1 At the conclusion of the defendants' case yesterday, the plaintiffs gave notice of an intention to make an oral application for relief pending judgment. I heard the application yesterday afternoon. The relief sought was set out in a draft form of order handed up by Miss Merkel. There were essentially two orders or groups of orders: first, an order that the defendants pay $900,000 into a controlled moneys account to be administered by the respective solicitors and to be applied by them according to the outcome of the proceedings; and, second, an order of a Mareva kind.
2 The first application was not pressed. Nor could it properly have been pressed. It amounted to an application for an order that cash security be provided pending judgment and was accordingly objectionable for reasons clearly stated by Deane J in Jackson v Sterling Industries Ltd (1987) 164 CLR 612 at p.625. The application eventually proceeded by reference to the Mareva claim only.
3 In submissions against the making of the order claimed, Mr Newton of counsel, who appeared for the defendants, emphasised that the basis for the grant of Mareva relief lies, as the High Court confirmed in Cardile Pty Ltd v LED Builders Pty Ltd (1999) 198 CLR 380, in the court's power to protect its own processes from frustration. The purpose of such an order is to maintain the status quo pending judgment. In Patterson v BTR Engineering Australia Ltd (1989) 18 NSWLR 319, Gleeson CJ said that the remedy is discretionary:
"… but it has been held that in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a 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 of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied."
4 As far as a prima facie cause of action is concerned, I am satisfied that that requirement is met in this case. The application was, after all, made on the seventh day of the trial after evidence from both sides was complete but before submissions.
5 The plaintiffs point to five main areas of concern in support of the contention that there exists a danger of dissipation of assets sufficient to warrant the exercise of the Mareva jurisdiction. The plaintiffs first express concern that until evidence given on Wednesday of this week, it appeared that the third defendant, Lakeside Golf Pty Ltd, was party to a shareholders agreement in relation to Clarendon Resort Housing Pty Ltd, the developer of the Wyong golf course and housing project, which involved the third defendants having a right to 47.5 percent of the profits from that project, but it is now clear that the third defendant no longer has that interest and disposed of it some two years ago.
6 Documents in evidence show that the third defendant did, in October 2001, become party to a shareholders agreement among the then shareholders or, as they were at that stage, prospective shareholders of Clarendon Resort Housing Pty Ltd, a company they formed as a vehicle for their development joint venture. There were three such parties, including the third defendant, Lakeside Golf Pty Ltd, and the shareholders agreement did, in general terms, provide for 47.5 percent of the surplus proceeds to be enjoyed by the third defendant.
7 In the last two days, the plaintiffs have become aware that the agreement of October 2001 was varied in May 2003 in consequence of the third defendant having transferred its shareholding to two other parties. The documents in evidence are sufficient to warrant an inference for the purposes of the present application that the third defendant's shareholding consisted of 95 shares and that these were transferred, as to 50, to Kooindah Pty Ltd and, as to 45, to CPG Developments Pty Ltd, formerly Clarendon Apartments Pty Ltd. It is accepted that CPG Developments stands at arm's length from the third defendant; indeed, from all the defendants. But it is said that Kooindah is associated with the defendants. This is borne out by an ASIC search of Kooindah which shows the fourth defendant, Hun Sunwoo, to be the sole director and his wife and two sons, all of whom share the fourth defendant's home address at Turramurra, to be the holders of 50 percent of the shares, the other 50 percent being held by persons with other names who share an address at Strathfield.
8 Also in evidence, however, is the instrument of transfer by which the 50 shares were transferred by the third defendant to Kooindah. It shows a consideration of $475,000. There is nothing before me to suggest that this consideration is otherwise than genuine. If one assumes that a sale to an arm's length party would be at a price per share not less than that applying to a sale to an associated party, the indication is that the transfer of the 95 shares by the third defendant in May 2003 was for a total consideration of the order of $902,500. If that is so, the third defendant's shareholding in Clarendon Resort Housing Pty Ltd came to be replaced by proceeds, in cash or receivables, of some $900,000. How that can be said to smack of dissipation or demonstrate a danger of dissipation is not readily explained.
9 The plaintiffs next point to matters concerning an option to purchase the development site at Wyong. The owner of the land, in the sense of the registered proprietor, is a non-party, Lakeside Resort Development Pty Ltd, which I shall call "LRD", in which the third defendant has at all relevant times held a 30 percent shareholding interest. Under a development agreement made in October 2001, LRD granted to Clarendon Resort Housing Pty Ltd an option to purchase the site for $10 million. That option was later exercised, it appears, with the result that the price of $10 million became owing to LRD.
10 The evidence does not appear to show when the $10 million became owing or when it was required to be paid, but the plaintiffs have put into evidence a letter dated 4 May 2004 by which Clarendon Resort Housing Pty Ltd asked LRD for an extension of time to pay, the extension being on the basis that $2 million would be paid by 4 October 2004, a further $1 million would be paid by 30 April 2005 and the balance would be paid by 4 October 2005. The letter gave two reasons for the request: first, delay in starting the project "for various reasons"; and, second, bank financing not being finalised. The letter carries an endorsement of agreement by LRD signed by two directors, one of whom is the fourth defendant.
11 I am not at all sure how this evidence is supposed to indicate danger of dissipation of assets by the defendants. The arrangement for time to pay represented an indulgence granted by a non-party, albeit one in which the third defendant has a 30 percent shareholding and the fourth defendant had a position of influence as a director at the time (although he ceased being a director on 18 April 2005), but the indulgence was granted to a Clarendon entity which stands at arm's length from the defendants and their associated interests. That arm's length relationship, coupled with the fact that the indulgence involved no more than the granting of time to pay without any form of release of the debt itself, does not seem to me to indicate any shadow of danger of dissipation relevant to the current application.
12 The third matter upon which the plaintiffs rely arises from evidence given by the fourth defendant in cross-examination on Tuesday last, 24 May. The fourth defendant was referred to a letter he wrote to a creditor of his group in 2000 saying that if the creditor (a company called Heilbrunn, represented by Mr Rutledge) were to press for payment of a sum then due, he, the fourth defendant, would have to become bankrupt. I quote here transcript page 356, line 33, to page 357, line 30:
"Q. And you were at pains to write to Mr Rutledge then that if Heilbrunn were to take you to Court, 'I have no choice but to declare bankrupt. It means inconvenience for me but end the matter with your client'?
A. Probably did, yes.
Q. And I am suggesting to you, Mr Sunwoo, it was not true that you could not pay the amount of your obligation to Heilbrunn in the year 2000?
A. $675,000?