Finn & Ors v Carelli

Frigo v Culhaci NSWCA, 17 July 1998, unreported, BC9803225 CASES CITED : Hortico (Aust) Pty Ltd v Energy Equipment Co (Aust) Pty Ltd (1985) 1 NSWLR 545 Ninemia Maritime Corp v Trave GmbH & Co Kg (The Niedersachsen) [1984] 1 All ER 398 Patterson v BTR Engineering (Australia) Ltd (1989) 18 NSWLR 319

Gary Finn (first plaintiff) PARTIES : Donna Finn (second plaintiff) FS Architects Pty Ltd (third plaintiff) Jill Carelli (defendant)

COUNSEL : R Watson (sol) J Carelli (in person)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1391/07 Gary Finn & Ors v Jill Carelli JUDGMENT (ex tempore) 1 HIS HONOUR: The plaintiffs Gary Finn, Donna Finn and FS Architects Pty Limited move for the continuation of a freezing order initially made by the Chief Judge on 7 February 2007 and continued to today by Hamilton J against the defendant Jill Carelli who is a judgment debtor to the present plaintiffs in proceedings in the District Court of New South Wales in which, on 1 December 2006, Ashford DCJ gave judgment for the cross-claimants in those proceedings (who are the present plaintiffs), against each of Rockcote Enterprises Pty Ltd, Jonel Srbin and the present defendant, for $107,595 plus costs. The plaintiffs assert that their costs in the District Court proceedings exceeded $150,000. The defendant has filed a Notice of Appeal without appointment in the Court of Appeal from the judgment against her in the District Court proceedings, having obtained an extension of time in which to do so. Grounds of appeal have not yet been articulated. Although it is not entirely clear why the jurisdiction of this Court has been invoked for the freezing order, since the District Court could have granted such an order in aid of its judgment, I proceed on the basis that it is sought in this Court's general jurisdiction to do all things necessary to do justice within the State, which is at least one of the jurisdictional bases for a Mareeva order, and that this Court's jurisdiction is invoked effectively in aid of the judgment of the District Court. 2 On an application for a freezing order, which now seems to be the fashionable term for an asset preservation order or a Mareva order, as a general rule an applicant has to establish, first, a prima facie cause of action against the respondent, and secondly, a danger that by reason of the respondent absconding or of assets being removed from the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the applicant, if ultimately successful, will not be able to have a judgment in its favour satisfied. Ordinarily there must be evidence of at least a more than usual danger of assets being removed or dissipated [Frigo v Culhaci NSWCA, 17 July 1998, unreported, BC9803225, although doubt as to the utility of that test was expressed by Gleeson CJ in Patterson v BTR Engineering (Australia) Ltd (1989) 18 NSWLR 319, 321-322].

3 The jurisdiction is now also contained in the rules of Court [see Uniform Civil Procedure Rules 2005(NSW), r 25.14]. I do not take the Rule to express any different test or contain any different requirement from those which have been described for an asset preservation order at general law. 4 It is not necessary for an applicant to show that the respondent has a positive intention of evading a judgment, and it is sufficient to show that the course on which the respondent proposes to embark is, objectively speaking, calculated to have that effect. But as the Court of Appeal made clear in Frigo v Culhaci, an applicant must establish, by evidence and not mere assertion, that there is a real danger that by reason of the respondent absconding or otherwise dealing with assets, the applicant will not be able to have its judgment satisfied. While acknowledging that there has been much debate as to the precise degree to which that has to be shown, the Court emphasised that mere assertion that the defendant was likely to put assets beyond the plaintiff's reach was inadequate, for which the Court cited Ninemia Maritime Corp v Trave GmbH & Co Kg (The Niedersachsen) [1984] 1 All ER 398, as well as Patterson v BTR Engineering. 5 It is important to bear in mind that the jurisdiction to make orders of this type was never intended simply to enable a plaintiff or judgment debtor to obtain security for its judgment in advance of execution, but was firmly founded on the jurisdiction of the Court to prevent abuses of its process by preventing a defendant or judgment debtor from embarking on a course of conduct which would have the effect of defeating the Court's jurisdiction. It also needs to be borne in mind that the mere fact that a judgment may not be satisfied for reasons of impecuniosity does not mean that there is an abuse of process. Indeed, it has been pointed out on several occasions that the prospect of impending insolvency is not a reason to grant a Mareeva injunction [Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545, 558]. 6 As I have said, the first element to be established is that the applicant has a prima facie cause of action against the defendant. In this case there is no difficulty with that conclusion, indeed, the applicant is in the relatively stronger position of having a judgment against the respondent. While an appeal from that judgment is pending, as I have said, the grounds of appeal have not been articulated and even if they had, the judgment was given after a contested hearing and for reasons which have been explained at length by Ashford DCJ. In those circumstances, there is no difficulty in being satisfied that the applicant has not only a prima facie cause of action, but a judgment, against the respondent. 7 Before I come to the second element, namely the risk of dissipation, I should address some ancillary issues that were raised by the respondent. As I have indicated in the course of argument, I do not accept that paragraph 10 of the existing order is of no utility or effect, an argument that was advanced on the basis that the order does not restrain dissipation of income. The order, as paragraph 7 explains, relates to all the respondent's assets, and money or other property received from a source of income becomes an asset when it is received. Indeed, debts due to the respondent are assets of the respondent even before the money is paid. Accordingly, I reject the submission that in purporting to limit to $500 a week expenditure and ordinary living expenses, the order has no effect or is meaningless. 8 Next, it was submitted that the applicant had been guilty of non-disclosure on the ex parte application for the injunction, and that the order ought to be set aside on that ground. The primary basis for this contention was that the applicant had put before the Court as an annexure to an affidavit a letter from a solicitor who acted for Rockcote Enterprises in the proceedings in the District Court and the appeal and who, in that letter, reported a conversation which that solicitor said she had with Ms Carelli, the present respondent/defendant. It is fair to say that, as reported in the letter, that conversation may well have been a powerful influence on a judge hearing an application for a freezing order. The respondent has put before me in an affidavit a different version of that conversation which is exculpatory, and at least on this application her version has not been challenged. It may well be that had that version been before the Chief Judge when the ex parte application was made, that relief would not have been granted; but there is no reason for supposing that the applicants had any reason to think that the material they were putting before the Court on that occasion was other than correct, or that there was anything else that required to be disclosed. I do not think that a case of non-disclosure such as would warrant setting aside an ex parte injunction has been made out. 9 I turn then to the question of the risk of dissipation. The applicants rely on the following matters: first, the sale of the respondent's house; secondly, the expenditure of the proceeds of that sale; thirdly, the suggestion that the applicant had a "big night at Star City"; and fourthly, a finding adverse to the applicant's credit made in the District Court proceedings. 10 So far as the sale of the house and application of its proceeds is concerned, it appears that the respondent listed the property for sale in about November 2006, before the District Court judgment was delivered on 1 December 2006. The sale was completed on 23 January 2007. The selling price was $460,000. From the proceeds, the outstanding mortgage to Perpetual Trustees Victoria Limited of $424,551 was discharged and various costs and adjustments on settlement were paid. There remained available to the respondent a total of $34,325. She has disbursed that in payment of agent's fees of $8,000, builder's costs of $22,800, conveyancing costs, replacing a car windscreen, about $1,500 on general living expenses and about $900 on a weekend at Star City when she saw Priscilla Queen of the Desert. The $8,000 paid to the agent was an agreed flat fee for the agent acting on the sale. The $22,800 paid to the builder were the costs of putting the property into order so that it could be sold, payment of which the builder agreed to defer until sale of the property, but which he was pressing for by the time of the sale. 11 Prior to the sale, the respondent had defaulted on a instalment in respect of the mortgage which, by December 2006, nearly exhausted the equity in the house. The sale of the house was, in those circumstances, inevitable and does not found any inference of an intention to dissipate assets in such a way as to defeat the plaintiff's judgment. Similarly, the manner in which the proceeds of the sale have been applied - which, on the evidence before me, is in payment of proper debts and liabilities - does not found any such inference. 12 At the time that the matter was before the Chief Judge, there was some evidence - in the form of a letter to the plaintiff's solicitors from Turnbull Bowles lawyers, the author of which, as I have said, claimed to have had a conversation on the topic with the respondent - that Ms Carelli had indicated that the preceding weekend she had had "a big weekend at Star City and it was all gone." Ms Carelli has given a much fuller account of that conversation in her affidavit, and has produced documentary evidence that she attended Star City to see Priscilla Queen of the Desert that weekend. On the evidence now before the Court, there is no sufficient reason to think that Ms Carelli gambled away any significant sum of money on that occasion.

13 So far as the adverse finding of credit of Ashford DCJ is concerned, the circumstance that one Judge in one proceeding has disbelieved a witness is simply not admissible as evidence relevant to credit in other proceedings. In any event, the judgment of Ashford DCJ is not admissible as evidence to establish that matter [(NSW) Evidence Act 1995, s 91]. 14 The respondent is a barrister who has been in practice since late 2005. Her tax return for the period 30 June 2006 shows a net loss from her professional practice, and she was then and continues to be in receipt of a parenting payment from Centrelink and child support in respect of two children in her care. She has sworn an affidavit which descends into considerable detail in apparently setting out her financial position. She has some personal effects and appliances, professional clothing and books, a motor vehicle (the debt on which exceeds the value), and a very little jewellery. Her affidavit did not depose to what outstanding fees are due to her, but she indicated from the bar table that as best she could think at the moment, they might be in the order of about $9,000. The defendant's responsive affidavit provides a great deal more detail and information about her position than one usually sees in an affidavit of a respondent to a Mareeva application. 15 The respondent contended that the injunction should be refused on the grounds of laches but, as Mr Watson for the applicant explained, the significant trigger for the application was not the sale of the house, but the information obtained as to the weekend at Star City. I do not think laches is a reason for declining relief. 16 However, for the reasons I have explained, I am quite unsatisfied that a sufficiently serious risk of dissipation has been established to warrant the sustaining of a freezing order. In addition, in the circumstances of this case, with what appear to be the very limited assets and very difficult financial position in which the respondent is in, the balance of convenience favours withholding rather than granting injunctive relief. If, upon further investigation, it transpires that further facts emerge which would justify Mareva relief, then it remains open to the plaintiffs to make a further application, and nothing I have said is intended to preclude that course being adopted on further evidence. 17 I will therefore not further continue the order originally made by the Chief Judge and continued by Hamilton J, and that order will expire today. 18 I order that the motion filed on 7 February 2007 be dismissed. I stand over the summons to Thursday 15 March 2007 at 9.30 before the Registrar. The exhibits may be returned. **********

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