Biscen Pty Ltd & Ors v Temsign Pty Ltd & Ors [1995] FCA 806

CATCHWORDS

PRACTICE & PROCEDURE - Mareva injunction - individual respondents' properties placed on market after proceedings threatened - corporate respondent's name changed and new company incorporated under former name at time when proceedings issued - only partial explanation from respondents - respondents' franchising business running at a loss - respondents proposing to use proceeds of property sales to fund expansion of business to Queensland - business not previously conducted outside Western Australia - incomplete particulars furnished concerning respondents' trading structure and financial position - prima facie cause of action conceded for purposes of motion - real risk that respondents' assets will be dealt with in a manner which would result in any judgment not being satisfied - conditional relief granted.

Mareva Compania Naviera v. International Bulk Carriers SA [1975] 2 Lloyd's Rep 509

Rahman (Prince Abdhul) v. Abu-Taha [1980] 1 WLR 126

Bekhor Ltd v. Bilton [1981] 1 QB 923

Riley McKay Pty Ltd v. McKay [1982] 1 NSWLR 264

PCW Ltd v. Dixon [1983] 2 All E.R. 158

Jackson v. Sterling Industries Ltd (1987) 162 CLR 612

Patterson v. B.T.R. Engineering (Aust) Ltd (1989) 18 NSWR 319

Yenald Nominees Pty Ltd v. Maurice Lyford & Ors (unreported, Federal Court Judgment No. 374/1994, 10 June 1994)

Tomlinson & Ors v. Cut Price Deli Pty Ltd & Ors (unreported, Federal Court Judgment No. 425/1995, 23 June 1995)

BISCEN PTY LTD & ORS v. TEMSIGN PTY LTD & ORS

No. WAG 102 of 1995

CARR J.

PERTH

10 OCTOBER 1995

IN THE FEDERAL COURT )

OF AUSTRALIA )

WESTERN AUSTRALIA )

DISTRICT REGISTRY ) No. WAG 102 of 1995

GENERAL DIVISION )

B E T W E E N : BISCEN PTY LTD

(ACN 060 843 245)

First Applicant

and

IAN STUART HUNGERFORD

AND DARELLE CHRISTINE

HUNGERFORD

Second Applicants

and

CLAIRE MICHELLE DARCY

AND GRAHAM JAMES DARCY

AS TRUSTEES FOR THE C.M.

DARCY TRUST

Third Applicants

and

CLAIRE MICHELLE DARCY

AND GRAHAM JAMES DARCY

Fourth Applicants

and

DARREL WAYNE DONOVAN

AND PATRICIA ANNE

DONOVAN

Fifth Applicants

and

MILLDON HOLDINGS PTY LTD

(ACN 066 779 726)

Sixth Applicant

and

PAUL DAVID COCHRANE

Seventh Applicant

TEMSIGN PTY LTD (ACN 059

983 185) AS TRUSTEE FOR

THE QUICK SIGN SHOPS

(AUSTRALIA) UNIT TRUST

First Respondent

and

LISA JANE BAILEY

Second Respondent

and

SARAH ANNE BAILEY

Third Respondent

and

RODINGA PTY LTD (ACN 009

040 788) TRADING AS

KROONENBURG MUMFORD &

ASSOCIATES

Fourth Respondent

and

JOHANNES JACOABUS

KROONENBURG

Fifth Respondent

CORAM: CARR J.

PLACE: PERTH

DATE: 10 OCTOBER 1995

MINUTE OF ORDERS

THE COURT ORDERS THAT:

1. The applicants bring in a minute of orders to reflect the reasons published today.

2. The matter be adjourned to 11.15 am on 13 October 1995 for the settlement of the terms of the above orders and to consider the question of the costs of the motion.

3. As an interim measure, paragraph 2 of the orders made on 26 September 1995 be amended by insertion after the word "business" in the last line of that paragraph of the words "as carried on in the State of Western Australia".

NOTE: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT )

OF AUSTRALIA )

WESTERN AUSTRALIA )

DISTRICT REGISTRY ) No. WAG 102 of 1995

GENERAL DIVISION )

B E T W E E N : BISCEN PTY LTD

(ACN 060 843 245)

First Applicant

and

IAN STUART HUNGERFORD

AND DARELLE CHRISTINE

HUNGERFORD

Second Applicants

and

CLAIRE MICHELLE DARCY

AND GRAHAM JAMES DARCY

AS TRUSTEES FOR THE C.M.

DARCY TRUST

Third Applicants

and

CLAIRE MICHELLE DARCY

AND GRAHAM JAMES DARCY

Fourth Applicants

and

DARREL WAYNE DONOVAN

AND PATRICIA ANNE

DONOVAN

Fifth Applicants

and

MILLDON HOLDINGS PTY LTD

(ACN 066 779 726)

Sixth Applicant

and

PAUL DAVID COCHRANE

Seventh Applicant

TEMSIGN PTY LTD (ACN 059

983 185) AS TRUSTEE FOR THE QUICK SIGN SHOPS

(AUSTRALIA) UNIT TRUST

First Respondent

and

LISA JANE BAILEY

Second Respondent

and

SARAH ANNE BAILEY

Third Respondent

and

RODINGA PTY LTD (ACN 009

040 788) TRADING AS

KROONENBURG MUMFORD &

ASSOCIATES

Fourth Respondent

and

JOHANNES JACOABUS

KROONENBURG

Fifth Respondent

CORAM: CARR J.

PLACE: PERTH

DATE: 10 OCTOBER 1995

REASONS FOR JUDGMENT

Introduction

This is a motion on notice whereby the applicants seek an interlocutory injunction restraining the first respondent, Temsign Pty Ltd ("Temsign"), the second respondent Ms Lisa Jane Bailey and the third respondent Ms Sarah Anne Bailey ("the Bailey sisters") until trial or further order from dealing with any of their assets. The
injunction is of a type now commonly known as a Mareva injunction: Mareva Compania Naviera v. International Bulk Carriers SA [1975] 2 Lloyd's Rep 509. In particular, the applicants seek to restrain the Bailey sisters from dealing with two residential properties which are registered in their joint names ("the East Perth property" and "the Subiaco property"). A similar restraint is sought in respect of a third property ("the West Leederville property"), the registered proprietor of which is a company called Bowquest Pty Ltd. It appears that the Bailey sisters are the sole shareholders in that company. The relief sought in the notice of motion is expressed in terms which suggest that injunctive relief is sought only to the extent of preserving, until trial, unencumbered assets having a value of $500,000. There are also provisions in the orders sought whereby Temsign would be able to deal with its assets in the ordinary course of business and for the Bailey sisters to draw funds to meet ordinary living expenses. In their notice of motion the applicants also seek an interlocutory injunction, until trial, prohibiting the first, second or third respondents from entering upon any of the premises in which the various applicants conduct their business or reside. I shall return to that separate matter after dealing with the question whether a Mareva injunction should be granted.

The motion came before me on an urgent ex parte basis on 15 September 1995. In relation to the application for the Mareva injunction I made what was intended to be a short-term order restraining any dealing with the East Perth property, the Subiaco property or the share capital of Bowquest Pty Ltd. Orders were also made that the motion be adjourned for further hearing on 26 September 1995 and that in the meantime all the relevant documents be served on the respondents. The further
hearing on 26 September 1995 had to be conducted by videolink. On that date senior counsel appeared for the respondents. By that time a degree of agreement had been reached between the parties which enabled some further interim orders to be made. The orders of 15 September 1995 were varied to enable the sale of the East Perth and Subiaco properties to proceed, subject to securing the proceeds of sale pending further order. An order was also made, at the suggestion of the Bailey sisters themselves, in relation to their passports and on that basis the present motion was adjourned to be dealt with on 5 October 1995.

I should mention certain other related proceedings in this Court which were commenced on 10 July 1995 and to which the respondents in the present matter are also respondent. Those proceedings are No. WAG 77 of 1995 in which J & J Bone Pty Ltd is first applicant, Mr J F Bone and his wife Mrs J K Bone (directors of the first applicant) are second applicants, Temsign, under its former name Quick Signs Shops (Australia) Pty Ltd, is first respondent, the Bailey sisters are second respondents and Mr Hans Kroonenburg (their accountant) is third respondent. In those proceedings the applicants have filed a notice of motion in which they seek similar, but not identical, interlocutory relief against the Bailey sisters as that which I have described above. At the hearing on 5 October 1995 the parties agreed that the evidence adduced in respect of each of the two motions should be treated as evidence in the other. I intend these reasons to apply generally to the decisions which I have made in respect of the interlocutory orders sought in Application No. WAG 77 of 1995.

The Legal Principles

Apart from the normal discretionary matters which must be considered on an application for an interlocutory injunction, there are special considerations applicable where the injunction sought is of a Mareva type. The leading cases are conveniently collected in a recent decision of Kiefel J, Tomlinson & Ors v. Cut Price Deli Pty Ltd & Ors (unreported, Federal Court Judgment No. 425/1995, 23 June 1995). I shall not refer extensively to those authorities because I think that one of them encapsulates the principles most usefully. The case to which I refer is Patterson v. B.T.R. Engineering (Aust) Ltd (1989) 18 NSWR 319 where Gleeson CJ at p.321-322 said:

"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".

In that case Meagher JA, in respect of the matter of dissipation of assets added (at p.327):

"The plaintiff is required to prove, on balance of probabilities, that there is a real risk of the dissipation of assets."

As Kiefel J. noted in the Tomlinson case, where it is considered appropriate, such an interlocutory injunction is granted to preserve the status quo, in so far as that relates to a respondent's property, pending ascertainment of the rights of the parties. The purpose of a Mareva injunction is not to create security for an applicant but to prevent the frustration of the Court's process: Jackson v. Sterling Industries Ltd (1987) 162
CLR 612 at p.625 (per Deane J).

The respondents, for the purposes of these motions, do not dispute that the applicants have shown a prima facie cause of action. In issue is whether the applicants have established that there is a real risk of the dissipation of assets and, if so, the extent to which any relief should be moulded to accommodate the reasonable requirements of Temsign's business and to enable the Bailey sisters to meet personal expenditure.

Factual Background

The chronology of events leading to the filing of this motion is of some importance. As I have mentioned above, Application No. WAG 77 of 1995 was filed on 10 July 1995. There was some correspondence before that date to which I will refer further below. In those proceedings J & J Bone Pty Ltd and Mr and Mrs Bone claim declarations that certain agreements in respect of a franchised signmaking business are void ab initio, alternatively rescission of those agreements, damages and other relief. The claims are based on alleged contraventions of ss.51A and 52 of the Trade Practices Act 1974 (Cth) and relate to certain alleged misrepresentations concerning that business including misrepresentations as to sales, profit and likely turnover of the business.

There are seven applicants in this application (No. WAG 102 of 1995) which was filed on 15 September 1995. They comprise the companies and individuals associated with those companies who entered into franchise and related agreements with Temsign in relation to four respective signwriting businesses in or near the Perth Metropolitan Area. In those proceedings there are thus four separate sets of claims. The essence of the claims is that the respondents made misleading statements concerning the turnover and anticipated turnover of either existing signmaking businesses owned or franchised (as franchisors) by them or of the particular business in respect of which the applicants entered into franchise and related agreements. In four of the five transactions involved in the two applications the respective applicants each paid or agreed to pay the sum of $35,000 by way of franchise fee and in the fifth transaction the franchise fee paid was $20,000. Those payments were in addition to the cost of fitting out, stock-in-trade and other like setting-up expenses. In most cases the applicants committed themselves to leases or sub-leases of their respective premises. The five transactions (i.e. including the one which is the subject of Application No. WAG 77 of 1995) were entered into during a period of approximately thirteen months between December 1993 and January 1995. The respondents' evidence is that there are five other Quick Sign shops, all situated in Western Australia.

As mentioned above, for the purposes of these motions, it is conceded that the applicants' cases are arguable.

Disposition of Assets

On 6 June 1995 Mr and Mrs Bone's solicitors wrote to Temsign under its former name [Quick Sign Shops (Australia) Pty Ltd] complaining about the turnover representations made to their client and seeking inspection of an identified record book for the purposes of verifying sales figures. The record book was identified as one to which the Bailey sisters had referred when making the turnover representations. Mr and Mrs
Bone and their accountants were allowed, soon after that letter was sent, to inspect various deposit books, but not the particular record book requested. They were told, by letter dated 22 June 1995, that that record book had been discarded "... along with many other old incomplete records and literature". Their solicitors wrote again to Temsign on 14 and 27 June 1995 seeking verification of trading figures. Proceedings had been threatened in the letter dated 6 June 1995 and the threat was renewed in the letter of 27 June 1995.

On 21 June 1995 the Bailey sisters signed an agreement appointing Messrs Rich & Co, real estate agents, as their agent to sell the East Perth property. The price originally stipulated in that document was $289,000 but there are amendments to that price indicating reductions to $275,000 and $259,000 respectively. The respondents say that the estimated current value of that property is between $220,000 and $240,000. The Bailey sisters purchased the East Perth property in July 1994 (eleven months prior to putting it on the market) for $262,000. The East Perth property was purchased with the assistance of funds loaned by the Commonwealth Bank of Australia repayment of which was secured by mortgage over that property. The loan was repaid and the mortgage was discharged in February 1995. There are no encumbrances registered against the title to the East Perth property.

The Bailey sisters bought the Subiaco property in February 1994 for $205,000, again with the assistance of a loan from the Commonwealth Bank of Australia. That loan was for $160,000 but repayments have reduced the amount outstanding to about $68,000. The property is also charged to secure $70,000 in respect of a loan made by the Commonwealth Bank of Australia to enable Bowquest Pty Ltd to purchase the West Leederville property. The respondents estimate the current value of the Subiaco property to be $230,000. On 19 July 1995 the Bailey sisters appointed a firm of real estate agents to sell the Subiaco property. The price nominated in the agency agreement was $259,950.

The West Leederville property was purchased by Bowquest Pty Ltd (it will be remembered that the Bailey sisters are the sole shareholders in that company) for $350,000 (including $20,000 for improvements and stamp duty) in March 1995. The full purchase price was advanced by Commonwealth Bank of Australia and an amount of some $347,000 is still outstanding to that Bank. It is common ground that the West Leederville property is now also on the market for sale. Bowquest Pty Ltd is not a party to these proceedings.

On 10 July 1995 the first respondent, which was then named Quick Sign Shops (Australia) Pty Ltd, held a general meeting of shareholders at which it was resolved to change its name to Temsign Pty Ltd. The documentation to effect this change of name was lodged with the Australian Securities Commission on 11 July 1995. The company was incorporated on 3 May 1993 under its former name which had remained unchanged until 10 July 1995. An ASC extract shows that the company's principal activity was stated to be "Trustee". On 11 July 1995 another company called Quick Sign Shops (Australia) Pty Ltd was incorporated. Its principal activity was stated as "Trustee Company". The Bailey sisters are the directors of that company and Ms Sarah Bailey is the company secretary. They held (and still hold) the same positions in Temsign.

The circumstances recited immediately above, together with certain evidence suggesting that the Bailey sisters were about to depart for Singapore, formed the original basis upon which the applicants sought this interlocutory relief in the middle of last month. The respondents have since then adduced evidence concerning their interest in expanding their business to Singapore. It appears that the proposal is currently suspended. Nevertheless, the respondents say they wish to expand ("continue" was the word used by their counsel) their business of franchising to the State of Queensland. Broadly speaking, the applicants no longer rely on any suggestion that the Bailey sisters are about to depart for Singapore although they point to the fact that this could always happen. Rather, the applicants, having referred to the timing of the corporate changes and proposed sales of property described above, rely upon what they contend will be the likely consequences of the respondents' proposed expansion of their franchising activities into Queensland. The respondents say that they require access to the net proceeds of the property sales to fund that expansion into Queensland. The applicants characterise this proposed expansion as being a speculative venture which will most likely result in the dissipation of those proceeds to the extent that any judgment obtained by them will not be satisfied. In essence, they say that the respondents' own evidence shows that their franchising business in Western Australia is running at a substantial loss and that the same is likely to occur if the respondents expand their operations to Queensland. The applicants say also that it is not clear which entity or entities are involved in conducting the respondents' business, whether there are trusts involved and precisely how the respondents intend to employ the net property sale proceeds in the Queensland venture.

The respondents say that the authorities in respect of Mareva injunctions make it clear that a respondent should not be shut out of funds sufficient for it to continue in business. They say that the proposed expansion into Queensland is simply a continuation of their business. I should note that, to date, there is no evidence that the respondents have carried on their franchising business elsewhere than in Western Australia, although they have carried out a feasibility study for expansion of their activities to Singapore.

The Respondent Group

I have had some difficulty ascertaining from the evidence precisely which entities have carried on or are carrying on what I have described as the respondents' franchising business. The applicants rely on the absence of clear evidence in that regard.

There are various references in a disclosure statement annexed to the seventh applicant's affidavit, sworn on 13 September 1995, to Quick Sign Shops (Australia) Pty Ltd as being trustee of a trust described sometimes as "the Quick Sign Shops Australia Unit Trust trading as Quick Sign Shop", or the Quick Signs Australia Unit Trust trading as Quick Sign Shops, or "the Quick Signs Unit Trust trading as Quick Sign Shops". The applicants submit, and I agree with the submission, that the extent and value of any right of indemnity which Temsign may have in respect of trust property would be a most material factor in assessing the danger that dissipation of the proceeds of the property sales might render worthless any judgment recovered by
them. Mr M.P. Cornes, counsel for the respondents, (in the course of dealing with orders sought by the applicants which would require the respondents to disclose details of any disposition of assets by the Quick Sign Shop Unit Trust from 10 July 1995 and whether the trustee of the Quick Sign Shop Unit Trust had been replaced) submitted that there was no evidence as to how the trust "related to the first respondent". In my view, the absence of such evidence does not assist the respondents' case at all. To the contrary, the respondents have chosen the course of not providing the Court with sufficient information concerning the entities within the respondent group, their respective legal and beneficial interest in the respondents' business and the extent of the assets and liabilities of those entities. In their affidavits (Ms Lisa Bailey adopts her sister's affidavit) the Bailey sisters treat their assets and liabilities and income and expenditure as including those of the corporations and trusts through which they conduct business without any attempt to segregate the various interests.

The respondents filed an affidavit from their accountant Mr J J Kroonenburg, who is the fifth respondent. In his affidavit Mr Kroonenburg refers to the planned expansion into Queensland and then seeks to explain the events of 10 and 11 June 1995, to which I have referred above, simply in these terms:

"To this end [an apparent reference to a plan that each State be support by a new, separate proprietary limited company acting as the State's master franchisor] a series of proprietary limited companies were (sic) established in June 1995. These were Quick Signs Shops (Queensland) Pty Ltd, Quick Sign Shops (W.A.) Pty Ltd and Quick Sign Shops (Australia) Pty Ltd. Two Quick Sign Shops (Australia) Pty Ltd companies were established - ACN Nos. 070 301 001 and 059 985 185 and to avoid confusion between them the latter's name was change to Temsign Pty Ltd".

I do not consider that this is a satisfactory explanation for the incorporation of a new company whose principal business is stated as being to act as a trustee and the switching of the name Quick Sign Shops (Australia) Pty Ltd to that new company. By the time Mr Kroonenburg swore his affidavit, the respondents were on notice of the applicants' concern in that regard and have done nothing to allay those concerns.

The respondents have set out in their principal affidavit details of their assets and liabilities and income and expenditure on what could be described as a consolidated basis i.e. consolidated with all their various business entities. I have detailed above their real estate interests. Other items of their property include a Porsche motor vehicle which Ms Sarah Bailey values at $74,000 and in respect of which she says she borrowed $62,000 for its purchase in April 1993, and a BMW motor vehicle owned by Ms Lisa Bailey which she values at $35,000 and in respect of which there is apparently an outstanding loan in that amount. Ms Sarah Bailey does not state whether there is any amount still outstanding in respect of the loan used to purchase her Porsche. The only other assets disclosed are furniture and other chattels to a total of $15,500. On the assumption that both vehicle loans are still outstanding, the applicants have prepared a tabulation, based on the respondents' affidavits, of the respondents' assets and liabilities which shows the net value of their assets as being $378,700 almost all of which is reflected in the three properties.

The applicants have prepared two similarly based tabulations in respect of the monthly income and expenditure of the respondents. The first shows expenditure exceeding income by some $14,801 per month. The second is a tabulation calculated on the basis that those of the applicants who have ceased making royalty and loan repayments under the franchise arrangements were to resume such payments. Even those tabulations show a monthly excess of expenditure over income of $6,641. Those figures were not the subject of any serious challenge by the respondents. The significance of the last tabulation goes to a basic argument raised by the respondents in opposition to these motions. The respondents say that because the applicants have suspended payment of moneys due under their various franchise agreements, there has been a significant deterioration in the cash flow of their business such that they must have access to the proceeds of sale of the various properties. This last tabulation shows that even if the applicants maintained those payments, the respondents' financial affairs would be running at a net cash flow deficit of some $6,641 per month. The applicants submit that the situation would be worse if they resumed purchasing stock from the respondents. However, I have decided not to have regard to that aspect because there are, in my opinion, too many variable factors involved in making that assessment. For example a higher volume of sales by the respondents (with consequent increases in stock purchases) might well result in obtaining lower prices from manufacturers and other suppliers. It is sufficient for present purposes, in my view, to point to the net monthly loss.

There is a degree of vagueness in Ms Sarah Bailey's affidavit sworn 26 September 1995 in which she describes the sale of the business formerly conducted by Mr and Mrs Bone and their company at Mt Lawley. I refer to the following paragraph:

"3. Accordingly, our parents offered to assist by buying the Mt Lawley shop business which we have been trying to sell since the Bone's left and they offered to advance us the sum of
$100,000 in consideration for this.

4. On 19 September 1995 my parents paid us $100,000 by way of a bank cheque and we have had to use a considerable amount of those moneys to clear existing debts and in respect of outstanding and anticipated legal bills."

Ms Bailey then described the manner in which some of that expenditure had been outlaid but there appeared to be some $50,000 remaining. Although later in that affidavit there are references to various bank accounts, there is no reference to the present whereabouts of that sum of $50,000. Presumably, it is held in cash.

There is some evidence that the Bailey sisters are prepared to handle large amounts of cash. I refer to the affidavits of Mr Ian Stuart Hungerford to the effect that at the request of the Bailey sisters a cheque payable by Biscen Pty Ltd to the first respondent on 22 November 1993 was made payable to cash and was in fact cashed. The cheque was for $30,000 and the reverse of the cheque shows that it was cashed as to $5,000 in $100 notes and as to $25,000 in $50 notes.

Nowhere in the respondents' affidavits is there any explanation as to how the Bailey sisters plan to deploy the proceeds from the property sales in the proposed expansion into Queensland. As Mr M C Hodgkin, counsel for Mr and Mrs Bone and their company, pointed out, the respondents may be proposing that the sums be advanced to companies having as little as $2 in paid up capital. He described the proposed venture into Queensland as being "highly speculative". I do not consider that the evidence to date justifies that description. Nevertheless I consider that, based on the current position of the respondents' business in Western Australia, on the balance of
probabilities there is a real risk that the proceeds of the property sales will be dissipated if they are expended on the proposed Queensland venture.

The respondents rely also on Mr Kroonenburg's affidavit to establish that the property sales are being undertaken for valid business purposes as part of an expansion plan for their Quick Sign Shop franchise business. Although paragraph 3 of Mr Kroonenburg's affidavit refers to a number of meetings and discussions with the Bailey sisters over the past year in which he urged them to adopt a long term strategic plan, he does not put a date on the time at which he recommended the sale of the residential properties in Perth. It is also somewhat strange that he makes no reference whatsoever to the investigation of expansion of the business to Singapore. The evidence from Ms Sarah Bailey would indicate that approximately $15,000 has been spent to that end including $12,000 on the feasibility study to which I have earlier referred. Ms Sarah Bailey states in her affidavit that the East Perth property was put on the market earlier than originally planned when she and her sister became aware that a house "a couple of doors down" was to become an Aboriginal womens refuge which could lessen the value of that property and make it harder to sell.

It is not necessary to decide precisely when the Bailey sisters determined to dispose of their principal assets. The fact of the matter is (as their counsel conceded) that they are "beyond doubt" trying to dispose of their assets. The respondents' case is that the purpose of the dispositions is a valid business purpose.

Mr Cornes submitted that the proposed expenditure on the Queensland expansion was a
legitimate business expense to which his clients should be allowed to apply the net proceeds of the property sales. He relied on the decision of the High Court of Australia in Jackson v. Sterling Industries Ltd (1987) 162 CLR 612 and in particular certain passages at pp.618, 626 and 642 of the reasons for judgment in that case. At p.642 Gaudron J. referred with approval to the development of a practice whereby Mareva orders should be varied to allow payment of debts incurred in the ordinary course of business and to allow the defendant sufficient funds to meet reasonable living expenses. On the latter aspect there is the authority of PCW Ltd v. Dixon [1983] 2 All E.R. 158 in which Lloyd J. observed that a Mareva plaintiff was not entitled to exercise undue pressure on the defendant to settle the action by preventing him from having sufficient moneys to pay his debts as they fell due. I am conscious of the possibility that there may be an attempt in the present matters to apply such pressure on the respondents. At p.617 in Jackson v. Sterling Industries Ltd Wilson and Dawson JJ identified the purpose of a Mareva injunction as being to prevent the abuse of the process of the Court by the frustration of its remedies. Deane J. at p.623 endorsed the general proposition expressed by Lord Denning M.R. in Rahman (Prince Abdhul) v. Abu-Taha [1980] 1 WLR 126 at p.1273. The terms of that proposition are virtually identical to the principle as enunciated by Gleeson CJ in Patterson which I have set out earlier in these reasons.

Conclusions

I do not consider that the timing of the appointment of agents to sell the East Perth property and the Subiaco property has been satisfactorily explained. The same applies
to the corporate re-arrangements involving the first respondent, to which I have referred above. The coincidence with the commencement of proceedings in Application No. WAG 77 of 1995 has made a firm impression on me which has not been dispelled by the explanations proferred. It may be that the explanations turn out to be more persuasive when the evidence is properly tested. The problem at this stage is that I do not find the proofs offered to be convincing. The respondents have not, in my view, been sufficiently forthcoming about their business affairs and financial arrangements.

I have concluded from the evidence before the Court to date that, on the balance of probabilities, there is a danger of the respondents' assets, (the net proceeds of the three property sales) being dealt with in such a manner that if the applicants obtain judgment they will not be able to get that judgment satisfied.

I make no finding that the respondents intend to deal with their assets in such a manner that if the applicants obtain judgment there will not be sufficient assets to satisfy such judgment. However, in my view the applicants have established on a balance of probabilities that there is a danger of the assets being dealt with in the Queensland venture in such a manner that there will be the result, whether intended or not. In Yenald Nominees Pty Ltd v. Maurice Lyford & Ors (unreported, Federal Court Judgment No. 374/1994, 10 June 1994) I expressed the view that nothing in the principles governing the grant of Mareva injunctions requires a finding of such a specific intent. In that decision I referred to Jackson v. Sterling Industries Ltd for the basic statement of principle and to a passage in Riley McKay Pty Ltd v. McKay [1982] 1 NSWLR 264 at p.276 which referred to intent or necessary effect in the alternative as supporting the view which I had formed.

I now turn to the question of the balance of convenience. I have already referred to the affidavit evidence from the respondents concerning their assets and liabilities and income and expenditure and their assertions of a need to have access to the net proceeds of sale of the residential properties.

Once again, I do not consider that the respondents have put sufficiently particular evidence before the Court on these matters. For example the Bailey sisters simply state that their total income is "now down to about $4,000 per month which is comprised solely of income received from the operation of our franchise shops". How that income finds its way into their hands is not stated. Furthermore, as I have mentioned above, there is no attempt made to deal separately with the affairs of the Bailey sisters and the corporate and trust interests in the respondent group.

However, I accept that it may be inconvenient to the respondents, to some extent, not to have access to the proceeds of the property sales for the purposes of the Queensland project. I have weighed that factor against the risk or danger of the applicants being unable to obtain any satisfaction of their judgments through the dissipation of these assets. In my view the balance comes down in favour of the applicants on that point. If and when the East Perth property and the Subiaco property are sold then the proceeds, after discharging existing encumbrances, should be preserved in such manner as the parties may agree among themselves or failing such agreement, as the Court will order. It should be remembered that the purpose of a Mareva injunction is not to create security for an applicant but to prevent disposal of assets in such a manner as will frustrate the Court's process. Accordingly, if circumstances change, there may well be a basis for permitting the respondents to deal with the proceeds in a manner consistent with the principles underlying the grant of such interlocutory relief.

At the hearing, the argument concerning relief was concentrated on the three properties. In the notice of motion relief was sought restraining the first respondent from dealing with any of its assets, with a proviso that it be entitled to deal with its assets in the ordinary course of business. I consider that it would be appropriate to make an order in those terms against the first respondent. The proviso should make it clear that the relevant business is the business conducted in Western Australia.

Furthermore, the individual respondents should have some recourse to the net proceeds of the East Perth property and the Subiaco property to meet their personal obligations. I consider that the interests of justice will be served if that access is quantified in terms of $15,000 per annum or the amount of any interest generated by the funds on deposit whichever is the greater figure to be drawn in advance in equal monthly instalments. It would appear that in the event of a sale of the West Leederville property there will not be any surplus once the mortgage is discharged, and as mentioned above, that property belongs to Bowquest Pty Ltd. However, if the applicants have any concerns in relation to the dispersal of the proceeds of sale of the West Leederville property they should prepare a suggested minute of order in respect of that matter, for my consideration.

There remain two further matters. The first is whether the injunction restraining the respondents from entering on to the business or residential premises of the applicants should be continued. An entitlement to access to those premises on the respondents' part is said to arise out of the various franchise agreements and for present purposes I will assume that is so. The applicants, so I was told, were continuing to trade with the benefit of the business name which is the subject of those franchise agreements. I do not consider that the applicants have demonstrated sufficient prejudice to justify the interim suspension of those asserted contractual rights. Consistent with the policy of maintaining the status quo, I propose to discharge that part of the order which is at present in force and which restrains that access. Whether such rights of access exist is not a matter which I have to decide at this stage.

Finally, I turn to the question whether the respondents should be required to file and serve affidavits concerning their assets and liabilities, any dispositions of such assets since 10 July 1995 and stating whether the trustee of the Quick Sign Shop Unit Trust has been replaced. Basically for the reasons contained in the decision of the Court of Appeal in Bekhor Ltd v. Bilton [1981] 1 QB 923, I do not think that the present circumstances warrant the making of such an order. In particular I refer to the reasons for judgment of Ackner LJ at p.942:

"The courts must be vigilant to ensure that the Mareva defendant is not treated like a judgment debtor."

The applicants should bring in a minute of orders to reflect the above reasons. The matter will be adjourned to 12 October 1995 to settle the orders and consider the costs of the motion.

I certify that this and the preceding twenty-four (24) pages are a true copy of the Reasons for Judgment of Justice Carr.

Associate:

Date: 10 October 1995

Counsel for the applicants: Mr C.J. Ryall

Counsel for the applicants in

Application No. WAG 77 of 1995: Mr M.C. Hotchkin

Solicitors for the applicant: Michell Sillar McPhee

Solicitors for the applicants in

Application No. WAG 77 of 1995: Hotckin Hanly

Counsel for the respondents in

both applications: Mr M.P. Cornes

Solicitors for the respondents in

both applications: Barker Gosling

Dates of Hearing: 7 October 1995

Date of Judgment: 10 October 1995

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