CATCHWORDS. Injunction - Federal Court - Mareva injunctions - Application under Trade Practices Act for damages for mis— leading and. deceptive conduct. = Associated claims for negligent and fraudulent. misrepresentation and breach. of warranty - Injunctions sought restraining appointment of receiver and disposal of assets by respondents pending. hearing of application - Respondents in Australia - Whether Federal Court has jurisdiction to grant injunctions - Test to be applied - Whether real risk of respondents removing or dissipating assets Federal Court of Australia Act 1976, ss. 22, 23, 32 Trade Practices Act 1974, s.87 HIERO PTY. LIMITED v. WILLIAM ANTHONY SOMERS & ORS. ~~ No. G.240 of 1982. CORAM: ELLICOTT J. SYDNEY 1l FEBRUARY 1983 IY THE FEDERAL COURT OF AUSTRALIA) ) - WEW SOUTH WALES DISTRICT REGISTRY) No. G.240 of 1982 -. GENERAL DIVISTON : ) FIER PTY. LIMITED ; . _ AppItcant " -WIDLIAM ANTHONY SOMERS . an a First. Respondent ; - EX. BUSINESS ACQUISITIONS PTY. * LIMITED Second Respondent KEDAW PTY. LIMITED Third Respondent ' ALFRED KNIGHT PITY. CIMITED - SO _ Fourth: Respondent ' BEALE PIANOS PTY. LIMITED Fifth Respondent * MUSIC" HOUSES OF AUSTRALIA PITY. ~ LIMITED _ Sixth Respondent ~ NICHOLSOM' S° PTY,: LIMITED Seventh Respondent "WES PATING PrY.. LIMITED ° Eighth Respondent. - ORDER "JUDGE MAKING ORDER= Ellicott x. - DATE: OF- ORDER: Il February 1583 " WHERE" MADE: Sydney 2e ~ THES COURT ORDERS. TEAT:— Te The: Notice of Motiom dated 25 January 1983 be: dismissed... The 'costs of the: third to eighth respondents of thts Notice of Motton he part of their costs aft the main application. IN THE FEDERAL COURT OF AUSTRALIA )} * ' ry . )- NEW SOUTH WALES DISTRICT REGISTRY ) Now G.240 of 1982 ' ). ' GENERAL DIVISION ) HIERO PTY. LIMITED Applicant. WILLIAM ANTHONY SOMERS ° ; First Respondent . _"- BE. BUSINESS ACQUISITIONS PIY. EIMDTED. Second: Respondent ° ; KELAW PTY. LIMITED Third Respondent. ALFRED KNIGHT PLY. LIMITED Fourth Respondent ' BEALE PIANOS PTY. LIMITED Fifth Respondent MUSIC HOUSES: OF AUSTRALIA PTY." | Sixth. Respondent. -- NICHOLSOM'S PTY. LIMITED Seventh Respondent W.HY PACING Pry'. LIMITED Eighth Respondent CORAM: ELLICOTr J IL February 1983 REASONS FOR JUDGMENT Or 9 December 1982, Hiero Pty. Limited, ("the applicant") commenced proceedings against the eight respondents... It has filed a statement of 'claim seeking am order for damages: against all of them by reason of their alleged contravention of s,52 of the Trade Practices Act 1974 and their alleged negligent and fraudulent 2. Misrepresentations. It also seeks damages against the second: ta eighth respondents. for breach of warranty. The claims: for damages: for negligent and fraudulent misrepresentation. and breach of warranty are brought im purported reliance: on. the Court's: jurisdiction over: assoctatedé matters under s.32 of the Federal Court 'of ARustralia Act I376. The third to eighth. respondents have fitek a defence putting in. issue the bulk of the claims: made. by: the applicant. om 25- January 1983,. the applicant. took proceedings by notice of mation. seeking: orders: against the third to etghth respondents pending the: hearing of the main applicatiom which weredirected to ensuring that those respondents woul not dissipate their assets or remove them from. Australia. The respondents have resisted the making; of these orders. - Om 28 July 1982, the applicant entered into an agreement: with the fourth to. eighth respondents inclusive, im essence: to: purchase certain goodwill, stock on hand' ancé fixtures: and. fittings: associated with a business conducted. undex trade: names which include: (inter aliz) the names "Palings™ and "Nicholsons"™. The business: was: conducted im New Soutir Wales: and Queensland. Under the agreement, the: purchase price was to be calculated om the basis of certain. stocktaking. It was payable, as to $150,000, on the: date: of the agreement, $950,000 om 27 August 1982 and 3. - -the: Balance in certain amounts: andi on certain dates, which. included 31 January 1983, 2& Eebruary 1983 and ZL March. 1383. The agreement also provided that a period. of grace: of 14 days: would he: allowed ta the purchaser for payment provided interest was paid. To secure the purchase price, a floating charge dated 30 August 138 2, was. executed. by the applicant in favour of the fourth to eighth respondents. Under this. security, if default is made in payment of the principal sum (in. effect,. the — balance: of the purchase price), the fourth to. eighth . respondents are entitled.to appoint = receiver of the Business: that is to say, the business sold pursuant to the agreement for. sale. The: business: was: taker aver om or about: . 30 august. rg az. Im order to deal with the financial aspects: of the sale. of the business. the sixth respondent, Music Houses of Australie Pty. Limited, engaged William Hubert Hutchinson as & financtal controller. He was, in fact, engaged through his owm. company, Frenchgate Management Services Pty: Limited... At all relevant times after ° 30 August If 82, Mr Hutchinsom was located, with the consent of the applicant, im am office at 416 George Street, Sydney, witich was: the head office of the Balings business. His duties were to: control the financial recording: and records of the sixth respondent, including the finalisation of the financial details of the sale ta the applicant. 4. Peter Reginald Hayward is. a director of the - applicant and was closely involved im the purchase and take-over by it o£ the goodwill and other assets. of the business. At all relevant times, Bernard Owen. Stephens . was: a director of the fourth to: eighth respondents and he was: closely' involved. im the management of those companies. ; Mx Haywarct says that. in September, Mr Stephens tole hint that, Mr Hutchinson was: the financial controller of Music Houses: (the sixth respondent) and was their representative and would be based' im Palings" office ta sort aut the documents: and to do the final figures. Mr Hayward says that whem Mr Hutchinson took up. his position im the office, he told him he was. the financial controller of Music Houses: and. he would be working in the butiding: to sort out Music Houses' documents. for Bill Hughes. until they: were- im order. Mr Hughes, I have ,assumed,. isc the main. benefictal shareholder or the " comtrakler of the group of which the third to eighth respondents form part. Since that date, Mr Hutchinson has beer im the office om most. days and. many discussions have: taken place between him and Mr Hayward. which have related toa the: business: which was acquired. Mr Hayward. says. that whem problems. arsse out of the inter-relationship hetweer those parts: of the business which were purchased and. the: other assets. of the vendors, he would raise them with Mr Hutchinsom who, at a later time, would: reply indicating that he had discussed them with Mr Stephens. Or accasions, whem he raised these matters, Mr Hutchinson told hinr that he would, in effect, have to check it out with Mr Stephens. ™ se ; Kevin Kay dayes is. an accountant and,is: i sinancial director of the applicant. He, tco p was Invelved in the acquisition. of the business by the applicant, He says he was tole by Mr Stephens in August 1982. that Mr Hutchinsorr wass the financial controller of - "Mastic Houses. and. would be: Iooking: after their interests during: and after the takeover.. He,. to0,. had a number of conversations with Mr Hutchinson. Shortly prior ta Christmas, he says he discussed with him. the creditors: - of the Palings: business,. He asked him — "What position would Music Houses take: with regard: to those creditors which are not included im the terms of the agreement? Im some- instances,. creditors: may present a2 problem hecause they will. look to. Palings. for settlement but - Palings has no Liability ta creditors, It is Music Houses" responsibility to: settle with creditors",. He 'says that Mr Hutchinson replied — "There may not be a problem because Music Houses: will be wound up within a month™,. . . . Or & January I983, Mr Hayward, Mr Hayes: and Mr Hutchinson, had Lunch at a: restaurant in North Sydney. It commenced at. TIO. Pm. But they appear ta have stayed at the restaurant talking and drinking until 7:00 or Te30 pem Mer Hayward. says that during the course of the conversation,.. the following took place:— XR - €. -, : BITL Hutchinson = "This. is: off the record, of course, but if you had not made the December payment of the purchase price, a receiver would have: been. appointed straight: away and I -would have~been the new managing director . - _ of Palings: on. the next day." - Peter Hayward:— , "Tl believe that there will be_am article in. - - tomorrow's: Financial Review: about Music. ' Houses' disposal of its properties." BiLL Hutchinson:— - "We know that you will probably win the case - but there will be no assets: left in Kelaw. Bill Hnghes is. a pretty astute commercial animal and he is: making sure that there is nothing left behind if the case goes against us." u Mic Hayes' version of the conversation is: as fallowss— ' Peter Hayward:— "CC believe there will he an article in tomorrow's Financial Review ahout Music , . Houses disposal of its. properties." BLIL Hutchinson:— "This is all off the record but Ir firmly beTieve that you were: quite right in taking the: course: of action which you have as I ; would do precisely what you are doing if I were. in your position. You should win, however Bill Hughes is. a good businessman , and. there will be nothing left in any of the- companies: by way of assets in the event that you succeed." Te moos Kevin Hayes: "Your mean that we will win the: battle . but. lose: the war?" ' Bill Hutchinson:— "®Yes'™.. ~ Needless: ta: say- there: was: other conversation, but this is the portiom which is relevant for present purposes... Both Mr Hayward: and Mr Hayes. were cross= examined' in relation to these conversations. and each ~ affirmed that. this was what was said. - Am affidavit by Mr Hutchinson was. read in 'which he disputed their version. He says that Mr Hayward referred to. the article im the "Financial Review™ and said:— "We feel we have beem duped om this deal anc& we: are prepared.to go all the way to get. satisfaction. It is more- a moral than financial issue and as.such we would be ' prepared to spend $200,000.00 or more and perhaps: even: jeopardise: the operations of Rustrealis to get satisfactiom. We have solicited the help of the press and a senior officer of HiIl Samuel who has first hand knowledge of this deal. It is our plan to "use both the Court and: the sumpathy of the press ta bring this matter to a conclusion." "To. this Mr Hutchinsom replied:— "I will lock for the article", Mr Hutchinson was not available for cross- examinatiorm and I was informed. by counsel for the third to eighth respondents that he had Had a heart attack and was in intensive care. 8. It. is not disputed betweem the parties that,. - pursuant tea. the: terms of the. agreement. (taking: into: account the: period of grace for payment) and,. no doubt, after the valuation of stock that the following amounts are: now payable by the applicant om account of the purchase: price. and: or. the dates mentioned:— . "wg2a0,,000- om 14 February 1983 $100,000 om 14 March 1983: - $LG0;.000 on. 14 April 1983" Tt is also agreed that pursuant to the deed of charge dated 30 August 1982, the third to eighth. _respondents would be entitled to appoint a receiver or receiver and manager of the business: and. assets: acquired im the: event of non-payment: of any of those amounts. om or before the dates: mentioned. The applicant has filed several affidavits. which are directed to. establishing a prime facie case that the respondents: contravened s.52 of the Trade Practices Act or were. [fable for negligent and fraudulent misrepresentation _ and. breach of warranty... The third to eighth respondents. will contest. these assertions at the final hearing but are content to have the present application dealt with on the basis that the applicant has: established a prima facie case for relief. Te is against. this: background that the applicant seeks: two injunctions... The first is to. restrain the fourth to: eighth. respondents, until further order, from appointing a receiver or receiver and manager of the business pursuant He to. the deed of charge, by reason of the non-payment of the amounts: mentioned: above om the due dates. The second: is to: restrain the third to eighth respondents, until further onde. from. dealing in any of their real property, the proceeds: of sale: of any of their real property: or any of their other assets, so as to cause their assets. withim Australia to fail below the value: of SIM or so-as to cause: their assets to that value to be beyond the reach of the- applicant im the event of the applicant recovering damages: ~ against them in these: proceedings.. The applicant has: adduced evidence: to establish that the damages: ta which they are entitled is of the order of $900,000 or more. : . Batir orders are sought on the basis: that the evidence: establishes that the third to eighth respondents intend to dissipate their assets within the jurisdiction or to' remove: them from the jurisdiction.. What they seek, therefore, are orders in the nature of what are now termed "Mareva™ injunctions. So far as IT am aware, this is the first occasion on which the Federal Court has had to make & positive eluding as: to whether or not such an injunction. should: be granted. Senior counsel for the respondents has argued strenuously that. this Court has no power to grant such an injunctiom. Alternatively, he argues that,if it has, the circumstances. have: not been established to justify it. ww - 10 Counsel. for the applicant relies: on ss.22 and. 23 of thé: Federal Court of Australia Act: I¢76 and s.87 of the Trade Practices: Act 1974 as. providing: a basis: for- the: making: of the orders: which the applicant seeks. He has; also: submitted that: this Court has an inherent. jurisdiction. ta: prevent an. abuse of its process and that -the making of suck orders: would, in this. case, prevent suci am abuse. - : - : 7 Before dealing: with this court's. jurisdicttom to make orders. of the nature sought, it is necessary to bear. in. mind the- basis upon which "Mareva" type injunctions: have: beer granted im other courts. . Until-several decisions of the English Court - of Appeak in 1975; it had. not been the practice to make orders: restraining a defendant from dealing with his assets or application by- a plaintife uniess: the plaintiff could establish some legal or equitable right im the assets to - which the order was directed. This was' based om a number of early decisions suck as Lister vi: Stubbs (1890) 45 ch. rr, Robinson ve pickering (1881) Ié6 Ch. D.660 and Mills v. -- Northern: Railway' of Buenos: Ayres (1870) E.R. 5 Ch. App. 622.. What have become known as. "Mareva™ injunctions were first granted: tn. IS75, by the Court of Appeal in England. (See Wippow # 'Waser Reishe o © Rarageorgis (1975) 3 ALL E.R SR (2975) (1380). L AIL E.R... 205). Tister vw Stubbs and the earlier cases, to which IT have: The statutory basis: for granting these injunctions: was: found. im s.45(I). of the Supreme: Court of Judicature (Consolidation) Act 1925 (U.K.) which provided:— - ™(L). The: High Court may: grant @& mandamus. or am injunctiom or appoint @ Receiver, "by am interlocutory order im all cases. in which ic appears: to the Court ta be just or convenient so ta do." The predecessor of s.45(I) was s.23(8&) of the Supreme: Court of Judicature: Act 1873, Section 23(8y was therefore available as a source of jurisdiction when. ° t referred, were decided. The reasoning lying: behind the grant of "Mareva™ type injunctions: was explained by Sir Robert Megarry V.C. int Barclay=Johnson ve Witt (1980). 3 AIL E.R. I90 at p.194 as follows:— "It seems to me that the heart and core of the Mareva. injunction is: the risk of the: defendant - removing his assets: from the jurisdiction and > so stultifying any judgment given. by the: courts - im the action. If there is no real risk of this, suct: an injunction should be refused; if there iss reak risk, then. if the other requirements are satisfied the injunction ought: to. be granted. T& the assets. are Likely to remain. in the' jurisdiction, then the plaintiff, like all others: with claims against the defendant, must rum the risk, commom to all, that the defendant may dissipate his: assets, or consume them im discharging other liabilities, and so leave ~ ' nothing with which to satisfy any judgment. On the ather hand, if there is a real risk of the assets Being: removed from the jurisdiction, a Mareve injunction will prevent their removal. It is not enough for such am injunction merely to. forbid the defendant to remove them from the jurisdiction, for otherwise he might transfer them ta soame- collahorator who would then remove- them; accordingly, the injunction will restrain the defendant from disposing of them even within the jurisdiction.. But that does not mean that - 10 Counsek for the applicant relies on ss.22 and 2x of the: Federal Court of Australia Act 1976 and s.87 of the: Trade: Practices: Act 1974 as: providing: a basis: for the making: of the orders which. the: applicant seeks. He has. also: submitted that: this Court has an inherent. " jurisdiction. tar prevent an. abuse of its: process and that. >the making of such orders: would, im this. case, prevent such am abuse. Tee . - : Before dealing with this court's. jurisdiction - to make orders. of the nature sought, it is necessary to bear im mind: the. basis: upon which "Mareva" type injunctions: have heer: granted im other courts. . , Until-several decisions of the English Court + of Appeal, in 1975:, it had. not beem the practice to make arders: restraining a defendant from dealing with his. assets om applicatiom by- a plaintiff unless: the plaintiff could establish some legal or equitable right im the assets to - which the order was directed. This was: based om a number of early decisions suck as Tister vi Stubbs (1390) 45 ch. Bele & Robinson ve sisters (I88L) L& Ch. D.660 and Mills v. What have become: known as: "Mareve"™ injunctions were first. granted: in r3:75 by the Court of Apoeal in England. (See wippon ¥ wusen: Reishs: ~ © Rareyeorgis (1975) 3 All E.R "S.A (1975) (1880). L ALL E.R. 215). I2. ° the assets will remain sterilised. for the benefit of the plaintiff, for the court will permit the defendant to_use- them for. paying: debts as they fall dues seet.Iva of Defence v. - Are Shipping Co. SA 486 p CSSay L WLR. 488. at 494 per Robert. Goff I." Since 1975 s.45(1) of the Supreme: Court of Tudicature (Consalidation) Act 1925 has heer replaced by S.37 of te Supreme: Court. Act.1981 (U-K-), whic has: beer: treated: as: conferring om the English Courts. an explicit statutory jurisdiction to grant such injunctions... : When: first granted, the injunctions were directed to foreigners, but im time: the English Courts held that there Was no reasor,. in principle, why they should not be granted against am English persorm or company where itt was "just or convenient™ to da so. This. aié not meam that the question of nationality, residence: or domicile became: irrelevant. Clearly,. it could have a: bearing. on the question. whether: there was = risk of removal. It. is: fair to. say that the initial decision to grant. such- injunctions was largely the. result of ford Denning' s: reforming: zeal. By rsa: he had approved the grant cf suck injunctions in circumstances going well beyond the facts im Nippon and Mareva. Ia. Prince: Abdul Rahman: v.. Abu-Taha.(I980)3 ALL E.R. 409; he said, at pa4IZr— *So IT would hold that a Mareva injunction can. be granted against a mam even though he is Based. in this. country if the circumstances are 'such that there is a danger of his: aBsconding, or a danger of the assets being removed out of the jurisdiction or dispased of within the jurisdiction, or otherwise dealt - wrth so that there is a danger that the plaintiff, if he gets judgment, will not be able to get it satisfied." ee on od - ~ rs. - Since 1975. "Mareva" type injunctions have heer qranted. im four Australiam States: (Victoria, Western _ Rustralia, Queensland and New South Wales) and in New Zealand, In South Australia, the jurisdiction to:' grant. them Kas. been denied. (See: generally" Rilay Moray Pty, - Dimited vu - Mokay (1982-1 N.S.W, BR. 264 whictr contains @ very useful summary of the relevant decisions and Legislation) ; - Im some: states: the jurisdiction to grant. such injunctions: has beer found im provisions similar to the ~ English provisions. In New South Wales,. however, the Court of Appeal in Ritey McKay declined ta treat the ' - equivalent of the English provisions (s.66(4) of the Supreme: Court Act! 1970 (N.S...) ) as. a foundatiom for : jurisdiction. Instead, it relied. on s.23 of that Ret; which. provides:— "The. Court shaIl have all jurisdiction which may he necessary for the administration of justice im New South Wales," Tt also relied. upon. the: Court's inherent power. Senior Counsel for the third to eighth respondents urged me: not. 'te follow these decisions when considering whether the Federal Court has: jurisdiction to grant. them. They are, of course, persuasive only... They are not. Binding: om this Court and). clearly, they relate: to the- jurisdiction of Courts: established under different statutory provisions. However, they do emphasise: that other Courts, i 14. in the: course of administering justice, have found it 'desirable tq restraim 2 defendant from removing or dissipating assets: where the plaintif£ would: thereby be deprived of the fortes: of any: judgment that might be obtained in the action. B consideration of the cases also shows that the limits of the jurisdictiom of other courts: to grant. such injunctions have not. yet: Been fully worked: gut and: that these courts: are - conscious: of the danger. of the: jurisdiction. being used ta give zw plaintite atm unfair advantage over a defendant. (See ' | Eres. ve x (I38ZyI ALT E.R. 556 per Kerr L.J. at pp-571I-2) - Im. this application, the applicant's case is hased partly or ar alleged breach. of the Trade, Practices Act 1974 , and partly on the Court""s: associated jurisdiction. The "respondents do: not dispute. that the applicant has made out a prima facie case. Before I could grant the injunctions: sought x would alsa: have ta consider the balance of convenience: The first questions I have to resolve, however, are whether this Court has jurisdiction to grant injunctions of this type an& if so, whether ze case has: beem made. out for the particular orders sought. Im my opinion, this: Court has: jurisdiction to. grant injunctions: restraining = respondent, pending 'the hearing: of am application, from removing or dissipating his assets. That jurisdiction,. however-,. should, as a general rule, only be exercised where the Court is satisfied, on the evidence, that there is @ real risk of the respondent removing or dissipating his assets. and thereby depriving the applicant of the. fruits of any judgment he may obtain in the application. This may be proved, for example, by evidence of a deliberate intention is. orm the part. of the respondent so to deal with assets for the very purpose of defeating the applicant's claim or by" evidence: that the respondent is dealing or proposing to deak with his: assets in such.a way that it will have this: effect. The jurisdiction, in my view, is: not confined to. cases: where = respondent is: a foreigner who proposes: to vemove: assets: from the jurisdiction. The gravamer of the - jurisdictiom is the consequence that the respondent's threatened acttor, it it occurred, would stultify any order the Court might make: im. favour of the applicant and this consequence: does not seem ta me ta be confined to cases: where the respondent is a foreigner whe is. about to remove assets from the jurisdiction. . The source Qf the Court's jurisdiction, in my opinion, im relatiom to all aspects of the applicant"s claim, is. ta be found in s.23) of the Federal Court of Australia Act. In relatiom to the applicant's claim under the Trade Practices Act, it is to be found im that section and in s.87 of the Trade Practices Act. It.is: not supported by any inherent jurisdiction. Section 23: of the Federal Court of Australia Act provides=— "The Court. has: power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and: to: issue or direct the issue of writs of suck. kinds, ass the Court thinks. appropriate." Whilst bearing in mind the comments of the High Court int Thomson's" Case: (1981) 37 A.L.R. 66, this. section plays an important role in defining the powers of the Court in all 1é.. matters. withim its: jurisdiction. It' should not be given & narrow interpretation. The Federal. Court is established (inter alia) by the: Act to: exercise /original jurisdiction vested in it by Parliament im respect of matters: arising under laws. o£ the Rarliament. It is consistent with. the object and purpose for which the Court was established: that. it should —~ have: att the: powers necessary for it to do justice in exercising the judicial power of the Commonwealth in matters over which it has jurisdiction "Tremy-cpinion,. the: sectionis wide enough tor empower the Court to: make: am interlocutory order which would ensure that a respondent did not se. act as to deprive an applicant unfairly of the fruits: ef any judgment the applicant might obtain: in a: matter. Such. am order, it seems toa. me, is clearly one: whitch: the Court could consider ""appropriate™ in dealing with matters over which it has jurisdiction. The "appropriateness" of it is confirmed by the approach adopted by other Courts im similar circumstances. - _.* Serior counsel for the respondents urged upon me the: Line of authority instanced by Lister v. Stubbs. In my view, & respondent's. right to deal with property in which an applicant has: no legal or equitable interest can be adequately protected by the Court limiting the circumstances in which it wWLIL grant injunctions of this nature. Clearly, the Court should not allow an applicant to use the injunction to obtain am unfair advantage over a respondent. Nor should the Court intervene if there is' no real risk of the respondent removing or dissipating assets. i7. Sectidm 23. would be available to: the Court as. a: source: of power im matters: within its: assoctated_ jurtsdfction.. Im sao far as this: is: am application for .damages: under the Trade Practices Act, s.&7 o£ that Act, im my: view, cam alsa be treated as: a source of power. I dor not think bt Es: confiined ta. final orders. 'Nor does: it,- im my- opiniorn. Limit the powers conferred by s.23 of the - Bederal Court of Australia Act. 'Indeed, it seems to he Thomson" s" Case s.87 is tohe regarded as the sole source of - power, Et. is, in my vitew,. adequate for the purpose. Tt confers power ta make: such order or oxdersr as the Court - thinks: appropriate: against. the person, who: engaged im the . conduct if the Court considers that the order or orders: wiIL compensate the applicant for the less. or damage: suffered. Im my: opinion, Lt is open ta the court under this. provision, ta make am interlocutory order designed to ensure that ar applicant or person. wha has. suffered: damage will im: fact be able ta recover the: amount of any damage found by the Court to have Beem suffered. It is: an order of 2 type which could properly be: said to "compensate" the applicant or the persom suffering: damage. : The question which remains is: whether, in exercise of these powers, I should make the orders sought. Ig. - I am satisfied, om the evidence, that the applicant was. justified in being apprehensive about the conduct. of the third ta eighth respondents with regard to their assets, In the absence: of any cross-examinatiom of Me Hutchinsor,. I accept the evidence of Mr Hayes that im December 1582 @ statement. wax made by Mr Hutchinsorm to the effect that Music Houses: would be wound up. I also accept the evidence of Mr Hayes and Mr Hayward that Mr Hutchinson . at the: Iuncheorm im January last, also made a statement to the effect that Mr Hughes was. making sure: that there would. be nothing left im the companies: if the. case (which the applicant hack then commencedy went against the respondents. Both were cross-examined and I find no reason, at this stage, not ta - -acecapt their evidence. Im coming to this: view, I have taken into account (inter alia) the circumstances surrounding Mr Hutchinson"s. engagement and his: relationship to the third to eighth respondents, the correspondence hetween the parties.' solicitors. and the nature of the Luncheon... Although Mr Hutchinson was a financial controller engaged-on @ contractual basis, I think that Mr Hayward. and Mr Hayes:,. and therefore the applicant, " were entitled to assume that he may well be reflecting the true position. He was im constant touch with Mr Stephens and he was. Iocated at the premises of the newly acquired business for the. purpose of supervising for the respondents the financial aspects: of the take-over, However, this is not enough to justify making an order. Before I do so, I must, in my opinion, be satisfied that there is a real risk that the third to eighth respondents will remove their - assets. or dissipate them. aE ae OR a ie a a te 1S. At the. hearing before me, evidence was: adduced on. behalf of the respondents: to establish that they have no. imtentiom of so dealing: with thefr assets. Music Houses . has not. been wound up: and reasons were given relating: to tax Losses; why that. company would not be wound up. Some companies: im the- group May: be wound up but they have no assets: or liabilities. Mx Stephens, who is: closely involved in the operation of the respondents, and: who makes all executive '-decistons with respect.to the property transactions of the _ group (subject to: final approval by Mr Hughes) gave evidence anc was cross-examined. He denies: that they are conducting their affairs so. ag to ensure that: they will be unable to satisfy any verdict. He says that suck a course of action has: never beer discussed,. nor has* anything beerr done for the purpose of achieving that.end. Certain real estate is Im the course: of realisation, but he says this is: im accordance with an intention to do so in- the ordinary course of business. Evidence has: been. adduced that the present: net value of the assets of the group is approximately $2.4 million. He regards the business of the group as that of an. investor. It does: not invest abroad. It is their intemtiom ta deal with their assets in an ordinary manner, that is, to repay loans and invest money in other directions, such as orm the: money market or im other areas, The: property at 416 George Street has been sold but the proceeds have been dealt with to pay off loans. 2c. Other properties im Brisbane, Wollongong: and Lismore. "are. for sale. "The Brisbane property is. the subject of am oral offer. to purchase. The others: are not currently _the:-subject ef any offer. Mx Hutchinson, im his: affidavit, denies any knowledge: of any intention toa. wind up Mustec Houses or to "dissipate assets. Or the basis of the evidence at present before me,. I am not satisfied that there is: a real risk of the. third: to: eighth respondents, or any of them, so acting as "ta remove or dissipate: any of their assets: with a view to or with the: effect of depriving the applicant of any order for damages. it may obtaimr in these. proceedings. Although the applicant Was, as I have held, justified in being apprehensive ~ about: the respondents: firture conduct, Iomust look at the ' whale of the evidence now before me. Mr Stephens is in a position. to: know what the: intention. of the respondents is with regard. to their assets and I accept his evidence. _ Although, as I Rave found on the evidence, Mx Hutchinson: made the statements alleged, I am. satisfied, at thts: stage, that they aid not reflect the true intentions _of the: respondents or Mr- Hughes. For these reasons, although I consider the Court has jurisdiction, I amr not prepared to make the orders sought. In the notice of motion, . 21. I therefore propose to dismiss the notice of motiomr. Because I consider that, in the light of Mr Hutchinson's statements, the: applicant was justified im commencing these- proceedings, I think that the proper order for costs is that the third to eighth respondents." costs: of this notice of motion be part of their costs: of the main application. i caanrdr that this and the EMeCeDN G& pages are a true copy of the. Reas0vs foc Judgment hervin of his Kouwour Mr. Justice: mencons aap. Ql, Lone Dated: # Lay 1993