The Mount Lyell Mining & Railway Company Ltd v. Roxon Company Oy & Anor [1994] FCA 848

3. The first respondent, by itself, its servants and agents, be restrained up to 5 pm on 23 November 1994 from selling or disposing of, charging or otherwise encumbering or

dealing with, the shares held by it in the issued capital of Roxon Pty Limited.

The first respondent, by itself, its servants and agents be restrained up to 5 pm on 23 November 1994 from doing or causing to be done, otherwise than in the ordinary course of business, any act calculated to have the effect of substantially diminishing the value of the shares held by it in Roxon Pty Limited.

The motion be stood over until 9.30 am on 23 November 1994.

The parties have liberty to apply before Justice Sackville on 48 hours notice.

Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. NG 503 of 1994 GENERAL DIVISION

This ex parte application came before me as Duty Judge on 10 November 1994. Mr Pembroke, who appeared with Mr Davie for the applicant, sought orders granting leave to serve the application and amended statement of claim on the first respondent outside Australia and in Finland, pursuant to Order 8, rule 2 of the Federal Court Rules. Mr Pembroke also sought an order in the nature of a Mareva injunction restraining the first respondent from disposing of or dealing in certain shares held by it in an Australian company, Roxon Pty Ltd. At the conclusion of the hearing I made orders to the effect of those sought and indicated

that I would publish my reasons at 2.15 pm today. I now do so.

I note that, as with all matters determined ex parte, I have not rad the benefit of argument and evidence from the first

respondent. Any conclusions expressed by me must be understood with that in mind. Furthermore, there may be other issues, beyond those referred to in this judgment, that the first

The proceedings were commenced by the filing in the Registry of a statement of claim by the applicant. This was done on 5 August 1994. The statement of claim named two respondents - a Finnish company, Roxon Companies Oy, as first respondent and an Australian company, Select Engineering Services Pty Ltd ("SES") as the second respondent. The first respondent is a company incorporated in Finland. At the material times, it conducted the business of designing, manufacturing and supply of heavy duty equipment for the mining industry. SES is a company incorporated in Victoria and, at the material times, it carried on the business of supplying and servicing heavy duty equipment for the

Mr Pembroke informed me that the statement of claim had not been served on either respondent. It had been filed on 5 August 1994 to ensure that the applicant was not defeated by the expiration of the limitation period. The reason given for the failure to serve the statement of claim on the first respondent was that the applicant was awaiting the outcome of proceedings that had been

instituted against the first respondent and an associated company

At the commencement of the ex parte application, Mr Pembroke was granted leave to file an amended statement of claim. In the amended statement of claim the applicant pleads a case against the first respondent, as the manufacturer of a Roxon Stroke- Master BML 150 "jaw crusher". This is a heavy machine, which was acquired by the applicant around August 1988 and used to crush ore at the Mount Lyell mine in Queenstown, Tasmania. The pleadings allege that the jaw crusher did not perform to specifications, experienced excessive interruptions and maintenance requirements, and had defects that prevented it crushing ore at a satisfactory rate. The case against SES is pleaded on the basis that SES sold the jaw crusher to the applicant and breached express and implied warranties given by it as the seller. Other allegations are made against SES, but

The case against the first respondent is pleaded on two bases. First, it is alleged that the first respondent represented to the applicant that the jaw crusher would have certain performance characteristics and features. The applicant claims that the representations were misleading and deceptive and induced the applicant to enter the contract with SES to purchase the machine. Secondly, it is alleged that the first respondent owed a duty of care to the applicant to ensure, inter alia, that the crusher was manufactured with proper skill and diliger-> and that the applicant was promptly informed of any design defects. The applicant claims that the first respondent breached its duty of care and that in consequence the applicant sustained loss and

damage. The relief sought by the applicant includes damages

under the general law and under s.82 of the Trade Practices Act

1974. The losses are said to amount to over $11 million, although the quantum claimed may be affected by the fact that in

October 1994 the applicant entered into a contract for the sale

In June 1993 the present applicant commenced proceedings in Finland against a company known as "Roxon Oy". According to Mr Carr-Gregg (who is a solicitor employed by the applicant), he formed the view at that time that the Finnish company with which the applicant had dealt had no presence or assets in Australia. Mr Carr-Gregg also deposed that he was influenced by the fact that he had been advised that a judgment obtained in Australia

It appears that the proceedings in Finland were instituted against the wrong company, although it belonged to the same group of Finnish companies. Roxon Oy, as the company which the applicant dealt with was known, apparently changed its name to Roxon Companies Oy in 1991, in consequence of a corporate restructuring. One consequence of that restructuring was that the operating assets of the company now known as Roxon Companies Oy (the first respondent) were transferred to another company within the group, which was given the name Roxon Oy. It was the latter company that the applicant inadvertently sued in Finland. In due course the first respondent was added to the Finnish

proceedings. The proceedings in Finland were essentially conducted (so it appears from translations of court documents) as a claim by the applicant in contract. The first respondent resisted the claim on the ground that there was no "business, contractual or other relation according to which Roxon Companies Oy would be liable to the claims stated in the writ". In the event, the District Court in Finland delivered a judgment on 30 September 1994, in which it ruled that no purchase or other contractual relationship had been concluded between the first respondent, or the company now known as Roxon Oy, and the applicant. Accordingly, the action brought by the applicant was dismissed "as directed to

a f rate Mr Carr-Gregg states in his affidavit that he first became aware of the fact that the first respondent had a significant asset in Australia in early 1994. That asset consists of the entire shareholding in Roxon Pty Ltd, a company which is incorporated in the Australian Capital Territory and which apparently carries on the business of manufacturing and selling mining equipment. According to a balance sheet of Roxon Pty Ltd as at 31 December 1993, the company had net assets in excess of $5 million. It

also appears that the first respondent has had its shareholding

Mr Carr-Gregg gave as his reason for not immediately instituting proceedings in Australia, once he had discovered the existence

of the asset, the fact that the Finnish court had fixed a hearing in June 1994 for the determination of preliminary legal questions. Mr Carr-Gregg thus decided that the appropriate course was to await the judgment of the Finnish court. That

judgment was ultimately handed down on 30 September 1994.

Mr Carr-Gregg deposed that the applicant now "accepts the binding nature" of the Finnish court's determination. By that I understand him to mean that the applicant no longer seeks to make out a claim in contract against the first respondent. However, it does seek to press its claims based on misleading and deceptive conduct in contravention of the Trade Practices Act 1974 and on breach of duty. I should add that there is nothing in Mr Carr-Gregg's affidavit to explain why searches were not carried out prior to early 1994, since these would have revealed the existence of the first respondent's assets in Australia. Mr Pembroke conceded that there was no explanation other than the

fact that the appropriate searches were simply not undertaken.

In any event, the present proceedings were filed in August 1994, while the applicant was awaiting the outcome of the Finnish court's deliberations. As I have noted, the application and statement of claim were filed at that time to preserve the applicant's position in the face of the possible application of limitation provisions. It has taken another month or so, after the Finnish court's decision, to activate the present

My initial reaction to Mr Pembroke's application on behalf of the

applicant for a Mareva injunction against the first respondent

was not to grant it. I was troubled by a number of matters.

There is no substantial evidence that the first respondent has shifted or is intending to shift assets to evade the effect of any judgment that may be awarded against it by an Australian court. There is evidence of the corporate restructuring that took place in 1991. While this occurred after the applicant gave notice to the first respondent of its claim for damages in 1990, I would not be prepared to draw an inference, without more, that the first respondent undertook the restructuring in order to escape the consequence of a possible judgment against it. Had the first respondent intended to achieve such a result, it is curious that it has been prepared to leave its shareholding in Roxon Pty Ltd intact for

The applicant made a considered decision to institute proceedings in Finland and changed course only when it failed in those proceedings. It is true, so far as the evidence shows, that the proceedings were instituted under a misapprehension as to whether the first respondent had any assets in Australia.

However, the correct position became known in early 1994, but nothing was done at that stage to commence action in Australia. It is also true that the application and statement of claim were filed in early August 1994, but this was done only to preserve the applicant's position in the face of possible

(iii) Insofar as there was a misapprehension as to the assets held by the first respondent in Australia, the misapprehension was due to the applicants's failure to

(iv) There was a three month delay from the date the application and statement of claim were filed until

In the end, I have decided, not without some misgivings, that it is appropriate to grant an injunction restraining the first respondent disposing of or dealing with its shareholding in Roxon Pty Ltd, at least for a short period. In Patterson v BIR Engineering (Aust) Limited (1989) 18 NSWLR 319, Gleeson CJ rejected a submission that it is necessary for a plaintiff or applicant seeking a Mareva injunction to establish a likelihood on the balance of probabilities that a defendant or responder+ will dissipate assets. The Chief Justice stated the relevant principles this way (at 321, 322, 325): "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.

The appellant submitted that the true test to be applied is whether the plaintiff has established the likelihood in question upon the _ balance of probabilities. This submission must fail. First, it is open to the theoretical objection concerning the conceptual difficulties involved in applying the standard of balance of probabilities to future, as distinct from past, events referred to by Lord Reid in Davies v Taylor [1974] AC 207 at 212. Secondly, it is too inflexible. It is not difficult to imagine situations in which justice and equity would require the granting of an injunction to prevent dissipation of assets pending the hearing of an action even though the risk of such dissipation may be assessed as being somewhat less probable than not. Thirdly, the test has been considered and rejected in England, for reasons which are convincing. It was specifically rejected by Mustill J in Third Chandris Shipping

Corporation v Unimarine SA [1979] QB 645, at 652, at least by implication, by the Court of Appeal in

Ninemia Maritime Corporation v_ Trave [1983] 1 WLR 1412."

This formulation has been applied in this Court by von Doussa J. in Beach Petroleym NIL. v Johnson (1992) 9 ACSR 404, at 405-406. His Honour noted that it is not necessary to show an active intention on the part of the respondent to defeat the applicants from recovering the judgment. It is enough to show that, in the absence of relief, there is a danger that the assets will be de with in a way ....t will prevent tic applicant recovering

On the material available to me (which, I stress, has not been

tested) I think there is a danger that the assets within

Australia might be removed by the first respondent. As Mr Pembroke pointed out, to use the language of Lord Denning MR, which found its way into Mr Carr-Gregg's affidavit, the shares could be removed from Australia "at the stroke of a pen": Third

ari hippin orporation v imarine [1979] QB 645, at 667. While the first respondent has, on the evidence before me, done nothing to warrant a finding that it intends to dissipate assets within Australia, it would be very easy to remove the asset in this case, by disposing of the shareholding to another

There are other facts, going to the balance of convenience, that suggest that an order should be made, at least until the first respondent has an opportunity to put its case. There appears to be no mechanism for reciprocal enforcement of judgments between Australia and Finland, suggesting that there may be difficulties in enforcing a judgment of an Australian court in Finland: compare Montecchi v Shimco (UK) Ltd [1979] 1 WLR 1180, at 1184, per Bridge L.J. More importantly, the shareholding of the first respondent in Roxon Pty Ltd appears to have remained intact since late 1990. An order restraining dealings in that shareholding for a short period is unlikely to create any prejudice to the first respondent. If, however, there is such prejudice, the first respondent will have an early opportunity to demonstrate

The test formulated by Gleeson C.J. in Paterson v BTR Engineering

(Aust) Ltd requires that there be a prima facie cause of action against the defendant. I do not think it either necessary or appropriate to go into the evidence at this stage. It is sufficient to say that, on an ex parte basis, I think that there is evidence of a cause of action by the applicant against the first respondent based on damages flowing from a breach of duty

Service outside Australia Mr Pembroke applied for leave under Order 8, rule 2 of the Federal Court Rules for the amended statement of claim to be served outside Australia. Order 8, rule 2(1) and (2) provides as follows: 2(1) Service outside the Commonwealth of originating process is not valid under this Order unless-

(a) the service is in accordance with the prior leave of the Court given under sub-rule (2);

(b) the Court confirms the service under sub-rule (4); or

(c) the person served waives objection by entering an appearance. 2(2) [Conditions to be satisfied] Where the Court is

(a) that the proceeding is a proceeding in which the Court has jurisdiction;

(b) that the proceeding is a proceeding to which rule 1 applies; and

(c) that the applicant has a prima facie case for the relief which he seeks,

the Court may, by order, grant leave to serve originating process outside the Commonwealth under this Order."

Mr Pembroke said that the claim against the first respondent, as pleaded, came within a number of sub-paragraphs of 0.8, r.l. These are paras. (ac), (ad), (b), (¢c) and (g), which read as follows: "(ac) where the proceeding is founded on a tort committed in the Commonwealth; (ad) where the proceeding is founded on, or is for the recovery of, damage suffered wholly or partly in

the Commonwealth caused by a tortious act or omission, wherever occurring;

(b) where the proceeding is founded on a breach of an Act, where the breach is committed in the Commonwealth;

(c) where the proceeding is founded on a breach, wherever occurring, of an Act, and is brought in

respect of, or the recovery of, damage suffered wholly or partly in the Commonwealth;

(9g) where the proceeding is properly brought against a person served or to be served in the Commonwealth and the person to be served outside the Commonwealth is properly joined as a party to the proceeding." I think that on the material presented to me the requirements of Order 8, rule 2(2), subject to one matter, have been satisfied and that an order should be made granting leave to serve the

The qualification relates to one matter I did not appreciate at the time I made the orders ex parte, on 10 November 1994. There is, in my view, sufficient evidence (without having had the benefit of argument from the first respondent) to conclude that the applicant has a prima facie case for relief, within Order 8,

rule 2(2)(c), in relation to the cause of action based on breach of duty. However, Order 8, rule 2(2)(c) has been read as requiring the applicant to demonstrate a prima facie entitlement to each particular cause of action pleaded: Tycoon Holdings Ltd v co etco c¢ (1992) 34 FCR 31, at 35, per Wilcox J. The matter I did not appreciate was that (subject to any further submissions from Mr Pembroke) it is not apparent from the affidavit of Mr Carr-Gregg that evidence has been adduced of the representations alleged to have been made by or on behalf of the first respondent, that in turn are said to have induced the applicant to purchase the machine. If this is correct, the orders I made yesterday may need to be modified in relation to

the cause of action based on misleading and deceptive conduct

within the Trade Practices Act 1974. However, I shall hear further from Mr Pembroke on this issue when I hand down these

The orders I made on 10 November 1994 were as follows:

1. Leave be granted to the applicant, pursuant to Order 8 rule

2 of the Federal Court Rules, to serve the application and

amended statement of claim on the first respondent outside

2. The affidavit of John Francis Cromwell Carr-Gregg sworn 10 November 1994 be served upon the first respondent at or

about the same time as service of the application and

amended statement of claim is effected. 3. The first respondent, by itself, its servants and agents, be restrained up to 5 pm on 23 November 1994 from selling or disposing of, charging or otherwise encumbering or dealing with, the shares held by it in the issued capital

4. The first respondent, by itself, its servants and agents, be restrained up to 5 pm on 23 November 1994 from doing or causing to be done, otherwise than in the ordinary course of business, any act calculated to have the effect of substantially diminishing the value of the shares held by

it in Roxon Pty Limited. 5. The motion be stood over until 9.30 am on 23 November 1994.

6. The parties have liberty to apply before Justice Sackville

Although, as the result of an omission, an undertaking as to damages was not proffered at that time, it is appropriate for

I certify that this and the preceding 13 pages are a true copy of the Reasons for Judgment of the Honourable Justice

skville. Associate: - f aoe a. Dated: 11 November, 1994 Heard: 10 November, 1994

Appearances: Mr M. Pembroke and Mr T. Davie instructed by Allen Allen & Hemsley Solicitors appeared for the Applicant.