Patterson v BTR Engineering

The Application in the matter is dated 23 August 1993 and claims judgment in the sum of $164,223 pursuant to s 592(1) of the Corporations Law together with interest and costs. The claim relates to debts incurred by a company known as Bright & Beautiful Pty

Limited. The Statement of Claim was filed on 24 August 1993.

Mr Rogers, the solicitor for the applicant, sets out in his affidavit in support of the motion that prior to 23 August 1994, according to searches carned out, the first respondent was the registered proprietor of 3 properties namely 8 Margetts Street, Pittsworth; 49 Briggs Street, Pittsworth and 84 Yandilla Street, Pittsworth all in the State of Queensland. The searches also showed that Francis Ciantar was the registered

proprietor of a property at 3422 Gold Coast Highway, Surfers Paradise.

On or about 23 August 1994 searches were made at the Land Titles Office in Queensland which indicated that the second respondent was the registered proprietor of the property 3422 Gold Coast Highway, Surfers Paradise. A company search is annexed showing the

first respondent as a director and shareholder of the second respondent. The searches also indicated that the property 49 Bnggs Street, Pittsworth comprised five

separate lots, being Lots 15 - 20. They also revealed that the first respondent had

disposed of Lots 15 and 16 in February 1993 for a consideration of $20,000.

In September 1994 further searches were carned out in Queensland and these showed that the property 3422 Gold Coast Highway, Surfers Paradise was the subyect of a

Memorandum of Transfer to a third party lodged on 22 September 1994.

The applicant and its solicitors became concerned that the first respondent may have an intention to dispose further of properties and assets 1n which she had an interest and on 28

September 1994 the applicant's solicitors wrote to Messrs J J Cullen & Associates,

solicitors for the first respondent. The relevant part of that letter was as follows :

"We note that your client 1s the registered proprietor of properties known as 49 Briggs Street, Pittsworth, 84 Yandilla Street, Pittsworth, 8 Margetts Street, Pittsworth and 48 Short Street, Pittsworth.

We request that you confirm by Spm on 30 September 1994 that your cient has not entered into any agreement to sell or otherwise dispose of the abovementioned properties or any other properties tn which she has an interest

Our client also requires by Spm on 30 September 1994 an undertaking by your client that she will not attempt to sell, enter an agreement to sell or sell or otherwise dispose of the abovementioned properties or any properties in which she has an interest. Please confirm that your client 1s not the registered proprietor of any properties other than the abovementioned and if she is please supply full details by Spm on 30 September 1994.

We further note that your client 1s a director and shareholder of Ciantar Nominees Pty Limited which 1s the registered proprietor of the property known as 3422 Gold Coast Highway, Surfers Paradise.

We note that Ciantar Nominees Pty Ltd has transferred its interest i the abovementioned property and the transfer was lodged at the Queensland Land Titles Office at 9 30am on 22 September 1994. Please confirm that Ciantar Nominees Pty Limited is not the registered proprietor of any other property and if it 1s please supply full details by 5pm on 30 September 1994,

In relation to the property transferred by Ciantar Nominees Pty Limited, please furnish details of the identity of the buyer, the consideration paid and into which account the sale funds have been deposited. Our client also requires by Spm on 30 September 1994 your client's

undertaking not to cause the sale proceeds to be dissipated without giving at least seven (7) days notice in writing.

If we do not receive the undertakings as sought we shali move the Court for the appropriate restraining orders without further notice to you.

Our client 1s aware of the proceedings that have been taken in Perth against your client by another creditor of Bright and Beautiful Pty Limited, that the hearing of those proceedings was to take place early this month but was vacated at your client's request and now 1s to take place on 5, 6 and 10 October 1994 We note with some concern that Ciantar Nominees Pty Limited

appears to have transferred its interest between the date originally intended for hearing and the actual date of the hearing."

No response or acknowledgment either oral or written was received to the above letter and on 17 October 1994 the applicant lodged the present application for interlocutory restraining orders in relation to the three properties and the proceeds of the property on

No appearance was entered to that Notice of Motion until it came on for hearing on 26 October 1994. On that day a Notice of Appearance was filed on behalf of Ciantar together with an affidavit by Mr Jeremy Cullen, the solicitor for the first respondent and for Ciantar. In his affidavit he stated that he was informed by the first respondent and believed that the first respondent is a director of the second respondent, Ciantar Nominees Pty Limited, and that the first respondent lived in a de facto relationship with Francis

Ciantar, the then other director of the second respondent up to his death in late 1992.

The first respondent, it is stated, was a beneficiary under the will of the said Francis Ciantar and inherited the four properties referred to above. At the date of death of

Francis Ciantar the Pittsworth properties were valued as follows : (1) 8 Margetts Street, Pittsworth $452,000

The property at 49 Bridge Street 1s stated to have comprised seven separate lots. In February 1993 the first respondent sold two lots to D S McKinley for a consideration of $20,000. The first respondent still retains the remaining five separate lots. In early 1994 the first respondent bought a further property at 48 Short Street, Pittsworth which is currently held by her. In late 1993 the first respondent listed the property at 3422 Gold Coast Highway, owned by Ciantar, for sale by public auction. The first respondent received advice that the property was not showing a satisfactory investment return and that it should be sold and another property purchased. The property subsequently sold by private treaty for a consideration of $140,000. It 1s stated to be the first respondent's present intention to purchase another property with these funds. All the properties referred to are stated to be unencumbered. The first respondent has occupied the property at 8 Margetts Street, Pittsworth for the last three and a half years. Her sources of income are set out in the affidavit. The first respondent, it 1s stated on instructions, has no present intention of disposing of any of the properties owned by her or the second respondent. The affidavit goes on to state that the first respondent is a person of substance and will be well able to meet a verdict in favour of the applicant and that she has no intention of dealing with, or selling, assets other than in the ordinary course of

business, with the intention of defeating any verdict to the applicant. The first respondent has filed an affidavit of 29 April 1994 in these proceedings in which

she stated that from 2 October 1990 to 20 June 1991 she was a director and secretary of Bright & Beautiful Pty Limited. That company, in October 1990, embarked on the production and marketing of a tooth whitener dental product. The company was principally administered by Dr Francis Ciantar and staff. From the beginning the company was successful and sales of the product reached very high levels. In early May 1991 a segment appeared on a television program in which it was alleged that a bankrupt person was involved in the business. It 1s asserted that this was not true and that the following week on the same program an apology was made to Dr Ciantar. As a result, it is said, of the television program, sales of the company's product fell off dramatically over a very short period. The company got into financial difficulties and subsequently a

provisional liquidator was appointed on 29 July 1991.

On 27 February 1991, the company made an applicanon to the applicant for a credit account in relation to television advertising. That application indicated an estimated television advertising expenditure of $40,000 per month. The first respondent says she was not a party to the credit application nor was it authonsed by her. She says that the claim is in respect of television advertising carried out by the applicant on the company's behalf between the period 24 April 1991 and 9 May 1991. It is asserted that at all

televant times the company was in a position to pay its debts as they fell due.

When the matter came on for hearing before me, counsel for the applicant objected to

those parts of the affidavit of Mr Cullen which related to the statements of intention by the first respondent with respect to the retention of the properties owned by her and her

intention with respect to the proceeds of the Surfers Paradise property.

In my opinion the portions of the affidavit of the solicitor made on information provided by the first respondent are plainly admissible in these interlocutory proceedings. On the

evidence contained in that affidavit the application must fail.

It was stated by counsel for the applicant that had the information contained in the affidavit been furnished prior to the taking out of the application, then the Notice of Motion would not have been filed. It is conceded by the applicant that if the affidavit is admitted into evidence then the applicant could not obtain the interlocutory restraining orders sought. This concession 1s clearly correctly made because the imposition of a partial freeze on the assets of a person requires proof that there 1s a real risk that the respondents by attempting to put assets out of reach are seeking to frustrate the Court's power to grant an effective remedy. Cf Patterson vy BTR Engineering Pry Limited (1989) 18 NSWLR 319 (NSW Court of Appeal). See also Jackson v Sterling Industries Limited (1987) 162 CLR 612 at 625 per Deane J. The evidence here does not disclose any such

Counsel for the respondents submitted that the Notice of Motion must in any event be dismissed because no prima facie case has been made out to support the application.

Reliance 1s placed on the judgment of Steytler J of the Supreme Court of Western Australia delivered on 25 October 1994. That litigation was between Jingles Australia

Pty Ltd as plaintiff and Francis Peter Ciantar and the first respondent as defendants. That

decision related to invoices in respect of advertising and associated work performed for

In his reasons for judgment in the above case his Honour stated that in the circumstances he was not prepared to find on the evidence before him that it was established that the debts the subject of the claim were incurred at a time when there were reasonable grounds to expect that the company would not be able to pay all its debts as and when they became due. On the evidence he formed the view that the company was, from about 21

May 1991 onwards, unable to pay all 1ts debts as and when they fell due.

It was pointed out by counsel for the respondents that the advertising debt, the subject of these proceedings, was incurred on 24 Apni 1991. Therefore 1t is said that there 1s strong support for the view that there is no prima facie case to the effect that as at 24 April 1991 there were reasonable grounds to expect that the company was unable to pay

However, the proceedings in the Western Australian Supreme Court were between different parties and cannot amount to an estoppel in the present application. I do not accept that the findings of Steytler J preclude a finding in the present case that the

Counsel for the respondents also submitted that an interlocutory injunction should not be granted against the second respondent in any event. However, in view of the concession

made by the applicant it is not necessary for me to consider that question.

In the instant case the affidavit of Mr Cullen makes it quite clear that the first respondent has no intention of disposing of property or proceeds so as to frustrate any fruits of

Accordingly, the Notice of Motion must be dismissed.

Each side 1s seeking costs against the other. Under s 43 of the Federal Court of Australia Act 1976 the award of costs is in the discretion of the Court. The exercise of this discretion must be a judicial one but it is not cut down by the miles. Order 62 r 15 provides that where the costs of a proceeding are reserved they shall follow the event unless the Court otherwise orders. Rule 15 does not purport to limit the Court's

discretion but contemplates that the Court will have a broad discretion.

Some useful guidance, however, can be gained from the case law.

In Ritter y Godfrey (1920) 2 KB 47 at 60, Lord Atkin said:

",.. In the case of a wholly successful defendant, in my opimuion the judge must give the defendant his costs unless there is evidence that the defendant (1.) brought about the htigation, or (2.) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense, or (3.) has done some wrongful act in the course of the transaction of which the plaintiff complains. These principles require further expansion.

By (1.) 1s meant - has so conducted himself as to lead the plaintiff reasonably to believe that he had a good cause of action against the defendant, and so induce him to bring the acuon The authority for this proposition 1s Bostock v Ramsey [1900] 2 QB 616. It 1s wide, for in terms it 1s not limited to unreasonable or improper conduct, or to conduct other than that which constitutes the alleged cause of action. Inasmuch as the bringing of many actions of contract

and most actions of tort 1s due to the effect upon the plaintiff's mind of defendant's conduct, and the effect is at any rate to induce a belief that the plaintiff has a good cause of action, it would appear to follow that provided the belief was reasonable the judge in all such cases has grounds for depriving a successful defendant of costs I presume e converso there would be grounds for dealing with a successful plainuff's costs when his conduct has induced the defendant reasonably to believe that he has a good defence."

See also Mitropoulos v The Greek Orthodox Church and Community of Marrickville &

District Lid (1993) 10 ACSR 134 at 139; Jones v North Australian Aboriginal Legal Aid

In this case my view is that the respondents' unreasonable failure to answer, or even acknowledge, the letter from the solicitors for the applicant of 28 September 1994 led to the making of the application on which the respondents have been successful. The unexplained inactivity of the respondents in not providing the information requested in the letter from the applicant's solicitor, which maternal could have easily been provided in response to that letter, led to the filing of the Notice of Motion. The applicant in the present case has not acted with undue haste and it is clear that the applicant would not have pursued the motion if it had been fully informed of the position. This fact is an important material factor to take into account. Another important related consideration 1s that unnecessary expense and time-consuming litigation are to be avoided where

reasonably possible. In the present circumstances I do not think that the proceedings were

For the reasons above I dismiss the motion and make no orders as to the costs relating to

the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of

Date . Counsel for Applicant Solicitors for Applicant :