1446/02 KARL SULEMAN ENTERPRIZES PTY LTD (IN LIQUIDATION) v JESSIE GEORGE & ORS
JUDGMENT
1 HIS HONOUR: On 9 April 2002 the Court made Mareva orders against the thirteenth and fourteenth defendants in proceedings brought by Karl Suleman Enterprizes Pty Ltd (In Liquidation) against what is now a total of fifteen defendants. The thirteenth defendant is a natural person. The fourteenth defendant is a company which was associated with him.
2 The allegations made by the plaintiff against those defendants include an allegation of breach of fiduciary duty as an agent and a Barnes v Addy claim. As well there is a claim against the thirteenth defendant that he was a de facto director of the plaintiff and a civil compensation order under s 1317H of the Corporations Law is sought.
3 The Mareva orders which were made were in a form which was common to the two defendants. There were substantial restrictions on the defendant's dealing with assets but there was a proviso in paragraphs 1(f) and 4(f) that the restriction would not prevent the thirteenth (in one case) or the fourteenth (in the other case) defendants from paying costs reasonably incurred in the proceedings which, taking the costs of the thirteenth and fourteenth defendants together, did not exceed $25,000. Today, application is made to vary each of those orders to increase the amount to $50,000.
4 There is one troubling aspect of the application which I should mention at the outset. Notwithstanding that the orders impose a limit of $25,000 on the amount which could be expended for legal costs, the former solicitors of the thirteenth and fourteenth defendants have rendered accounts totalling a little over $29,500 and those accounts have been paid. The third of the accounts, which took the amount over the $25,000 which had been permitted, was rendered on 9 May 2002. That is, over four months ago. It was paid soon afterwards. In addition to the amounts which have been paid to those former solicitors, there is an account of $1330 rendered by them which has not been paid.
5 By his affidavit of 13 September 2002 Mr Sindon, the thirteenth defendant, deposed to not having noticed that the payment of the third account resulted in him exceeding the amount allowed by the Court order and that the fact was not drawn to his notice by his former solicitors. He apologised to the Court for his accidental breach of the Court order.
6 It is most important for the practical operation of Mareva orders that solicitors who are involved in acting for a defendant who is the subject of a Mareva order take meticulous care that they do not do anything which results in there being a breach of that order. It is a matter of high seriousness that this be scrupulously observed.
7 It is clear law that if people have knowingly aided and abetted a breach of an injunction, proceedings can be taken against them for contempt (see for instance Elliot v Klinger [1967] 1 WLR 1165 at 1166). This is so even if that person is not strictly someone who is bound by the Mareva order.
8 It is common for a Mareva order to be expressed so that it applies to a particular respondent, acting by himself, his servants or agents. It is not only people who are strictly bound by the Mareva order itself who need to take care that they are not assisting in a breach of it. In Seaward v Paterson (1897) 1 Ch 545, Lindley LJ said at 554 of a person who was neither a servant nor an agent of a person who was the subject of an injunction:
"He is bound, like other members of the public, not to interfere with and not to obstruct the course of justice; and the case, if any, made against him must be this - not that he has technically infringed the injunction, which was not granted against him in any sense of the word, but that he has been aiding and abetting others in setting the Court at defiance, and deliberately treating the order of the Court as unworthy of notice. If he has so conducted himself, it is perfectly idle to say that there is no jurisdiction to attach him for contempt as distinguished from a breach of the injunction, which has a technical meaning."
9 I make these observations at the level of general principle. It is important to point out that the former solicitors of the thirteenth defendant have not been heard and may have a different view of events to that which has been placed in evidence before me. I stress that I am not making any finding that they have actually been involved in any wrongful conduct. My point in making these remarks is to stress the seriousness, as a matter of general practice, of solicitors acting for parties bound by Mareva orders not engaging in conduct which will have an inevitable effect on their clients being in breach of those orders. If a solicitor acting for a client who is bound by a Mareva order sees that the amount of funding which the Mareva order allows for legal costs is running out, the proper course is to apply to vary the funding limit in the Mareva order before the funding limit actually runs out.
10 As the reader will infer, the thirteenth and fourteenth defendants have changed solicitors. Their new solicitor has done work which will entitle him to payment of some $3250 but, properly, no account has yet been rendered for that amount.
11 There is evidence from the thirteenth and fourteenth defendants' new solicitors that he estimates the costs of the thirteenth and fourteenth defendants from and including this application until completion of interlocutory steps following the filing of a defence, including application for discovery and interrogatories, if administered, will be no less than $25,000.
12 The increase of the limit for legal costs to $50,000 is intended to legitimise, retrospectively, the over-payment which has been made to the previous solicitors, to allow the previous solicitors to be paid the amount of $1330 which is outstanding and to allow the present solicitor to be paid the amount of $3250 which has been accrued but not rendered.
13 In an earlier application today brought by the fifteenth defendant, I allowed the increase in the amount of legal expenses which could be paid under a Mareva order. In this case, as in that one, it is, in my view, relevant that the terms of the Mareva order which are presently on foot permit expenditure of legal costs only when costs are reasonably incurred in these proceedings. That term imposes, in my view, a useful restraint on the legal representatives of defendants bound by a Mareva order.
14 It is, however, also appropriate that the legal representatives of someone bound by a Mareva order be given scope for exercise of their professional judgment about what is proper and reasonable to defend the interests of their client. It is often not possible for a court order to circumscribe that any more closely than by allowing money of the person bound by the Mareva order to be used in "paying costs reasonably incurred", up to a particular dollar sum.
15 There is in this case some lack of particularity about the justification for the increase in fees which is sought. In broad terms, it will allow about another $20,000 of funding to be available.
16 Given the requirement that it can only be expended reasonably, and given that the order, as it presently stands, sets an upper limit to the amount of expenditure, and given that the issues in the case are ones of reasonable complexity, it seems to me appropriate that the limit should be increased as asked.
17 I vary the orders made 9 April 2002 by deleting the amount of "$25,000" in paragraph 1(f)(ii) and paragraph 4(f)(ii) and in each case replacing it with the sum of "$50,000".
18 I note that neither party seeks an order for costs.
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