Kuan Han Pty Ltd v Oceanview Group Holdings Pty Ltd [2003] FCA 1063 | Case summary

Further detail of background to the interlocutory applications 7 The substantive proceedings which I have already identified were commenced by statement of claim on 27 September 2002. The context is the purchase of a substantial commercial property at 32-36 Princess Street, Brighton-Le-Sands, New South Wales by the applicant from the respondent for a purchase price of 5.91 million dollars. Those commercial premises are currently occupied by Coles Supermarkets Australia Pty Ltd, which utilises the premises to carry on the business of a supermarket. Prior to the purchase of this commercial property, which occurred at public auction on 20 November 2001, the applicant contends that material misrepresentations, each in contravention of ss 51A, 52, 53A of the Trade Practices Act 1974 (Cth) ('the TP Act'), were made to it on behalf of the respondent in relation to the extent of outgoings payable in respect of the property. These representations were to the effect that the outgoings were $55,000 per year when in fact the true outgoings of the commercial premises at the time the representations were made were either $72,203.01, $112,044.97 or $112,045.41 per annum. The applicant maintains that it was induced to purchase the commercial property for the amount that it did in reliance upon the accuracy of the specified outgoings of $55,000 per year. The applicant apparently acquired its property for investment purposes, and not for occupation. The applicant contends that based on what are the true outgoings, the property is valued at between $4,700,000 and $5,700,000, that is between $200,000 and $1,200,000 less than the price paid by the applicant. The applicant claims, amongst other relief, for an order pursuant to s 87 of the TP Act for rescission of the contract of sale entered into between the applicant and respondent on 20 November 2001, or alternatively an order that the respondent compensate the applicant for the difference between the amount paid under the contract of sale and the true value in the light of the amount of the actual outgoings that prevailed at the time of the alleged representations. 8 The applicant has placed a large body of evidence before the Court which indicates that the applicant has a sufficiently arguable case to the effect that the respondent has contravened ss 51A, 52 and 53A of the TP Act. The respondent did not in these interlocutory proceedings contend otherwise, nor has the respondent filed any evidence refuting the contentions advanced by the applicant in the principal proceedings in spite of the directions of the docket Judge to do so. 9 On 7 July 2003, the applicant's solicitor informed the respondent's solicitor by way of letter that it had come to the applicant's attention that between 17 April 2003 and 7 July 2003 the respondent had ceased to be the registered proprietor of two strata properties forming part of the residential tower of the development, namely Lot 7 on Strata Plan 62254 and Lot 10 on Strata Plan 62254. The applicant's solicitor further stated that his enquiries to date confirmed that the respondent remained nevertheless the registered proprietor of the property comprised in certificate of title identifier comprising Lot 67 on Deposited Plan 6770, subject to a mortgage in favour of Westpac Banking Corporation. That property is located at 44 Princess Street, Brighton-Le-Sands, and features in these proceedings as the property sold to Samuel Issa allegedly in order to defraud the respondent's creditors. Number 44 Princess Street is vacant land not falling within Strata Plan 62254. The applicant's solicitor also conveyed his client's concern about the way in which the respondent was dealing with its assets and in turn requested that the respondent's solicitor provide him by no later than 5:00 pm on 14 July 2003 with following information concerning: 'a. the net proceeds of the sale of the two strata units being comprised in the certificate of title folio identifier Lot 7 of SP 62254 and Lot 10 of SP 62254; b. how [the respondent] dealt with the net proceeds and whether there (sic) are still part of the assets of [the respondent]; c. why the properties were sold; d. the current estimated value of the property comprised in certificate of title folio identifier Lot 67 of DP 6770, and the current level of indebtedness of [the respondent] to Westpac secured by the mortgage on that property; and e. [the respondent's] current asset and liability position and evidence to meet a judgement in these proceedings of an amount up to $500,000.' The applicant's solicitor thereby put the respondent on notice that failing an adequate reply, the applicant would approach the Court for a mareva injunction and any further relief as it may be advised. 10 On 11 July 2003, the respondent's solicitor furnished a written response in the following terms: '1. Our client is not attempting to avoid any judgment or enforcement of any judgment that your client may or may not obtain in these proceedings. 2. As you would known, the development of the Princess Street premises at Brighton-Le-Sands was a development that was carried out by our client and the various unit lots have been sold off by our client in the ordinary course of business since the building works were completed over a number of years. 3. The sale of the last two apartments out of the original 60 forming part of the Princess Street development, does not of itself constitute any evidence to suggest that our client is attempting to sell off all its assets in order to avoid any judgment. 4. The information you have requested is irrelevant to these proceedings and is of a confidential nature which our client is under no obligation to disclose to your client. Any attempt by your client to make an application for a Mareva injunction will be defended.' 11 It may be observed that although the applicant's solicitor in his letter of 7 July 2003 was under the implicit misapprehension that the 44 Princess Street property was still, by that time, beneficially owned by the respondent, the respondent's solicitor in his letter of 11 July 2003 remained silent upon the circumstance that the settlement of the 44 Princess Street property had already taken place on about 30 June 2003 in favour of Samuel Issa. 12 The applicant's solicitor deposed in his affidavit of 18 August 2003 that upon considering the respondent solicitor's letter dated 11 July 2003, he thought that there was no further cause for concern as to any dissipation of the respondent's assets. There is much to be said for the view that the respondent should reasonably have disabused the applicant of its implicit assumption that the 44 Princess Street property remained an asset of the respondent. 13 By letter dated 7 August 2003, the respondent's solicitor advised the applicant's solicitor that the sum of $113,376 was then being held by him in trust, in the following context: '[W]e advise that we are instructed that the funds held in trust and a security deposit held by Rockdale City Council are the remaining assets of the [respondent]. [The respondent] requires access to the trust funds to meet the ongoing costs associated with both these proceedings and other proceedings…' Understandably, these assertions caused the applicant's solicitor 'considerable concern', since it thereby became apparent that the 44 Princess Street property was no longer an asset of the respondent. 14 On 15 August 2003, the applicant's solicitor undertook a title search of the 44 Princess Street property and on about 18 August 2003 obtained a copy of the registered dealing comprising the transfer from the respondent to Samuel Issa of the property No. 44 Princess Street, Brighton-Le-Sands. That transfer revealed, inter alia, that stamp duty was paid in respect of the transfer on about 19 June 2003 and that the consideration for the transfer of the property apparently received by the respondent was $360,000. Although not received by the applicant's solicitor until about 22 August 2003, a settlement adjustment statement revealed to the applicant's solicitor that the date of transfer of the 44 Princess Street property was 30 June 2003 as referred to in [11] above. 15 On about 19 August 2003, a notice to produce documents for inspection pursuant to Order 33 rule 12 of the Federal Court Rules was served by the applicant's solicitor on the respondent's solicitor. That notice required the respondent to produce at the offices of its solicitor on 21 August 2003 at 9:30 am the following documents of the respondent: '1. Originals or copies of all documents within the following categories: (a) Settlement Sheets and Statements of any transfers of Properties within the last 12 months; (b) Net Proceeds of the Disposal of Properties located at 7/SP 62254, Lot 10 of SP 62254 and Lot 67 of DP 6770; (c) Balance Sheets and Profit and loss Statements of the Respondent as at 30 June 2002 and as at any date thereafter; (d) The Respondent's Bank Account Statements of dealings and transactions for the last 12 months; (e) Tax Returns for the year ended 30 June 2002 and 30 June 2003.' 16 During the morning of 21 August 2003, the applicant's solicitor received a telephone call from the respondent's solicitor to the effect that a limited number of bank statements would be made available for inspection and further that attempts were being made to obtain the other documents sought by the notice to produce. The applicant's solicitor attended the offices of the solicitor for the respondent on the same day and was furnished with fourteen pages of bank statements of two bank accounts apparently conducted by the respondent. After reviewing these bank statements the applicant's solicitor spoke with the partner who had the day to day carriage of these matters on behalf of the respondent, and sought clarification as to whether the unproduced bank statements for the periods 14 April 2003 to 28 April 2003, 30 May 2003 to 9 June 2003, and 8 July 2003 to 21 July 2003 could be provided. 17 The applicant's solicitor asserted in his affidavit dated 22 August 2003 that the following conversation then took place: 'Respondent's solicitor: Steve Issa [being the director of the respondent] said that's all he's got in relation to bank statements. I have tried to get in touch with Swabb Attorney's to obtain their Conveyancing files, but haven't been able to do so. I can't contact the solicitor responsible. The clients are also speaking to their accountants about their financial documents. Our client's have not prepared tax returns for any of the years… referred in the Notice to Produce. Applicant's solicitor: Can you contact your clients to see whether they will allow our firm to obtain the Settlement Statement and the Contract for the Sale of the three properties directly from Swabb Attorney's. Respondent's solicitor: No. I can't do that, the documents could be privileged.' I have no reason to doubt the accuracy of the above account of that conversation. The reference therein to 'Swabb Attorneys' was to the firm of solicitors who acted for the respondent on the sale of its strata lots of the Princess Street development. 18 On the same day being 21 August 2003, the applicant's solicitor conveyed to the solicitor for the respondent his concerns regarding the failure of the respondent to comply with the notice to produce which Wilcox J had directed on 19 August 2003 be resolved informally by agreement between the parties. The principal concerns adverted to by the applicant's solicitor may be summarised as being: (i) The failure of the respondent to furnish settlement sheets relating to transfers of properties from the respondent effected within the last 12 months; (ii) The failure of the respondent to produce documents relating to the net proceeds of the disposal of properties being Lot 7 on SP 62254, Lot 10 on SP 62254, Lot 67 on SP 62254 and Lot 67 on DP 6770 (I have already referred to all of those title references other than Lot 67 on SP 62254); (iii) The failure of the respondent to furnish balance sheets and profit and loss statements as at 30 June 2002 and as at any date thereafter; (iv) The failure of the respondent to produce its complete bank statements of dealings and transactions for the last 12 months. The applicant's solicitor noted that in respect of the respondent's bank account number 000253812, it had in its possession bank statements for the periods from 12 September 2002 to 11 March 2003; from 12 March 2003 to 11 April 2003; from 12 April 2003 to 11 May 2003; and from 12 May 2003 to 11 June 2003. In respect of bank account number 000253811, the applicant's solicitor confirmed that it held the bank statements for the following periods: 30 March 2003 to 14 April 2003; 29 April 2003 to 29 April 2003; 30 April 2003 to 12 May 2003; 13 May 2003 to 26 May 2003; 27 May 2003 to 29 May 2003; 10 June 2003 to 23 June 2003; 24 June 2003 to 29 June 2003; 30 June 2003 to 7 July 2003; 22 July 2003 to 29 July 2003; and 30 July 2003 to 14 August 2003. The applicant's solicitor recorded that the incomplete set of bank statements coincided with the time of disposal of the 44 Princess Street property, Lot 7 on SP 62254 and Lot 10 on SP 62254. These periods included 14 April 2003 to 28 April 2003; 30 May 2003 to 9 June 2003; and 8 July 2003 to 21 July 2003; and (v) The failure of the respondent to provide the applicant tax returns for the years ended 30 June 2002 and 30 June 2003. The applicant's solicitor noted that he was informed by the respondent's solicitor that the respondent had not filed an income tax return for the year ended 30 June 2002. 19 The applicant's solicitor requested that the above outstanding documents be made available for inspection by 9:30 am on 22 August 2003. 20 Also on 21 August 2003, the applicant's solicitor sought confirmation by 11:00 am on Friday 22 August 2003 as to the relationship between the directors of the respondent, Steve Issa and Michael Issa, and the owner of the 44 Princess Street property, Samuel Issa. 21 At about 9:19 am on 22 August 2003, the applicant's solicitor forwarded to the respondent's solicitor by way of facsimile transmission the following extracted letter: 'We refer to our letters of 7 July 2003 and 18 August 2003. Please kindly, as a matter of urgency: (a) Respond to the questions raised in our letter of 7 July 2003. We also seek the questions to be answered in respect of Lot 67 of DP 6770. We note we requested your client to answer the questions raised again in paragraph 2.5 of our letter of 18 August 2003. We reproduce the questions sought as follows for your ease of reference. (i) Please kindly advise of details concerning the net proceeds of the sale of the two strata units being comprised in the certificate of title folio identifier Lot 7 of SP62254 and Lot 10 of SP62254, and the Property comprised in the Certificate of Title Folio Identifier Lot 67 of DP6770. (ii) Please kindly advise how your client dealt with the net proceeds and whether they are still part of the assets of your client; (iii) Please kindly advise why the properties were sold; (iv) Please kindly advise your client's current asset and liability position and evidence of its ability to meet a judgement in these proceedings of an amount up to $500,000. (b) As regards the sale of the properties comprised in Folio Identifiers, Lot 67 of DP 6770, Lot 7 of SP 62254 and Lot 10 of SP 62254, we note your advice that the sales were handled by Swabb Attorneys. We are awaiting your urgent production of the contracts for inspection. In the interim, please advise: (i) If there was any agent involved in the sale of each of the three properties by your client; (ii) If yes to (b)(i), please advise the details of the agent. We look forward to your response by 11:00 am on Friday 22 August 2003.' 22 As at 12:30 pm on 22 August 2003, the applicant's solicitor had received no further communications from the respondent's solicitor in respect of the matters referred to in [21] above. Indeed by that time, the respondent had also not produced: (i) Settlement sheets and statements of any transfers of properties within the last 12 months; (ii) Information concerning the net proceeds of the disposal of properties located at Lot 7 on SP 62254, Lot 10 on SP 62254 and Lot 67 on DP 6770; (iii) Balance sheets and profit and loss statements of the respondent made as at 30 June 2002 and made as at any date thereafter; and (iv) Complete production of all its bank account statements for the last 12 months. 23 On 22 August 2003, Wilcox J entertained the part-heard notice of motion dated 18 August 2003 which sought a mareva injunction against the respondent. During the course of that interlocutory application, it appears that the respondent's solicitor provided the applicant's solicitor with a series of settlement sheets in respect of sales of the respondent's assets. Apparently, the applicant's solicitor was not in a position to comprehend those documents at that time. The settlement sheets were presumably prepared by Swaab Attorneys, being as I have earlier recorded the solicitors acting for the respondent on the respective conveyances. The settlement sheets revealed that during the period 5 September 2002 and 30 June 2003, the respondent received bank cheques totalling $2,932,732.92. The relevant amounts received from the respective sales of each property of relevance, including the vacant land at No. 44 Princess Street, is summarised in the following table: 'Date Amount Property Location

I observe that in relation to the amount of $108,623.71 received from Samuel Issa in respect of the sale of the 44 Princess Street property, approximately $212,000 was provided to Westpac Banking Corporation to presumably discharge the mortgage held by it over that vacant land. 24 Importantly for present purposes, the following relief was sought in the applicant's notice of motion dated 18 August 2003 against the respondent: '… 2. Subject to any proper claim for privilege at an appropriate time, the respondent within 7 days of the making of this order file at Court in a sealed envelope marked "Only to be opened at a direction of a Judge" an affidavit or affidavits setting out with particularity: (a) all current assets and liabilities of the respondent and the approximate value of those assets and liabilities; and (b) any assets of the respondent disposed of by it or on its behalf within 12 months prior to the date of the affidavit for an amount of over $1,000 and how the proceeds of any such disposition have been dealt with by the respondent.' I should observe that Order 2(a) is cast in identical terms to Order 3(a) which I subsequently granted on 12 September 2003. 25 His Honour granted the applicant mareva style relief against the respondent up to a value of $500,000.00 (to which the respondent in any event submitted) but declined to grant Order 2(a). Although his Honour's reasons for judgment were not apparently published, the following exchange between counsel for the applicant and Wilcox J may be recorded at this juncture: 'Mr Muston: … I would submit that such an order is justified, your Honour, [the applicant] is without the information about the nature and the location of the defendants assets, or the respondent's assets I should say, the applicant is in no position really to determine what they are undertaking as to damages perhaps entails. Nor are they in a position to make any… His Honour: Who is giving an undertaking as to damages? Mr Muston: Well, my client will be required to give such an undertaking, your Honour, if they were to obtain a Mareva Order. His Honour: Hang on. If you give an undertaking as to damages, that is an undertaking to pay such damages as sustained by the respondent by reason of your getting this order? Mr Muston: Yes. His Honour: They would have to prove what their damage was. Mr Muston: They would but at this particular point in time, your Honour, my client is in no position to evaluate the risks associated with giving such an undertaking where they don't know what assets are not being disposed of. There may be no risk because if my friend's instructions are correct, there are no assets. Well alternatively, your Honour, there may be considerable assets which could in turn result in considerable damages as a result of them not being dealt with. His Honour: But you are prepared to give the undertaking as to damage today? Mr Muston: Yes. His Honour: This would require an affidavit to be provided within 7 days which would then be in a sealed envelope in the Registry in which you don't get to see. Mr Muston: Subject to any application. His Honour: So you have got to give the undertaking as to damage without knowledge of what is in the envelope? Mr Muston: Yes, and in 7 days a further application could be made to… His Honour: No ... I've never heard of this and I'm not going to be the first Judge in history that has ever done it. Mr Muston: Well, if your Honour pleases. His Honour: I'm not going to make terms, Mr Muston. Now, tell me what is happening about the problem about whether the trial can go ahead.' 26 Austin J in Bax Global (Australia) Pty Ltd v Evans & Ors (1999) 47 NSWLR 538 at 544-5, observed that '[w]ithout information about the nature and location of the defendant's assets, the plaintiff may be unable to make the risk assessment which is necessary in order to give the undertaking as to damages, or if the undertaking is given, it may lead to an unexpected exposure'. The state of progress of the present interlocutory proceedings before me had sufficiently changed the dynamics of the litigation to warrant in my opinion the proposed Order 2(a) being revisited by me. Resolution of the issues arising for consideration 27 In Cardile & Ors v LED Builders Pty Ltd (1999) 198 CLR 380 Gaudron, McHugh, Gummow and Callinan JJ observed (at 403) that the Court must exercise 'a high degree of caution' when invited to grant a mareva injunction and that such an injunction: (i) operates as a very tight negative pledge species of security over property, to which the contempt sanction is attached; (ii) does not deprive the party subject to its restraint either of title to or possession of the assets to which the order extends; (iii) does not improve the position of claimants in an insolvency of the judgment debtor; and (iv) operates in personam and not as an attachment. 28 Following the High Court's decision in Cardile v LED Builders, a mareva injunction may be appropriately made against a third party to the proceedings 'assuming the existence of other relevant criteria and discretionary factors, in circumstances in which ... some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor' (at 405-6 per Gaudron, McHugh, Gummow and Callinan JJ). 29 The applicant contended that legal process is available to compel Samuel Issa to disgorge title to the 44 Princess Street property from s 37A of the Conveyancing Act which provides: '37A Voluntary alienation to defraud creditors voidable (1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors.' 30 The applicant's principal complaint concerning the transfer of the 44 Princess Street property by the respondent to Samuel Issa is essentially that the transaction was made with the intent to defraud creditors. It was pointed out by the applicant that a relevant matter prima facie establishing that intent is that the consideration paid by Samuel Issa was approximately $39,000 less than the $399,000 purchase price paid by the respondent in 1995 which was of course $360,000recorded in [14] above. The applicant sought to establish that the fair market value of the 44 Princess Street property was $600,000 at the time of transfer to Samuel Issa, and that I should take judicial notice of the circumstance that property prices in Sydney have not stagnated but have rather steadily increased over the material period of time. It was submitted that on no possible view could it be accepted that the 44 Princess Street property was transferred on commercial or arms length financial terms, and that the proximate relationship between the director of the respondent and the transferee of the property tended to fortify that conclusion. It was therefore submitted that there was an arguable case that there had occurred an alienation of the property made with the intent to defraud creditors and that on discretionary grounds, a mareva style injunction should issue against Samuel Issa having the effect of preventing him from disposing of the 44 Princess Street property until further order of this Court. 31 In an affidavit deposed on 11 September 2003, Steven Issa who is a director of the respondent, and presumably has been so at all material times, purported to testify to the circumstances surrounding the purchase and transfer of the 44 Princess Street property to his son Samuel Issa. Steven Issa confirmed that the respondent purchased for $399,000 the 44 Princess Street property (which was located immediately adjacent to the development) in about December 1995 pursuant to an option granted in January 1995. At the time of the purchase there was apparently a brick house on the property which was initially used by the respondent as a site office for the respondent's adjoining development. Nevertheless, Steven Issa asserted as follows: 'In my opinion based on properties for sale in that area in late 1995 the property was purchased for a premium price [of] approximately $100,000 in excess of its true market value as the respondent was required to purchase the property in order to proceed with the development.' Steven Issa attributed the above opinion to his recollection of property prices in 1995. 32 Although the house on the 44 Princess Street property was demolished in or about late 2002, Steven Issa deposed that he recalled placing the property on the market with an asking price of approximately $400,000 and that later in early 2003 he changed the selling agents in circumstances where no asking price was stipulated. Steven Issa next deposed that the best offer he received was $360,000, which he said ultimately justified the sale of the 44 Princess Street property for this amount to his son Samuel Issa. Steven Issa also stated that Samuel Issa was not concerned in the day-to-day operations of the respondent. These assertions were somewhat unspecific and imponderable, and inexplicably lacking in any supporting correspondence or other documentation which would normally be expected in relation to the listing of property for sale. 33 The respondent also sought to tender during the interlocutory hearing on 12 September 2003, which commenced at about 2:15 pm, an expert report from a valuer as to the market value of the 44 Princess Street property. I declined to receive that evidence. That was because although the respondent had been on notice, at least since 27 August 2003, of the applications presently before the Court, it chose to provide the expert report to the applicant at about 12.00 pm on 12 September 2003. No explanation for the considerable delay in the preparation and service of that expert report was proffered in affidavit form or otherwise. The present interlocutory matter had been listed for hearing by the Court on two previous occasions and an adjournment to allow the applicant to consider the expert report and for the applicant to file evidence in reply, was not in my view an appropriate or attractive avenue in the circumstances. For what it may matter, no such alternative was suggested on behalf of the respondent in any event. Moreover, even if satisfactory verification of the valuation had been furnished in a timely manner, there would have remained for resolution what was, on objective circumstances before the Court, an arguable case that the alienation of the 44 Princess Street property was made with the intent to defraud creditors in contravention of s 37A of the Conveyancing Act. 34 The applicant has placed before the Court prima facie evidence that the respondent has undertaken a substantial reduction of capital by the disposition of at least the substantial proportion of its assets, being a reduction of capital not sanctioned by the Court and therefore prima facie unlawful. So much is prima facie evidenced from the facts and circumstances already set out in these reasons. No explanation whatsoever was tendered to illuminate the run down of the respondent's assets and not one scrap of probative evidence was offered by the respondent to revolt the sudden evaporation of its assets. 35 The Court has been left with the following disturbing and unexplained circumstances: (i) Approximately three million dollars acquired from the sale of the properties referred to in [23] above remain unaccounted for; (ii) The bank statements which have been excluded from the limited range of bank statements produced by the respondent would have (if they had been produced) confirmed the removal of approximately $204,291.53 from these accounts between 14 April 2003 and 22 July 2003; (iii) The 44 Princess Street property was sold in the context of irregular events to the respondent director's son at prima facie undervalue who has not for example sought to place before the Court any evidence which would suggest that he was a purchaser in good faith who did not, at the time the property was transferred to him, have notice of an intent to defraud creditors on the part of the respondent (s 37A of the Conveyancing Act); and (iv) The respondent's only assets as at 7 August 2003 are $113,376 held in trust by Bartier Perry solicitors and a security deposit held by the Rockdale City Council. 36 As I have foreshadowed, that state of affairs, whilst remaining unexplained despite ample time and opportunity so to do, is consistent with the conclusion that the respondent has engaged in a design to reduce its capital and alienate its property so as to deny to the applicant the realisation, or effective realisation of financial significance, of any favourable judgment in the substantive proceedings. Accordingly, I incline to the view that the applicant has made out a strong prima facie case for relief pursuant to s 37A of the Conveyancing Act, whereby the Supreme Court of New South Wales, may compel Samuel Issa to transfer the 44 Princess Street property to the respondent, subject to a charge in his favour for such sum as he may establish to have been furnished in the nature of valuable consideration for his purported acquisition of that property. 37 Counsel for both the respondent and Samuel Issa submitted that notwithstanding the existence of any such prima facie case, I should decline to grant the mareva injunction against Samuel Issa on discretionary grounds. I am not disposed to this view. The general discretionary considerations of application here are uncontroversial, and have been consistently applied across all Australian jurisdictions. A clear expression of these principles can be found in the reasons of Gleeson CJ in Patterson v BTR Engineering (Aust) Limited (1989) 18 NSWLR 319, and being expressed in the context of applications of the present kind: '…Has the applicant proceeded diligently and expeditiously? Has a money judgment been recovered in the proceedings? Are proceedings (for example, civil conspiracy proceedings) available against the third party? Why, if some proceedings are available have they not been taken? Why, if proceedings are available against the third party and have not been taken and the court is still minded to make a Mareva order, should not the grant of the relief be conditioned upon an undertaking by the applicant to commence, and ensure so far as is possible the expedition of, such proceedings? It is difficult to conceive of cases where such an undertaking would not be required. Questions of this kind may be just as relevant to the decision to grant Mareva relief as they are to a decision to dissolve it. These are matters to which courts should be alive' (Cardile v LED Builders (at 404)). 38 I have carefully weighed and considered the above principles in the light of what I consider to be compelling circumstances in favour of the applicant, and am satisfied that my discretion should be exercised in the applicant's favour. In my view, the applicant has proceeded both diligently and expeditiously, and could not have reasonably reached the perception, until 7 August 2003 (being the day upon which it was advised that the respondent's assets had been significantly dissipated) that the respondent was in the process of reducing its capital, and moreover to an apparently blatant extent. I put that prima facie situation emphatically to counsel acting for the respondent and Samuel Issa on the occasions of my involvement in these proceedings, and received no assurance that there would or could be demonstrated to the Court why it is that there has been an apparently massive dissipation of cash proceeds of the sale of the respondent's realty in circumstances pointing prima facie to an unlawful reduction of the respondent's capital. No reaction has been proffered to that observation on my part. 39 True it is that a liquidator appointed to the respondent may be entitled, pursuant to Part 5.7 of the Corporations Act 2001 (Cth) to set aside the transfer of the 44 Princess Street property, subject to the rights of any encumbrance without notice, but ultimately, if a mareva injunction is not presently made against Samuel Issa, that property may find its way into the hands of a bona fide purchaser for value or mortgagee without notice. This may have the result that perhaps the only identifiable and tangible asset of the respondent apparently still subsisting would effectively no longer remain available to satisfy any judgment awarded in favour of the applicant in the substantive proceedings for damages. In the normal course, the applicant should undertake to commence proceedings forthwith at least against Samuel Issa pursuant to s 37A of the Conveyancing Act, but Counsel for the applicant indicated that all that had now been put in train. 40 Consequently, there remains for consideration the disclosure orders contemplated by Order 3 which I have reproduced at [5] above. The respondent, unconvincingly, sought to dissuade me from making that order on the footing that I had no power to make it, or that alternatively it was not warranted, notwithstanding the events of concern already traversed in these reasons for judgment. 41 The power of the Federal Court of Australia to make interlocutory orders generally derives, in part, from s 23 of the Federal Court of Australia Act 1976 (Cth) ('Federal Court Act') which states: '23 The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, such writs of such kinds, as the Court thinks appropriate.' 42 In Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1, Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ considered, in their joint judgment, the scope and operation of s 23 of the Federal Court Act. Their Honours said (at 32): 'Interlocutory relief The powers of the Federal Court under s 23 of its Act are powers "to make orders of such kinds, including interlocutory orders, as it 'thinks appropriate'", as Deane J noted in Jackson v Sterling Industries Ltd. He added: "Wide though that power is, it is subject to both jurisdictional and other limits. It exists only 'in relation to matters' in respect of which jurisdiction has been conferred upon the Federal Court. Even in relation to such matters, the power is restricted to the making of the 'kinds' of order, whether final or interlocutory, which are capable of properly being seen as 'appropriate' to be made by the Federal Court in the exercise of its jurisdiction." One limitation on the powers of the Federal Court to grant interlocutory injunctions is that those powers must be exercised for the purpose for which they are conferred. In a later passage of the judgment of Deane J in Jackson v Sterling Industries Ltd, his Honour said a power to prevent the abuse or frustration of a court's process should be accepted "as an established part of the armoury of a court of law and equity" and that "the power to grant such relief in relation to a matter in which the Federal Court has jurisdiction is comprehended by the express grant to that court by s 23 of the Federal Court of Australia Act". But, his Honour observed, orders must be framed "so as to come within the limits set by the purpose which [the order] can properly be intended to serve". The Mareva injunction is the paradigm example of an order to prevent the frustration of a court's process but other examples may be found. The moulding of an interlocutory injunction must depend upon the circumstances of each case. As Brennan J observed in Jackson v Sterling Industries Ltd: "A judicial power to make an interlocutory order in the nature of a Mareva injunction may be exercised according to the exigencies of the case and, the schemes which a debtor may devise for divesting himself of assets being legion, novelty of form is no objection to the validity of such an order." The general principle which informs the exercise of the power to grant interlocutory relief is that the court may make such orders, at least against the parties to the proceeding against whom final relief might be granted, as are needed to ensure the effective exercise of the jurisdiction invoked.' The highlighted portion is my emphasis. 43 In Cardile v LED Builders Pty Ltd, Gaudron, McHugh, Gummow and Callinan JJ accepted the above cited passage as a correct statement of principle subject to the following two matters (at 401): 'The first matter is that, in that passage, the attention of the Court was directed to orders against parties to the proceedings and against whom final relief was sought. If relief is available against non-parties, the focus must be the administration of justice. The second matter is that references to "Mareva orders" be substituted for "injunctions".' 44 In A & Anor v C & Ors [1981] QB 956, Robert Goff J held, inter alia, that an asset disclosure order may be appropriate in 'aid' of a mareva injunction, and in Reid v Howard (1995) 184 CLR 1, the High Court observed that disclosure orders may be made as 'ancillary' to the grant of such relief. However, I would not respectively think that it is the case that disclosure orders may only be made in 'aid' of, or as 'ancillary' to, a mareva injunction. 45 The express grant of power in s 23 of the Federal Court Act is wide and general, and even absent resort to s 23, the Court has the power 'to make such orders in relation to matters properly before it, as an incident of the general grant to it as a superior Court of law and equity, of the jurisdiction to deal with such matters' (Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 623 per Deane J). Subject to being guided by the principles referred to in [42] above, it is appropriate for the Court to mould interlocutory orders which meet the unique circumstances of each case, so as to ensure that the integrity of the Court's process is preserved (CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 391-2) and the 'effective exercise of the jurisdiction invoked' is maintained (Patrick Stevedores v MUA (at 32)). That may be a separate and distinct reason for facilitating disclosure orders which are not otherwise in 'aid' of, or 'ancillary' to, the mareva injunction sought, so long as the orders are appropriately made in the exercise of the Court's jurisdiction. For example, the Court may order a party to the proceedings to disclose certain information, regardless of whether a mareva injunction is claimed, because that information may be clearly appropriate to any subsequent application that may be made for such an injunction (Australian Competition and Consumer Commission v Top Snack Foods Pty Ltd & Ors [1997] 380 FCA). 46 In Bax Global v Evans, Austin J considered the jurisdictional basis for ancillary disclosure orders. After tracing the relevant authorities, Austin J postulated (at 544-5): 'Now that Cardile's case has defined more precisely the course of the jurisdiction to make the Mareva orders themselves, some inferences can be drawn as to the Court's jurisdiction to make ancillary disclosure orders. Since the source of the jurisdiction to make Mareva orders is the Court's inherent power to prevent abuse of its processes and stultification of the administration of justice by the removal of assets from the plaintiff's reach, the Court must also have the power to order disclosure of the nature and location of particular assets or assets of a class so that the Mareva relief is effective and not oppressive. As Robert Goff J pointed out in A v C (at 959), if the plaintiff does not know the number and location of (say) the defendant's bank accounts, a Mareva order in respect of bank accounts generally could be oppressive both to the defendant and to the bankers who are required to act in accordance with it, especially where there is more than one account or several defendants... Robert Goff J concluded, as do I, that considerations such as these point to the conclusion that in the special cases where the court decides to make Mareva orders, it may make such disclosure orders as are necessary to ensure that the mareva jurisdiction is properly and effectively exercised. While the power to do so does not depend upon the statutory discovery and interrogatory procedures, Cardile indicates (as I have mentioned) that these procedures should be considered as alternative methods of compelling disclosure, where they are available.' 47 Turning again to the somewhat extraordinary circumstances of the present case, I can find no persuasive reason for not making an order in the terms identified in Order 3 set out in [5] above, the operation of which would be subject to the respondent not being obliged to make the relevant disclosures if there is a proper claim to privilege, and on the applicant making appropriate application to the Court to inspect the affidavit or affidavits prepared in compliance with the order. 48 Given that the applicant has tendered evidentiary material in the nature of settlement sheets establishing that the respondent received approximately three million dollars in proceeds from the sale of the development properties, being evidence which was not previously available, and has established a reasonable case for a mareva injunction as against Samuel Issa, which of course carries the inference that the respondent may have deposited assets in the hands of third parties to remove those assets from the applicant's reach, I am satisfied that there has been sufficient change in circumstances to warrant my reconsideration of Order 3(a), in order to ensure that the mareva injunctions are effective and not oppressive. 49 The respondent sought comfort from the decision of Debelle J in Southern Equities Corp Ltd (In Liq.) v Bond & Ors (No. 4) [2000] SASC 358 where in the circumstances of that case, his Honour declined to grant the plaintiff relief beyond a disclosure order compelling the defendants to swear affidavits disclosing their assets. That was a decision however which turned on very different factual circumstances and which did not consider the precise type of relief presently at issue. 50 The purpose of Order 3(a) is to compel the respondent to disclose its assets and liabilities and the approximate value of those assets and liabilities. This in turn would ensure that the true circumstances surrounding the disposal, if not alleged dissipation, of the respondent's assets are made known. The respondent may have legitimately applied its assets to satisfy validly declared dividends, or other liabilities incurred in the ordinary course of its business. The respondent may have assets beyond those so tentatively suggested in its solicitor's letter dated 7 August 2003, and in excess of its liabilities and in those circumstances, the third party mareva injunction may operate oppressively on Samuel Issa. If that is so, steps may be taken by Samuel Issa to dissolve any mareva injunction operating against him. The financial picture of the respondent, might also assist the Court in determining whether a receiver should be appointed in aid of the mareva injunction operating against the respondent so as to ensure the effective preservation of the respondent's property (Beach Petroleum NL & Anor v Johnson & Ors (1992) 9 ACSR 404; Cardile v LED Builders at [36-38]). These matters cannot be considered unless and until the order is first made, and the occasion for prima facie compliance therewith duly crystallises. 51 Similarly, the purpose of Orders 3(b)(i) and (ii) is to discern whether, and if so where, the respondent has secreted approximately three million dollars in funds. The proceeds from the sale of the respondent's properties may still be in the hands or control of the respondent, or they may have been deposited with third parties. In my view, in order to ensure that the mareva injunctions are effective, yet not oppressive, the above disclosures should be made by the respondent. This would also assist in determining whether the mareva injunctionas against Samuel Issa should remain in force or for that matter, whether further relief should be granted against him or other third parties so as to preserve the integrity of the Court's processes. 52 Finally, the applicant has attempted to avail itself of the Court's standard production procedures in order to ascertain the information required to give effect to the mareva injunctions and this has, to a large extent, been a fruitless exercise. Because of the way in which the respondent has dealt with its assets, I am of the view that any further attempt to engage the various processes under the Federal Court Rules in order to compel the production of the material sought, would not only unfairly and unjustifiably prejudice the applicant, but also allow the respondent, by reason of the inevitable protraction of time, to further abuse the integrity of the Court's processes. There must come a point in time where the justice of the case demands the dispensation of the normal methods of production of documentation. The present exigencies invite in my view such an approach.

Kuan Han Pty Ltd v Oceanview Group Holdings Pty Ltd

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