff.
CITATION : FINN KAYAKS PTY LTD -v- DAWN HARWOOD [2013] WASC 339 (S)
Application for suppression order in respect of publication of reasons for decision - Potential prejudice to criminal proceedings - Anonymisation of reasons for decision where allegations of fraud are made
Orders made for partial suppression of the reasons for decision
(This judgment was delivered extemporaneously on 12 September 2013 and has been edited from the transcript.)
1 PRITCHARD J: In this matter, the plaintiff successfully applied for a freezing order to prohibit the defendant from disposing of, or dealing with, or diminishing the value of her assets in Australia up to an unencumbered value. I delivered oral reasons for decision at the conclusion of the hearing on 13 August 2013 (the reasons for decision). Apart from counsel for the parties and the transcript officer and court staff, no one else was present in Court at that time.
2 After I delivered my reasons for decision, counsel for the defendant indicated that she wished to seek a suppression order in respect of the publication of the reasons for decision. I invited counsel to await transcription of the reasons for decision, at which time I would provide the parties with the opportunity to make an application for whole or partial suppression of the reasons for decision, and to make such submissions as they saw fit in relation to any such application.
3 The reasons for decision which I gave are now ready for publication. They have been published confidentially to the solicitors for the parties, but have not yet been entered onto the Court's database or, in other words, published to the world at large including by being made available on the internet.
4 The defendant has now applied by chamber summons, dated 11 September 2013, for an order that the entirety of the reasons for decision be suppressed until the conclusion of the criminal proceedings against the defendant.
5 The ground for the suppression application is that it is just for the reasons to be suppressed in view of the criminal proceedings, and specifically that the judgment contains information which might be prejudicial to the defendant's criminal proceedings, which are yet to be determined. In particular, that information includes the observation that the defendant did not dispute, for the purposes of the freezing order application, that the plaintiff had a good arguable case on the cause of action being pursued in this Court. That cause of action includes allegations of dishonest or fraudulent conduct by the defendant which, as I understand the position, reflect the basis for the criminal charges now brought against the defendant.
6 The defendant's application for a suppression order was not supported by an affidavit. Instead, the defendant relies on the content of the reasons for decision, and the material already before the Court in the plaintiff's application for the freezing order (which included information as to the criminal proceedings brought against the defendant).
7 Counsel for the defendant submits that the potential prejudice to the criminal proceedings as a result of publication of the reasons for decision arises from the fact that possible witnesses to the criminal proceedings may have access to the reasons for decision, or may become aware of them prior to the commencement of the criminal proceedings. I understand the submission to be that the information in the reasons for decision may affect the evidence of those witnesses in some way.
8 In addition, counsel for the defendant points to the fact that the publication of the reasons for decision in a way which will identify the defendant will result in the publication of very serious allegations of dishonesty and fraud, which have not been tested and which would be damaging to the defendant's reputation.
9 At the commencement of the hearing today counsel for the defendant provided a minute of proposed orders, in which she proposed an alternative course to suppression of the entirety of the reasons for decision. In summary, she sought to anonymise the names of the parties to these proceedings and to suppress references in the reasons for decisions to certain information which would have the potential to identify the defendant such as her name, the address of properties owned by her, and identifying details in relation to persons connected with her.
10 The source of the Court's power to suppress lies in the inherent jurisdiction of the Court.
11 In addition, the Court's Consolidated Practice Directions at 8.2.1 are also of present relevance insofar as they deal with the situation where allegations of fraud are made against a person in proceedings. The Practice Directions contemplate the anonymisation of the reasons for decision published by the Court in relation to claims based on allegations of fraud, or an order that reasons not be entered on the Court's database. Paragraph 5 of Practice Direction 8.2.1 provides:
Where reasons for decision to which this Practice Direction relates -
(a) have been published to the parties; or
(b) will be published to the parties,
a party or other person who has been or may reasonably expect to be identified in the reasons, may apply to the judicial officer for an order that the version of the reasons which are entered on the Court's database not identify that person, or if that is not practicable, for an order that the reasons not be entered on the Court's database.
12 The power to suppress or to restrict the publication of part of a judgment is to be exercised with great caution, because it involves a departure from the principle of open justice. Le Miere J discussed the principle of open justice in McJannett v Daley [No 2][6] at [3] to [4]:
It is not enough that the hearing of a case has been in public. The process of reasoning which has decided the case must itself be exposed to the light of day, so that all concerned may understand what principles and practices of law and logic are guiding the courts, and so that full publicity may be achieved which provides, on the one hand, a powerful protection against any tendency to judicial autocracy and against any erroneous suspicion of judicial wrongdoing and, on the other hand, an effective stimulant to judicial high performance (790).
13 However, as is noted in the quoted passage, the principle of open justice is not absolute. The decision whether to make an order for suppression of a Court's reasons for decision is one which involves an exercise of discretion having regard to competing public interests. In this case, the competing interests include the public interest in open justice (to which I have already referred) and the public interest in ensuring that an accused person has a fair trial. The exercise of discretion is dependent, of course, on the particular facts of the case.
14 For the reasons which follow, I am persuaded that the defendant's application for suppression should be granted, to the limited extent which is reflected in the minute of orders now proposed by the defendant's counsel.
15 First, I accept that publication of identifying information in relation to the defendant would have the potential to adversely affect the defendant's fair trial in the criminal proceedings, particularly having regard to the observation in the reasons for decision that the defendant did not contest the existence of the plaintiff's good arguable case for the purposes of the freezing order.
16 Secondly, the allegations referred to in the reasons for decision involve serious allegations of fraud and dishonesty which are as yet untested. Although I place far less weight on this consideration, the possibility exists that those allegations will adversely affect the reputation of the defendant if published at the present time.
17 Thirdly, the suppression order which is sought is confined to specific and limited personal information about the defendant or information which could result in her identity being ascertained. Suppression of identifying information in this limited way is consistent with Practice Direction 8.2.1 in respect to allegations of fraud.
18 Fourthly, the reasons for decision will be intelligible without the information which is the subject of the minute of proposed orders. The limited suppression that is sought would permit the reader to understand the basis for the grant of the freezing order, but without prejudice to the defendant's position.
19 Fifthly and importantly, the suppression order is to be of limited duration until the criminal proceedings against the defendant have been completed.
20 Finally, while I will hear from counsel in this respect, I do not consider that there is any need to suppress these reasons in relation to nonpublication and suppression. I have deliberately refrained from referring to the specific personal information about the defendant which is to be suppressed, so that my reasons in respect to the suppression order can be published, and so that those reasons will be clear and transparent. The only qualification to that is that the names of the parties in the title of these reasons should be anonymised when these reasons are published.
[1] Rules of the Supreme Court 1971 (WA), O 52A r 2(i).
[2] BCBC Singapore Pte Ltd v PT Bayan Resources TBK (No 3) [2013] WASC 239 [75] (Le Miere J).
[3] Patterson v BTR Engineering (Australia) Ltd (1989) 18 NSWLR 319 [325] (Gleeson CJ); BCBC Singapore Pte Ltd v PT Bayan Resources TBK (No 3) [2013] WASC 239 [97] (Le Miere J). See also, to similar effect, Uniflex (Australia) Pty Ltd v Hanneybel (Unreported, WASC, Library No 980465, 17 August 1998) 9 (White J); Mort v Woolf [2002] VSC 503 [2], [8] - [9] (Beach J); Victoria University of Technology v Wilson [2003] VSC 299 [33] (Redlich J).
[4] Patterson v BTR Engineering (Australia) Ltd (1989) 18 NSWLR 319.
[5] Mitchell v Saengjan [1994] NTSC 34; (1994) 117 FLR 273, 284.
[6] McJannett v Daley [No 2] [2012] WASC 386 (S).
(2011) 243 CLR 506
(1989) 18 NSWLR 319
(1994) 117 FLR 273