Turner v Universal Home Loans

2895/03 WARREN TURNER V UNIVERSAL HOME LOANS PTY LTD JUDGMENT (Ex tempore; revised 19 March 2004) 1 HIS HONOUR: The plaintiffs were in a business relationship with the first and second defendants for some time, relating to the provision to the first defendant of office space in the second plaintiff's building, and the sharing of commissions payable in respect of financing transactions procured by the first defendant. 2 The business relationship broke down and consequently there were proceedings between the parties, or some of them, in the Local Court, and in the District Court at Newcastle. It appears that after those proceedings had commenced, that is to say in about December 2002, the second defendant transferred his half interest in a property at 5 Shaun Close, Maitland, to the third defendant for nil consideration. That transfer came to the attention of the plaintiffs in about May 2003 and led to the plaintiffs making an urgent ex parte application for asset preservation orders. 3 Asset preservation orders were made, initially on 21 May 2003, against the first and second defendants, extending to all of their respective assets. There were subsequent modifications made to the orders generally by way of authorising exceptions to the restraint on dealing with assets, but the orders remain in place today. 4 On 8 March 2004 the plaintiffs filed an application seeking the following order: "Further to Mareva orders currently on foot, First and Second Defendants to file affidavits stating: (i) assets and liabilities; (ii) income and expenditure for the last four (4) months by 19 February 2004 [sic]." 5 The application was made returnable before the Registrar on 18 March and was sent by him to me as Equity Duty Judge. On that day counsel for the plaintiffs handed up written submissions, which he supplemented orally, in which he contended that the evidence on the application would show that some documents produced on subpoena in the District Court proceedings indicated deposits into the mortgage account of Mr and Mrs McNabb in excess of $1,000 per week. Counsel for the plaintiffs contended that if the money had come from the first defendant, or from the second defendant, the deposits would involve breach of the asset preservation orders against one or other of them. 6 Counsel also contended that the documents produced in the District Court would strongly suggest that the second defendant understated the true value of the Maitland property when it was transferred to his wife in December 2002. 7 Counsel for the plaintiffs submitted that these matters, which he wished to prove by affidavit evidence, would raise very serious concerns as to whether the asset preservation orders had been complied with. 8 I expressed some concern as to whether the application before the court was an appropriate vehicle for these contentions. Counsel for the plaintiffs indicated that the plaintiffs would consider their position and I adjourned the application until today, 19 March. 9 When the hearing of the application resumed this morning, counsel for the plaintiffs informed the Court that his clients wished to proceed with the application for an order for the provision of affidavits of assets and income by the first and second defendants. It emerged in the hearing, however, that the evidence upon which the plaintiffs wished to rely for that purpose was the evidence that I have summarised, relating to suspected contravention of the existing orders. 10 When counsel for the plaintiffs sought to read that evidence, counsel for the defendant objected to on two grounds. First, he submitted that it was inappropriate for the plaintiffs to seek an affidavit of assets and income at this stage, when it was plain that the purpose of requiring the affidavit would be related to the allegation of breach of the orders, rather than to make the asset preservation orders effective and not oppressive. Second, he said that most of the paragraphs of the affidavit were not admissible, because the documents in question had been produced in another proceeding and their use on the present application was contrary to the implied undertaking of the party who obtained access to documents to use them only for the purpose of the District Court proceeding. 11 Without ruling on the second ground, I formed the view that the first ground was valid and that the application was bound to fail. 12 In Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538, 543-5, I considered the judicial basis for ancillary disclosure orders made in support of asset preservation orders. I reached the conclusion (at 544-5), relying on observations by Robert Goff J (as his Lordship then was) in A v C [1981] QB 956, that an ancillary disclosure order, made in conjunction with an asset preservation order, relies on the same source of jurisdiction as supports the asset preservation order. 13 The disclosure order is made for the purpose of ensuring that the jurisdiction to make an asset preservation order is properly and effectively exercised. For example, if the plaintiff does not know the number and location of (say) the defendant's bank accounts, an asset preservation order made in respect of bank accounts generally could be oppressive, both to the defendant and to the bankers who are required to comply with it, especially where there is more than one account or several defendants. The plaintiff may be unable, in the absence of information about the nature and location of the defendant's assets, to decide whether it is prudent to give the undertaking as to damages, which must be given before the asset preservation order is made. If the undertaking as to damages is given, the undertaking may lead, in the absence of information about the defendant's assets, to an unexpected exposure to liability on the part of the plaintiff. These are the sorts of considerations that go towards determining whether it is appropriate to make a disclosure order ancillary to an asset preservation order. 14 In the present case, the plaintiffs seek, by way of final relief (according to their amended statement of claim) a money order against the defendants. I was informed by counsel for the plaintiffs that relief is also to be sought, apparently against the third defendant, in respect of the Maitland property. It may be, having regard to the nature of the final relief sought, that if the plaintiffs sought discovery, or the administration of interrogatories, designed to ascertain the assets, liabilities and income of the first and second defendants, their application for that relief would be open to challenge on the ground that any such inquiry would be irrelevant to the plaintiffs' case. It is unnecessary for me to determine now whether that is so. The point is that if an ancillary disclosure order had been sought in a timely fashion, the application for the order would probably not have been open to objection on the ground that interrogatories or discovery would be a better remedy. 15 However, the asset preservation orders against the first and second defendants in the present case were made in May 2003, and no ancillary disclosure order was made at that time. It is unlikely that any order for the preparation and filing of an affidavit of assets and income now, almost a year later, would be based on the considerations I have outlined, going to whether the making of the asset preservation orders was effective and justified. 16 In fact, counsel for the plaintiffs presented their case on the basis that the disclosure order would be directed towards another purpose, namely, assisting the plaintiffs to discover whether the asset preservation orders have been breached. That is quite a different matter which, in my opinion, goes outside the jurisdictional basis for ancillary disclosure orders. If the plaintiffs wish to contend that orders of the Court have been contravened, there is a well established procedure for doing so, and an application for a disclosure order ancillary to asset preservation orders should not be used for that purpose. 17 My order, therefore, is that the application filed by the plaintiffs on 8 March 2004 is dismissed. 18 On the question of costs, the appropriate course is to order the plaintiffs to pay the first and second defendants' costs of the application. That order for costs should extend to the appearances of the parties before Young CJ in Eq on 12 February 2004, and the Registrar on 5 March 2004. 19 Although the application has been held to be not a competent application, the law has been to some extent unclear and in those circumstances I would not regard this as an appropriate case for ordering costs otherwise than on the usual party/party basis.

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