This matter was in the Duty List last Tuesday and Thursday and there is an urgency about the matter. In these proceedings, by an Amended Statement of Claim filed 29 January 2018, the Second Plaintiff, Goldorb Corporation Pty Ltd ("Goldorb"), claims that it lent various sums of money to the three Defendants, Elpat Pty Limited ("Elpat"), Brisbane Project Management Services Pty Limited ("BPMS") and Property Listing Services Pty Limited ("PLS"), in connection with land development projects in Queensland with which those companies were engaged. The First Plaintiff, Mr Victor Hammond, was one of two directors of Goldorb at all relevant times. His son, Mr Glenn Hammond, was the other director. Mr Geoffrey Elvin was the sole director of the three Defendants at the time of the transactions with which the proceedings are concerned.
In June 2017, Mr Geoffrey Elvin ceased to be a director of Elpat and the other companies and his son, Mr Andrew Elvin, took his place. On 28 July 2017, Mr Geoffrey Elvin was declared bankrupt on his own application. In June 2017, Mr Victor Hammond, by his tutor Mr Glenn Hammond, commenced proceedings in this Court claiming that he had lent Mr Elvin various sums of money which had not been repaid. Mr Hammond verified that pleading. In that affidavit he stated, "I believe that the allegations of fact in the statement of claim are true" (see Exhibit 2, p 20). On 12 September 2017, Mr Hammond obtained judgment in this Court against Mr Elvin in the sum of approximately $1.3 million in respect of all the loans that are the subject of the claims in these proceedings. To obtain that judgment, Mr Glenn Hammond swore in an affidavit that the loans had been made to Mr Elvin by Mr Hammond and not repaid by Mr Elvin (see Exhibit 1, which is also p 58 of Exhibit 2). In that affidavit, Mr Glenn Hammond stated (at paragraph 2), "The source of my knowledge of the matters contained in this affidavit concerning the debt is I hold and have viewed the books and records evidencing the loans made to the defendant herein", and then in paragraph 4, "The amount owing to the plaintiff at the time of commencement of the proceedings in respect of the cause of action for which the proceedings were commenced was $1,245,456.29." There is also a statement that no moneys have been received or credits accrued to reduce the amount of the claim.
Subsequently Mr Hammond, through his solicitor, filed a proof of debt in Mr Elvin's bankruptcy (see Exhibit 2, pp 51‑59). In the covering letter, the solicitor acting for Mr Hammond enclosed the proof of debt, advised the trustee in bankruptcy that the Statement of Claim had been filed and served on the Defendant and also enclosed a document which he described as being "... evidence of the Judgment debt owed to my clients." That document (which is reproduced at Exhibit 2, p 58), is the affidavit that Mr Glenn Hammond swore in support of the application for Default Judgment.
In September 2017, caveats were lodged. In a covering letter which was sent by Mr B. Worthington (solicitor for the Plaintiffs) to Elpat's solicitors, Mr Worthington described the Default Judgment in the first paragraph and stated (Exhibit 2, p 1), "the judgment arose from money loaned by my client to Geoffrey Elvin for the development by Elpat of five properties", and the third paragraph stated, "It is my client's position that a constructive trust exists, Elpat holding or having held the funds advanced by my client on behalf of Geoffrey Elvin..." The letter went on to advise that proceedings would shortly be filed in the Supreme Court and that he had placed caveats over properties developed by Elpat.
In proceedings in Queensland, agreement was reached that the caveats (which had been lodged by Mr Hammond and Elpat) would be removed and replaced by undertakings to be given by the Defendants to the Supreme Court of Queensland in respect of the land and the proceeds of sale of the land whereby those proceeds would be retained in the trust account controlled by the Plaintiff's solicitor in Queensland.
It was a condition of the undertakings given by the Defendants that Mr Hammond would commence proceedings in this Court for a claimed constructive trust in respect of the various properties or their substituted form of proceeds of sale.
Mr Hammond did commence proceedings within the time specified and the Statement of Claim which he filed did advance a constructive trust claim. However, in January of this year, an Amended Statement of Claim was filed and that Statement of Claim added Goldorb as a Second Plaintiff, added BPMS and PLS as Second and Third Defendants, and saw the abandonment of any claim by Mr Hammond for the constructive trust, and indeed any claim by Mr Hammond. What was left in the Amended Statement of Claim was a claim by Goldorb in debt against the three Defendants. The Defendants, not surprisingly, claimed that their undertakings to the Court should be discharged given that, if the only claim against them was one in debt, the caveats were unmaintainable and the price extracted for providing them should no longer be paid or maintained by the Defendants. The Defendants put on a Notice of Motion returnable 18 June 2018 in the Supreme Court of Queensland seeking discharge of the undertakings. The Plaintiffs filed a Notice of Motion in this Court on 30 May 2018 seeking replacement undertakings to be given by the Defendants to this Court. There was a holding-over agreement from last week that the undertakings given by the Defendants in the Supreme Court of Queensland would extend until Friday of this week. That therefore explains the urgency of this matter.
The matter that I have to decide is, essentially, whether the Plaintiffs and, really, Goldorb should be granted a Mareva Order precluding the Defendants from dealing with their assets, that is, the land in Queensland and/ or proceeds of the land on sale until Goldorb's claim is heard in this Court. The Plaintiffs, again probably really Goldorb, claim that there is a risk of dissipation of the land and proceeds if a Mareva Order is not made. In relation to the Defendants, it seems to be accepted that the present concern is the position of Elpat, rather than the Second and Third Defendants, and I shall refer from now on to Elpat, rather than all three Defendants.
Mr T. Lynch SC, who appears for the Plaintiffs (with Mr R. Weaver), drew attention to material in the evidence which supports the contention that funds flowed from Goldorb to Elpat and the other Defendants or to trust accounts operated by their solicitors, that some moneys were repaid to Goldorb on Mr Elvin's direction out of the proceeds of sale of developed properties. Mr Lynch contends that there was considerable informality between Mr Elvin and Mr Hammond, not atypical in small private companies, but the Plaintiffs' contention is that when one looks at the material, and has reference to Exhibit A, there are in those documents indications that support the conclusion, he submits, that, as a matter of inference, the real debtor was Elpat and the real lender was Goldorb. It does appear from the material that such loans as were made were sourced from Goldorb and found their way into the projects conducted by the Defendant companies. Exhibit A also includes some bank accounts in this connection. This material, however, is not inconsistent with an agreement between Mr Hammond and Mr Elvin that Mr Hammond would organise funds to be provided by Goldorb on his behalf as loans to Mr Elvin, who was free to specify to which project or projects he wanted to apply those funds, and there may have been some advantage to Mr Lynch and/ or Mr Elvin in organising their affairs in this way.
The claim by Mr Hammond that he had lent money to Mr Elvin is completely inconsistent with a claim that Goldorb had lent those funds to Elpat or the other Defendants. Ms Buncle, Counsel who appears for the Defendants, contended that there is a res judicata and, alternatively, an issue estoppel operating here. She referred to two decisions in this connection of the Court of Appeal, Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508 and Dimitrovski v Australian Executor Trustees Limited [2014] NSWCA 68. I do not see these cases as providing any assistance, as I do not think that there is any scope for the principle of res judicata or issue estoppel because Goldorb has made no prior claim against Elpat or any of the other Defendants. The only persons affected by those principles are Mr Hammond or Mr Elvin. This is not to say that the judgment obtained by Mr Hammond is not relevant in assessing whether a Mareva Order should be made. I say this because, as I have noted, Mr Hammond was at all relevant times a director of Goldorb and he swore an affidavit in support of his claim against Mr Elvin in the terms which I have set out previously. I have also set out that the other director of Goldorb, that is, Mr Glenn Hammond, swore an affidavit in support of Default Judgment, and I have also referred to the proof of debt.
There is an affidavit from Mr Hammond, but it does not attempt to explain why he did make the claims that he made, and indeed, as Ms Buncle pointed out, his affidavit tends to support the proposition that he regarded himself as having made loans to Mr Elvin in his own right, even though the funds that he was to lend were to be paid out of Goldorb, and the moneys were to be paid into an account operated by Elpat. Ms Buncle asserts, and I accept her submission, that the Plaintiffs have failed to provide evidence from any representative of Goldorb, and the relevant representatives would be either Mr Victor Hammond or Mr Glenn Hammond, that supports the contention that a loan contract was made between Goldorb and Elpat. I accept that Goldorb may at a hearing be able to persuade a judge based on the inferences that Mr Lynch has so articulately outlined, but that is a different matter.
Mr Lynch pointed out that there was an inconsistency in Mr Andrew Elvin's evidence because in paragraphs 16 and 17 of his affidavit dated November 2017 he said (at paragraph 16), "I can depose that the applicant [Elpat] does not carry on business and its sole assets are the properties which are either subject to undertaking given to this honourable court or have been sold and the net proceeds have been deposited in Legend Legal Group's trust account", and (at paragraph 17), "the only liability of the applicant at this point is the tax liability to the ATO. The applicant does not have any other assets, such as investments or money in the bank, which can be utilised to meet any future liability as and when they fall due", whereas in his affidavit filed in these proceedings dated 19 June 2018, at paragraphs 17 and 18, Mr Elvin made reference to the sale of 89B Spanns Road Beenleigh, Queensland, of leaving an approximate net amount of $193,000, and then said (at paragraph 18):
"On the basis of my understanding of the undertakings made before Justice Boddice in the Supreme Court of Queensland in September 2017, 89B Spanns Road and the proceeds of sale were not the subject of that undertaking. As a result, the proceeds of sale were used in order to continue trading as a going concern over the past 9 months."
Mr Hammond does not suggest that Mr Elvin was wrong to say that the Spanns Road proceedings were not the subject of the undertaking given. His point is that the statement that the proceeds of sale were used in order to continue trading as a going concern over the past nine months is not consistent with the statement made earlier that Elpat was not trading, and Mr Elvin has given only the most general statement of what occurred with the funds. Mr Lynch also says that this demonstrates that Elpat was not repaying the loan out of the proceeds of sale of the property and that that was a breach of a condition pleaded in the Amended Statement of Claim. In relation to the second point, there is no evidence to support that the pleaded term was in fact a term of the contract.
So far as the first point is concerned, Mr Lynch relies on it to establish a want of probity on the part of Mr Andrew Elvin sufficient to establish that the Plaintiff is entitled to concerns about dissipation of assets. Mr Lynch did accept that Elpat has acted entirely within the undertakings that it gave to the Supreme Court of Queensland. There was agreement on the principles relating to Mareva Orders. Her Honour McColl JA, sitting alone in Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 at [67] ‑ [75], set out the principles, and although she was addressing, particularly, the question of orders in a context of an appeal, both Ms Buncle and Mr Lynch agreed that those principles are the relevant principles.
McColl JA, at [68] - [69], refers to a need for the Plaintiff to "demonstrate a good arguable case on a justiciable cause of action". For this, a case must be one "more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50 percent chance of success", and her Honour refers to Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co KG 'The Niedersachsen' [1983] 1 WLR 1412; [1984] 1 All ER 398 (at 404) per Mustill J. What is required is a preliminary appraisal of the plaintiff's case, rather than an attempt to have a premature trial of the action.
A relevant matter is also whether there is a danger that a judgment obtained will be wholly or partially unsatisfied because the assets of a defendant might be disposed of or dealt with or diminished in value with the consequence that a plaintiff will be in danger of not being able to have his, her or its judgment satisfied. It is not necessary to show that a defendant has a positive intension of evading a judgment. Directors of a company against whom a claim is pending may very well put their personal assets at risk if they permit the company to act in a way which leaves it unable to meet a contingent debt should that contingent debt be realised, but the possibility that they will nevertheless act in such a fashion remains.
I proceed on the basis that there is a risk that if orders are not now made freezing the assets of Elpat that any net funds of Elpat may be transferred out of the company, making enforcement of any judgment which the Plaintiff obtains of little value to it. I am less convinced that Goldorb has a good arguable case, and I say that, not only because of the actions taken by the only two directors of Goldorb to promote and obtain a judgment against Mr Elvin for Mr Hammond that I have recounted and the likely difficulty that this will present in a court reaching a conclusion favourable to Goldorb, but also because the key persons involved have not provided any explanation to this Court as to how they came to the conclusions to which they have previously arrived in connection with the earlier proceedings.
The making of a Mareva Order has been authoritatively stated as a drastic remedy which should not be granted lightly. Its purpose is to preserve the status quo, not to change it in favour of a plaintiff (see Frigo v Culhaci [1998] NSWCA 88, approved in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18). As McColl JA noted in Samimi (supra), the Court is entitled to take into account discretionary considerations.
The following matters lead me to conclude that I should not grant a Mareva Order in favour of Goldorb:
1. Two directors of Goldorb have acted to obtain a judgment against Mr Elvin in favour of Mr Hammond as opposed to a judgment in favour of Goldorb and against Elpat and others.
2. Those directors swore affidavits totally inconsistent with the claim now being advanced by Goldorb.
3. Mr Hammond, through his solicitor, lodged a proof of debt which included the affidavit of Mr Glenn Hammond filed in support of the Default Judgment.
4. No explanation has been provided to the Court as to how the conclusions which were reached and used to support Mr Hammond's claim in the original proceedings, for the proof of debt and for the claimed constructive trust were reached, and how the conclusions supporting the present claim have been reached. Mr Lynch accepted that, at the final hearing of this matter, such explanations will need to be given to overcome the effect of what amount to admissions by Mr Victor Hammond and Mr Glenn Hammond that will tell against the case which Goldorb now seeks to promote. In my view, the absence of those explanations on this application makes it difficult to conclude, even on a preliminary basis, that they have reasonable prospects of so persuading the Court on a final basis.
5. There is no evidence that Mr Hammond has sought to withdraw the proof of debt which has been lodged, nor has any attempt been made to set aside the judgment in his favour obtained in this Court.
6. The Plaintiffs lodged a caveat and obtained undertakings in the Supreme Court of Queensland on the basis of a claimed constructive trust asserted by Mr Hammond, which claims were abandoned by him. The caveats were, it is now apparent, without foundation and the undertaking which Elpat gave would not have been given, I infer, but for the asserted constructive trust or proprietary interest in the properties. Goldorb is free to mount a case that it, rather than Mr Hammond, is the real creditor and that Elpat, rather than Mr Elvin, is the real debtor, but I do not think that this is a case in which the drastic remedy of a Mareva Order should be made to prevent the Defendants from conducting themselves as they see fit until the hearing.
I have taken into account that, although Mr Andrew Elvin has said things that appear to be inconsistent and which would in other circumstances give cause for concern, it needs to be noted that he did so in the context of an application by the Plaintiff, that is, Mr Hammond, to maintain a caveat for which there appears now to have been no proper basis. It also needs to be viewed against the fact that the Plaintiff had obtained judgment against Mr Elvin and lodged a proof of debt, whether the Defendant was aware of that or not.
For these reasons, I refuse the application for a Mareva Order sought by the Plaintiffs. The consequence must be that the Notice of Motion is dismissed and that the Plaintiffs pay the Defendants' costs of the Motion.
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Decision last updated: 17 December 2018