supse AG 1 cue IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G81 of 1987 GENERAL DIVISION ) BETWEEN: DAREDE NOMINEES PTY. LTD. Applicant AND: CABOOLTURE 24 HOUR MEDICAL CENTRE PTY. LTD. First Respondent AND: GEOFFREY WALTER EDELSTEN Second Respondent AND: LEANNE MARGARET EDELSTEN Third Respondent AND: STEPHEN FRANCIS WELLER Fourth Respondent AND: RALEMA PTY. LTD. Fifth Respondent MINUTES OF ORDER , we JUDGE MAKING ORDER: PINCUS J: ° oe DATE OF ORDER: 19 JUNE 1987 ooumt OF WHERE MADE: BRISBANE : THE COURT ORDERS THAT: Upon the applicant by its counsel undertaking to pay to any party adversely affected by the interlocutory injunctions hereby granted such compensation (if any) as the Court thinks just, in such manner as the Court directs 1. The first respondent, by its directors, servants, agents or otherwise howsoever be restrained until ey the determination of these proceedings or further earlier order from selling, transferring, disposing or otherwise howsoever dealing with, or attempting to deal with, any of its assets whatsoever other than in the ordinary course of business save to the extent that they exceed $350,000.00. The fifth respondent, by its director, servants, agents or otherwise howsoever be restrained until the determination of these proceedings or further earlier order from selling, transferring, disposing or otherwise howsoever dealing with, or attempting to deal with, any of its assets whatsoever other than in the ordinary course of business save to the extent that they exceed $350,000.00. The costs of the application for interlocutory injunctions be costs in the proceedings. The respondents' application for security for costs be dismissed. The applicant have its costs of the application for security for costs to be taxed, such taxation-not to take place until further order. The respondents' application for particulars of the amended Statement of Claim be dismissed. The applicant have its costs of the application for particulars to be taxed, such taxation not to take place until further order. Settlement and entry of orders 1s dealt with in Order 36 of the Federal Court Rules. oe IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G81 of 1987 GENERAL DIVISION ) BETWEEN: DAREDE NOMINEES PTY. LTD. Applicant AND: CABOOLTURE 24 HOUR MEDICAL CENTRE PTY. LTD. First Respondent AND: GEOFFREY WALTER EDELSTEN Second Respondent AND: LEANNE MARGARET EDELSTEN Third Respondent AND: STEPHEN FRANCIS WELLER Fourth Respondent AND: RALEMA PTY. LTD. Fifth Respondent PINCUS J. 19 JUNE 1987 EX TEMPORE REASONS FOR JUDGMENT: There are two applications before me in this matter, the first of which is an application for a Mareva injunction. The applicant is a company which lent $250,000 to the first, second and third respondents on 2 April 1987, repayable on 1 April 1988, and claims that it did so on the security of the first respondent's interest in two medical practices, conducted at Caboolture and Southport respectively. The respondents say that the intention was that only one of the practices, that of Caboolture, would be used as security and also say, in effect, that the first respondent's interest in that practice is in any event rather tenuous; the fifth respondent, another company in the same group, is said to have the only relevant interest in the practice at Southport. It is convenient to begin by referring to some matters which seem not to be disputed. There 1S no doubt about the loan of money, nor any doubt that some security was intended to be taken. There is in evidence a mortgage debenture over assets of the first respondent. It does not identify any particular asset but creates a fixed charge over "all freehold and leasehold land in which" the respondent "has any interest at any time". It is not disputed that there was never any question of the first respondent's taking a lease from the owner of the premises in which the Caboolture Medical Centre is located and that all the owner's discussions were had with the second respondent. Similarly, with respect to the Southport premises, 1t is the second respondent who is the lessee, under an undated lease, an executed copy of which has been produced. In the principal application it is alleged that there were to be securities given over both the practices and that this did not occur. It is suggested, in fact, that there was fraud. "t, we The applicant claims that the respondents arranged matters in such a way that the intended security was not given and, in particular, that the Southport practice has gone to the fifth respondent. It is an oddity of the case that there is no dispute that the intention of the respondents was, and always is, that the second respondent personally, and not either of the companies, should have the lease. If that were so, it is difficult to understand why there was discussion about a security over a lease to be given by the first respondent. It 1s also common ground that on 1 April 1987 at' the office of the Commission for Corporate Affairs there was registered a business named "Southport 24 Hour Medical Clinic". The name of the person carrying on that business was registered as that of the first respondent, rather than the fifth respondent, thus giving some support of an independent kind to the case that at the time the loan was made on 2 April, it was claimed that the first respondent had an interest in the Southport clinic. Next, 1t is not (at this stage, at least) disputed that on 14 May 1987, not long before these proceedings were instituted, the second respondent executed a sub-lease in relation to the Southport clinic to the fifth respondent, commencing on 1 April 1987 - again, the day before the loan agreement. I say "again" because that is the day on which the first respondent was registered as carrying on that business. The existence of the sub-lease 1s consistent with the applicant's theory that, after the loan was made, the second respondent decided that the first respondent, one of the borrowers, should have no interest in the Southport clinic; the backdating supports that. Four days later, on 18 May 1987, there was registered under the Business Names Act (Queensland), a "Statement of change in certain particulars" signed by the fourth respondent, showing that the fifth respondent had begun to carry on the business of the Southport clinic in succession to the first respondent. It is also common ground that there are some signs of financial trouble with respect to the affairs of what might be loosely called "the Edelsten Group." Some detail about that aspect should be given. On 6 April 1987 there was issued out of the Supreme Court of Queensland a writ by the owner of the shopping centre in which the Caboolture clinic 1s located, against the second respondent, claiming $193,519.06 rental. The defence which was delivered says, in effect, that there was an agreement for lease between the plaintiff and defendant, but it was rescinded or repudiated and therefore the plaintiff is not entitled to any rent. Further, the defence says that the plaintiff agreed that the defendant, who is the second respondent in the present case, should enter into occupation on or about 2 February 1987, (that is, some months ago) but not pay any rent until, inter alia, "all other lessor's works were completed to the satisfaction of the defendant". There is a degree of improbability about such a a wee restriction on the rights of the landlord. That is, as Mr. Muir Q.C. for the applicant said, it 1s improbable that an experienced developer would enter into such a transaction. The defence in the Supreme Court complains about the condition of the premises and says that because of non-fulfilment of the term just mentioned, as to satisfaction of the defendant, or because there was no agreement for lease, there is no rent due. There is, however, no suggestion that the defendant in that case has left, or proposes to leave the premises. In short, the defence in that case is not of a convincing character, on the face of it. Another case as to which evidence is before me, which has been determined recently, is one in the Supreme Court of New South Wales. Mr. Justice Clarke in that court entered judgment against the second respondent in a sum of $287,000 on 25 March 1987. It 1s further admitted that another substantial judgment was entered by consent on 29 January 1987. In December 1986, the Taxation Commission sued the second respondent for $5.6 million and his home at Dural is said to be up for sale. It is convenient now to turn to the evidence adduced on behalf of the applicant. Dr. &.G. Simmelmann says in an affidavit that a meeting was held on 2 April 1987 at which were present the third and fourth respondents and one Meryl Shenker. The purpose of the meeting, he says, was to have executed a loan agreement, debenture charge, and certificate certifying that the applicant carried on the medical practices mentioned above. The word "Applicant" 1n the affidavit seems to be a mistake and is apparently intended to mean the first respondent. Meryl Shenker who, I was informed, was present in court during the hearing before me has made an affidavit which does not deny the purpose of the meeting as alleged by Simmelmann, and merely says that the only document she received up to 2 April 1987 was a debenture charge. Simmelmann also says he was told by his solicitor that the latter had requested copies of the lease and that Meryl Shenker told him, and the solicitor, on 2 April that she did not have copies of the lease. Again, Meryl Shenker''s denial is limited and that limitation was referred to during the course of the hearing. She does not deny, in particular, that the solicitor requested copies of the lease. I can see no reason for him to do so unless they were to be involved in the transaction. Meryl Shenker does not deny that she told the solicitor, during the course of the meeting, that she did not have copies of the lease, and paragraph 4 of her affidavit is framed in such a way as to tend to support what Simmelmann says about that aspect of the matter. Simmelmann also says that the certificate as mentioned by him was signed on 2 Apri] but that 1s unequivocally denied. In Paragraph 17 of his affidavit, he says he was told by his solicitor that on or about 26 April the fourth respondent told him that the first respondent did not hold the said leases, meaning the leases of the two practices and that the first respondent did not then conduct the Southport practice. This is not denied by the fourth respondent, who makes no reference to paragraph 17 of % Simmelmann's affidavit and the omission seems to me very significant. Simmelman also says that his solicitor claims that on that occasion the fourth respondent refused to disclose the name of the company conducting the Southport practice, and refused to advise whether the change in the practice had occurred prior to or after the advance made on 2 April, but said it occurred about that time. Again, this is not denied. Counsel suggested various tests as to the strength of the case which must be put forward to give jurisdiction to grant a Mareva injunction, and the matters which I have referred to seem to me to give the applicant's case, on the face of 1t, considerable strength. There are other circumstances, however, which should be referred to. Meryl Shenker made an affidavit in the Supreme Court of Queensland recently, saying that she had been told that the fifth respondent carries on the Southport practice pursuant to a sub-lease. That seems to be so, but the sub-lease was not entered into until 14 May 1987. Donna Maira Dreier has made an affidavit on information and belief from one Holloway, who was formerly the Queensland Medical Director of the Edelsten group. Holloway is said to have told Mrs. Dre1rer that on 2 May 1987 the second respondent told him that there were Liquidity problems; that he had obtained a loan of $250,000 from Simmelmann but the loan had been made against the security of the two practices, but that, unknown to Simmelmann, the Southport lease had been transferred the day before the rv agreement was signed. According to Mrs. Dreier, Holloway says that was described by the second respondent as a "good business move". An affidavit has been filed denying that conversation by hearsay; it was, of course, made on hearsay. However, I think 1t is significant, as senior counsel for the applicant has pointed out, that although Simmelmann has gone on oath, the chief protagonist on the other side, the second respondent, has not chosen to do so. Simmelmann's affidavit was filed on1 June 1987 and, presumably, served shortly after. Simmelmann says that his solicitor was told on 29 April by the fourth respondent that a company called Dalima Pty. Ltd. conducted the Southport practice and that Ralema Pty. Ltd., the fifth respondent, was part of the Edelsten group of companies. In his affidavit, the fourth respondent says that Dalima Pty. Ltd. 1s a central administrative entity of the Edelsten group and that it provides "central administrative facilities to the medical practitioners practising independently at, inter alia, the Caboolture and Southport clinics." In the same affidavit, the fourth respondent says that the first respondent's business at the Caboolture clinic 1s the provision of facilities and administrative services. Simmelmann's affidavit further says that his solicitor was told that neither the first nor the fifth respondent holds a lease in respect of the premises in which the practices are conducted. The fourth respondent says as to that that "The right SS wy of occupation is at the will of Dr. Edelsten as Lessee, subject to the Supreme Court Action." What that seems to mean is that the first respondent has no rights at all in respect of the occupation, if it has any, of the Caboolture clinic, in contradistinction to the fifth respondent which has a sub-lease. It seems to be improbable that there was an intention to take a security in respect of the Caboolture clinic, if the first respondent was known to have no rights in it. The version of events put together by Simmelmann seems to me a little unsatisfactory in some ways; it is incomplete; he does not deal with the background of the transaction. Nevertheless, on the critical matters, his version of events seems, in general, more likely than that put forward on the other side. It 1s desirable to refer in some further detail to the case made in the statement of claim. After setting out the allegations referred to above, that 1s, the allegations with respect to the security available, the statement of claim says that 1t was intended to make the applicant believe that the first respondent was the lessee of the premises in which the medical practices were being conducted, that the first respondent owned and operated the practices, that it was not in default under either of the leases and that the loan would be secured by substantial assets and an establishment capacity to generate substantial income. It seems to me, speaking generally, that the evidence put forward by the applicant supports that case with some a "hore > 10. strength. The statement of .claim goes on to say that the respondents, and each of them, now contend that the fifth respondent owns and operates the practice at Southport, and that the applicant is unable to ascertain the truth of the contention. The evidence put forward on the respondents' side shows, as I have suggested above, that the connection of the first and fifth respondents with those practices is a very difficult matter indeed. It seems to me impossible to believe that if there had been any revelation of the position as now disclosed, anyone would have been interested in taking a security relating to those practices; and it 1s common ground that there was an interest in obtaining security in at least one of them. The statement of claim also says, in paragraph 18(d), that: "The first Respondent owns the said practice at Southport but 1s now transferring its interest in it without consideration to the fifth Respondent." It is not at all clear what has happened as between the first respondent and the fifth respondent. There is a degree of artificiality, of course, in speaking of them as separate entities, because no doubt they are in common control. Nevertheless, it seems correct to say that a strong case has been advanced that since the representations referred to, the fifth respondent has acquired whatever interest the first respondent had in that practice. What might be called simply the official a we ~~ ll. document of 1 April 1987, the record at the Commissioner of Corporate Affairs, is strong evidence of that. On the part of the fourth respondent, there is evidence giving an explanation as_ to why the records showed what they didon 1 April 1987. The explanation involves the proposition that an illegality was being committed, and I find it very unsatisfactory. The essence of it, then, is that although the rather tangled web of the Edelsten group's affairs has not been unravelled so far as relevant, for the purposes of this case I am satisfied that there is a substantial case to be advanced that the applicant was misled with respect to the first respondent's interest in these practices, which, as I have said, seems to he very shadowy indeed and that the fifth respondent took its interest in May, knowing of these circumstances. It seems clear enough that there 1s a prima facie case; but two particular Matters have caused me difficulty. The first 1s that, as the senior counsel for the respondents, Mr. Byrne 9.C., argued, there is strong evidence that the applicant, knowing of the circumstances at least in a general way, affirmed the transaction, by purporting to appoint a receiver under the debenture charge. It has been given me concern that the relief on which Mr. Muir Q.C. principally relies, as a basis for obtaining a Mareva injunction, is rescission, in the face of this strong evidence of affirmation. Mr. Muir Q.C. suggests that an answer to the suggestion of affirmation is that not all the facts are known and there is 12. something in that. It is also a possible answer that, in exercising its jurisdiction under the Trade Practices Act, to grant whatever relief seems appropriate to meet the case, in particular to undo transactions of this sort, the Court 1s not necessarily restricted as the Supreme Court would be in exercising jurisdiction under the general law. Putting that another way, the statutory powers under the Trade Practices Act are not necessarily brought to an end by proof, even clear proof, of affirmation. I, therefore, take the view, prima facie, that the applicant may well succeed in having the transaction undone and the money which has been lent returned, despite the matter I have mentioned. It has assumed importance because, as Mr. Byrne Q.C. has pointed out, the principal sum is not due to be repaid until next year, on 1 April 1988, and the application seeks a premature repayment by way of rescission. The second matter which has concerned me is the position of the fifth respondent, and I have had some doubt as to whether or not any relief should be granted against 1t. My doubts have been somewhat aggravated by reading the decision of the High Court in the case of Jackson v. Sterling Industries Limited (unreported, 11 June 1987) to which Mr. Byrne Q.C. was good enough to refer me. The precise point at issue in Jackson v. Sterling Industries Limited, namely, whether or not security could be ordered by way of a payment into court ina claim of this sort, does not arise here, but the learned Justices made remarks about the basis of the Federal Court's power to grant relief under the 13. Mareva principle which seem to be of assistance to Mr. Byrne Q.C. for the respondents. In particular, Wilson and Dawson JJ., in thezr joint reasons, say that the foundation at present of the Mareva principle is the prevention of abuse of process, and, in particular, prevention of abuse of process of the court. I do not find that concept easy to grasp. If a defendant or a_ respondent is sued or threatened with suit in this court or another court and attempts to get rid of his assets, he will ordinarily do so in a way which does not involve any approach to the court. It may be that their Honours intended to use the expression "abuse" in the Same sense as that in which 1t was used by Robert Goff J., as he then was, in the case to which they referred, Iraqi Ministry of Defence v. Arcepey Shipping Co. 5.A. [1981] 1 Q.B. 65 at p.72. There his Lordship said: ». @ jurisdiction which found its origin in the prevention of an abuse has been transmitted into a rewriting of our established law of insolvency." His Lordship does not use the expression "abuse of process of a court". If it were the case that I had to find that any of the respondents was guilty of an abuse of process of the court, in the ordinary sense, Mr. Byrne Q.C. must succeed. But in the judgment of Mr. Justice Deane, with whom the Chief Justice agreed, he uses an expression, which may well have the same source or a similar source, but is significantly different. His Honour refers to prevention of: ' Opn: 14. ",.. a defendant from disposing of his actual assets (including claims and expectancies) so as to frustrate the process of the court by depriving the Plaintiff of the fruits of any judgment obtained in the action." That seems to be a different concept from prevention of abuse of process of the court. However that may be, I prefer to decide the matter on the assumption that Wilson J. and Dawson Jd. did not intend necessarily to suggest that 1t 1s necessary to find an actual or threatened abuse of process of the court in the ordinary sense; I could not find one here. On the whole of the case, and not without some doubt, I am satisfied that the application for a Mareva injunction should succeed in both aspects; that 1s, 1n respect of the first and fifth respondents. I should add that Mr. Byrne Q.C. made the point that an undertaking had been given to the Supreme Court in other proceedings which cover some of the same ground. It seems to me, however, that 1t is no task of mine to inguire into why that was done. It is enough to note that it does not cover the same ground, and is significantly different. Subject to anything counsel may have to say as to form, then, I propose to make an order substantially im terms of the notice of motion which was filed on 1 June 1987. The second application which is before me is one which initially seemed to create some difficulty; it is an application for security for costs against the applicant. It seems to me that 15. where an applicant is a mere trustee, it 1s, in general, rather hard on a respondent, in a case where there are arguable questions, to require it to look ultimately to the trustee's right of indemnity to obtain satisfaction of any order for costs. Mr. Muir Q.C. has put before me evidence tending to suggest that the applicant is a substantial company, but I do not accept that it is. Its position, as at June 1986, has heen substantially worsened by making the loan which it may not be able to recover; that 1s, the loan in issue in this case. I have, however, decided that I should not grant security for the reason put forward by counsel for the applicant, that the case 1s about the money which was lent in April and which is repayable to the applicant, on any view of the matter, 1n less than a year. The first, second and third respondents are all liable to repay 1t onl April 1988 and do not contest their liability to do so, so far as the evidence before me shows. If the applicant's attempt to get an order for repayment of the money before 1 April 1988 fails, it 1s not likely to fail so many months before that date as to create significant hardship on the assumedly successful respondents. Suppose, for example, that the case comes on for trial late this year, and it is difficult to imagine it is likely to come onany earlier, all that the respondents, if they then succeed, would suffer 1s a fairly short delay until 1 April 1988, on which date they could recover their costs against the applicant by simply deducting them from the sum then due. 16. It therefore appears that, contrary to the practice which should prevail in cases of applicants who are mere trustees without substantial asset, in these exceptional circumstances, no order for security should be made. That conclusion makes it unnecessary for me to go into the rather difficult question of the extent to which the merits should be considered on applications of this sort. The application for security will therefore be refused. 4 certify that this and the {5 preceding pages are a true copy of the reasons for judgment herein of His Honour Mr. Justice Pincus Sxl FE Associate ~ Dated 19° JunNé Fs 7