I am considering an application for what is still referred to in the ordinary parlance of the legal profession as a Mareva injunction, in respect of the property of the second defendant to proceedings for personal injury commenced in the Common Law Division of this Court and certain property in the name of his wife who is not a party to those proceedings, but is named as a second respondent to the summons. More formally orders are sought under Uniform Civil Procedure Rules 2005 (NSW) rr 25.9, 25.11 and 25.14 against the respondents restraining them from removing any assets in or outside Australia or from disposing of, dealing with or diminishing the value of them.
The freezing order is sought in support of the plaintiff's rights which it is hoped will be vindicated in a judgment for a substantial sum of damages. The plaintiff's personal injury action is for or as a result of very severe sexual abuse that was inflicted upon her by Geoffrey Croft when she was for a period fostered by the Department of Community Services to him and his wife while she was a ward of the state. She was then about 16 or 17 years of age.
The matter, I think from the evidence I have read, was reported in the proceedings of the Royal Commission into Institutional Responses to Child Sexual Abuse and in about 2017 or thereabouts the plaintiff reported the matter to police and she made a number of statements in that regard. The matter was taken up by the police and resulted in the prosecution of Mr Croft, not only for five counts of serious sexual assault and indecent assault against the plaintiff but also for four counts of similar serious offending against another person.
It is important to say for present purposes that Mr Croft stood his trial before his Honour Judge McLellan SC of the District Court and a jury commencing on 10 September 2019 and the jury returned verdicts of guilty on 30 September 2019. Judge McLellan sentenced him on 25 October 2019 to what seems to be, on the information available to me, an aggregate term of imprisonment of 22 years, with a non-parole period of 10 years.
Mr Croft has recently lodged a notice of intention to seek leave to appeal against his conviction and sentence and the time for initiating process to be filed in the Court of Criminal Appeal has been extended to 24 August 2020.
The principal proceedings in the Common Law Division, which are not before me today, include the State of New South Wales as first defendant but the State is not a party to these proceedings commenced by way of summons. The statement of claim was filed in the Registry on 16 April 2020. It has been served and Mr Croft has filed a notice of appearance by his solicitors who act for him in the criminal matter. That document was filed on 1 July 2020.
In accordance with the usual practice of the profession the application for the Mareva injunction has been made ex parte. It has something of a history in this Court, in as much as it first came for hearing before Justice Wright on 23 June 2020 when his Honour expressed some dissatisfaction with the evidence that had been put forward and adjourned the matter. It came back before Bellew J on 15 July 2020. The additional evidence contemplated had not been finalised and it has come back before me today as duty judge, a further affidavit of the plaintiff's solicitor having been filed.
I have before me as evidence two affidavits of Mr Gregory Alexander Walsh, the plaintiff's solicitor, sworn on 18 June 2020 and 24 July 2020 respectively. I also have an affidavit of a solicitor in his employ, Angela Skocic, sworn on 22 June 2020.
The summons names Mr Croft and his wife Sandra June Croft as respondents. The reason for that is, that the evidence I have referred to demonstrates that in May 2019 at a time when Mr Croft would have been already committed to stand trial in the District Court he disposed of some of his property to Mrs Croft for "love and affection" and, accordingly, Mr Sheller of Senior Counsel, who appears with Ms Reid for the plaintiff, submits there is at least a strong suggestion in the evidence that he disposed of potentially valuable assets to his wife for no valuable consideration. Mr Sheller submits I would be satisfied Mr Croft was attempting to shield his property from future legal liabilities to his victims.
So far as the searches and inquiries carried out by Mr Walsh and his firm reveal, Mr and Mrs Croft as at 12 September 2017, when the plaintiff had made her first two statements to the police, owned five properties in NSW: two properties in Armidale; a substantial rural holding at Yarrowyck; a grazing leasehold property at Ebor; and a small house in Brushgrove, New South Wales
There are no historical searches so it is a little bit difficult to say what interest of Mr Croft had in those last three properties I have mentioned, whether it be in fee simple or as tenants in common with his wife, which were transferred to his wife for, I will say, no better consideration than "love and affection".
The plaintiff calls into question the validity and motive for those transfers. Mr Sheller submits that, whereas there may be other explanations, the most obvious explanation is that those properties were transferred to Mrs Croft in an attempt by Mr Croft to render himself judgment proof, given, as I have said, that he was expected to stand trial and, perhaps, appreciated that, in the event of conviction, civil proceedings might ensue.
I should also say that the civil proceedings are progressing appropriately. A detailed evidential statement has been prepared which is annexed to Mr Walsh's second affidavit and a summons has been drafted ready to be filed in the Equity Division seeking to have the transfers from Mr Croft to Mrs Croft set aside as having been made in contravention of the provisions of section 37A of the Conveyancing Act 1919 (NSW). The process has yet to be filed, but from Mr Walsh's second affidavit I am satisfied that it is the plaintiff's intention to initiate those proceedings.
As the New South Wales Court of Appeal pointed out in Frigo v Culhaci [1998] NSWCA 88 at p.6:
"A mareva injunction is an exceptional interlocutory remedy. Its function is to minimise the possibility of an unscrupulous defendant seeking to render himself or herself 'Judgment proof' by taking steps to ensure that no assets within the jurisdiction can be found on the day of judgment."
It is important to bear in mind that its purpose is not to provide the plaintiff with security in advance of the judgment and it is the duty of the Court to scrutinise applications carefully. The general rule is that the plaintiff will need to establish:
"first, the prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant's absconding, or of assets being removed out of the jurisdiction or disposed within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied" (Frigo at p.6).
It is plain that the remedy is available in appropriate cases not only against the proposed or actual defendant to proceedings but may also lie at the suit of the plaintiff against a third party in circumstances where, inter alia, that third party can be shown to be in receipt of property in which the defendant may have a beneficial interest. But it is not so limited. In Cardile & Ors LED Builders Pty Limited (1999) 198 CLR 380; [1999] HCA 18 at [57] a plurality of justices of the High Court said:
"What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word "may", be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which: (i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including "claims and expectancies", of the judgment debtor or potential judgment debtor; or (ii) 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."
It may be observed that their Honours would include in that phrase "some process ultimately enforceable by the courts" proceedings brought under the provisions of section 37A of the Conveyancing Act (see Cardile, [55]).
The case that Mr Sheller advances therefore proceeds on this basis, with every respect, reducing it to its essential components: (1) the plaintiff has a prima facie cause of action against Mr Croft; (2) there is a danger, by reason of his assets already having been disposed of within the jurisdiction to Mrs Croft, that if the plaintiff succeeds she will not be able to have her judgment satisfied; (3) Mrs Croft is a person who is in possession of assets of Mr Croft, that is to say his interest in the three parcels of real property that I have identified; and (4) there is a process available to oblige her to disgorge his interest in that property, as I have said, and that process will be instituted on behalf of the plaintiff soon.
It seems to me that although the Court ought to be slow to issue a Mareva injunction against a third party, each of those matters referred to above (at [16]) has been made out. There is no doubt that there is a strong prima facie case that the plaintiff will be successful against Mr Croft in her action for personal injury damages. I do not rely so much on the apparent fact that he has been convicted as that fact will not be admissible against him in his civil trial. Rather, having read her statement carefully, I am satisfied that the account she gives is credible and is capable of being accepted by a judge of this Court when the matter comes on for trial, whether or not Mr Croft's appeal to the Court of Criminal Appeal is successful.
There is no doubt that Mr Croft has alienated available or potentially available assets to Mrs Croft, who is a third party within the penumbra of the categories of case where the High Court has sanctioned Mareva orders against third parties, and that the plaintiff proposes to take proceedings to require her to disgorge her husband's interest in relation to the matter. Of course, these are not the only matters informing the balance of convenience for the exercise of this power.
The plaintiff has offered the usual undertaking as to damages appropriately. She has disclosed that her means of satisfying such an undertaking are limited given that she is the recipient of a Social Security benefit. However, if one accepts the evidence, including the psychiatric evidence which has been read in relation to the proceedings, one may infer, at least at a prima facie level, that the injuries suffered at the hands of Mr Croft are the basis for her straightened circumstances in life. The evidence, generally speaking, provided by her statement demonstrates that, certainly before the age of 16, there were high hopes for her doing well at school and, perhaps, going on to university.
A matter I am concerned about relates to the limitation upon the proposed order, which is the sum of $3 million. Mr Walsh, an experienced solicitor in this area, estimates that that would be the upper range of the damages that might be properly awarded if the plaintiff is successful in her case. There is no breakdown by a schedule of damages showing how that sum is arrived at and it does seem to me that, although damages in any such case are likely to be substantial, that sum is of certainly an indefinite amount. However, I do not think that that alone should stand in the way of making the order given that I propose to bring the matter back, if I make the order in the short term, to enable the issue of the appropriateness of the order and the terms to which it should be subject to be addressed.
It is also the case, of course, so far as the order relates to Mr Croft, he will need to have available funds in relation to his appeal to the Court of Criminal Appeal and, perhaps, to fund his civil action. An allowance is made in that regard in the proposed order and again if that allowance is insufficient, doubtless, an application can be made.
So far as Mr Croft is concerned, given that he has, in the shadow of his trial, actually disposed of assets, it seems to me that an order in the usual terms is appropriate with regard to him but I am not so convinced in relation to Mrs Croft. There is no suggestion anywhere of any complicity on her part in his tortious wrongdoing, as alleged by the plaintiff, and it seems to me that an order going to her ought to be limited to the three properties shown to have been transferred to her for other than what lawyers would regard as valuable consideration.
I am satisfied that I should exercise my discretion to make the orders for the reasons I have given, notwithstanding some initial doubts expressed in argument with Mr Sheller. I think, however, that the matter should be brought back before the Court as soon as possible. There are some difficulties in regard to this. First, Mr Croft is incarcerated, and from the letter from his solicitor, Mr Harris, to Mr Walsh there can be difficulty, because of the current lockdown in NSW Correctional Centres, in obtaining access for an interview via the prison system's AVL facilities. It may be that an order to bring the matter back before the Court could facilitate space being made available for Mr Croft, but I am unsure.
The other matter is that the best information about Mrs Croft is that she may have left the New England region and gone to Queensland and is there residing. It may be that there will be difficulty serving her with the order and obtaining her attendance upon the further hearing as to why the order should be continued.
I should say if I have not already, that I think even though we are dealing with real property, Mr Sheller has persuaded me that it is appropriate to deal with the matter ex parte. Even in the case of real property, further encumbrances can be attracted at fairly short notice if a person's need is great and the bank is happy to proceed expeditiously. Unregistered dealings are not unknown.
For those reasons I do propose to make an order but, in the case of Mrs Croft, limited in the way that I have described and I will be asking Mr Sheller to bring in an amended form of order giving effect to those reasons.
1. Direct that the plaintiff bring in a form of order giving effect to my reasons. That may be forwarded to me in chambers and I will finalise the order at that time.
2. Stand the matter over for mention or directions before me on Friday 31 July 2020 with a view to considering the continuation of the injunction, assuming that the parties are ready to deal with the matter then.
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Decision last updated: 30 July 2020