FEDERAL COURT OF AUSTRALIA Reid v Interarch Australia Pty Ltd [2000] FCA 633 CATHERINE GAY REID & ANOR v INTERARCH AUSTRALIA PTY LTD & ANOR NG 981 OF 1998 HELY J 11 MAY 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 981 OF 1998 BETWEEN: CATHERINE GAY REID APPLICANT AND: INTERARCH AUSTRALIA PTY LIMITED RESPONDENT JUDGE: HELY J DATE OF ORDER: 11 MAY 2000 WHERE MADE: SYDNEY Upon the second applicant giving to the Court the usual undertaking as to damages, THE COURT ORDERS THAT: 1. Upon the annulment of bankruptcy of the second respondent, and until further order, the second respondent by himself, his servants or agents be restrained from disposing of, encumbering or otherwise dealing with any of his money, property or other assets whether in his name or not, provided that this order: (i) shall not apply to so much of the assets of the second respondent as exceed $500,000 and, (ii) shall not prevent the second respondent from: (a) paying ordinary living expenses up to an amount of $500 per week; (b) making payments of principal or interest to the St George Bank on the security of the property held by the applicant under the name of Gregory Christopher Powell at Penshurst; (c) paying costs reasonably incurred in these proceedings up to an amount of $30,000. 2. The second respondent have liberty to apply for a modification or discharge of these orders upon his formulating a specific proposal for the application of the surplus arising in consequence of the annulment of his bankruptcy, in purchasing an identifiable property for use by the second respondent and his family as their home. 3. Without limiting the ability of the second respondent to claim privilege against self incrimination at any time, an order that the second respondent within 7 days of the annulment of his bankruptcy, cause to be delivered to the Registry in a sealed envelope identifying the proceedings and marked "not to be opened without an order of a Judge of the Court" an affidavit sworn by the second respondent setting out: (a) the name and address of any bank, building society or other financial institution at which there is an account in his name or under his control together with the number of such account and the balance therein at the date of the swearing of the affidavit; and (b) an itemised list of all property real and personal owned by the second respondent or in respect of which he has a legal or equitable interest. 4. Costs reserved. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 981 OF 1998 BETWEEN: CATHERINE GAY REID APPLICANT AND: INTERARCH AUSTRALIA PTY LIMITED RESPONDENT JUDGE: HELY J DATE: 11 MAY 2000 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application by the second applicant for a Mareva injunction against the second respondent. These are proceedings in which the second applicant seeks to recover damages from the respondents for breach of s 52 of the Trade Practices Act 1974 (Cth)and for negligence in the performance of contractual obligations. The evidence so far filed in the proceedings establishes a prima facie case of entitlement to relief. The evidence is that in the event that the applicant is successful, its loss would be somewhere between about $500,000 and about $700,000. 2 The second respondent is an undischarged bankrupt, but the applicants claim is not a debt which is provable in the bankruptcy. According to a report provided by the Trustee, during the first months of the administration of his bankrupt estate the second respondent claimed to own no real property. In due course he admitted that he had an alias of Gregory Christopher Powell and under that alias he was the registered proprietor of at least two properties, one at Penshurst and the other at Monterey. 3 The Trustee has made arrangements for the realisation of the Monterey property in consequence of which sufficient funds will be generated to pay the provable liabilities of the second respondent, resulting in an annulment of his bankruptcy. That annulment is expected to take place later this week and it is expected that a surplus in excess of $150,000 will be returned to the second respondent. 4 The basis upon which the Mareva injunction is sought is acquisition of properties under an assumed name and initial concealment of those properties from the second respondent's Trustee in Bankruptcy. The second applicant argues that this gives rise to an inference that the second respondent might seek to place the surplus distribution from the Trustee beyond the reach of the applicant, as in the past he has acquired properties under an assumed name presumably for the purpose of concealing their existence from persons who may have claims upon him. I accept that the purpose of Mareva injunctions is to prevent frustration of the Court's processes. I accept that the function of such injunctions is not to provide a creditor seeking them with security for its anticipated debt, but I do think that the material before me does establish the existence of a risk that the second respondent would dissipate the surplus distribution to be returned to him such that it is appropriate to grant relief in the nature of that sought. 5 Two problems have been identified in terms of the relief. First, the Trustee's report indicates that there is a mortgage to the St George Bank on the security of the property at Penshurst. I do not think that the second respondent should be restrained from making payments of principal or interest to the St George Bank which may be due under that mortgage. Second, the proposed form of the injunction permits payment of costs reasonably incurred in these proceedings up to an amount of $5,000 and it is said by Mr Christie that $5,000 is an unrealistically low amount. 6 I have no evidence before me as to the costs likely to be incurred in these proceedings but as the docket judge in charge of this case I have some knowledge of what is involved, and I agree with Mr Christie that $5,000 is an absurdly low estimate of the costs likely to be incurred. The order only allows payment of costs which are reasonably incurred. That limitation itself operates as a brake and the specification of a ceiling is really in the nature of an additional precaution. I think that it would be reasonable to stipulate a ceiling of $30,000. 7 Some evidence was given by Mr Powell that he wishes to use the distribution to be returned from his Trustee to acquire a house to be used as a home for his family and himself as his wife and two children are currently living with the second respondent's parents in Narwee. 8 I do not think that it would be appropriate, all other things being equal, to prevent Mr Powell from using surplus moneys to purchase on reasonable terms an identifiable property for use by his family as their home. Having said that, it seems to me that the proposal for the acquisition of a home is in too embryonic a stage to allow the orders I propose to make to be drafted so as to accommodate it. I therefore propose to grant the applicant the relief it seeks with some modifications. I do so, however, upon the basis that when and if matters progress to a stage where a specific proposal can be formulated with precision for the application of the surplus funds in the acquisition of a home, I will reserve liberty to the second respondent to apply for a modification or discharge of the orders which I propose to make, in order to permit that proposal, assuming that there is no properly maintainable specific objection to it, to be carried forward. 9 The second applicant, by its legal adviser, gives to the Court the usual undertaking as to damages. Consequently, upon the annulment of bankruptcy of the second respondent, until further order of the Court, I order that the second respondent by himself, his servants, agents or otherwise, be restrained from disposing of, encumbering or otherwise dealing with any of his money, property or other assets whether in his name or not, provided that this order: 1. shall not apply to so much of the assets of the second respondent as exceed $500,000 and, 2. shall not prevent the second respondent from: (a) paying ordinary living expenses up to an amount of $500 per week; (b) making payments of principal or interest to the St George Bank on the security of the property held by the applicant under the name of Gregory Christopher Powell at Penshurst; (c) paying costs reasonably incurred in these proceedings up to an amount of $30,000; and I reserve to the second respondent liberty to apply for a modification or discharge of these orders upon his formulating a specific proposal for the application of the surplus arising in consequence of the annulment of his bankruptcy, in purchasing an identifiable property for use by the second respondent and his family as their home. 10 I also propose to make an order in terms of paragraph 3 of the notice of motion filed on 5 May, 2000. 11 I reserve the costs of this application. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely. Associate: Dated: 15 May 2000 Solicitor for the First Applicant: Bush Burke & Co Solicitor for the Second Applicant: The Walker Law Group Counsel for the First and Second Respondents: Mr Christie Solicitor for the First and Second Respondents: Davis O'Neill Sistrom Date of Hearing: 11 May 2000 Date of Judgment: 11 May 2000