Jetset Tours Pty Ltd v Leibler [1999] VSC 265

Supreme Court of Victoria|1999-06-24|Before: Warren J

Mareva injunction - Breach of undertaking - Removal of undertaking - Removal of assets from jurisdiction - Security

I have before me an oral application for a mandatory Mareva injunction. The application was foreshadowed before His Honour Justice Byrne at the commencement of the trial in the commercial list on 22 June 1999. His Honour referred the application to me as the judge sitting in the Practice Court. I am informed that the reference was made so as to avoid any potential difficulties with Justice Byrne continuing to preside over the trial.

I am informed that the trial commenced before His Honour on 22 June 1999 and is proceeding. I am informed of very little about the substantive proceeding save that the plaintiff, Voyager Travel Pty Ltd ("Voyager") seeks to enforce an agreement against the defendants, Jetset Tours Pty Ltd and Jetset Travel Technology Holdings Pty Ltd (whom I will collectively call "Jetset" hereafter) for payment of commissions.

A perusal of the relevant statement of claim reveals that the commissions relate to airline travel bookings. A further examination of the court file discloses that Jetset has issued a counterclaim against a number of parties including the plaintiff and one Isi Joseph Leibler. Mr Leibler is the fourth defendant by counterclaim. His solicitors acting in the substantive proceeding are Arnold Bloch Leibler.

In the counterclaim dated 24 May 1999 it is alleged that Mr Leibler was, at the relevant times, a director and managing director of Jetset. The counterclaim alleges that in the course of dealings with Voyager Mr Leibler knowingly acted contrary to the interests of Jetset and conspired with others against the interests of Jetset. As a consequence relief is sought to set aside a particular agreement and guarantee as being unenforceable. It is also alleged that Mr Leibler, as a result of these matters, acted dishonestly as a director of Jetset and is in breach of section 232 of the Corporations Law. It is further alleged that Mr Leibler breached certain fiduciary duties owed to Jetset. As a consequence damages of $1,297,253 are claimed by Jetset against Mr Leibler and others. This amount has been maintained as the damages claimed since the filing of the original counterclaim dated 1 October 1998.

In the application before me Jetset seeks a mandatory Mareva injunction against Mr Leibler, alternatively, a mandatory injunction against his solicitors, Arnold Bloch Leibler, as a result of an undertaking alleged to have been given in the course of correspondence between the solicitors for Jetset, Brian Ward & Partners and Mr Leibler's solicitors, Arnold Bloch Leibler. It is necessary, therefore, to set out the pertinent parts of that correspondence.

By about 18 December 1998, Jetset's solicitors believed that Mr Leibler was about to relocate from Melbourne to Israel permanently. As a consequence, Brian Ward & Partners wrote to Arnold Bloch Leibler on 18 December 1998 requesting an undertaking that Mr Leibler was "not taking steps to remove his personal assets from the jurisdiction and the bases upon which" (those solicitors and their clients) "should have confidence that he (Mr Leibler) would have the capacity to meet any adverse judgment or order for costs". By letter dated 23 December 1998, Arnold Bloch Leibler responded and stated that "we are instructed that Mr Leibler will have sufficient assets in Australia to meet an award of damages. In particular, our client instructs us that the proceeds of the sale of his property situated at 114-116 Kooyong Road, North Caulfield, will remain in Australia pending the determination of this dispute. We are instructed that our client will provide you with notice should he seek to alter his position from that outlined above".

By letter of the same day, 23 December 1998, Brian Ward & Partners sought further information about Mr Leibler's assets and the proceeds of sale of his property.

By letter dated 5 January 1999, Arnold Bloch Leibler replied advising that the relevant property was expected to net $1 million, had not been sold and that Mr Leibler would "place the proceeds of the sale of his property in our trust account pending the determination of this proceeding". On 5 February 1999, Brian Ward & Partners wrote to Arnold Bloch Leibler requesting details of settlement upon sale of the property and "confirmation that you will hold the entire proceeds of the sale in your trust account pending the determination of this proceeding". No response was received.

On 16 February 1999, Brian Ward & Partners re-sought information about the sale and stated their belief that the property had been sold for in excess of $1 million. The solicitors stated in their letter:

"In accordance with the undertaking in your letter of 5 January 1999, we require that your client place the entire proceeds of the sale of his property in your trust account pending the determination of this proceeding and that your client provide 14 days notice should he seek to alter his position with respect to the entire proceeds of the sale of the property being held in trust. We require as a matter of urgency details with respect to the above in order to give further consideration to this matter."

No response was received from Arnold Bloch Leibler. On 25 February 1999, Brian Ward & Partners wrote again stressing the significance and the urgency of the need for clarification of the asset position. No response on the topic was forthcoming. On 2 March 1999, Brian Ward & Partners wrote to Arnold Bloch Leibler on other matters relating to the trial and raised the sale of Mr Leibler's house, indicating their belief that the property had been sold for $1.6 million. The solicitors stated in their letter:

"As you are aware, this property is the subject of an undertaking made by you on behalf of Mr Leibler on 5 January 1999. We rely on your undertaking that the entire proceeds from the sale of your client's property will be deposited into your trust account immediately upon receipt and that you will give us 14 days notice prior to the disbursement of these funds from your trust account".

In the course of a telephone conversation between Mr Ward of Brian Ward & Partners and Mr Manetta of Arnold Bloch Leibler on 13 May 1999, it came to light that the latter firm held the sum of $500,000 in their trust account, that sum representing the net proceeds of sale of Mr Leibler's interest in the North Caulfield property. This revelation apparently caused considerable concern to Mr Ward as he learned also that Mr Leibler jointly owned the property with his wife and that the property was subject to bank mortgages. It seems the bank mortgages were not disclosed by a title search conducted by or on behalf of Mr Ward's office. As a consequence, Mr Ward wrote to Mr Manetta on 13 May 1999, complaining, inter alia, that his client had relied upon the "undertaking" of Arnold Bloch Leibler and on the basis of the correspondence expected that approximately $1 million would be held on trust. On 14 May 1999, Mr Ward wrote again to Mr Manetta requiring the entire proceeds of sale (about $1.6 million) be placed in the trust account of Arnold Bloch Leibler or a bank guarantee be provided. On the same day, 14 May 1999, Mr Manetta replied stating in a letter that the true title position, including the fact of the bank mortgages was disclosed by a title search and asserted that in view of the amounts of the mortgages, the holding of $500,000 by Arnold Bloch Leibler placed Jetset in a better position than if a Mareva injunction application was made and succeeded.

On 19 May 1999, Mr Manetta wrote to Mr Ward advising that the proceeds of sale would yield a sum of about $750,000 for Mr Leibler and which sum would be held in the firm's trust account "in accordance with Mr Leibler's undertaking".

Further debate continued in the correspondence between the solicitors leading to Mr Ward indicating in a letter dated 16 June 1999 that his clients required an undertaking and documentary evidence that Arnold Bloch Leibler held at least $750,000 in its trust account. No response was received. Mr Ward re-stated his request in a letter dated 21 June 1999. On the morning of the trial on 22 June 1999 Arnold Bloch Leibler advised Brian Ward & Partners by fax:

"We refer to your letters concerning Mr Leibler's undertaking. We hold $750,000 in a Hongkongbank account pursuant to the undertaking. We will provide you with a copy of the Bank's written confirmation this morning at court".

I was informed that the response provoked fears that the moneys were offshore. However, at court a computer print-out was given to Jetset on behalf of Mr Leibler. I do not have any affidavit deposing as to the nature of the print-out. The document appears to be a ledger print-out for the total sum of $750,604.66 held in an account with the Hong Kong Bank in Australia. There is reference in the document to "Arnold/Isi Leibler/Voyager".

Mr Whelan QC who appeared with Mr D Collins for Jetset on this application sought a mandatory Mareva injunction against Mr Leibler, that he pay the sum of $750,000 into court pending determination of the proceeding or further order. Alternatively, orders are sought restraining Mr Leibler from instructing Arnold Bloch Leibler to pay any part of the sum of $750,000 to any person unless 14 days notice was given to Jetset. Mr Whelan sought orders against Arnold Bloch Leibler also, that it be restrained from paying any part of the moneys in the absence of 14 days notice to Jetset. Further and alternatively it was submitted that Mr Leibler be required to give an undertaking to the court (largely in the form of the injunctive relief sought). It was submitted that the extraction of an undertaking was the least desirable course because Mr Leibler resides in Israel and enforcement of the undertaking or attachment proceedings could prove difficult as a consequence.

Mr Gilmour QC, who appeared for both Mr Leibler and Arnold Bloch Leibler, opposed the application on the grounds that there was no breach of the undertaking and that the undertaking gave Jetset an outcome that was better than any order the court could have made on an application for a Mareva injunction. This being the case because the property (and the proceeds of sale) were jointly owned and were the subject of bank mortgages.

Mr Gilmour, however, informed the court that he had instructions that in order to resolve the matter, and I interpolate to enable the parties to focus on the immediate matter of the trial before Justice Byrne, Mr Leibler would give an undertaking to the court. The undertaking proffered was that Mr Leibler would take all necessary steps to ensure that the sum of $750,000 was held in the trust account of Arnold Bloch Leibler until the determination of the proceeding or upon the expiration of 14 days notice to the solicitors for Jetset. Mr Gilmour, in any event, acknowledged that there may be difficulties in the nature of contempt attaching to Arnold Bloch Leibler if that firm did not, of itself, comply with the existing undertaking or the undertaking proffered and paid any part of the moneys without notice to the applicant's solicitors. Upon Mr Gilmour making the offer of the undertaking, the hearing was stood down for approximately 30 minutes at the request of Jetset to ascertain whether the matter could be resolved. It was not and Mr Gilmour did not persist further with the offer of the undertaking.

The starting point in this application is whether or not draconian orders in the nature of a Mareva injunction should be made against Mr Leibler and in the nature of a mandatory injunction ought be made against his solicitors. The principles are well known as to the onus borne by an applicant for a Mareva injunction (see Pearce & Anor v. Waterhouse [1986] VicRp 57; (1986) VR 603 and Glenwood Management Group Pty Ltd & Anor v. Mayo & Anor [1991] VicRp 45; (1991) 2 VR 49).

The applicants must demonstrate that they have a good arguable case, that there is a real risk that the respondent will remove assets from the jurisdiction before a judgment can be satisfied and that there is a danger of default if the assets are removed from the jurisdiction.

The applicants fall at the first hurdle. There is no evidence before me as to whether they have an arguable case. The application proceeded on a very broad oral basis. Indeed, I was not taken to the pleadings. Presumably there are witness statements filed in the proceeding as the matter is within the Commercial List. I was not taken to such statements. Essentially I know nothing of the Jetset case against Mr Leibler save those matters I have gleaned from the court file. In such circumstances I consider it inappropriate to exercise the discretion to grant the injunction sought against Mr Leibler. However, even if I took a robust view of the application and accepted that the applicants have a good arguable case, and I consider I cannot so assume, the applicants have failed to demonstrate that there is a real risk of the sum of $750,000 being removed from the jurisdiction. The moneys are held in a bank operating within the jurisdiction. So much was not challenged on behalf of Jetset. Furthermore, there is no evidence that there has been an attempt to remove the moneys from the jurisdiction.

The fact that Mr Leibler resides in Israel is not, of itself, sufficient to establish the necessary risk to grant the injunction sought. In addition the course of correspondence reveals, at the very highest, a misunderstanding between the respective parties' solicitors and disclose no fact to support an assertion of risk of removal of moneys from the jurisdiction. Furthermore, by the letter of Brian Ward & Partners of 16 June 1999 there is an acceptance, on behalf of the applicants, that their requirements will be satisfied if the sum of $750,000 is held in the trust account of Arnold Bloch Leibler. I am satisfied that such is the case.

Mr Whelan asserted that the relevant computer print-out of the ledger was not the usual solicitors trust account record. I am not informed on the evidence, one way or the other, whether the assertion is correct. To satisfy the requirements to invoke the granting of a Mareva injunction more is required of the applicants. It follows that the application against Mr Leibler fails in all aspects.

Insofar as an undertaking has been sought as a minimum position by the applicants and indeed proffered, if necessary, by the respondent I do not consider it appropriate on the basis of the evidence before me to require that such an undertaking be given. Even if I was to regard the application as a quasi security for costs application there is no risk to the applicants on the evidence before me. The moneys are within the jurisdiction and are within the trust account of a firm of solicitors who, as solicitors, have obligations to the court and the applicant's solicitors.

Similarly, the principles are well established as to the onus borne by an applicant for a mandatory injunction as is sought against Arnold Bloch Leibler (see Optus Networks Pty Ltd v. City of Boroondara, (1997) 2 VR 318; and Nicholas John Holdings v. ANZ Banking Group Limited (1992) 2 VR 707). The applicants must satisfy me that there is a serious question to be tried and if I am so satisfied, demonstrate that the balance of convenience favours the granting of an injunction. For the reasons already stated, there is insufficient evidence before me to satisfy the first test. In so far as the applicants allege that there is a discrete serious question to be tried between them and Arnold Bloch Leibler, I cannot be so satisfied. The course of correspondence and exchanges between the respective solicitors reveals, as I have observed already, at most a misunderstanding. The application must fail against Arnold Bloch Leibler on this threshold basis.

Furthermore, by virtue of the letter of Brian Ward & Partners of 16 June 1999 the applicants were prepared to accept the arrangement that is in fact in place, namely that $750,000 be held in the trust account of Arnold Bloch Leibler and that 14 days notice be given to the applicant's solicitors if a different course was proposed. Nothing in the evidence before me discloses a risk that the circumstances that were acceptable on 16 June 1999 have altered. The balance of convenience would not, therefore, favour the granting of the injunction sought. It follows that the application against Arnold Bloch Leibler fails also. Accordingly I will dismiss the application.

At a glance

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Judgment (30 paragraphs)

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Cases Cited (3)