A CATCHWORODS INJUNCTION - Mareva - respondent not joined in claim for principal relief - respondent said to be holding property of a respondent in claim for principal relief - whether sufficient prima facie case - extent of jurisdiction to grant Mareva injunctions. Siskina & Ors. v. Distos Compania Naviera (1979) A.C. 210 Hiero Pty. Ltd. v. Somers (1983) 47 A.L.R. 605 WAREA PTY. LTD. & ANOR. v. WATERLOO INDUSTRIES PTY. LTD. & ORS. G6 OF 1986 PINCUS J. BRISBANE 4 MARCH 1986 IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G6 of 1986 GENERAL DIVISION BETWEEN : JUDGE MAKING ORDER: AND: AND: DATE OF ORDER: WHERE MADE: WAREA PTY. LTD. First Applicant STRIPE LIMITED Second Applicant WATERLOO INDUSTRIES PTY LTD & ORS trading as DELTRITE FINANCIAL SERVICES First Respondent WILLIAM LEONARD ARMSTRONG Second Respondent LISA N. VIRBA Third Respondent ROBERT WAYNE COLLINS Fourth Respondent MINUTES OF ORDER PINCUS J. 4 MARCH 1986 BRISBANE THE COURT ORDERS THAT: 1, The fifth respondent be restrained until judgment following trial of the within action or earlier order from, in her capacity as trustee of the Armstrong Trust - (a) selling, disposing or charging or otherwise encumbering or dealing with any real property heid by her in Australia; (b) withdrawing any moneys from any bank account operated by her in her capacity as trustee of the Armstrong Trust; (c) disposing of or otherwise dealing with any asset which she holds inher capacity as trustee of the Armstrong Trust. 2. Leave be given to the applicants to amend the Statement of Claim. 3. The applicants do serve an amended Statement of Claim by the 14th day of March 1986. 4. The fifth respondent do deliver a defence to the Statement of Claim by the 24th day of March 1986. 5. The fifth respondent does give discovery of documents on or before the 4th day of April 1986 and that inspection take place on or before the llth day of April 1986. 6. The costs of today be reserved. 7. The matter be set down for further mention ona date to be fixed on telephonic application to the Registrar. E i Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION ) ~ QLD G6 of 1986 BETWEEN: WAREA PTY. LTD. First Applicant AND: STRIPE LIMITED Second Applicant AND: WATERLOO INDUSTRIES PTY LTD & ORS trading as DELTRITE FINANCIAL SERVICES First Respondent AND: WILLIAM LEONARD ARMSTRONG Second Respondent AND: LISA N. VIRBA Third Respondent AND: ROBERT WAYNE COLLINS Fourth Respondent PINCUS J. 4 MARCH 1986 EX TEMPORE REASONS FOR JUDGMENT This is an application to continue an injunction granted by Spender J. against Joan Lenore Cecelia Armstrong who is the fifth respondent, The principal application seeks relief against the other respondents, including relief on the basis that some of them have been guilty of breaches of the Trade Practices Act, and also relief under the general law. The applicants complain, in substance, that they invested moneys with some of the respondents, that they did so having been induced by misstatements of fact and that they cannot recover their money. No allegations under the Trade Practices Act are made against the fifth respondent and she is joined merely because it is thought that some of the money invested by the applicants may have come to her. The history of the dealings between the parties is as follows. In April 1985 there was made an investment in Eurobonds in the sum of $40,000, and in early July Mr. C.M. Finlay, a director of both the applicants, was told by a Sydney financial dealer that money had been received from the Caribbean Bank of Credit Limited and there was difficulty getting funds cleared. On 9 July 1985 the applicants made a further investment of $80,000, although it does not appear that they had then received the money already invested. On the same day, the second respondent, Mr. Armstrong, writing as a director of the first respondent, instructed the Bank of America that a sum of $A80,000 was being transferred to "our account," presumably meaning the account of Waterloo Industries Pty Ltd., the first respondent, with the Bank of America in San Francisco; Mr. Armstrong's letter said the money was coming from Singapore. On 15 July the second respondent, Mr. Armstrong, telexed Mr. Finlay to say that payment would be made on 10 October; $20,000 was paid by the applicants to the first respondent, said to be the fee required by the bank which I have mentioned, to issue a letter of credit for $300,000. (It should be mentioned that not all of this information is adequately verified; some of it is hearsay and will, I suspect, prove to be inaccurate. I have not troubled, however, to discriminate between the various pieces of evidence on that basis, but simply set out what is the prima facie position presently exposed.) On 10 October cheques totalling $20,015 were paid, signed by the second respondent in favour of various persons, including a sum of $15,015 to the third respondent. On the following day, 11 October, the second respondent remitted a sum of $10,015 to BA Australia Limited to be deposited in the name of the "Armstrong Trust". It may merely be a coincidence that the sum of $10,015 may be arrived at by taking the cheque of $15,015 written on the previous day, and taking from 1t the cheques of $5,000 also written on the previous day. On 8 November a further investment of $107,000 was made by remittance on behalf of the second applicant, and in November through to January there were numerous communications between the bank I have mentioned, Mr. Armstrong, and Mr. Finlay, containing demands for payment, promises to pay, and so forth. On 19 December 1985 the second respondent, Mr. Armstrong, writing on behalf of a company called Armstrong Securities Proprietary Limited, which is nota party to these proceedings, to BA Australia Limited, purported to do so as trustee for the *"Toadfish Trust" and spoke of moneys which Mr. Armstrong expected to be transferred to BA Australia Limited, Brisbane, in the name of William L. Armstrong. The letter also directed BA Australia Limited to accept instructions with respect to the transfer, marked for the attention of Mr. A. Healey, with the telex containing the transaction code "Bloated Toad". Mr. Healey was called before me, but for some reason which escapes me, no one thought to ask him anything about this or any other aspect of the matter. On 6 January 1986, a director of the first and second applicants spoke to an accountant in Hong Kong who informed him that the second respondent, Mr. Armstrong, had arranged the establishment of telex and fax facilities at 322 8th Avenue, New York. That happens to be the address shown on the letterhead of the bank; the applicants suspect that the bank does not really exist. A search was conducted in the records of a local authority and subsequently in those of the Titles Office and it 1s disclosed that the fifth respondent 1s registered as proprietor of some land as trustee of the Armstrong Trust. The assignors of the land were W.L. Armstrong and R.K. Giles. The applicants are apprehensive because they have invested substantial sums of money and, despite promises made, have got nothing back. They fear that some part of the money may have gone to the Armstrong Trust and their purpose is to ensure, so far as they can, that, at least for the time being, the Armstrong Trust remains intact. Mr. Boughen, who appeared for the fifth respondent, argued that there was no sufficient connection shown between the Armstrong Trust and any of the other respondents to justify relief against the fifth respondent, except, perhaps, in respect of the sum of $10,015 to which I have already referred. The structure, on the face of it, looks to be complex in that there are at least three trusts involved: there is the Armstrong Trust, which seems to have got two pieces of property from Mr. Armstrong, namely, the money, and his half-interest in the land to which I have referred; there is the Toadfish Trust, which, on the face of it, looks to be a creature of Mr. Armstrong, and thirdly, there is the Armstrong Family Trust, which 1s said in some of the documents to be trading as Deltrite Financial Services. The trustee of that trust 1s said to be the first respondent, Waterloo Industries Proprietary Limited. The question which has somewhat troubled me is whether Mr. Boughen is right in saying that there is insufficient material before me to raise a case against the fifth respondent other than in respect of the $10,015. Mr. Boughen argued that an injunction of the Mareva type prima facie cannot go againsta person against whom there is no cause of action, and no doubt had in mind, in particular, the decision of the House of Lords in The Siskina (1979) A.C. 210. He said that even if there were a sufficient connection shown between the other respondents and the Armstrong Trust I should not grant an injunction because I have no jurisdiction to do so. The principal argument advanced on behalf of the applicants, by Mr. Russell, was that there is a sufficient prima facie cause of action against the fifth respondent as trustee, on the basis that it is shown that moneys belonging to the applicants, and moneys of which they have been deprived in breach of the Trade Practices Act, have gone through to the trust. On reflection, I am not satisfied that there is a sufficient case to support that. I have already pointed to the coincidence about the §10,015, but there is nothing before the court which would warrant even a prima facie inference that the money in the Armstrong Trust is traceable back to the applicants, and I am not prepared to extend the injunction on that basis. That leaves for consideration Mr. Russell's alternative argument which was, in substance, that there is a prima facie case that a substantial part of the money in the trust has come from Mr. Armstrong, and that it is within the jurisdiction of the court to prevent its dissipation, at least for the time being. Consideration of that argument involves some reference to the recent history of the Mareva injunction. Neither counsel referred me to any reported case in which an injunction under the Mareva principle had been granted against a respondent who was not a person primarily liable, and as I have implied, the Siskina case seems to be against that notion. Nevertheless, The Siskina may be distinguishable on the basis that there the person against whom the injunction was sought was not sought to be enjoyed in, so to speak, an ancillary way as the recipient of ill-gotten gains. Further, Mareva injunctions are granted against persons primarily liable on the basis that those who hold their funds, such as banks, may be the subject of contempt proceedings, and in that way they are indirectly restrained. It seems but a small step to enjoin the holders of funds directly and I think the court should take that step; such a course has, I understand, been taken in an unreported decision in New South Wales, F.C.T. v. Goldspink. The expressions used in the authorities vary as to the degree of proof which is necessary to warrant the grant of a Mareva injunction. As to the risk of removal or disposition which must be shown, it has sometimes been said that there must be "a real risk" or words to similar effect, and I refer to the remarks of Ellicott J. in Hiero Pty. Ltd. v. Somers (1983) 47 A.L.R. 605 at 610. As far as the cause of action itself is concerned, which seem from a perusal of the authorities to be fairly skimpy, cases have on occasions been held to be sufficient to warrant holding matters in statu quo. Here the case against the fifth respondent seems to me marginal, but good enough. I am encouraged so to hold by the circumstance that, considering the respondents as a group, none of them has either given evidence in any of the applications so far made to this court before Spender J. or myself or, indeed, provided any documents which might help to unravel the mystery of where all the money has gone. All that one knows solidly about the Armstrong Trust is that Mr. Armstrong, who seems to be the leading spirit among the respondents, is said to be a potential beneficiary of the trust, and that he has put money into the trust. What Mr. Boughen in substance invites me todo is to assume, without any evidence, that there is another source of funds for the trust, that is other than the second respondent, Mr. Armstrong. In putting that forward he has in his favour the fact that the transfer of land, to which I have already referred, was effected by two persons only one of whom was Mr. W.L. Armstrong; but it would have been simple for the fifth respondent to file material to explain, if it be the fact, that there are other persons who put money into the trust, having no connection with Mr. Armstrong or the other respondents. She has not done so and so far from doing so has, as I hold, evaded service of a subpoena, a means whereby the applicants hoped to have her explain to the court what the money in the trust is. On the face of the material before me, prima facie there is a close connection between the second respondent and the Armstrong Trust, among others. It seems to me, that he probably is the "Armstrong" in the name of Armstrong Trust, and I think I should restrain the fifth respondent from getting rid of any property from the trust, for the time being. I should mention that some reliance was placed upon the decision of the Full Court in the case Pallas v. Finlay, a decision given on 18 July 1985 relating to enforcement of terms of settlement of an action. What was there held was that in proceedings brought under the Trade Practices Act it is impossible to join individuals not said to be liable under that Act who have undertaken to be joined if they made default in paying moneys by way of settlement of the proceedings. The judgment, however, does not seem to lay down as a general principle that the jurisdiction of this court in the adjectival area can never extend to granting relief against a person against whom no claim under federal law is made. Once it is accepted that Mareva injunctions may be granted in this court, then the whole scope of that remedy becomes available to litigants here. This is not a matter dealt with by the High Court in any of the trilogy of cases laying down the principles with respect to the accrued jurisdiction and in particular is not referred to in Fencott v. Muller (1983) 151 C.L.R. 570. Nevertheless, the approach taken by the High Court in those cases is not inconsistent with the notion that this court, once seized of a matter under the Trade Practices Act, may grant remedies of a procedural kind against persons against whom no claim under a federal statute is made, I therefore propose to extend the injunction, or more precisely, to make an order, subject to any argument as to form, in the terms sought by the applicants. : | certify that this and the 2 precedinc Pages are a true copy of the reasons for Judgment herein of His Honour Mr. Justice Pincus prt gone sociate Dated 10 - 3 - 936