Tjiong v Tjiong

Supreme Court of NSW|2007-02-23|Before: Hamilton J

CITATION : Tjiong v Tjiong [2007] NSWSC 216

DECISION : Application for Mareva relief refused.

CATCHWORDS : EQUITY [340] - Equitable remedies - Injunctions - Interlocutory injunctions - Injunctions to preserve property pending determination of rights - Mareva injunctions - Other matters - Nature of evidence required - Standard of proof.

Katrina May Lan Tjiong (P1) PARTIES : Lindsay Kuang Djin Tjiong (P2) Richard Tat Tjhien Tjiong (D)

COUNSEL : M B Evans (Ps) P A Hallen SC (D)

SOLICITORS : Ryan & Bosscher (Ps) Diamond Conway (D)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1453/05 KATRINA MAY LAN TJIONG & ORS v RICHARD TAT TJHIEN TJIONG JUDGMENT 1 HIS HONOUR: This is an application for Mareva relief. It is limited to an injunction dealing with a house property in which the defendant has a one half interest. It is said by the plaintiff that this is the defendant's only asset. It is clear, despite the fact that the relief sought, if granted, is not sought in the conventional form of Mareva relief, it will undoubtedly be relief of a Mareva nature, since the plaintiffs lay no claim of any sort to this house property itself. 2 There are existing proceedings between the plaintiffs and the defendant. In these proceedings the plaintiffs, who are the niece and nephew of the defendant, seek to have him removed as the executor of their father's estate and also to have set aside a discretionary trust that was created out of the father's property before his death. Neither of those claims would necessarily result in a monetary judgment against the defendant. 3 The plaintiffs, however, seek to bring forward a further claim against the defendant. This is contained in an amended statement of claim, not yet filed, nor sworn, nor even perhaps completely finalised in format. The fact that it has not been finally brought forward would not of itself preclude the grant of Mareva relief, if the circumstances otherwise indicated it to be appropriate. 4 The new claim propounded in the proposed amended statement of claim is that the defendant, as an attorney for his father in his lifetime, as executor of his estate after his death and as trustee of the trust I have already mentioned, breached his duty as trustee to preserve the assets of the trust. His actions which lead to this allegation are that, over several years, the defendant sold shares held by the various trusts and reinvested the money in interest bearing deposits with banks. There is not the faintest suggestion that any of the funds were abstracted. To anybody with any knowledge of financial conditions in Australia over the last few years, it would not be surprising that the relevant assets have diminished in value, because the Australian share market has continued to rise and the assets would be of greater value now had they remained invested in shares. 5 Counsel for the plaintiffs in this regard draws my attention to ss 14B and 14C of the Trustee Act 1925, particularly, the provision in s 14C(1)(f) to the potential for capital appreciation being one of the factors to which a trustee must have regard in investing trust funds. He does not, however, draw to my attention any case, neither since s 14C was cast in its present form some years ago, nor generally, as to trustees having been held liable for disinvestment by moving money from shares to cash assets in a situation where the share market continued to rise. 6 So far as the threat of dissipation, to which I shall subsequently advert, is concerned, Mr M B Evans, of counsel for the plaintiffs, asserts that the evidence shows that by a transaction engaged in in December 2006 the value of the defendant's assets was considerably diminished. He suggests that this shows that the defendant is likely to engage in transactions diminishing the value of his assets, so as to justify the granting of Mareva relief. 7 The locus classicus in relation to the requirements for Mareva relief is the statement of Gleeson CJ (when Chief Justice of this Court) in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321 - 322: "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."

Meagher JA at 326 substantially agreed with this formulation by the then Chief Justice. 8 I should add that in the High Court in Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1, the majority Judges at [76] referred to the first limb of what a plaintiff has to establish as "the existence of a serious question". 9 An earlier formulation which is often quoted is that from the comparatively early days of Mareva jurisdiction. It is the statement of Mustill J in Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co KG [1983] 2 Lloyds Rep 600 at 603. That is where his Lordship said: "… the strength of the plaintiff's case is relative in two distinct respects - (1) The plaintiff must have a case of certain strength before the question of granting Mareva relief may arise at all. I will call this the 'threshold'. (2) Even where the plaintiff shows he has a case which reaches the threshold, the strength of his case is to be weighed in the balance with other factors relevant to the exercise of discretion". 10 I do not regard this statement of his Lordship as inconsistent with what was said in the Court of Appeal in Patterson's case. It also accords, in my view, with the general approach to interlocutory injunction applications expounded by McClelland J in Kolback Securities Ltd v Epoch Mining NL 8 NSWLR (1987) 533 at 535: "As I see it, the position is as follows. Where a plaintiff's entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled: see, eg, Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 216; A v Hayden (No 1) (1984) 59 ALJR 1 at 4-5; 56 ALR 73 at 79. Where the uncertainty depends in whole or in part on a contested question of fact it is not appropriate for the Court to decide that question on the interlocutory application. Where the uncertainty depends in whole or in part on a contested question of law, it may or may not be appropriate for the Court to decide that question on the interlocutory application, depending on circumstances, eg, whether the question is novel or difficult, or is susceptible of resolution on the present state of the evidence, or whether the urgency of the matter renders it impracticable to give proper consideration to the question: see, eg, A v Hayden (No 1) (at 4; 78); Cohen v Peko-Wallsend (1986) 61 ALJR 57 at 59; 68 ALR 394 at 397. If the Court does decide the question of law the uncertainty is to that extent removed.

Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused: Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJR 425; 46 ALR 398; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJR 283; 52 ALR 651; A v Hayden (No 1) ; Castlemaine-Tooheys Ltd v South Australia (1986) 60 ALJR 679; 67 ALR 553 and Cohen v Peko-Wallsend Ltd ." 11 That approach of his Honour is frequently used in this Division of this Court in dealing with interlocutory injunction applications and has received recent approval in the High Court: Australian Broadcasting Corporation v O'Neill (2006) ALJR 1672 at [72] per Gummow and Hayne JJ. 12 So far as the second limb in Gleeson CJ's formulation is concerned, there was exposition of what is required by way of proof of the danger of dissipation of assets in Frigo v Culhaci [1998] NSWCA 17. This was referred to by me in my judgment in Electric Mobility Company Pty Ltd v Whiz Enterprises Pty Ltd [2006] NSWSC 580. In Frigo the Court of Appeal said: "A plaintiff must establish, by evidence and not assertion, that there is a real danger that, by reason of the defendant absconding or removing assets out of the jurisdiction or disposing of assets within the jurisdiction, the plaintiff will not be able to have the judgment satisfied if successful in the proceedings. There has been much debate as to the precise degree of risk which must be shown: see generally Patterson . What is clear is that mere assertions that the defendant is likely to put assets beyond the plaintiffs reach will not be enough: Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG [19 8411 All ER 398; Patterson .

The evidence relied upon at the contested hearing fell far short. The admissions in the 'without prejudice' correspondence should have been ignored. The sale of an encumbered home unit at a figure above market value does not, standing alone, imply disposal of assets in order to defeat a prospective judgment, even where the purchaser is a close relative. Even if, which is doubtful, the appellant's suspension of work in the building contract could have been regarded as evidence of financial difficulties, it was not argued below that it had such effect. More importantly, that alone is not enough. A mareva injunction is not designed to stop a person from sliding into insolvency." 13 The relevant passage in the judgment of Mustill J in the Ninemia case at 606 - 607 was as follows: "It is not enough for the plaintiff to assert a risk that the assets will be dissipated. He must demonstrate this by solid evidence. This evidence may take a number of different forms. It may consist of direct evidence that the defendant has previously acted in a way which shows that his probity is not to be relied on. Or the plaintiff may show what type of company the defendant is (where it is incorporated, what are its corporate structure and assets, and so on) so as to raise an inference that the company is not to be relied on. Or, again, the plaintiff may be able to found his case on the fact that inquiries about the characteristics of the defendant have led to a blank wall. Precisely what form the evidence may take will depend on the particular circumstances of the case. But the evidence must always be there. Mere proof that the company is incorporated abroad, accompanied by the allegation that there are no reachable assets in the United Kingdom apart from those which it is sought to enjoin, will not be enough." 14 Although this matter has arisen very recently and suddenly, Mr Hallen, of Senior Counsel, has been present for the defendant today, and counsel on both sides have chosen to conduct the matter as a full interlocutory hearing on what material is at present available, without waiting to expand upon that, perhaps with a short ex parte or interlocutory regime put in place in the meantime. 15 In this matter, in my view, the plaintiff has not made out a prima facie case at all. I find it difficult to see that a case is established on the material available to me, even in a prima facie way, that the defendant was guilty of a breach of duty as a trustee, or fiduciary, or that it could be said that there was a serious question to be tried with respect to such a breach. 16 But, even if one takes it that a prima facie case is established, or a serious question to be tried is raised, it is a weak case that the plaintiff puts forward. Weighed with what evidence there is of apprehension of the dissipation of assets it is not, in my view, sufficient to justify the granting of Mareva relief. 17 It is true that there are curious aspects of the transfer of the house property from the defendant's mother to the defendant and his wife in December 2006, but the circumstances surrounding and leading up to those transactions have not been fully explored and are not clearly established. On the evidence, it is not established "by evidence and not assertion that there is a real danger" of the disposal of assets. On the basis of my conclusion that in this case there cannot be said to be a prima facie case or serious question at all, one does not, of course, even move on to consider the strength of the evidence of danger of dissipation. 18 The result of the foregoing is that the plaintiffs' application will be dismissed. 19 Mr Hallen has asked for an indemnity costs order against the plaintiffs, but I do not propose to make an order for indemnity costs. The costs order that I propose is the usual order in the case of an interlocutory injunction application that is dismissed, that the plaintiffs pay the defendant's costs of the application. 20 The orders that I make are:

(1) I grant leave to file in court notice of motion returnable instanter. (2) I dispense with service of the notice of motion. (3) I note the undertaking of Mr Andrew O'Brien to pay the filing fee. (4) I dismiss the plaintiffs' application for a freezing order. (5) I order the plaintiffs to pay the defendant's costs of that application. (6) Balance of notice of motion stood over to 9.30am on 1 March 2007 before the Registrar.

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Judgment (14 paragraphs)

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