Fantasia v Otho Pty Ltd, unreported; SCt of WA; Library No 980054; 13 February 1998

Northcorp Ltd v Allman Properties (Australia) Pty Ltd [1994] 2 Qd R 405

Perth Mint v Mickleberg [1984] WAR 230

Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264

West Clothing v Sail America [1988] WAR 119

Z Ltd v A-Z and AA-LL [1982] 1 QB 558

1 PULLIN J: In this case, the plaintiff seeks a mareva order or asset preservation order, (as to which see Cardile v LED Builders (1999) 198 CLR 380), restraining the first defendant, Bean San Goh, from removing from the jurisdiction, disposing of, transferring, selling encumbering, mortgaging, assigning, charging or otherwise dealing with, any of his assets wheresoever situated including, but not limited to, freehold property, property whether real or personal, and any assets of Dr Bean San Goh, any money held in any bank accounts, and any shares.

2 The circumstances leading to the application are as follows. In May 1999, the plaintiff agreed to advance to the first defendant, certain moneys to be repaid on 26 March 2000. A similar agreement was entered into in February 2000, the moneys to be repaid on 26 May 2000. The first defendant indicated that he was unable to make repayment on the agreed dates, and so the plaintiff agreed to extend the time, providing acknowledgments of debt documents were signed by the first defendant with a guarantee to be given by the first defendant's son, Steven Wern-Yi Goh. The first of these two acknowledgments of debt contains clauses as follows:

"1.1. The Lender agrees, at the request of the Borrower and the Guarantor to roll over the repayment terms of the Loan as at 26 March 2001 on terms set out in this Deed.

1.2 The Lender and the Borrower agree that the amount owing as at 26 March 2001 is US$383,450. This is calculated on the following basis:

(a) Amount outstanding as at 26 May 2000:

US$329,000*(1+8%)=US$355,320.

(b) Amount outstanding as at 26 March 2001:

US$355,320*(1+9.5%*10/12)=US$383,450

2.1 The Borrower and: Healthy Skin Pte Ltd of 9 Raffles Place #12-01, Republic Plaza, S048619, Singapore ("Healthy Skin") used the Loan to purchase shares in Sanford Limited of Level 6, 225 St Georges Tce, Perth WA 6000 Australia in May 1999.

2.2 If requested by the Lender, the Borrower will arrange for the Loan to be secured by shares registered in the name of the Borrower or Healthy Skin in Sanford Limited. The number of Sanford Limited Shares held by Healthy Skin is 681,818."

3 I mention cl 2.1 and cl 2.2 because it was suggested by the first defendant that security had been obtained, or could be obtained, by the plaintiff in relation to those shares. The evidence reveals, however, that an attempt was made to obtain that security over the Healthy Skin shares, but security has not been obtained. I also note that clause 4.1 of this document reads:

"The Borrower must repay and finally discharge the loan in United States dollars together with all accrued interest on the Loan and all other amounts payable under this Agreement on or before 31 December 2001 ..."

"Payment under this Deed must be made to the Lender without set-off or counterclaim, free and clear of, and without, any deductions whatsoever."

5 I might add that I have read selectively from that agreement. The second acknowledgment of debt provides in cl 1.1:

"The Lender agrees, at the request of the Borrower and the Guarantor to roll over the repayment terms of the Loan as at 26 March 2001 on terms set out in this Deed."

"The Lender and the Borrower agree that the amount owing as at 26 March 2001 is $US69,989 ..."

7 There was a similar provision concerning security of the shares as in the other acknowledgment of debt which involved Healthy Skin and the 681,818 shares held by it. The comments that I made about that in relation to the other document apply in this case as well. Clause 4.1 of this document reads:

"The Borrower must repay and finally discharge the loan in United States dollars together with all accrued interest on the Loan and all other amounts payable under this Agreement on or before 31 December 2001 ..."

"Payments under this Deed must be made to the Lender without set-off or counterclaim, free and clear of, and without, any deductions whatsoever."

9 The moneys which were borrowed by the first defendant were used by the first defendant to obtain shares in Sanford Securities Ltd, which are today trading at about 33 cents on the ASX. About the time that the acknowledgments of debt were signed on 10 April 2001, the first defendant informed the plaintiff that he had no assets other than the Sanford Securities Ltd shares.

10 In September 2001, the plaintiff's solicitors carried out a search of property at the Titles Office. They discovered that the first defendant's statement in April 2001 that he had no assets other than the Sanford Securities Ltd shares, appeared not to be correct. This was because in April 2001, the first defendant was the registered proprietor of an undivided half-share in property at 14 Allenby Road, Dalkeith.

11 The search revealed a transfer which had been registered at the Titles Office on 9 July 2001, although dated 9 February 2001. This showed that the registered proprietors, the first defendant and his wife, had transferred the property to the first defendant's wife, so that she became the registered proprietor alone. The consideration was stated in one word as "gift." The stamp duty shown on that transfer was $23,905 based on an assessed value of $600,000.

12 The plaintiff did nothing about this information at that stage because it wanted to wait and see if payment was made on 31 December 2001. On 20 December 2001, the plaintiff wrote to the first defendant making demand for payment of all moneys due on 31 December 2001, and then on 21 December 2001 the plaintiff received a letter from the defendant's solicitors rejecting the demands for payment and raising for the first time, various matters by way of defence, including a claim that rectification of the acknowledgment of debt documents would be necessary because the original loan was in Australian dollars and that the reference in the acknowledgment of debt of US dollars was wrong.

13 There was also the possibility of a further defence based upon a collateral agreement which the first defendant said had been breached. The solicitors for the first defendant advised that the first defendant rescinded the loan agreements and advised of a claim for damages and a claim to set off those damages against the plaintiff's claim, notwithstanding the provision in the acknowledgment of debt agreements which I have referred to earlier.

14 The plaintiff then sought an undertaking from the first defendant not to deal with assets, which undertaking was not given. The amount of the claims by the plaintiff at the moment are claims for payment in American dollars, but the Australian dollar amount is approximately 1,000,000 in total.

15 There are some further facts which I will relate in a moment, but I will first summarise the law which governs the application.

16 A mareva order will not be granted unless there is a good arguable case and there is a real risk that if the order is not granted, the defendant would remove or dissipate his assets. The remedy is discretionary: see Perth Mint v Mickelberg & Ors (No 2) [1985] WAR 117 and Patterson v BTR Engineering (Australia) Ltd (1989) 18 NSWLR 319.

17 As a general proposition, a mareva order can be granted if the circumstances are such that there is a danger of the defendants disposing of assets within the jurisdiction or otherwise dealing with them so that there is a danger that the plaintiff, if here it gets judgment, will not be able to get it satisfied: see Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 at 623.

18 A mareva order is an interlocutory order which, if granted, imposes a severe restriction upon a defendant's right to deal with his or her assets. It is granted at the suit of a plaintiff whose status as a creditor is in dispute and who need not be a secured creditor. Its purpose is to preserve the status quo, not to change it in favour of the plaintiff.

19 The function of the order is not to provide a plaintiff with security in advance for a judgment he hopes to obtain and that he fears might not be satisfied, nor is it to improve the position of the plaintiff in the event of the defendant's insolvency. Many authorities attest to the care with which courts are required to scrutinise applications for mareva orders: see Patterson v BTR (supra) and Cardile v LED Builders (supra).

20 There may be difficulties associated with the quantification and recovery of damages pursuant to an undertaking given by the plaintiff if it should turn out that the order should not have been granted. These problems were discussed in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1979) 146 CLR 249 at 260 et seq; affirmed (1981) 146 CLR 306; and see Cardile's case at 404.

21 In my opinion, the plaintiff has a good arguable case. It holds executed acknowledgments of debt with a promise from the first defendant to pay without set-off and free and clear of, and without any, deductions whatsoever. There is evidence which leads me to conclude also that there is a risk of dissipation of assets by reason of the dealing with the Dalkeith property. The circumstances of that dealing are as follows. The property was purchased by the first defendant and his wife in 1996. There has been produced by the first defendant, a single-page document dated 28 February 1996 called a declaration of trust, and it states:

"We Bean San Goh and Patricia Ai Tuan Goh both of 35 Tyrell Street, Nedlands in the State of Western Australia ('the Trustee') Hereby Delare (sic) that by a contract of sale dated 28 February 1996, the Trustee agreed to purchase the property situated at 14 Allenby Road, Dalkeith more particularly described as Lot 25 on Plan 4874 and comprised in Certificate of Title Volume 1900 Folio 901 ('the Trust Estate') And the Trustee now holds and will continue to hold the Trust Estate in trust for Bean San Goh, Patricia Ai Tuan Goh and Julian Pao-Yi Goh all of 35 Tyrell Street, Nedlands in the said State ('the beneficiaries') as joint tenants."

22 I am informed by counsel for the first defendant that Julian is the son of the first defendant and his wife. This document was stamped on 30 April 1996. So the position was that each of the persons having a beneficial interest had a one-third interest in the property at 14 Allenby Road, Dalkeith.

23 Then the first defendant in his affidavit filed in these proceedings had this to say:

"In about August 1998 there was a personal conflict between my wife Patricia Ai-Tuan Goh and me and we agreed to separate. I moved to live in Sydney. As a result, we agreed that I would transfer my interest in the jointly owned properties to her. We also agreed that I would retain my shares.

The property at 35 Tyrrell Street, Nedlands was sold in February 1999. At that time, my wife also asked me to transfer 14 Allenby Road, Dalkeith to her and I agreed. My wife produced to me the transfers for the sale of 35 Tyrrell Street and a transfer of 14 Allenby Road to sign. I signed them both at the same time, namely in February 1999. I believe that transfer was not dated or registered because my wife had to obtain the consent of Westpac Banking Corporation as mortgagee. I then signed a fresh transfer because the original contained some errors."

24 The fresh transfer which is referred to in the material I have just quoted from the first defendant's affidavit, is the one which I referred to earlier in some detail. If there had been an agreement between the first defendant and his wife to transfer his interest, then the way that that would have to be effected would be to arrange for an amendment to the declaration of trust, if that was possible. He did not do that.

25 The transfer of the legal interest which I have referred to already would not transfer any beneficial interest. If the transferred legal interest was a transfer as trustee, then it is unlikely that there would show in the consideration box the word "gift", and the stamp duty payable in the event of a transfer by two trustees to one trustee to hold on the same trust as before, would result in nominal stamp duty only.

26 The substantial stamp duty which was paid suggests that this was a transfer of an interest of a substantial interest in the property; that is, a beneficial interest in the property. If that is so, then it suggests that the parties ignored the trust declaration document for some reason. One can only speculate about why that is so at this stage of the proceedings.

27 On the face of the transfer, the first defendant was transferring a substantial interest, not only an interest as a trustee. That evidence is enough to raise a considerable suspicion about the transaction. I should add that the plaintiff disputes the suggestion that there has been any matrimonial discord between the first defendant and his wife. I would not try and resolve this issue here. That is a matter which would have to be resolved at trial.

28 The plaintiff, in separate proceedings in CIV 1302 of 2002 against the first defendant and his wife, is seeking to set aside the transaction concerning the Dalkeith property as a voluntary conveyance to defraud creditors under s 89 of the Property Law Act. This provision is similar to section 37A of the Conveyancing Act (1989) (NSW. (For discussion about that provision, see Cardile v LED (supra)).

29 As a result, I am prepared to grant the mareva order. In Cardile's case, the High Court pointed out that a court making an order should grant the minimum relief necessary to do justice between the parties, see par [70] and par [124]. I note that in par [75], the Court suggested that the appropriate order was in the terms set out in that paragraph. That suggested order involved a restraint from disposing of, or dealing with, property up to the value of a certain dollar amount.

30 In my view, such an order would create impossible problems if it came to enforcement, because it would not be clear what property was caught and which was not caught by the order. That is doubtless why Kirby J in par [75] suggested that the order would require some significant "adaptions". A change to the general form of order would be to identify specific property up to the dollar amount which was mentioned.

31 The order that I propose will be general in its terms. After the first defendant discloses its asset position, it may be possible to minimise disruption to the first defendant by restricting the mareva order to prevent dealing with only some property.

32 I also note Kirby J's emphasis on the importance of the undertaking to be given by the plaintiff in proceedings such as this: see par [122]. In my view, an undertaking by the plaintiff, which is a company incorporated in the British Virgin Islands, would be inadequate in the circumstances. However, Chuen Jin Goh is a director of the plaintiff, and he is prepared to give his personal undertaking.

33 I note that Dr Goh lives at 7 Menora Road, Dalkeith, and that he is an Adjunct Professor of Mathematics at the University of Western Australia. He settled in Perth in 1989 as a permanent resident, and I am informed that he owns property which would provide sufficient backing for that undertaking. I will hear a little more about that before making the orders.

34 I am also prepared, at this stage, to allow the first defendant to draw up to $5,000 per month to meet legal and other expenses. So for those reasons, I would grant the application requested.