Equitable Remedies - Interlocutory injunctions - Injunctions to preserve status quo and property pending determination of rights - Mareva injunctions - Other matters - Principles on which granted - Whether real danger or risk of dissipation of assets.

Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612, applied.

Judgment Number: [2006] TASSC 46

1 On 21 February 2006 the plaintiff sued the defendant for specific performance of a written agreement (the "Connector Park agreement") dated 26 August 2004, damages for its breach and an injunction restraining the defendant from transferring its land unless and until it complied with all of its obligations in the agreement to construct a roadway over land referred to as the Connector Park roadway or until it ensured that the provisions of the agreement were passed onto or agreed to by any purchaser of the land by assignment of the agreement, or by such purchaser entering into a new agreement with the plaintiff and the defendant by which the purchaser assumed all the obligations of the defendant yet to be performed under it.

2 By an interlocutory application filed on 11 April 2006, the plaintiff applied for a Mareva order that until further order the defendant by itself, its director, Joseph John Pintarich, and other directors, officers, employees, agents or otherwise be restrained from disposing of, encumbering, paying away or dealing in any other way with $400,000, being part of the monies which will become payable to the defendant by Hallwill Pty Ltd, or its nominee, pursuant to an agreement for sale ("the sale contract") entered into between the defendant and Hallwill for the sale to Hallwill of the property over which the Connector Park roadway passes. A further order was sought by which the $400,000 would be required to be deposited in an interest bearing bank account pending further order.

3 The defendant is the registered proprietor of the land in question. It is comprised in several titles which are collectively known as Connector Park, a large area of commercial land in the course of being developed. The plaintiff is the owner of a large area of land that bounds Connector Park on the north. It wishes to subdivide that land into residential lots and seeks to have the benefit of the Connector Park roadway as one of two means of access to those lots.

4 By cl 5.4 of the Connector Park agreement, which was made between the plaintiff, the defendant and others, it was agreed that the defendant would grant to the plaintiff a right of carriageway over the roadway leading through Connector Park from the south, where it bounds a public road known as the Kings Meadows Connector, to the boundary of the plaintiff's land to the north. It was agreed that the right of carriageway would continue until the roadway was taken over as a public road maintainable by the Launceston City Council ("the Council"). By cl 5.5 the parties acknowledged that it was not intended to register the right of carriageway as a right of way but that the plaintiff would maintain an equitable interest pending dedication of the roadway to the public pursuant to the Local Government (Building and Miscellaneous Provisions) Act 1993, s95(1). By cl 5.6 the defendant agreed to complete the construction of the roadway by 6 January 2005 with appropriate sealed pavements, power and street lighting as specified by the Council and to do all things necessary to ensure that the roadway was taken over as a road maintainable by the Council by 6 July 2005. On 12 December 2005 the plaintiff gave to the defendant notice that it required completion of the construction of the roadway by 24 April 2006, making time of the essence, and also required the defendant to do all things necessary to ensure that the roadway was taken over as a road maintainable by the Council by 24 October 2006, time being made of the essence once again. There is unchallenged evidence that the defendant breached the agreement by failing to complete the construction of the roadway and by not ensuring that it was taken over by the Council. Those failures are central to this action.

5 By the Connector Park agreement the plaintiff was to pay the defendant $800,000 (plus GST) in three stages. Of that sum, $400,000 was to be paid on settlement and it was in fact paid at that time. By cl 5.8 it was agreed that in consideration of the defendant completing its obligations with respect to the roadway, the plaintiff would pay a further $200,000 to the defendant upon the Council taking over the road, and the balance of $200,000 would be paid upon the plaintiff succeeding in having a rural zoned area of its property, to be served by the road, rezoned to residential zoning under the Council's planning scheme.

6 Assignment by either party of its rights and obligations under the Connector Park agreement was contemplated by cl 6.2 in the following terms (the reference to JAC is a reference to the plaintiff):

Connector Park and JAC must both ensure that the provisions of this document are passed on to, or agreed to by, any subsequent purchasers of the Connector Park Land or the Freehold Property, as the case may be, by assignment of this document or by the relevant parties and the purchaser entering into a new agreement to adopt on the same terms and conditions all of the obligations yet to be performed by the respective parties under this document."

7 To protect its right of carriageway over Connector Park, which cl 5.5 declared to be an equitable interest, the plaintiff lodged a caveat on 15 June 2005, by which it forbade the registration of any dealing affecting that part of the defendant's land over which the right of carriageway exists.

8 By the sale contract, the date of which I am unaware, the defendant agreed to sell most of Connector Park, including the land over which the Connector Park roadway passes, to Hallwill. Not included in the sale is part of Connector Park with a large commercial building on it, which is currently leased by the defendant to Motors Pty Ltd. The sale price was $3,000,000, payable by a deposit of $1,000,000 and the balance on completion. The sale contract provided for 10 February 2006 as the completion date, which passed without completion taking place. By cl 9.1 the purchaser was permitted to nominate, in writing, other persons or corporations to complete the contract. It is out of the balance purchase monies of $2,000,000 that by the interlocutory application, the plaintiff seeks to have $400,000 frozen.

9 The defendant applied for the removal of the caveat affecting the land so that it could complete the sale to Hallwill. One of the plaintiff's grounds for opposing the removal of the caveat was that if it was to be removed, the purchaser of the land or its nominee would be able to acquire title to the land free from the equitable interest in the roadway. In the sale contract the defendant failed to comply with cl 6.2 of the Connector Park agreement by ensuring that all of the provisions of the Connector Park agreement were passed onto, or agreed to by, Hallwill or its nominee by assignment of the Connector Park agreement, or by the relevant parties and Hallwill or its nominee entering into a new agreement to adopt on the same terms and conditions all of the obligations yet to be performed by the defendant under the Connector Park agreement.

10 On 7 March 2006 I ordered that the application for removal of the caveat be adjourned sine die. In reasons for judgment (Connector Park Pty Ltd v RV Pty Ltd [2006] TASSC 9), the conclusion I reached was that there should be an order requiring the plaintiff to consent to the registration of the relevant transfers from the defendant to Hallwill or its nominee. In that way, the plaintiff would be able to satisfy itself that the transferee had notice of the equitable interest and its title would not be indefeasible so far as concerned the easement. See Land Titles Act 1980, s40(3)(e)(ii). I determined that what needed to be done was that one of the parties should draft a deed or agreement of assignment or novation that conformed with what was expected and required by cl 6.2 of the Connector Park agreement and present it to the other party for settlement and eventual execution. To protect the status quo until such matters had been attended to, I ordered that until further order the defendant be restrained from transferring title to the land to any other person.

11 In support of the interlocutory application for the freezing order, the plaintiff relies on the evidence of its managing director, Dean Murray Cocker, in three affidavits sworn by him. He was also cross-examined by the defendant's counsel. In summary, the plaintiff's application is based on the following assertions of fact.

12 At present, the only access to the plaintiff's land is from Ernest Street, Kings Meadows, to the east. The land comprises 44.21 hectares. It wishes to subdivide the land for residential purposes. Unable to incorporate the Connector Park roadway into a subdivision, because the roadway had not been constructed and taken over by the Council, it made an application for approval of a subdivision into 58 lots of that portion of the land which was suitably zoned for the purpose. The Council issued a permit for 31 lots only upon the ground that an alternative access, in addition to Ernest Street, was required for any more than 31 lots. On an appeal by a third party, the Resource Management and Planning Appeal Tribunal ("the Tribunal") determined that the Council's decision was invalid because the Council lacked jurisdiction to grant a permit for a subdivision that was markedly different than the one applied for and publicly advertised.

13 The matter was returned to the Council, this time as an application by the plaintiff for a subdivision into 57 lots in three stages, the first two stages totalling 35 lots and the last stage 22 lots. Once again, the proposed road for the estate was via Ernest Street to the east. Although the plans showed the Connector Park roadway as a "future road link" from the south, it was not part of the subdivision proposal. The Council refused the permit and the plaintiff appealed. The Tribunal also refused to permit the subdivision. It did so because of the likelihood of an unacceptable increase of traffic in Ernest Street and other nearby streets in Kings Meadows and because of inadequate provision, by way of a storm water detention basin or otherwise, for the satisfactory disposal of storm water from the subdivision, so as not to increase existing flood problems at a lower level in the Kings Meadows area. (It made no determination concerning whether a permit would have been granted if the Connector Park roadway had been constructed, taken over by the Council and included in the subdivision proposal). It appears that the Tribunal's decision was also influenced by it not being satisfied that there was sufficient demand for residential lots in the area to make coordinated development of the Future Urban zoned land in the area reasonably likely in the foreseeable future to conform with the Zone Intent for that zone.

14 It is the plaintiff's case that because the Connector Park roadway had not been constructed and taken over by the Council, it was unable to incorporate the roadway into any proposed subdivision of its land. It claims that as a consequence, it has acted reasonably in endeavouring to mitigate the loss it claims to have suffered by reason of the defendant's breach of its contractual obligations, by submitting alternative and smaller subdivision proposals for planning approval, both of which were ultimately unsuccessful. It has incurred expense in doing so and it claims to have suffered substantial losses by its inability to subdivide the land with plans that incorporate the Connector Park roadway and which may well have been permitted under the planning laws. It claims that it is more likely that the problems concerning traffic and storm water disposal could also have been resolved.

15 At the hearing of the interlocutory application for the freezing order, evidence was given by the plaintiff's managing director, Mr Cocker, that he calculated that because of the defendant's breaches of the provisions of the Connector Park agreement concerning the roadway, the plaintiff had lost $416,997 in interest due to delay on receipt of future profits, $293,914 in costs of surveyors, town planners, traffic engineers and other experts that were thrown away in the course of assisting in the formulation of the unsuccessful development applications and $186,548 for estimated holding and interest costs on the capital sum invested by the plaintiff in its land. Therefore, Mr Cocker asserted a total loss of $897,459 had been suffered by reason of the defendant's breaches. That assertion was challenged by the defendant at the hearing of the interlocutory application. The plaintiff's counsel indulged in some forensic bargaining by pointing out that only $400,000 of the defendant's funds are sought to be frozen. That apparent generosity in seeking to freeze over $400,000 less than what the plaintiff claims to have lost is substantially offset by the fact that the plaintiff owes a contingent debt to the defendant of $400,000, under cl 5.8 of the Connector Park agreement, which may become payable once the defendant has complied with its obligations under the Connector Park agreement.

16 Objections were taken by counsel for the defendant to the admission of some of the evidence of Mr Cocker concerning his assertions and calculations of losses. I reserved my decision on the objections. I find it unnecessary to rule on them, in view of my determination, to which I will come in due course, that the interlocutory application should be dismissed.

17 It is generally a requirement that an applicant for a pre-judgment freezing order must establish that there is a serious question to be tried concerning the asserted cause of action. Sometimes it has been expressed as a requirement to show a prima facie cause of action, a reasonably arguable case or a good arguable case. References to cases that have used the various terms may be found in Mareva and Anton Piller Orders - Freezing and Search Orders by Peter Biscoe at 170 - 172.

18 Whatever the precise wording of the requirement, there is no doubt that the plaintiff has satisfied it. No suggestion was made by the defendant's counsel to the contrary. The evidence establishes that the defendant breached the requirements of the Connector Park agreement to construct the roadway by 6 January 2005 and to have it taken over by Council by 6 July 2005. Neither event has occurred yet. However, Mr Cocker was prepared to accept that 102 days of the delay in complying were caused by factors outside the control of the defendant and due allowance for that period of delay might be granted to the defendant, but even with that allowance, the breaches occurred in 2005 and still the defendant does nothing about rectifying them, according to the evidence.

19 Determinative of this application is the general requirement for a freezing order that the applicant establish a danger or real risk of the defendant's assets being removed from the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion with the result that the plaintiff, if it succeeds at the trial, will not be able to have its judgment satisfied. Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 428. As stated in Sharman v Palmer [2000] TASSC 58 by Evans J, the authorities emphasise that the order should only be granted if it is necessary to prevent an abuse of the process of the court which has been shown to be likely to occur in that there is a real risk that the defendant will so deal with its assets as to stultify and render ineffective any judgment given against it. "Its use must be necessary to prevent the abuse of the process of the court. As Ackner LJ pointed out in AJ Bekhor & Co Ltd v Bilton [1981] EWCA Civ 8; [1981] QB 923 at 941 - 942, the Mareva injunction represents a limited exception to the general rule that a plaintiff must obtain his judgment and then enforce it. He cannot beforehand prevent the defendant from disposing of his assets merely because he fears that there will be nothing against which to enforce his judgment nor can he be given a secured position against other creditors." Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 at 617 - 618.

20 The plaintiff's counsel pointed to evidence of threats that had been made by the defendant's sole director, Mr Pintarich. That evidence came from Mr Cocker. It was that there was an angry oral outburst by Mr Pintarich, consequent upon service on the defendant of the notice of 12 December 2005 that required completion of the defendant's obligations concerning the roadway. In the course of that outburst, Mr Pintarich threatened that if the notice was not withdrawn he would ensure that the roadway would never be finished. It was also that on 3 April 2006, in the course of many expletives, Mr Pintarich threatened that "I will do everything in my power to hinder you as you have hindered me". What was precisely meant by that is not apparent, but what is apparent is that it appears to have been brought about by Mr Cocker asking Mr Pintarich if he was prepared to sign a deed of novation that had been submitted by the plaintiff's solicitors to the defendant's solicitors. The deed was prepared and submitted at least partly in response to my determination, on 7 March 2006, of the application for removal of the caveat. However, the submitted deed went much further than was required, for it contained (inter alia) a provision that would have required the defendant to deposit the same sum as is now sought by the plaintiff to be deposited, $400,000, out of the proceeds of the sale to Hallwill as security for any damages that may be recoverable by the plaintiff in this action. Neither of Mr Pintarich's threats amounted to a threat to put the defendant's assets out of the plaintiff's grasp in the event of the action being successful and they do not persuade me that there is a real risk of that occurring. There was no other evidence upon which the plaintiff sought to rely to establish that there was a positive intention to frustrate a judgment.

21 It was submitted that the Court should have regard to the fact that the defendant is the trustee of a unit trust, and that its most recent balance sheet for 30 June 2004 shows that it has trust funds of only $100. However, that is not to say that its assets are so limited. Its land is shown in the accounts at cost and on the face of the evidence it appears that its assets are substantially greater than the accounts reveal, having regard to the fact that since 30 June 2004 the sale contract has been entered into for the sale of some of the defendant's land for $3,000,000, an amount greater than book value, and it still retains the building and land it leases to Motors Pty Ltd. There is no basis for thinking that the defendant is insolvent or close to that position.

22 My conclusion is that this is not an appropriate case for making a freezing order because the plaintiff has failed to establish that there is a danger or real risk of the defendant's assets being put outside the grasp of the plaintiff, either deliberately or otherwise. A bare assertion of such a danger or risk is not enough. Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545. Even proof of insolvency would be insufficient on its own and it has not been established anyway. There must be evidence of at least more than a usual danger of assets being made inaccessible in the event of judgment, but no more than that has been shown.

23 For these reasons, the interlocutory application will be dismissed.