CATCHWORDS PRACTICE & PROCEDURE - Mareva injunction - assets assigned to a related company - orders against third party ancillary to injunction against respondent - undertakings as to damages Federal Court of Australia Act 1976 (Cth) s 23 Trade Practices Act 1974 ss 52,87 Jackson v Sterling Industries Ltd (1987) 162 CLR 612 Refd The Siskina; Siskina (Cargo Owners) v Distos Compania Naviera SA [1979] AC 210 Refd Rasu Maritima S A v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [1978] 1 QB 644 Refd American Cyanamid Co v Ethicon Ltd [1975] AC 396 Refd Construction Engineering (Aust) Pty Ltd v Tambel (Australasia) Pty Ltd (1984) 1 NSWLR 274 Refd The Australian Coarse Grain Pool Pty Ltd v The Barley Marketing Board of Queensland (1983) 57 ALJR 425 Refd Patterson v B T R Engineering (Aust) Ltd (1989) 18 NSWLR 319 Foll Prince Abdul Rahman bin Turki al Sudairy v Abu-Taha & Anor [1980] 1 WLR 1268 Refd Beach Petroleum N L v Johnson (1992) 11 ACLC 75 Refd The Mount Lyell Mining & Railway Company Limited v Roxon Companies OY unreported decision of Sackville J 11 November 1994 Refd Northcorp Limited v Allman Properties (Australia) Pty Ltd [1994] 2 Qd R 405 Refd Third Chandris Shipping Corporation v Unimarine SA [1979] 1 QB 645 Refd Re: Sgambellone, Re: Jacques Ex parte (1995) 53 FCR 275 Refd Veracruz Transportation Inc v V C Shipping Co Inc and Den Norske Bank A/S [1992] 1 Lloyd's Rep 353 Refd Reese River Silver Mining Co v Atwell [1869] LR 7 Eq 347 Refd T S B Private Bank International S A v Chabdra & Anor [1992] 1 WLR 231 Refd McIntyre v Pettit & Ors (1988) 90 FLR 196 Refd Mercantile Group (Europe) AG v Aiyela & Ors [1994] 1 All ER 110 Refd SCF Finance Co Ltd v Masri & Anor [1985] 1 WLR 876 Refd Active Leisure (Sports) Pty Ltd v Sportsman's Australia Ltd [1991] 1 Qd R 301 Refd Glenwood Management v Mayo [1991] 2 VR 49 Refd The Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Refd Peter John Tomlinson & Anor v Cut Price Deli Pty Ltd & Ors No QG 72 of 1991 Bohodar Mykytowych & anor v Cut Price Deli Pty Ltd & Ors No QG 18/94 Novamaze Pty Ltd & Ors v Cut Price Deli Pty Ltd & Ors No QG 149 of 1994 Kiefel J Brisbane 23 June 1995 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No. QG 72 of 1991 BETWEEN: PETER JOHN TOMLINSON and JEAN TOMLINSON Applicants AND: CUT PRICE DELI PTY LIMITED First Respondent AND: ENZO SGAMBELLONE Second Respondent AND: HARRY MALOVANY Third Respondent AND: PETER HOEFLER Fourth Respondent AND: RON HARMER Fifth Respondent AND: CUT PRICE DELI PTY LIMITED Cross Claimant AND: PETER JOHN TOMLINSON and JEAN TOMLINSON Cross Respondents IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No QG18 of 1994 BETWEEN: BOHODAR MYKYTOWYCH and LESIA MYKYTOWYCH First Applicant AND: VANUXI PTY LIMITED Second Applicant AND: CUT PRICE DELI PTY LIMITED First Respondent AND: CUT PRICE DELI FRANCHISING PTY LIMITED Second Respondent AND: ENZO SGAMBELLONE Third Respondent AND: HARRY ALBERT MALOVANY Fourth Respondent IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No. QG149 of 1994 BETWEEN: NOVAMAZE PTY LTD First Applicant AND: DARRYL PAUL WEEDMAN and ELAINE MARGARET WEEDMAN Second Applicants AND: CUT PRICE DELI PTY LIMITED First Respondent AND: ENZO SGAMBELLONE Second Respondent AND: LUZETTE McKENZIE Third Respondent AND: BERNE NO. 7 PTY LTD Fourth Respondent AND: RUSSELL GORDON DONALD and VIVIAN ANNE DONALD Fifth Respondents JUDGE MAKING ORDER: Kiefel J. DATE OF ORDER: 23 June 1995 WHERE MADE: Brisbane MINUTES OF ORDERS THE COURT ORDERS THAT: 1. A mareva injunction be granted. Minutes of Order to be discussed with counsel. 2. Costs to be reserved. NOTE: 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 No. QG 72 of 1991 BETWEEN: PETER JOHN TOMLINSON and JEAN TOMLINSON Applicants AND: CUT PRICE DELI PTY LIMITED First Respondent AND: ENZO SGAMBELLONE Second Respondent AND: HARRY MALOVANY Third Respondent AND: PETER HOEFLER Fourth Respondent AND: RON HARMER Fifth Respondent AND: CUT PRICE DELI PTY LIMITED Cross Claimant AND: PETER JOHN TOMLINSON and JEAN TOMLINSON Cross Respondents IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No QG18 of 1994 BETWEEN: BOHODAR MYKYTOWYCH and LESIA MYKYTOWYCH First Applicant AND: VANUXI PTY LIMITED Second Applicant AND: CUT PRICE DELI PTY LIMITED First Respondent AND: CUT PRICE DELI FRANCHISING PTY LIMITED Second Respondent AND: ENZO SGAMBELLONE Third Respondent AND: HARRY ALBERT MALOVANY Fourth Respondent IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No. QG149 of 1994 BETWEEN: NOVAMAZE PTY LTD First Applicant AND: DARRYL PAUL WEEDMAN and ELAINE MARGARET WEEDMAN Second Applicants AND: CUT PRICE DELI PTY LIMITED First Respondent AND: ENZO SGAMBELLONE Second Respondent AND: LUZETTE McKENZIE Third Respondent AND: BERNE NO. 7 PTY LTD Fourth Respondent AND: RUSSELL GORDON DONALD and VIVIAN ANNE DONALD Fifth Respondents CORAM: Kiefel J. DATE: 23 June 1995 PLACE: Brisbane REASONS FOR JUDGMENT Each of the applicants in the Novamaze, Tomlinson & Mykytowych proceedings above seek "Mareva" injunctions against Cut Price Deli Pty Limited ("CPD"), the first respondent in each of those proceedings and Cut Price Deli (Aust) Pty Ltd ("Aust"). They allege that, by reason of an assignment of CPD's principal assets to Aust and which took place during the currency of the proceedings, the Court should infer that there has been a deliberate attempt to place CPD's assets beyond the reach of the applicants in the event the applicants are successful and obtain judgments and that, unless restrained, those companies and those persons who stand behind them, will take steps to further distance or encumber the property. These applications have, unfortunately, been heard on three days over a two-week period. On the first occasion, 8 June 1995 I granted the injunction then sought, against CPD alone, for a short period. Since then the applicants have amended their motion seeking orders to join Aust and to likewise restrain it. The Mareva Injunction This Court has power pursuant to s.23 of the Federal Court of Australia Act 1976 (Cth), and as an incident of its general powers to grant such an injunction: Jackson v. Sterling Industries Ltd (1987) 162 CLR 612 where it considers it appropriate to do so. The injunction is interlocutory and is granted to preserve the status quo, in so far as that relates to the property of a respondent pending ascertainment of the rights of the parties: The Siskina; Siskina (Cargo Owners) v Distos Compania Naviera SA [1979] AC 210, 256. When it is granted, that will be so because to permit a respondent/defendant from disposing of assets would frustrate the process of the court by depriving the plaintiff of the fruits of any judgment obtained in the action: Jackson v. Sterling Industries. Putting to one side matters usual and necessary to be considered with respect to the grant of any interlocutory injunction, such as the giving of an undertaking by the applicants as to damages which the respondent, or any third party affected by the order, may suffer, the effect of the order proposed on those parties and other matters going to the balance of convenience together with any number of discretionary considerations which may arise, it has been said that an applicant ought, to obtain such an order, show at the outset: a "good arguable case" against the respondent and that any judgment obtained may not be satisfied because of dealings with the assets. The requirement that the applicant show a "good arguable case" is not however putting the requirement any higher than is always required for interlocutory injunctions. The phrase was used by Lord Denning M.R. in Rasu Maritima SA v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [1978] 1 QB 644, but not with the intention of adding to the test posed in American Cyanamid Co. v. Ethicon Ltd [1975] AC 396, but as conforming with it (see 661). And it has been held that the phrase refers to a case which is arguable in the sense that it is not frivolous: see Construction Engineering (Aust) Pty Ltd v. Tambel (Australasia) Pty Ltd (1984) 1 NSWLR 274, 279-80, which is to say that it does not differ from the test in The Australian Coarse Grain Pool Pty Ltd v. The Barley Marketing Board of Queensland (1983) 57 ALJR 425. With respect to the second requirement, Gleeson CJ in Patterson v. B.T.R. Engineering (Aust) Ltd (1989) 18 NSWLR 319 said (321-2): "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", to which Meagher JA was in broad agreement, save that, with respect to the second requirement under consideration, his Honour added (327): "...the plaintiff is required to prove, on balance of probabilities, that there is a real risk of the dissipation of assets." The test formulated by Gleeson CJ follows the terms used by Lord Denning MR (Prince Abdul Rahman bin Turki al Sudairy v. Abu-Taha [1980] 1 WLR 1268, 1273) which expression was approved by Deane J in Jackson v. Sterling (623), as von Doussa J noted in Beach Petroleum N.L. v. Johnson (1992) 11 ACLC 75, 77, when his Honour also applied the Chief Justice's test. It has recently been applied in this Court in The Mount Lyell Mining & Railway Company Limited v. Roxon Companies OY (unreported decision of Sackville J, 11.11.94) and in other appeal Courts (the Court of Appeal of the Supreme Court of Queensland, in Northcorp Limited v. Allman Properties (Australia) Pty Ltd [1994] 2 Qd R 405). There is no reason to doubt its correctness and I shall apply it. It is this element in these applications which is usually critical, for even an obviously strong prima facie case is not of itself sufficient to warrant such an injunction. How a danger is made apparent or is to be deduced in each case is not susceptible to definition, although the observation by Lawton CJ (Third Chandris Shipping Corporation v. Unimarine SA [1979] 1 QB 645, 671), that it will depend upon facts from which a prudent sensible person of commerce could infer a potential default, is apposite. It has been said that, since such an order operates as a denial of the right to deal with property prior to judgment being entered, caution should be exercised (Construction Engineering v. Tambel). But if it is held on proper evidence that there is the requisite danger by reason of dealings with assets it seems to me that the necessary care will have been exercised. The Applicants' claims against CPD The Tomlinson Proceedings These proceedings were heard in August and September 1994 and a decision in them is currently reserved. There can be no question that the applicants' case is arguable. The applicants ultimately claimed, I was informed, the sum of $321,716 for damages for fraud, misrepresentation or contravention of s.52 of the Trade Practices Act 1974. At the heart of the applicants' case were representations alleged to have been made by or on behalf of CPD prior to the applicants entering into a franchise agreement with it, as to the profits which would be made, benefits which would be received and as to the increase in value of the store which they would realise on sale. The Mykytowych Proceedings The application was filed on 9 February 1994 and claims unspecified damages for deceit, negligent misrepresentation or pursuant to s.87 of the Trade Practices Act 1974 or orders by way of restitution. Relief is also sought against Messrs. Sgambellone and Malovany as being knowingly concerned in or a party to contraventions of s.52. The allegations in the statement of claim and which have been further particularised, are to similar effect to those in the Tomlinson proceedings. Following some interlocutory applications a defence was filed in September 1994. A motion concerning questions as to further discovery is due to be heard on 14 June 1995. Mrs Mykytowych deposes that the allegations in the statement of claim are true and that an accountant, who I take it will be called at trial, has calculated damages at $482,684. The Novamaze Proceedings The application, filed on 27 October 1994, claims damages for fraudulent misrepresentation, for contravention of the Trade Practices Act 1974, for breach of duty, negligence and breach of warranty. The statement of claim, which I have considered in an application to strike it out (dismissed, decision 3 March 1995) also alleges a series of representations including, as in the other proceedings, particular representations as to the income of other franchise stores which, taken with others, paints a picture of profitability and success in franchise stores. The strike out application was found by me to have no substance. Mr Weedman for the applicants, deposes to the correctness of the allegations. The amount claimed is $452,380. In each of the Novamaze and Mykytowych proceedings the pleadings disclose a prima facie case, the representations being such that, at the least they may amount to misleading or deceptive conduct. Indeed CPD did not contend otherwise. The amounts claimed by all applicants total about $1.2M, exclusive of costs. It remains to mention, as relevant to the timing of later transactions, that earlier proceedings brought by other franchisees (the Jacques proceedings: refer report of decision and appeal) were heard and determined and culminated in a judgment of $247,181 which was satisfied in May 1993 save as to costs, which were later taxed at $140,000 but not paid until October 1994. The decision of the Full Court in the appeal was given on 20 May 1994. On 31 August 1994 the Jacques issued a bankruptcy notice against Mr Sgambellone (see Re: Sgambellone, Re: Jacques Ex parte (1995) 53 FCR 275). The Two Cut Price Companies CPD was, prior to 1 July 1994 the franchisor of and sole operator of a large number of retail outlets in Australia. It also owned some stores itself and owned trademarks and other intellectual property rights. Its directors were Mr and Mrs Rechichi and Mr Sgambellone and the shares were held by the two men. It was a trustee of the Cut Price Deli Trust, a discretionary trust, but in which the assets of the company ($6.515M or $7.867M, the latter being derived from the annual return) at 30 June 1994 were represented only by its right of indemnity from the trust. Income from franchise fees and supplier contributions, which are likely related to the franchises, is disclosed in the accounts of the trust and was in the order of $6M, $3.623M being for the franchise fees. this is reduced however by substantial expenses and which includes a large sum for management fees. Elsewhere however in the material the "turnover" of the franchise operation which extends over some fifty outlets is said to be in the order of $105,000,000 but this is not further explained. Nor, however is it said that the income shown in the Trust accounts represents all franchise income and I note there are shown to be other associated companies and a property trust. Assets of the CPD trust, totalling some $9M, include $1.2M representing the investment in stores it owns, which are valued at $80,000 each and receivables at $3.398M, which appears to be made up of loans to the associated companies and the property trust. $1.9M is attributable to goodwill. The trust had liabilities of $7.867M. There has not been any attempt to attribute a value to the interest in the numerous franchise agreements. Given income, even of $3.623M, it is obviously substantial. The company extracts of Aust are somewhat confusing. It was apparently only acquired in early 1994 and it would seem that the record of Westpac as a holding company and AGC as the owner of its shares may be out of date. Mr Malovany, who is the General Manager of both CPD and Aust and the only deponent for the respondents, says that the only shareholder is E.J. Enterprises (Aust) Pty Ltd a company controlled by the Sgambellones and itself a trust company. Aust is also a trustee of the "Oasis Food Hall Trust" and it is said that presently Mr Sgambellone is the legal and beneficial owner of all units in it, but subject to a proposed later adjustment to be reached as between the Sgambellones and the Rechichis. Mr Rechichis and Mr and Mrs Sgambellone are the directors of it. As at 30 June 1994 it had assets of only some $13,532 but non-current liabilities of $2.702M and a loss of $2.688M, representing the amount of shareholders' equity. The Agreements of July 1994 There are now exhibited three documents dated 1 July 1994, entitled respectively "Licence", "Agreement" and "Management Agreement". They are in very short form. The "Agreement" is an assignment to Aust of all current franchise agreements save some company owned outlets and franchise agreements the subject of litigation. The consideration for the assignment is said to be "Aust assuming all future obligations and liabilities ..." under the franchise agreements assigned. The licence agreement provides a non-exclusive licence to Aust for an initial term of seven years to use intellectual property in registered trademarks, business names, "or know how and operating system management procedures" relating to the franchising system of CPD. Pursuant to it Aust is to pay $4,000 per annum for each franchise held by it. This has been now assessed at $460,838. The amount is to be increased at the rate of five percent per annum after the first year. The management agreement was produced on the last day of this hearing. It is for the same term as the licence agreement and provides for a payment to CPD of $10,000 per month. The agreements were executed by Mr Malovany for CPD and Mr Sgambellone for Aust. The Third Party Aust No debt is presently due to the applicants from CPD. They have foreshadowed proceedings to set aside the transactions as an alienation of property by CPD with intent to defeat its creditors and have sought a declaration that Aust holds the assigned interests on trust for CPD. CPD and Aust submit that unless the applicants can now show an accrued cause of action against Aust they cannot have an injunction against it and rely upon recent cases such as Veracruz Transportation Inc v. V.C. Shipping Co. Inc and Den Norske Bank A/S [1992] 1 Lloyd's Rep. 353, 358. An injunction is ancillary to or incidental to a substantive right which is being infringed, though often that is a cause of action. A mareva injunction necessarily would require the right or action to be referrable to assets or sound in money. The applicants contend that, at least with respect to the right to avoid a fraudulent alienation of property Reese River Silver Mining Co v Atwell [1869] LR 7 Eq 347 is authority for the proposition that that right arises prior to judgment and execution, I take it however that that is said to be the case with respect to a person to whom a debt is presently owed. There may be other ways in which the applicants' rights against Aust may arise, but it does not seem to me to be necessary to do so. In T.S.B. Private Bank International S.A. v. Chabdra & Anor [1992] 1 WLR 231, 241-2 the view was expressed that an injunction against a third party may also be seen as ancillary to the cause of action against the defendant. But in any event it seems to me it can be viewed here as ancillary to the injunction against CPD, that injunction being incidental to the cause of action against it, and as in aid of that injunction: and see McIntyre v. Pettit (1988) 90 FLR 196. Orders against third parties in aid of an injunction, where the third party has become mixed up in the transaction have been made: see eg. Mercantile Group (Europe) AG v. Aiyela & Ors [1994] 1 All ER 110, and would, I consider, be made where the third party has actively participated in the deliberate removal of assets, as here alleged. In effect the further injunction is simply recognising that a party such as CPD and those associated with it effectively controls Aust (or the same people in any event control both entities) and makes clear that they are not to act through Aust to further deal with or encumber the assets. As to whether to join Aust to the motion, it has been suggested that where ownership, as between a defendant and a third party, is a live issue that party ought be joined to the proceedings: SCF Finance Co Ltd v. Masri & Anor [1985] 1 WLR 876. It would however now be a mere formality and no useful purpose served by it, since material has been filed with respect to Aust and it has been heard upon all matters. Whilst the question whether the applicants have a cause against Aust remains unresolved it is probably preferable not to join it as a party to the proceedings. The Timing of the Transactions That the agreements were in fact entered into on 1 July 1994 is said to be substantiated by a disclosure document which was in currency at the time and which referred to the arrangement. It is noteworthy however that the disclosure document does not describe the transactions with any accuracy and informs franchisees that Aust will "manage" the existing business and undertakings of CPD "and associated companies" and that the franchisees may "from time to time" be directed to make payments to Aust. If anything this supports the notion that ownership and control are to remain with CPD. The Notices of Assignment were not given to franchisees until May 1995 and after questions were raised by the applicants' solicitors. By the "Agreement" of 1 July it was left to CPD to decide when to give notice. No explanation has been given for what appears an unusual step, and not one which can readily be seen to be in the interests of the parties to the agreement. Mr Malovany points out that the arrangements arose out of discussions in late 1993 and early 1994 between him, the Messrs. Rechichi and Sgambellone and their accountant. I shall later refer to what is said to have prompted these discussions. For present purposes it may be observed that prior to late 1993 judgment had been entered against CPD in the Jacques proceedings and almost a quarter of a million dollars paid in satisfaction of it. Substantial costs due to the applicant were outstanding and of course CPD must have incurred substantial costs itself in the litigation. The final decision in the litigation, substantially upholding the decision in favour of the Jacques was given in May 1994. Its proximity to the date of the agreements is obvious. As at 1 July 1994 the Tomlinson proceedings were approaching hearing and had likely then been allocated dates. The Mykytowych proceedings were progressing through interlocutory applications regarding pleadings. The Novamaze application had not however been filed and the material does not reveal whether CPD had notice that it would be. The Reasons given for the Arrangements In a document entitled "National News Bulletin" of 22 May 1995 which is distributed to CPD's franchisees, it was said: "Although many Franchisees have been advised - one question asked of us by Franchisees is `Who is Cut Price Deli (Aust) Pty Ltd?' The Directors of Cut Price Deli were of the opinion that Cut Price Deli (Aust) was necessary to be created to enable the future growth of Cut Price Deli, as the affairs of Cut Price Deli (old) had become so complex through a combination of family, commercial and legal factors. Accordingly, in July 1994, Cut Price Deli assigned its interests in the Franchise Agreements to Cut Price Deli (Aust) Pty Ltd with the exception of a small number of franchises that were the subject of actual or threatened litigation in the opinion of Cut Price Deli. It was decided that Cut Price Deli (old) would continue to operate the company locations. It was also decided that Cut Price Deli (old) would retain the majority of its assets and liabilities. For your information, Cut Price Deli (Aust) Pty Ltd is an entity controlled by Frank and Enzo with their family interests as the beneficiaries. It currently runs the day to day operations of the group. ...." The three factors there referred to are further expanded upon by Mr Malovany who says that as a result of the discussions in late 1993, early 1994 it was decided that it was necessary to acquire or form a new vehicle to either acquire the whole or part of CPD's business because of "family commercial and legal factors". Those factors are then described in these terms: "Family" - Mr and Mrs Rechichi are divorced and are endeavouring to settle their property interests. Because CPD is trustee of the Cut Price Deli Trust and having regard to such a trust being a family discretionary trust the beneficiaries were both Mr Sgambellone and his family and associates and Mr Rechichi and his family and associates. It was not possible to divide up the trust into specific proportions between the Sgambellone interest on the one hand (as to one half) and to Mr and Mrs Rechichi on the other (as to the other half). "Commercial and Legal factors" - For some years and specifically in 1993 and early 1994 CPD had been considering establishing a distribution scheme to handle the distribution of the product that is sold in Cut Price Deli shops. To undertake that proposed distribution agreement arrangement, it was considered by me, Mr Rechichi, Mr Sgambellone and Mr Duncan necessary to have a new corporate vehicle. For these reasons enterprises acquired Aust and the trust. I refer to sub-paragraph (m) of paragraph 10 of my affidavit sworn 8 June 1995. Mr Duncan handled all negotiations and advised me and Mr Sgambellone and Mr Rechichi that if an existing corporate and trust vehicle could be acquired (similar to or the same as that which was eventually acquired) it would not only satisfy the family commercial and legal factors hereinbefore referred but would have certain taxation benefits. " Mr Lyons QC, for CPD and Aust, submitted that since Mr Malovany had not been required for cross-examination I was obliged to accept the explanations, or as I would describe them, assertions, given. I do not accept that submission. Some of them, the need for a new corporate vehicle for distribution purposes and the impossibility of effecting the desired distribution of trust property or income are improbable. There may well be a taxation component, but this appears even on the companies' material to have been an after-thought. The timing of the agreements with respect to the litigation is a striking feature. Why any of these perceived needs suddenly arose and needed to be put into effect in late 1993 or mid-1994 is not explained. Then there is the commercial aspect of the transactions. Whilst, no doubt for other purposes, no consideration passed to CPD on the signing of the assignment agreement, it is probably correct to view the three agreements together. But even so what is shown is the disposition of assets which produce income of at least $3.62M per annum and perhaps much more, for an annual income of about $600,000. The companies referred to an accountant's calculation of the present value of income under the agreements, but that serves only to highlight the fact that that was not what was agreed to be paid. An indemnity is given only with respect to future liabilities, leaving the obvious potential liability which may arise out of the litigation for CPD, which now has a more limited income and liabilities of over $7M. Nowhere is it explained how these are to be met. CPD is not to take on new franchises, and it seems it will sell off what company-owned outlets it can and not renew leases on others. It remains to add that the fact that the documents were not lodged for stamping and that no notice of assignment was given to franchisees is hardly business like and suggests a degree of secrecy. The transaction can be viewed as a single transfer of assets whilst providing only sufficient funds to CPD to wind itself down. I reject the reasons proffered. It is likely, I consider, that the intention of CPD, in concert with Aust and the three men controlling and managing them, was to remove the assets from the prospect of execution. Is there the Requisite Danger of Non-satisfaction? Counsel for CPD submit that, whatever conclusions are reached about the transactions, it remains in a position to meet the judgments, and it cannot be shown that they will be further disputed. The short answer to that is that I have no confidence that CPD will retain what assets it now has. It has already acted in what I can, on the present state of the material, only conclude is a manner designed to protect its assets from judgments. And the dearth of information and paucity of explanation is not brought about by insufficient time in which to place such material before the Court. When the matter was first, briefly outlined to me on 8 June 1995, when I granted the injunction against CPD, I indicated to its legal representatives that I held concerns about the transactions and I would expect that explanatory information be made available together with details as to its operating expenses so that any order operating for a longer term, if granted, might be properly fashioned to protect the commercial activities. The timing of the transactions, absent satisfactory explanation, would be enough to permit the conclusion. An explanation, if given, would however have to show why it was commercially sensible for CPD, a trust company, to assign valuable rights in return for only a future indemnity and limited income. The principal assets pointed to by Mr Lyons QC, as remaining available to creditors, are the company-owned stores and the right to income from the licence agreement. There is dispute about the number of stores remaining, CPD contending for some twenty one and having a realisable value of $1.485M and Mr Tomlinson pointing to some fourteen only. The basis for the higher values, at some $240,000 for some stores, is not revealed and if it is the same as that put forward in the Tomlinson proceedings may need be approached with caution. The value given in the accounts is notably only $80,000 per outlet and there has been reference to many of the outlets having traded at a loss in the past, which may account for the decision not to renew some leases. With respect to the income stream, only some $300,000 per annum or so will be left after maintaining the outlets. How, in any event, I could conclude that any sale proceeds or income would be retained and not distributed is not apparent to me. And whilst it was submitted that CPD could not render itself insolvent, given provisions usual to charges which it has given its bank, that raises the question as to how it and the trust are to meet the liabilities shown in the 1994 accounts. Aust has now offered an undertaking not to dispose of or encumber its interest in the franchise agreements. The applicants have not accepted it. That would preserve the former principal asset of CPD, if however it were apparent that, between 1 July 1994 and now it has not in any event been encumbered or dealt with. Regrettably, since this may have provided adequate protection for the applicants, absent further information and assurances, which may in any event need verification, I could not be confident that this would be so. No information, or up to date accounts has been provided. It is said that Aust has no secured creditors, but that will hardly suffice. That is not to say however that Aust cannot later apply for a discharge or variation of any injunction on proper material. I had considered whether to grant an adjournment to permit the companies to put this material before the Court. But they have had sufficient opportunity already to do so and the matter requires resolution. In any event I could not be sure that further evidence would be accepted without challenge and further delay. The Applicants' Undertakings The applicants offer undertakings. There is evidence however that the Tomlinsons and the Mykytowychs will not be able to meet any order for costs, let alone damages. The Weedmans, who stand behind Novamaze, do however have assets with a value of some $300,000 plus whatever the franchise they still operate is worth. Since CPD and Aust have not disclosed the extent of any damage which will likely be suffered I do not conclude that the undertaking is inadequate. That conclusion must however be drawn with respect to the other two applications. In that circumstance it is usual to order that security be given: Spry "Equitable Remedies" 4th edition, 475. Here however I infer that cannot be provided and it is not unlikely that a contributing circumstance to the position in which the applicants are now placed is that they have expended considerable sums in the purchase of the franchise outlet: $275,000 by the Tomlinsons and $240,000 by the Mykytowychs. In the result, the fact that undertakings of value cannot be given is a consideration to be taken into account by the Court in deciding whether the most just course is that an injunction should be granted: Spry, 476; Active Leisure (Sports) Pty Ltd v. Sportsman's Australia Limited [1991] 1 Qd R 301, 311. Counsel for the applicants asked me to take into account the strength of the applicants' cases: see Glenwood Management v. Mayo [1991] 2 VR 49. But, realistically, whilst I could conclude that the cases are arguable I cannot, at an interlocutory stage and by reference to affidavits, conclude questions which will principally involve credit. The question which I consider is relevant is what is the likely effect upon the companies if CPD is ultimately successful in defending the actions? Any mareva injunction, like any equitable relief, should only require the minimum necessary (The Commonwealth of Australia v. Verwayen (1990) 170 CLR 394, 411). It is at this point however that I encounter difficulty. I have no current accounts for either company placed before me. The accounts for the 1994 year require explanation and this has not been forthcoming. It does not, on the present material, seem possible to except assets, income or items of expenditure from any injunction, since much of what is disclosed is unexplained. Nor is it possible to limit the order to CPD, since I am not satisfied that the assets retained have the value which CPD asserts. The companies have, I take it, chosen not to disclose details of their usual outgoings so that I could frame an order so as to permit the franchise operations to continue and at the same time protecting, so far as possible, the applicants' position. It was submitted that CPD ought be able to continue to sell its outlets, as that is its business, but nothing has been shown to suggest that there is any pressing need to sell nor that there will be, in the months which will pass before hearing in the two applications awaiting hearing. It was also submitted that Aust would be unable to supply its franchisees - but at least in that respect it ought be possible to frame an exception to the order. A general exception referring to expenses associated with its business, is fraught with potential difficulty, since it would leave uncertain what was apprehended by it and would be made in circumstances where the Court itself did not know what might be contended as falling within it, particularly when regard is had to the other trusts and companies who appear financially connected with CPD. CPD does have secured creditors and there are likely to be recurring obligations to them. At least where they are third parties not associated with CPD and Aust and payments are made pursuant to financial arrangements entered into before the making of the order, an exception can be formulated. A further usual exception is of course the payment of reasonable legal costs associated with these proceedings. Otherwise it seems to me the only course I could take would be to grant an initially wide order and allow liberty to CPD and Aust to apply to limit the order. That is not the preferred course, but it was within the power of CPD and Aust to have a narrower order made. I have considered whether it would be preferable to order disclosure by them of their assets and liabilities prior to making any order but, again, there has been ample opportunity for them to have done so already and complaint made about the extent of disclosure. If time is lost in obtaining a date for a further hearing, that is a result brought about by the companies themselves. A wide order has potential to adversely affect CPD and Aust, although this may be reduced by the order being narrowed or even discharged on application by the companies and with disclosure of necessary matters. I am presently unable to gauge the extent of any harm which may be caused, nor the length of time during which that might occur, so that I may weigh that against the strong case shown for the need for an injunction. In each of the proceedings there will be an order that, until further order, each of CPD and Aust be restrained from disposing of, encumbering or in any way dealing with their assets. I shall discuss with Counsel the drafting of Minutes of Order, which will include the exceptions I have referred to. I certify that this and the preceding twenty pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel. Associate Date: 23 June 1995 Counsel for the applicants: Mr F.W. Redmond Solicitors for the applicants: Lynch & Co Counsel for the respondents: Mr P.J. Lyons QC and Mr P. Favell Solicitors for the respondents: Snelgrove & Co Date of Hearing: 8, 16, 22 June 1995 Place of Hearing: Brisbane Date of Judgment: 23 June 1995