Kim v Melton Wool Pty Ltd [1999] VSC 52

Supreme Court of Victoria|1999-02-25|Before: Beach, J.

Mareva injunction - Security for undertaking as to damages.

This is the return of a summons filed on behalf of the plaintiff whereby the plaintiff seeks a Mareva injunction restraining the defendant from removing its assets from the jurisdiction.

The defendant agrees that moneys totalling that sum were transferred from the plaintiff's personal bank account to that of the defendant between the dates in question. However it denies that the moneys were lent by the plaintiff to the defendant and contends that the moneys were transferred to the defendant as part of a complex commercial transaction relating to the assets, liabilities and share capital of two companies called Ssang Bang Wool Limited and Tae Young Spinning Co. Limited and its subsidiaries. In my opinion the detail of that transaction is not relevant for present purposes.

The defendant is a wholly owned subsidiary of Ssang Bang Wool Limited. Ssang Bang Wool is a Korean company without assets in this State. The sole business of the defendant is a wool processing plant at 33 Norton Drive, Melton. It has come to the knowledge of the plaintiff that the defendant is proposing to sell the wool processing plant. At this stage it has received an offer of $3,200,000 for the plant.

In an affidavit sworn 22 February 1999 the defendant's Trading Administrator, Jimmy Park, has deposed to the fact that that offer has not yet been accepted.

The defendant has secured creditors who are owed approximately $3,000,000. If the offer is accepted it would follow that there would only be available in this State some $200,000 to satisfy any judgment the plaintiff may recover against the defendant.

The final matter to note before considering the principles I am required to apply in determining the fate of the present application is that the trial of the proceeding has been fixed for 2 June 1999.

Before the court will grant a Mareva injunction the plaintiff must show that he has a good arguable case, that there is a risk that the defendant will remove its assets from the jurisdiction before judgment is satisfied, and that there is a danger of default if assets are removed from the jurisdiction. See Glenwood Management Group Pty Ltd & Anor. v. Mayo & Anor. [1991] VicRp 45; [1991] 2 V.R. 49.

It is clear that the plaintiff has a good arguable case. Indeed it was not contended by counsel for the defendant that he did not.

It is also clear in my opinion that if the defendant's wool processing plant is sold there is a risk that after the defendant has paid out its secured creditors it will remove the balance of the proceeds of the sale from the jurisdiction. I say that because there is simply no reason for it to retain that balance in this State. As I have already pointed out, the defendant is a wholly owned subsidiary of a Korean company and its only asset in this State is the wool processing plant. There is no suggestion in the affidavits filed on its behalf that it proposes to invest the net proceeds of sale in some other business venture or form of investment in Victoria. And so I ask rhetorically - why would it not transfer the net balance to its parent company? If it did, there would then be no assets in this State from which it could satisfy any judgment obtained against it by the plaintiff.

The conclusion I have arrived at, therefore, is that the plaintiff has satisfied those matters he is required to before he is entitled to the relief sought.

It is pointed out by counsel for the defendant that the plaintiff does not reside in Australia and has no assets in this country. In that situation it is said that any undertaking given by the plaintiff as to damages is worthless and in the event that a Mareva injunction is granted it should only be on condition that the plaintiff provide proper security in respect of the undertaking.

If the defendant does sell the plant for $3,200,000 and a Mareva injunction is granted but worded in such a way as to permit the defendant to pay out its secured creditors, it will mean that the defendant will not have available to it, for the next six months or so, the sum of approximately $200,000.

If one assumes that it would have been able to invest that sum at a rate of interest of 10% per annum over that period of time, in the event it is successful in its defence of the proceeding it would face a potential loss of the order of $10,000. If of course the defendant sells the plant for more than the sum presently on offer its potential loss would be greater.

In the circumstances I think it is appropriate that the defendant give security in the sum of $20,000 in respect of his undertaking as to damages.

The plaintiff having given the usual undertaking as to damages, I make the following orders in the proceeding:

1. I order that the defendant be restrained (subject to the matters set out below) from disposing of or otherwise transferring or dealing with the proceeds of sale of any or all of its assets and undertaking comprising a wool processing plant situated at 33 Norton Drive, Melton; such order however is not to prevent the defendant:

(a) proceeding with the sale that will give rise to the moneys the subject of this injunction;

(b) using the proceeds of sale to discharge debts owed to secured creditors of the defendant;

(e) paying its reasonable legal fees of this proceeding.

2. I order that on or before Friday 19 March 1999 the plaintiff provide to the Prothonotary of the Court and in a form approved by the Prothonotary security in the sum of $20,000 in respect of his undertaking as to damages. In the event the plaintiff does not comply with paragraph 2 of this order, paragraph 1 of this order is dissolved forthwith.

5. I direct that within 7 days of this day this order be prepared by the solicitors for the plaintiff and be brought to me for authentication.

At a glance

Court

Decision date

Before

Source

Judgment (25 paragraphs)

Parties