Jackson v Sterling Industries Ltd

Jackson v Sterling Industries Ltd - [1987] HCA 23 - HCA 1986 case summary — Zoe

[12]

In the Federal Court the power to grant a Mareva injunction may also be found in an inherent or, more correctly, implied power as well as in s. 23 of the Federal Court of Australia Act. It is an implied power because of the statutory nature of the Court. Notwithstanding that the Federal Court is declared by s. 5(2) of the Federal Court of Australia Act to be a superior court of record and a court of law and equity, there are limits upon its functions which differentiate it from other Australian superior courts. Ordinarily, a superior court of record is a court of general jurisdiction which means that, even if there are limits to its jurisdiction, it will be presumed to have acted within it. That is a presumption which is denied to inferior courts and is denied to a federal court such as the Federal Court. The consequence of the presumption is that prohibition does not, in general, go to a superior court, but prohibition is the means provided to keep such federal courts within the bounds of their jurisdictional limits: Constitution, s. 75(v); Judiciary Act 1903 Cth, s. 33(1)(b). In those courts jurisdiction cannot be presumed so as to displace this remedy: Reg. v Ross-Jones; Ex parte Green [11] . In this respect, federal courts differ from the supreme courts of the States which, although of statutory origin, are truly designated superior courts because they are invested with general jurisdiction by reference to the jurisdiction of the courts at Westminster. Nor does s. 32(1) of the Federal Court of Australia Act confer any general jurisdiction. That section, to the extent that the Constitution permits, confers jurisdiction on the Federal Court in respect of matters that are associated with matters in which the jurisdiction of the Court is invoked. Associated matters at common law or under State statute law form too wide a category to fall within any accrued or pendent jurisdiction which that Court may have and s. 32(1) has been held to do no more than confer jurisdiction upon the Federal Court in associated matters which arise under Commonwealth laws but in respect of which jurisdiction has not otherwise been conferred upon the Federal Court: Philip Morris Inc. v Adam P. Brown Male Fashions Pty. Ltd. [12] .

[28]

Initially, injunctive orders to preserve assets were made to prevent a non-resident defendant from removing assets from the territorial limits of a court's jurisdiction so as to frustrate the effectiveness of any judgment that might be obtained: see Nippon Yusen Kaisha v Karageorgis [23] ; Mareva Compania Naviera S.A. v International Bulkcarriers S.A. [24] . In due course, it was perceived that a general interlocutory power to make orders preventing a defendant from disposing of his assets so as to defeat any judgment obtained in an action was an incident of the substantive jurisdiction to entertain the action and was not confined to the case where the defendant was a non-resident. That general power has been held to encompass an order requiring the disclosure by a defendant of his assets (see Bekhor Ltd. v Bilton [25] ; T.D.K. Tape Distributor v Videochoice Ltd. [26] ); an order for the delivery up (to a named solicitor) of designated assets which were not specifically in issue in the proceedings (see C.B.S. United Kingdom Ltd. v Lambert [27] ); and, an order restraining a local company from disposing of or dealing with assets which were outside the jurisdiction at least where they had been within the jurisdiction when the action commenced: see Hospital Products Ltd. v Ballabil Holdings Ltd. [28] ; on appeal [29] . Arguably, it extends to the making of an ancillary order after judgment to protect the efficacy of execution: see Stewart Chartering Ltd. v C. & O. Managements S.A. [30] . As a general proposition, it should now be accepted in this country that "a Mareva injunction can be granted if the circumstances are such that there is a danger of [the defendant's] absconding, or a danger of the assets being removed out of the jurisdiction or disposed of within the jurisdiction, or otherwise dealt with so that there is a danger that the plaintiff, if he gets judgment, will not be able to get it satisfied": per Lord Denning M.R., Rahman (Prince Abdul) v Abu-Taha [31] quoted with approval by Street C.J. in Ballabil Holdings [32] .

[33]

The orders of the Federal Court which are now challenged by the appellant are those requiring the appellant to "provide security in the sum of $3,000,000". Those orders fall in a different category to any interlocutory order for the preservation of assets which has previously been made, at least in a reported case in this country. The basis of the initial order made by Sheppard J. was plainly adequate to warrant the grant of some relief in the nature of a Mareva injunction. That basis was that it appeared to his Honour that the present appellant, who was a respondent in the proceedings before him, remained in possession of assets representing the whole or most of an identified amount of $4,300,000 and that he was likely to dispose of those assets pursuant to an overall scheme to defeat any judgment which the present respondent, who was the applicant in those proceedings, might obtain against him. If the order had been restricted to injunctive relief preventing the appellant from disposing of so much of that $4,300,000 (or the assets representing that money) as remained in his possession, it would have clearly been within the powers of the Federal Court under s. 23 of the Act. However, the order which his Honour made differed in nature from the mere grant of such restricted injunctive relief. In terms, it provided that the present appellant "provide security in the sum of $3,000,000 in such manner and form as the parties may agree or, in default of agreement, the Court or its Registrar may approve". In the absence of agreement between the parties, it was subsequently ordered by Burchett J. that the "manner and form of providing the security ordered" be the payment of $3,000,000 (in cash or by bank cheque or partly in cash and partly by bank cheque) "to any Registrar" of the Federal Court or the "[p]rovision of security in the sum of $3,000,000 in such other manner and form as the Court or its Registrar" may approve. Beyond specifying that the $3,000,000 should be paid or provided by way of "security", the orders did not identify what, if anything, the money was to secure or what was subsequently to happen to it. Nor did they restrict the obligation of the appellant to pay the money by way of "security" by reference to the extent of the appellant's assets. The combined effect of the mandatory orders was to impose an unqualified requirement that, in the absence of approval of some "other manner and form", the appellant provide security by payment of the designated sum to a Registrar of the Federal Court.

[34]

There are three related grounds upon which these combined orders are susceptible of attack. First, they required the appellant to pay into court not money identified as being within his possession but money which he was required to provide or obtain regardless of source. Secondly, they go beyond a mere order for the preservation of assets pending judgment or execution in that they specifically required that the money be paid into court as "security". Thirdly, they failed to identify either what the money paid "to any Registrar" was to secure or what the entitlement of the appellant (or anyone else) was in relation to it after it has been so paid. Put in positive form, it appears to me that, when an order for the preservation of assets goes beyond simply restraining the defendant from disposing of specific assets until after judgment, it must be framed so as to come within the limits set by the purpose which it can properly be intended to serve. That purpose is not to create security for the plaintiff or to require a defendant to provide security as a condition of being allowed to defend the action against him. Nor is it to introduce, in effect, a new vulnerability to imprisonment for debt, or rather for alleged indebtedness, by requiring a defendant, under the duress of the threat of imprisonment for contempt of court, to find money, which he may or may not have (whether or not at some point of time it may have been available to him), to guarantee to a plaintiff that any judgment obtained will be satisfied. It is to prevent a defendant from disposing of his actual assets (including claims and expectancies) so as to frustrate the process of the court by depriving the plaintiff of the fruits of any judgment obtained in the action. It may be appropriate in a rare case that such an order requires the defendant actually to deliver assets to a named person or even to the court itself or (in "a most exceptional case") extends to the appointment of a receiver of all or part of the assets of a defendant company: see the discussion in the judgment of Street C.J., Ballabil Holdings [34] . Even in such cases however, the order must be confined to preserving assets until after judgment or, arguably, until there has been an opportunity to seek execution: it should not purport to create security over them in favour of the plaintiff and it should make clear that it goes no further than to deprive the defendant of possession of them for the purpose of precluding his disposal of them so as to defeat a judgment. That being so, any order requiring the delivery of assets should make clear that the assets will be held on behalf of the defendant until after judgment or further order and will then be re-delivered to the defendant unless they are made the subject of some other claim (e.g. by a person entitled to claim under a writ of execution) on behalf of the plaintiff or some other creditor.

At a glance

Court

Decision date

Before

Source

Judgment (122 paragraphs)

Parties