Supreme Court of WA|2001-06-29|Before: Mr P, White J, Parker J

Todd v Novotny & Anor [2001] WASC 171 (29 June 2001)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : TODD -v- NOVOTNY & ANOR [2001] WASC 171

Practice and procedure - Mareva injunction - Arguable case - Risk of dissipation of assets - Whether plaintiff's prospects of success warrant relief

Cambridge Credit Corporation Ltd (receiver appointed) v Surfers' Paradise Forests Ltd [1977] Qd R 261

Carlton & United Breweries (NSW) Pty Ltd v Bond Brewing NSW Ltd (1987) 76 ALR 633

Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337

Cool Sonic International Inc v Cool Sonic Research Pty Ltd (in liq) & Ors [1999] VSC 344

Derby & Co Ltd & Ors v Weldon & Ors (No 3 and 4) [1989] 2 WLR 412

Galaxia Maritime SA v Mineralimportexport [1982] 1 All ER 796

Kounis v Kounis (1987) 11 ACLR 854

Locabail International Finance Ltd v Agroexport [1986] 1 WLR 657

Mitchell v Saengjan (1994) 117 FLR 273

Neat Holdings v Karajan Holdings Pty Ltd (1992) 8 WAR 183

Patrick Stevedore Operations No 2 Pty Ltd v Maritime Union of Australia (No 1) (1998) 72 ALJR 868

Perrey v Mordiesel Co Pty Ltd [1976] VicRp 58; [1976] VR 569

Perth Mint v Mickelberg (No 2) [1985] WAR 117

Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370

Project Development Co Ltd SA v KMK Securities Ltd [1983] 1 All ER 465

Queensland v Australian Telecommunications Commission (1985) 59 ALJR 362

R v Turner [1975] QB 834

Raviner Rohini Pty Ltd v Krizaic [1991] FCA 318; (1991) 105 ALR 593

Re Westbourne Galleries Ltd [1973] AC 360

Riley McKay Pty Ltd v McKay (1982) 1 NSWLR 264

Santos & Associates v Glowtime Pty Ltd & Anor [2000] WASC 58

Tsimidopoulos & Ors v Mulson Holdings Pty Ltd (1989) 1 WAR 359

Tudorshine Pty Ltd v Seabush Pty Ltd [1999] WASC 9

Uniflex (Australia) Pty Ltd v Hanneybel, unreported; SCt of WA (White J); Library No 980465; 17 August 1998

Z Ltd v A-Z & AA-LL [1982] QB 558

1 PARKER J: By summons the plaintiff seeks an asset preservation order restraining the defendants from removing their assets out of the jurisdiction or disposing or dealing with their assets pending trial of this action.

2 Following an earlier unsuccessful application for similar relief, by order made on 15 December 2000 - see Todd v Novotny & Anor [2000] WASC 308 - I granted an interim interlocutory injunction, the terms of which were varied on 28 March 2001, which remains in force pending this decision.

3 While both parties were before me on 15 December 2000, that was a hearing which was listed with little notice given the nature of the application and I accepted at that time that the defendants had not had adequate time to fully assemble and present their evidence in opposition. They were to do this with a view to a further full inter partes hearing on the merits of the continuance of the interim asset preservation order until trial and decision. That took longer than expected and it was not until 28 March 2001 that the full inter partes hearing of this interlocutory application commenced. It was continued on 10 April 2001 and thereafter further written submissions have been filed. This decision is in respect of that hearing.

4 In the principal action the plaintiff claims damages for breach of contract against the first defendant and equitable compensation or an account of profits together with declarations and other relief against both defendants. Although the claim as pleaded is put more broadly, and on alternative bases, in essence the plaintiff claims that he and the first defendant, as partners or otherwise in a fiduciary relationship, were involved in a number of ventures of a mining nature in overseas and Australian locations, but principally in Indonesia. It is the plaintiff's case that the first defendant has acted in breach of the fiduciary obligations he owes to the plaintiff, and with him the second defendant which is a company controlled by the first defendant, to the substantial financial loss of the plaintiff.

5 It is an essential element of the plaintiff's pleaded case that there was a partnership, or alternatively by virtue of a joint venture or on some other basis a fiduciary relationship, between the plaintiff and the first defendant between the years 1992 and 1996, and that the first defendant has acted in breach of the fiduciary obligations owed by virtue of this partnership or relationship. The plaintiff's pleaded case is primarily that of partnership. While the plaintiff maintains as an alternative that if there was not a partnership there was on some other basis a fiduciary relationship it will be convenient for brevity in these reasons to refer only to the allegation of a partnership. In taking this course, as a matter of convenience, I do not overlook the potential significance of the alternative but given the nature of this application and the evidence and submissions it is unnecessary to delve into the legal and factual issues raised by the alternative. Generally, references to the partnership in these reasons should be taken to include references to an alternative relationship giving rise to fiduciary obligations.

6 There is no written partnership or other agreement to support the plaintiff's case in this respect. Nor are there any of the usual records and documentation such as partnership accounts, partnership income tax returns or the like. It is common ground that both parties were involved together in a variety of commercial ventures and dealings. The issue is whether they did so as partners, which is the plaintiff's case, or whether each was pursuing his own separate interests although often becoming jointly involved with the other in some companies and activities.

7 I approach this interlocutory application on the basis that it is for the plaintiff to demonstrate that he has an arguable or a prima facie case for substantive relief in the action, Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 393, or as it sometimes formulated that the plaintiff is likely to succeed in the action. He needs also to show that there is a real risk that without an order the plaintiff, if successful in the action, will find that the benefit of any judgment achieved is in substance denied him because the defendants have dissipated their assets or put them beyond the reach of the processes of this Court, Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft Mbh und Co KG [1983] 1 WLR 1412 at 1422, Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612, and that the balance of convenience favours an interlocutory order at this stage of the proceedings.

8 It is clear that the remedy is not to be granted lightly because of the significant limitation of an asset preservation order on the capacity of a party to deal with his or its property; cf Cardile at 403-4.

9 The granting of an order is, of course, discretionary and a variety of factors may be relevant in a particular case to the determination whether the interests of justice are best served by the granting of an order. Because of the nature of the remedy, however, the strength of the applicant's case for substantive relief in the action, and the apparent degree of risk that the Court's processes could be subverted or frustrated, will naturally weigh in determining where the balance of convenience lies. It is in this context that decisions have referred to the need for the applicant to show a good arguable case, Rasu Maritima SA v Perusahaan [1978] QB 644 at 661, or a high degree of assurance that the applicant will succeed at trial, Shepherd Homes v Sandham [1971] Ch 340 at 351 and Films Rover International Ltd & Ors v Cannon Film Sales Ltd [1986] 3 All ER 772 at 781. It is not the case, in my respectful view, that statements such as these in the decisions are formulating a threshold test which is other than the traditional formulation of an arguable or prima facie case. Rather, they may be seen to be reflecting the appropriateness of the exercise of considerable caution before an order of this type is granted. As was observed in Glenwood Management Group Pty Ltd v Mayo [1991] VicRp 45; [1991] 2 VR 49 at 54-55, as the apparent strength of the applicant's case diminishes the balance of convenience moves against the making of an order.

10 This application is being considered on the basis of affidavit evidence which is necessarily incomplete and which has not been tested by cross-examination. It is not feasible, therefore, for there to be any final determination of any aspect of the merits of the cases for final relief for the respective parties or any resolution of disputed factual issues as between the two parties. Any consideration of the evidence and the issues, and any views or findings which are expressed in these reasons, are necessarily tentative.

11 In the course of submissions there was some reference to contemplated amendments to the pleadings. There was no formal application to amend the pleadings before me at the time of the hearing (although there have been steps since then) and I propose to deal with this application on the basis of the pleadings at the time of the hearing. A material amendment to the pleadings may or may not be circumstance which, on fresh application, could lead to some reconsideration of the decision on this application.

12 By the statement of claim the plaintiff pleads that the partnership was formed when in or about December 1992 he and the first defendant agreed that each would assist the other in the joint acquisition and exploitation of mineral exploration rights in Indonesia, and to share any profits and expenses of so doing equally. The agreement is said to have been reached orally, although one or more facsimiles are relied on as affording some confirmation of the agreement. It is the plaintiff's case that the parties expressly contemplated that their interests in any mining developments would be held through shareholdings in Australian companies, and that in pursuance of this the parties took up an equal interest in Peregrine Indonesia Pty Ltd, a company incorporated in Victoria, which later became Scorpion Resources Pty Ltd. The only partnership pleaded and relied on, at this and other points, is one between the plaintiff and the first defendant, with no other partners.

13 In this way it is the plaintiff's case that the parties entered into a partnership, the business of which was the acquisition and exploitation of Indonesian mineral rights, or alternatively that they entered into a joint venture or other relationship in respect of those mineral rights, in either case giving rise to mutual fiduciary obligations which are extensively pleaded.

14 The equal interest in Peregrine/Scorpion Resources is alleged to have been taken up so that the plaintiff held 45 shares, the first defendant 2 shares and the second defendant 43 shares. The plaintiff and the first defendant were each directors. I note that a further 10 non-voting shares seem to have been held by a Mr Whitehouse, one of them in his name and 9 held by the second defendant on his behalf. Whitehouse was a director and had responsibility for the day to day running of the Indonesian operations.

15 The plaintiff further alleges that in January 1994, pursuant to the 1992 partnership agreement, and a further agreement with Whitehouse, the plaintiff and the first defendant caused Scorpion Metals NL to be incorporated in Queensland, became its directors, and caused it to acquire Scorpion Resources. The plaintiff came to own 135 shares in Scorpion Metals, the first defendant 6 shares and the second defendant 129 shares. Whitehouse held 30 shares. Scorpion Resources acquired an interest it is alleged in two mining interests in Indonesia.

16 It is then the case of the plaintiff that in February 1994 the scope of the partnership agreement was orally extended to include other mining developments in Indonesia and in Australia. The additional Indonesian mining developments are alleged to be three mining tenements described as the Masupa Ria Contract of Works, the Mandor Contract of Works and the Sampit Contract of Works ("the tenements"). In respect of these it is alleged that pursuant to the partnership the plaintiff and the first defendant each acquired 25 shares of the 100 issued shares in Chinook Exploration Mining Co Ltd, a company incorporated in the British Virgin Islands. Another group of investors, some of which were incorporated, known as the Rand Edgar Group, acquired between them the other 50 shares. It is the plaintiff's case that Chinook acquired all the issued shares in tenement companies which came to hold respectively the tenements identified earlier, and that pursuant to the partnership the plaintiff and the first defendant were each directors of the tenement companies which were formed in the British Virgin Islands.

17 While it is the plaintiff's case that he and the first defendant as partners each held 25 Chinook shares, they did so "as part of a group of seven investors" which they formed and which is described as the "Novotny Group". This group held "interests in the Novotny Group, according to various percentages so that the plaintiff and the second defendant each held 30 per cent, Whitehouse 10 per cent, a company and three other persons held variously 5 and 10 per cent of the Novotny Group's 50 per cent shareholding in Chinook.

18 It is further alleged that in 1994, pursuant to the partnership, the plaintiff and the first defendant became directors of a Canadian company now known as South Pacific Resources Inc in circumstances whereby the Novotny Group appointed three directors and the Rand Edgar Group appointed three directors.

19 It is the further pleaded case of the plaintiff that in April 1994 he and the first defendant further orally extended the partnership agreement to apply it to further Indonesian and Australian mining developments. The Indonesian developments were known as the Mirih Contract of Works, the Landak Contract of Works and the Pleihari Contract of Works ("the new tenements"). It is the plaintiff's case that, pursuant to the partnership, in 1994 the plaintiff and the first defendant each acquired a beneficial interest in 25 shares, which together represented 50 per cent of the issued shares, in Canadian Equatorial, although the registered holders of these shares are said to include R Atkinson and I Park. Canadian Equatorial came to be, in the plaintiff's pleaded case pursuant to the partnership agreement, the owner of all issued shares in three newly incorporated tenement companies of which the plaintiff and first defendant were directors and which had come to acquire respectively a designated percentage interest in the new mining tenements. Of these Golden Gauntlet Resources Ltd acquired a percentage interest in the Pleihari Contract of Works.

20 It is also the plaintiff's pleaded case that, in further pursuance of the partnership agreement, the parties entered into an Assistance Agreement with Chinook by which the parties were to provide advice and assistance to Chinook in relation inter alia to the exploration and development of the tenements and the new tenements in consideration of US $1,150,000, of which $150,000 was payable on the acquisition by South Pacific of all issued shares in Chinook, and US $500,000 on the receipt by South Pacific of the proceeds of any "senior financing deal" subsequent to the placement of US $1 million by South Pacific, and the remaining US $500,000 one year later.

21 There then followed complex dealings which are detailed in the statement of claim and which included an agreement by South Pacific to issue 47.5 per cent of its shares to the Novotny Group and a similar percentage of its shares to the Rand Edgar Group, and South Pacific agreeing to assume and guarantee obligations of Chinook under the Assistance Agreement including the payment of the US $1.15 million to the plaintiff and the first defendant. Chinook made the initial payment and then the plaintiff alleges the first defendant and Chinook agreed, without informing the plaintiff, that the first defendant would pay to the plaintiff a sum of US $250,000 (ie half of US $500,000) due under the provisions of the Assistance Agreement when the obligation to pay this arose. In exchange for this, it is the plaintiff's case, that Chinook caused to be issued to the first defendant 230,000 common shares in South Pacific in August 1995. It is the plaintiff's pleaded case that some of these 230,000 South Pacific shares were sold by the first defendant for some CAN $1 million.

22 Following these events, it is the plaintiff's pleaded case that he instituted proceedings in British Colombia in August 1995 to recover from Chinook and South Pacific moneys due to him pursuant to the Assistance Agreement. These proceedings he settled in September 1995 on terms which included:

• A payment to him of US $500,000 by South Pacific,

• The plaintiff transferring his shareholding in Canadian Equatorial to South Pacific for $1,

• The plaintiff resigning his directorships in _inter ali_a Canadian Equatorial and one of the new tenement companies Golden Gauntlet,

• Releasing Chinook and South Pacific from further liability, and

• That South Pacific should acquire for no consideration the balance of all other issued shares in Canadian Equatorial, there being procedural and trust provisions agreed for this purpose.

23 It is the plaintiff's case that he agreed to these terms on the assumption that all assets controlled by Canadian Equatorial would pass to South Pacific of which he remained, with the first defendant, a shareholder. This assumption he now pleads was false as, without his knowledge, Golden Gauntlet had transferred its interest in the Pleihari Contract of Works, which is said to have been of particularly significant potential value, so that the Pleihari Contract of Works came to be held and is now held by Indogold Corporation, a Panamanian Company in which the plaintiff has no direct or indirect interest. It is the plaintiff's case that the first defendant was a director of Golden Gauntlet, Canadian Equatorial and South Pacific and knew of the terms of settlement of the action and of the transfer of the Pleihari Contract of Works. He claims he would not have agreed to the settlement had he known of the transfer of the Pleihari Contract of Works and, as a consequence, he has lost the opportunity to negotiate a better settlement or to pursue his legal rights while retaining his shares in Canadian Equatorial.

24 In these matters, it is the plaintiff's case, that the first defendant acted in breach of the fiduciary duties which he owed the plaintiff as partner and that the first defendant has benefited financially from his dealings with South Pacific and Chinook in relation to the mineral rights whereas the plaintiff did not.

25 In a further element of the statement of claim the plaintiff raises the circumstances under which he was removed as a director of South Pacific in June 1995. He alleges this occurred because, in breach of the partnership agreement, the first defendant failed to nominate the plaintiff for re-appointment as one of the nominees of the Novotny Group, when the plaintiff was willing to be nominated and, had he been nominated, he would have remained as a director. It is the plaintiff's case that since his removal as a director of South Pacific the first defendant has remained a director and thereby has obtained various monetary benefits including share warrants from South Pacific with a value to the first defendant of some CAN $600,000 at the date of the pleading, the plaintiff not having received similar benefits.

26 This is a very brief and incomplete summary of the plaintiff's pleaded case. It is enough to indicate the commercial, factual and legal complexities of the case which the plaintiff seeks to establish against the first defendant and also against the second defendant by which the first defendant is said to have acted in many of these activities. It is on this basis that the plaintiff pursues his claims for damages for breach of contract, equitable compensation and account of profits, or alternatively declarations that the defendants hold certain property on trust for the plaintiff, and further alternatively his claims for damages for loss of opportunity in respect of the number of these transactions.

27 Even in its present form the statement of claim has only been arrived at after much amendment since the commencement of this action in 1996. It is to be noted the plaintiff has apparently experienced some difficulty in adequately framing his case and, it seems, further amendment may be in contemplation.

28 In essence, the defendants deny there was ever a partnership as alleged or that on any other basis there was a fiduciary relationship between the plaintiff and the first defendant, and for the most part deny the other allegations.

29 Having had the opportunity to consider the full body of the evidence which is now before me on this application and, in particular, to do so with the benefit of the extensive analysis of it which counsel for the respective parties have undertaken, I have come to the following views:

• Entirely absent is any written agreement or even detailed correspondence recording the existence and terms of a partnership between the plaintiff and the first defendant.

• There are no partnership records, in particular no accounts, income tax returns or statements as to the distribution of profits, as between the two alleged partners, although there are some records of their respective contributions to various ventures and there is evidence as to the distribution of the proceeds of the sale of Scorpion Resources to Scorpion Metals and at the time of the sale of the Chinook Contracts of Work to South Pacific.

• Given the nature, variety and significance of the transactions and activities in which the plaintiff alleges the partnership was involved, and the duration of its activities, the above is somewhat surprising.

• There is a body of correspondence, usually facsimiles, between the plaintiff and the first defendant and between the first defendant and other persons, which contain references to the plaintiff and the first defendant as partners and which is capable of affording some evidence of the existence of the partnership.

• This correspondence is not, however, consistent as there are references to persons as partners which appear not to be references to partners in a true legal sense and there are references to "financial partners", and "Queensland partners and "joint venture partners" and the like. There are also references, including references to Whitehouse, which suggest a partnership involving more persons than merely the plaintiff and the first defendant, that being inconsistent with the plaintiff's pleaded case of a partnership only between the two of them.

• Some reliance is placed by the plaintiff on references in the correspondence to "us" and to "our interests" and the like, whereas in many such instances these may well be references which include persons other than the plaintiff and the first defendant.

• While there is reasonable support in the other evidence, especially contemporary communications, to show that equal shareholdings were taken by the plaintiff and the first defendant in Peregrine and Scorpion Resources and Scorpion Metals and that the ultimate proceeds of this activity were shared so that each benefited equally, it is also the case that there was a 10 per cent capital shareholding, albeit non-voting, held by Whitehouse. While it is possible, as Mr McCusker QC has argued, for this to be the situation consistently with the pleaded partnership between the plaintiff and the first defendant, the existence of a capital shareholding in a third party is not obviously consistent with a partnership involving only the plaintiff and the first defendant.

• While the plaintiff refers to a number of contemporary documents in support of his evidence that he and the first defendant, on two separate occasions, orally agreed to expand the scope of the partnership agreement, on each occasion to apply it to identified further Indonesian and Australian mining ventures, these documents do not appear to provide clear support for that position.

• As much as the plaintiff's pleaded case and the evidence reveals, there were originally four shareholders in Chinook but in the end there were seven members of the Novotny Group and twenty members of the Rand Edgar Group, ie in all 27 shareholders of which the plaintiff and the first defendant were two, and Whitehouse another. Similarly, there appear to have been many shareholders in South Pacific. While it is the plaintiff's pleaded case that their interests in these various companies were pursuant to the partnership agreement the involvement of many others is not obviously consistent with this proposition, although, as Mr McCusker QC has stressed, it is possible.

• With respect to the Assistance Agreement there is no documentary or other evidence which appears to offer any clear support to the plaintiff's affidavit evidence that this was entered into by the plaintiff and the first defendant pursuant to the alleged partnership agreement. The plaintiff also has to overcome the position which the correspondence suggests he took when dealing with payment under the Assistance Agreement, which appears to have involved a disavowal by the plaintiff of any partnership or similar relationship in relation to that agreement. In particular, in both typed and handwritten messages from the plaintiff to the first defendant in April 1995, it appears that the plaintiff was firmly taking the position that his entitlement to payment under the Assistance Agreement was quite independent of any entitlement of the first defendant. And in one message in which the plaintiff raised the matter of fiduciary duties it was in the context of the obligations of the plaintiff and the first defendant as shareholders and directors not as partners. These events closely preceded removal of the plaintiff as a director of South Pacific as to which the plaintiff's case, once again, is dependent on the existence of a partnership or some other fiduciary relationship between the plaintiff and the first defendant.

30 In these observations I have not sought to comment on many of the other factual issues that were raised in the course of submissions. Nor have I sought to set out in any detail the evidence which is capable of offering some support for the plaintiff's case or which is consistent with it. There is such evidence, although it is not obviously capable, on its own, of establishing that case and generally speaking it is also capable of being understood in ways which do not offer support for the plaintiff's case.

31 Despite the difficulties which I have noted as to aspects of the plaintiff's case, it is my view that the plaintiff has been able to demonstrate the existence of an arguable or prima facie case. This, however, depends to a substantial degree on the evidence of the plaintiff himself. While the plaintiff's case involves legal and factual difficulties and must overcome inconsistencies apparent from the documentary evidence, nevertheless it does not appear to be frivolous or vexatious and there appears to be evidence capable of establishing its essential elements.

32 For the reasons which have been touched on, however, it is my present assessment that generally speaking the arguable case of the plaintiff is barely established. Insofar as it is possible to assess these issues in a preliminary way on affidavit at this interlocutory stage, the plaintiff has not demonstrated that there can be any real confidence in the success of his case at trial. Of course, he may well succeed in whole or part. The point is, that it is not possible to have any real degree of confidence of that success on what is presently before me.

33 Little has changed as to the risk of dissipation of funds from the position when this matter was last before me. There was then demonstrated that there had been an apparent dissipation of assets since the commencement of this action. It also appears to be the case that, in the course of these proceedings to date, the first defendant has failed to discover records relating to two bank accounts, he denied the existence of such accounts on affidavit, and after the bank had been subpoenaed gave what appears to be quite unconvincing reasons for what he advanced was a failure to recall the existence of the accounts. One of them appears to have had a balance of over $700,000. He has also refused to authorise his Singapore bank to produce documents in answer to a subpoena, his authority being required under the relevant Singapore legislation. This has occurred in relation to an issue whether he has given proper discovery in relation to his accounts in Singapore. It also appears that the first defendant has made a loan of US $500,000 to a Mr Anwari and a loan of CAN $1 million to Mr Ridwan Mahmud but there are no entries in the discovered bank records of the first defendant relating to these transactions, nor have the discovered records disclosed account balances at any relevant time large enough to enable such payments to be made. On the present state of the evidence these matters can only encourage the tentative view that the first defendant has not made full and frank disclosure in respect of his financial position, so far as that has been required for the purposes of this action. This, in turn, adds further weight to the view which I had previously formed that a real risk of dissipation of assets had been demonstrated. I see no reason to alter that view at the present time even though the first defendant is resident in this jurisdiction and owns realty and has other assets here.

34 Also of relevance to the risk of dissipation of assets, and the question of the balance of convenience to which I will turn shortly, there is one further matter on which I should record my tentative views. This matter also has some relevance to the strengths of the respective cases of the plaintiff and the defendants with respect to some matters of disputed fact. There is apparently clear evidence before me on affidavit including that of an expert document examiner, which is not the subject of denial by the first defendant, that an incorrect translation of a document written in Indonesian was relied on by the defendants. Further, the apparent effect of the present evidence is that the first defendant has falsely deposed that the incorrect translation was provided to him by another person. The first defendant has also deposed that he had annexed to his affidavit of 8 September 2000 a true copy of that document whereas, as far as the evidence presently discloses, the annexed document had been materially altered. It is on this materially altered document and the incorrect translation that the defendants sought to found a contention that the Pleihari and Tanahlaut Contracts of Works were different mining tenements, which appears not to be the case. This is relevant to the value of the Pleihari Contract of Works, the effect of the incorrect translation and the alteration being to diminish the possible value of the Pleihari Contract of Works on which the plaintiff's case places some stress. The present state of the evidence also suggests that the first defendant, who had denied any involvement in the transfer of the Pleihari Contract of Work from Golden Gauntlet to Indogold, failed to discover a document which bares his signature, but which has now come to light, and which has the effect of effecting that transfer. The first defendant now accepts the authenticity of that document. The knowledge of the first defendant of the transfer of the Pleihari Contract of Work from Golden Gauntlet and his involvement in that transfer is a material aspect of one part of the plaintiff's case.

35 In making these observations I would reiterate that they are tentative views because of the incomplete and untested state of the evidence but the issues were squarely raised between the parties in the course of the hearing before me. I have sought to give due weight to this apparent dishonesty on the part of the first defendant in assessing the prospects of the plaintiff's case at trial. Despite this I have not been persuaded that the plaintiff has a clear prospect of success.

36 With respect to the balance of convenience in the initial stages before me much was made by the defendants of difficulties presented by any interlocutory injunction by virtue of the need of the first defendant to comply with orders of the Family Court of Western Australia in proceedings between the first defendant and his former wife. These concerns have been overcome by amendments to the form of the interim interlocutory injunction so as to allow compliance by the first defendant with orders of the Family Court and I need not deal with this concern any further.

37 There were issues raised as to the usual undertaking as to damages which it was submitted was effectively worthless as, on what is presently known, the plaintiff is a resident of Singapore but has no known realty or other identified assets either in that jurisdiction or in this jurisdiction. I should note my view that if that remained the position it would appear to be adequately dealt with by requiring a substantial deposit or equivalent security to be lodged with the Court.

38 These matters aside the parties have not given significant attention in their submissions to any other issues particularly relevant to the balance of convenience. While progress toward trial has been slower than usual, a great deal of interlocutory skirmishing and the pleadings account for much of this and there is no reason to consider the plaintiff is not being reasonably diligent in pursuing the action. The main considerations are the balancing of the competing interests.

39 Given the present circumstances I am not persuaded that it would be appropriate to continue the interim interlocutory injunction. As indicated in the reasons I accept that the plaintiff has made out an arguable case for relief in the action, and has shown that there is a real risk that the assets of the defendants may be dissipated before judgment so that in the event of the success of the plaintiff in the action he might, for practical purposes, be denied the fruits of his judgment. Despite these matters it is my view that the balance of convenience is against restraining the defendants from what would otherwise be the normal conduct of their financial affairs until judgment. The factor that has weighed most in persuading me to this view is my assessment of the absence of any real confidence in the apparent prospects of success of the plaintiff in the action.

40 In summary of what has been dealt with in these reasons, given the legal and factual complexity of the case which the plaintiff seeks to establish and the absence of what would be expected to be usual documentary and other confirmatory evidence of his case founded in breach of partnership (or other fiduciary relationship), and given the extent to which the available documentary evidence involves matters inconsistent with the case which the plaintiff seeks to make good, I am unable to be satisfied that there is a sufficient prospect of success of the plaintiff's case to justify the severe restraint that an asset preservation order would impose. This is a difficult value assessment which involves to a considerable extent an attempt to assess where the greatest injustice would lie. I have been fully conscious in reaching this view of what presently appears to be dishonest conduct in the action by the first defendant, who effectively controls the second defendant, but having given this aspect all the weight which I think may properly be attached to it at this stage I remain unpersuaded that the interim interlocutory order should be continued.

41 The interim interlocutory order will be discharged and the application dismissed.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : TODD -v- NOVOTNY & ANOR [2001] WASC 171 (S)

Procedure - Costs - Unsuccessful application for asset preservation order - Unusual circumstances

Allied Collection Agencies Ltd v Wood & Anor [1981] 3 All ER 176

Collins v Westralian Sands Ltd (1993) 9 WAR 56

Esther Investments Pty Ltd v Markalinga Pty Ltd (1992) 8 WAR 400

1 PARKER J: This supplementary decision concerns the costs of an application for an asset preservation order which the plaintiff sought pending the trial of this action.

2 Following an earlier unsuccessful application for similar relief, by summons filed on 13 November 2000 the plaintiff sought an asset preservation order. Interim interlocutory relief was granted on 15 December 2000 - see Todd v Novotny & Anor [2000] WASC 308 - but this was done on the basis that the defendants should have time to fully assemble and present further evidence in opposition to the continuance in force of the interim order. That further full hearing of the merits took place in March and April 2001 and the decision dismissing the application and discharging the interim interlocutory order was delivered on 29 June 2001 - see Todd v Novotny & Anor [2001] WASC 171.

3 Even so, the plaintiff did establish that there was a prima facie case and that there was a risk of dissipation. The application failed because the prima facie case was not sufficiently strong to justify the considerable restraint which an interlocutory order of this nature would have imposed in the circumstances. It was not the case that the bringing of the application was obviously unjustified.

4 The defendants seek orders for their costs in respect of the application in any event. This is opposed by the plaintiff who submits that, given the nature of the application, the finding that a risk of dissipation of assets had been established and that there was a prima facie case, it would be unjust for there to be an order against the plaintiff to pay the costs of the application in any event. The plaintiff submits that either costs should be reserved to the trial judge or should be in the cause.

5 In addition to the circumstances already identified there are additional factors, which when all are taken together, mark this as an unusual case for the purposes of the exercise of the discretion as to costs.

6 The hearing of the application was unusually lengthy and involved matters of legal and factual difficulty. The affidavit evidence placed a surprising, and at times unnecessary, amount of documentary and other material before the Court. This was true on both sides. To a substantial degree, in these respects, the hearing may be seen as involving what was in substance a rehearsal of critical issues in the action. Much of the work involved in respect of the application, on both sides, was thus work which would have needed to be done in any event in the preparation for trial of the respective parties.

7 Further, the conduct of the defendants in connection with their opposition to the application involved, as the reasons for decision delivered on 29 June 2001 disclose, an apparent attempt to mislead the Court on a material issue, and also reliance on what appeared to be unsatisfactory and questionable affidavit evidence as to the bank accounts of the first defendant and discovery.

8 All these factors being taken into consideration, it appears to me that it would be quite inappropriate for the defendants to have their costs of the application in any event. Further, an order that costs be in the cause could well lead to unfairness. There are material distinctions between the present case and the circumstances in Southern Equities Corporation Ltd (in liq) & Ors v Bond & Ors (No 4) [2000] SASC 358 at [5], and Steepleglade Ltd v Stratford Investments Ltd (1976) 2 FSPLR 3 to which the plaintiff referred.

9 In my view the appropriate order is to reserve the costs of this application to the trial judge as the outcome of the action may well be relevant to an assessment of where the costs burden of this application should ultimately fall as between the parties. A further advantage of reserving the costs is that the effect of the clear overlap between the work done in connection with this application and the ultimate trial of the action can be better assessed by the trial judge at the same time as the costs of the trial are being considered. That advantage will carry through to the role of the taxing officer as well.

10 I would record the following views, however, for the assistance of the trial judge and the taxing officer.

11 There was, in my view, unusual complexity of law and fact within the meaning of RSC O 66 r 12(1) for an application of this type. For this reason, I would have been persuaded that the taxation of costs in respect of this application should be conducted without regard to the limit set by item 23. That being so, there would be no sufficient justification, in my view, for separate allowance under item 13A as sought by the defendants. Such an order would not be appropriate in any event, in my view, as adequate allowance can be made for time properly spent in preparation under item 23 if the taxation is conducted without regard to the limitation prescribed by item 23.

12 I would not be minded to fix any limit for the purposes of item 23 as it appears to me that to do so would potentially cut across the due exercise of the taxing officer's discretion in a case where a reasoned attempt to fix an appropriate limit would involve a more detailed assessment of the work actually done by the respective parties than can be made on the materials presently before me. In addition, this aspect is complicated by the question of overlap with the preparation for trial, a factor which, at least in some respects, may best be dealt with by the taxing officer in light of the more detailed examination possible on taxation.

13 It would be my view that a certificate for transcript of the application would be appropriate.

14 It would appear that directions might properly be given to the taxing officer that it would be appropriate for a reasonable allowance to be separately made for photocopying and for the work involved in preparing, and in considering the other party's, outline of submissions and supporting evidentiary references.

15 In my view allowance might properly be made by the taxing officer for representation by counsel and the attendance of an instructing solicitor, both at senior practitioner level, but not for a second counsel.

16 The costs of the application will stand reserved to the trial judge.

Todd v Novotny & Anor [2001] WASC 171

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (110 paragraphs)

Todd v Novotny & Anor [2001] WASC 171 (29 June 2001)

Parties

Cases Cited (16)