Kama & Anor v Wong & Anor [2005] NSWSC 428 | Case summary

1 This is the third set of interlocutory proceedings between these parties within the last week in the Duty Judge list. The proceedings began with a Summons filed on 13 April 2005 by the present Defendants, to whom I will refer for convenience as Mr and Mrs Wong. Mr and Mrs Wong applied urgently for the removal of the caveat which the present Plaintiffs, to whom I will refer as Mr and Mrs Kama, had placed on the title to their property at Glenwood. The nature of the caveatable interest was described simply by reference to a loan agreement between the parties. 2 Mr and Mrs Wong's application was urgent because the sale of their property was due to be completed within a matter of days; in fact, I think it is due for completion today. In those circumstances Mr and Mrs Wong sought leave to serve on short notice. Leave was granted and the matter came before the court on 15 April 2005. On that occasion Mr Gruzman of Counsel appeared for Mr and Mrs Wong and Mr Gee of Counsel appeared for Mr and Mrs Kama. 3 After a contested hearing, Mr and Mrs Wong were successful in obtaining an order for the removal of the caveat on the ground that the caveat disclosed no caveatable interest in the land. It transpired from the evidence and from submissions made on that day that Mr and Mrs Kama were alleging an agreement between themselves and Mr and Mrs Wong whereby each of the two sides would contribute loan funds to a company which they would incorporate offshore to conduct a business. Mr and Mrs Kama had, in accordance with the alleged agreement, contributed their share of the loan funds to the company but Mr and Mrs Wong had not contributed their share. 4 The evidence was that in a conversation which occurred between the parties in January 2005 Mr and Mrs Wong were taxed by Mr and Mrs Kama with their failure to provide their share of loan funds to the company and by way of explanation, or perhaps mollification, Mr and Mrs Wong said they would provide their share of the loan funds to the company from the proceeds of the sale of their house at Glenwood. 5 Mr and Mrs Kama, on the basis of that conversation, alleged a caveatable interest in the property itself. I was of the view that the caveat did not disclose any caveatable interest in the land. If anything, what was claimed was some sort of interest in the proceeds of sale of the land. For that reason I ordered the caveat lodged by Mr and Mrs Kama to be removed. 6 The response of Mr and Mrs Kama was to commence proceedings for an order restraining disposition of the proceeds of sale of the land. Those proceedings were commenced by a summons filed on 15 April 2005. On that day an ex parte application was made the injunction, as sought, was granted up to 4:00pm on 18 April 2005. The injunction restrained Mr and Mrs Wong from disposing of the sum of $217,500 out of the net proceeds of sale of their property, after payment of costs and expenses of the sale, other than by placing it in a trust account. 7 The matter came back before the court on 18 April 2005. On that occasion Mr Gee of Counsel appeared for Mr and Mrs Kama and Mr Rundle of Counsel appeared for Mr and Mrs Wong. Two questions were contested: whether there was a serious question to be tried as to whether Mr and Mrs Kama had an equitable interest in the fund and whether an asset preservation order should be made. 8 As to the first question, after argument, I held that the evidence did not show an arguable case or a serious question to be tried. It seemed to me that all that the evidence showed was that Mr and Mrs Wong agreed to lend money to what I will call the joint venture company and in the discussion which occurred between the parties in January 2005 they had indicated the means by which they would discharge their obligation to lend the money: they indicated that they would obtain the money either out of the proceeds of sale of their house, or out of the income of a business which they were conducting in Singapore. 9 It seemed to me that there was no evidence of any statement made by Mr and Mrs Wong or of any obligation undertaken by them which constituted the proceeds of sale as some sort of security for the payment of the loan moneys to the company. It did not seem to me that the evidence disclosed any intention on the part of Mr and Mrs Wong to create a charge over that fund or otherwise to give either to Mr and Mrs Kama or to the company itself any interest in the fund itself. 10 As to the second question, I held that there was no evidence justifying an asset preservation order. My reasons for my conclusion are more fully set out in an ex tempore judgment which I delivered on 18 April. Reference should be made to that judgment. 11 Mr and Mrs Kama now seek, by way of another interlocutory hearing, essentially the same relief. They say that there are circumstances which, in the interests of justice, warrant the Court entertaining the second application, namely, material changes in circumstances which have occurred since the last application was determined. Those circumstances include the formulation of new causes of action against Mr and Mrs Wong and, it is said, further evidence which would suggest that Mr and Mrs Wong are dissipating their assets in order to make themselves judgment-proof in these proceedings. 12 I have examined the evidence which has been put forward by Mr and Mrs Kama in support of this renewed application and have studied carefully the thorough submissions made by Mr Harper SC who now appears with Mr Gee for Mr and Mrs Kama. If I were of the view that there was substance to the new ways in which Mr and Mrs Kama seek to put their case against Mr and Mrs Wong, or if I were satisfied that there was something additional by way of evidence which would suggest dissipation of assets such as to warrant a freezing order, I would have entertained this further application. However, I have come to the conclusion that there is no substance in the new causes of action nor is there anything shown to suggest that there is a risk of dissipation of assets which was not in evidence on the previous occasion. I will very briefly review the reasons for coming to this conclusion. 13 It is now said that Mr and Mrs Kama and Mr and Mrs Wong entered into a partnership to carry on a joint venture. It is said that Mr and Mrs Wong breached their fiduciary duty as partners by failing to make a contribution to the joint venture or partnership in the form of making a loan to the offshore company in accordance with an alleged agreement. Even if that be the case, even if the relationship between the parties can be characterised as a partnership, that advances no further the assertion that Mr and Mrs Kama have some sort of equitable interest in the proceeds of sale of Mr and Mrs Wong's house. All that the partners - if they be partners - have agreed is they will contribute from their own resources to the partnership vehicle. 14 One has to come back to the conversations relied upon by Mr and Mrs Kama in support of their claim to see whether the agreement to contribute funds alleged against Mr and Mrs Wong went so far as to create any sort of charge or proprietary interest in the proceeds of sale of the house rather than being a mere indication as to the means by which Mr and Mrs Wong would honour their alleged obligation to lend moneys. 15 Nothing has been added by way of evidence in this application to suggest that what was agreed by Mr and Mrs Wong in January this year or October last year designated the proceeds of sale as charged with, or otherwise standing as security for, the obligation to lend money, so that it seems to me that even if one classifies the relationship between the parties as a quasi partnership or a joint venture, the matter is no further advanced than it was on the last occasion. 16 Alternatively, it is sought to say that the proceeds of sale of the property are impressed with a trust. Again, it seems to me that this allegation cannot be substantiated from any evidence which is presently before the court. There are no words said by Mr and Mrs Wong which can reasonably be construed as indicating that they intended to constitute themselves as trustees of this fund for the benefit either of the company or of Mr and Mrs Kama. 17 For these reasons I do not think that the framing of the case by Mr and Mrs Kama in a different way adds anything of substance to their case as previously put. 18 I come now to the question of whether any further evidence has been adduced to warrant an asset preservation order. I must bear in mind that, as far as I presently see, the only cause of action which Mr and Mrs Kama have against Mr and Mrs Wong is an action for damages for breach of an agreement to pay a sum of money to a third party, namely, the offshore company. 19 So far as the evidence presently indicates, it is by no means clear that the only assets of Mr and Mrs Wong in Australia which may be available to meet any judgment obtained by Mr and Mrs Kama are the proceeds of sale of their home in Glenwood. I take into account that Mr and Mrs Wong are presently resident in Singapore. However, it appears quite clear that they went there well before the dispute between the parties crystallised into litigation for reasons associated with a business which they were carrying on there. I cannot therefore infer that Mr and Mrs Wong have gone to Singapore to avoid the recovery of a judgment against them in these proceedings. 20 In an application for an asset preservation order there should be some evidence to suggest that the defendant is dealing with its assets for the purpose of defeating a judgment, or else is proposing to deal with its assets in such a way as will very likely dissipate those assets so there will be nothing left to answer a judgment obtained by the plaintiff. 21 The evidence in the present case falls far short of either of those positions. The evidence merely suggests that Mr and Mrs Wong are looking to close down one of their businesses in Singapore and start up another business. There is no evidence to suggest that that intention is motivated by a desire to render themselves judgment proof against Mr and Mrs Kama in these proceedings. There is no evidence to suggest that any such new business will necessarily dissipate the assets available to meet a judgment. In short, I am not satisfied that the requisite intention has been demonstrated on the part of Mr and Mrs Wong to support an asset preservation order. It seems to me that this is a case in which Mr and Mrs Kama will have to pursue their remedy for damages for breach of contract, if such a remedy is available, in the normal way. 22 For those reasons I would refuse to entertain the Plaintiffs' second application for relief and, in any event, I indicate that if I had entertained the application I would have dismissed it. 23 The Defendants seek an indemnity costs order and an order that the costs be assessed forthwith, notwithstanding that the proceedings are apparently to continue to a final hearing. The basis for the indemnity costs order is that the second application which the Plaintiffs have made ought never have been brought and there were insufficient new considerations to warrant it. 24 The basis upon which indemnity costs orders are often made is that a party, properly advised, would never have commenced or defended the proceedings which have occasioned the costs. That proposition should not always be understood as being a criticism of the legal representatives of a party who appear in the matter: as everyone experienced in the law knows, one can proffer accurate and helpful advice to a client who simply refuses to take it and, regardless of a reasonable prediction as to the unsuccessful outcome of litigation, insists that he or she have his or her day in Court. 25 I am not suggesting for a moment that that is what has happened in the present case. All I wish to say is that when an indemnity costs order is made on the ground that a party, properly advised, would never have occasioned the costs, the order is not automatically an implied criticism of the legal advisers for that party. 26 In my view there was no justification for the bringing of this second application. The framing of new causes of action did not add anything to the arguments which had been addressed in the first application. There was no new evidence in the second application in support of any interest as claimed. There was also, in my view, insufficient new evidence to warrant a suggestion that the Defendants were making away with their assets for the purpose of defeating a judgment. It seems to me that the Plaintiffs have persevered with the application in the face of difficulties which must have been obvious. 27 The Defendants should not have been put to the costs of this second application. While the first application was arguable and was made with sufficient basis not to warrant an indemnity costs order, I think that the second application is in a different category and, for the reasons I have given, there should be an indemnity costs order in respect of the second application. I think it is appropriate that the costs of the second application be assessed forthwith, and I so order. - oOo -

Kama & Anor v Wong & Anor

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