New South Wales District Court CITATION: Watters v Watters [2008] NSWDC 152 HEARING DATE(S): 5 August 2008 JUDGMENT DATE: 5 August 2008 EX TEMPORE JUDGMENT DATE : 5 August 2008 JURISDICTION: Civil JUDGMENT OF: Gibson DCJ (1) Until further order, and on the undertaking of the plaintiff as to damages (set out in Schedule A to the Penal Order) I make orders in accordance with paragraphs 5 – 19 of the Penal Order against Andrew Jonathon Watters (the defendant) and Loyis Watters, currently residing at 10 Telopea Avenue, Caringbah. DECISION: (2) Direct that service of these orders be effected by service of this judgment and the Penal Order: (a) upon the solicitors for the defendant by fax by 6:00pm this evening; and, (b) upon the defendants by personal service at their home by midday 6 August 2008 or, if there is no one present in the premises, by affixing a copy of this judgment and the Penal Order to their front door and/or by placing a copy in the letterbox. (3) Costs reserved. (4) Stood over for further directions, including any application to discharge these orders, before Gibson DCJ in Court 13D on Thursday 7 August 2008 at 9:00am. CATCHWORDS: INJUNCTIONS - application for ancillary relief in the form of a freezing order - whether prima facie case - whether a risk of dispersal of assets established - whether ancillary freezing order against third party should be made LEGISLATION CITED: Legal Profession Act 2004, s 347 Uniform Civil Procedure Rules 2005 (NSW), Pt 25 r 25.11 Cardile v LED Builders Pty Ltd (1999) 198 CLR 381 CASES CITED: Patterson v BTR Engineering (Aust) Pty Ltd (1989) 18 NSWLR 319 Pearce v Waterhouse [1986] VR 603 PARTIES: Plaintiff: Marabelle Catherine Watters Defendant: Andrew Jonathon Watters FILE NUMBER(S): 2908 of 2008 COUNSEL: Plaintiff: Mr M K Condon Defendant: N/A SOLICITORS: Plaintiff: MCW Lawyers Defendant: N/A Introduction 1. The plaintiff, a widow aged 78, commenced proceedings by Statement of Claim filed on 30 June 2008 against the defendant, her son, for liquidated damages in the sum of $202,395,50 being moneys the defendant withdrew from her bank account without her knowledge or permission and applied to his own benefit ($177,806.50), and also for repayment of a loan of $20,000. 2. The background to this claim is as follows. The defendant offered, in February 2006, to look after the plaintiff's financial affairs. The plaintiff's husband had passed away in April 2003; she had then given the family home to the defendant and his wife and had taken up residence in another property with her daughter and son-in-law. Although the plaintiff felt capable of managing her financial affairs she permitted her son to do so. She occasionally wrote a cheque for household expenses on her Westpac Cash Management Account, which as at 20 February 2006, when her son took it over, had a balance of $180,014.66, but these expenses were modest. The address for the bank statements was changed from her address to her son's address, although some statements, inexplicably, still went to her address. There matters rested until March 2006, when a chance inquiry by the plaintiff at the Cronulla branch of the bank revealed that in two years her account balance had dwindled to under $100.00. Westpac Bank traces show that some of these amounts were deposited to an account owned by the wife of the defendant (paragraph 11). Some of these monies have been paid back, and I have taken this into account in favour of the defendant. These amounts were all withdrawn by internet banking. The plaintiff does not own, and cannot operate, a computer. 3. The plaintiff confronted her son, who told her, according to her affidavit, that he was "robbing Peter to pay Paul" and that the explanation was "gambling". Thereafter he ceased to visit her home, even though he had to drive past to go to work every day. 4. More unwelcome discoveries awaited the plaintiff. In early April 2008 she found that a caveat for $25,000 had been registered on the title of the home she had bought after she had given the family home to the defendant. The caveator was a finance provider, and the sum was alleged to have been advanced by him to the plaintiff. The plaintiff's solicitor arranged for the removal of this caveat, but in the course of so doing, the plaintiff learned that the defendant had refinanced (for $1,860,000.00) the home she had given him and that he and his wife had put the property on the market for sale. On 3 July 2008 the defendant and his wife entered into a contract for sale for $2,250,000.00 for the property and settlement is imminent. 5. The plaintiff's solicitor wrote to the defendant and his wife on 19 May 2008. There was no immediate reply and proceedings were commenced on 30 June 2008. The solicitors for the defendant wrote on 23 July complaining that their client could not file a "meaningful" defence until "certain particulars of the claim are provided" and then sought a detailed list of each and every transaction which was contained in the claim. This has now been provided and, under threat of an application for default judgment, the defendant has now served (but not filed) a defence which merely traverses the pleadings. 6. The plaintiff comes before me today seeking a freezing order pursuant to Pt 25 r 25.11 Uniform Civil Procedure Rules 2005 (NSW). Such relief is available in this Court where the orders are ancillary in nature to proceedings that have already been commenced. The undertaking as to damages has been given, and the matter is to be stood over to Thursday 7 August 2008. 7. Since this is an urgent application, this ex tempore judgment is only a brief review of the facts of the case and the legal principles applicable to such applications. There are essentially two legal issues to deal with. The first of these is the test for the granting of such an interim order, and whether the necessary elements for the test have been made out. The second is whether an order can also be made against the defendant's wife. I will first deal with the issue of the appropriate test. The test for granting a freezing order 8. There are two requirements. The first is that there is a prima facie case. There is ample material, in my view, to meet this requirement. A very substantial sum has been removed from the plaintiff's account by internet banking, in circumstances where there is a strong circumstantial case against the defendant. 9. On the issue of any delay, it is in very small compass, does not engender any detriment (as litigation was commenced) and is understandable given the plaintiff's age and relationship with the defendant. 10. However, a prima facie case is not enough. A plaintiff must establish not only that he or she has a prima facie case against the defendant, but also that there is some risk of a dispersal by the defendant of his assets so as to defeat the value of any victory by the plaintiff. 11. I have had regard to the following matters in relation to this risk: (a) The nature of the claim 12. In exceptional cases, one can infer the existence of this risk partly or wholly from the factual material in the prima facie case. In Patterson v BTR Engineering (Aust) Pty Ltd (1989) 18 NSWLR 319 at 326 Gleeson CJ (at 325), Meagher JA (at 326) and Rogers A-JA (at 330) noted that the nature of the claim could be taken into account when assessing the risk. Meagher JA, at 326, added: "This may well be the situation in all cases where the plaintiff's prima facie case against the defendant involves proof of gross dishonesty. This was the view taken by Vincent J in Pearce v Waterhouse [1986] VR 603 at 607 ("… I should take into account the nature of the claim"). In the present case, therefore, the trial judge was justified, in dealing with the second ingredient, to take into account that a defendant against whom it had been proved at a prima facie level that he was guilty of theft of $10 million of the plaintiff's property would not be likely to preserve it intact on his theft having been discovered, or indeed to preserve intact any property he may legitimately own." 13. The nature of the claim would include the fact that the plaintiff, a 78 year old woman, entrusted the defendant, her son, at his request, with the day to day management of her financial affairs, with the result that her bank balance went from $180,014.66 on 6 February 2006 to less than $100 two years later. All these withdrawals were made by electronic banking (the plaintiff does not own and cannot operate a computer) in circumstances where the plaintiff was not alerted to this because the address on the plaintiff's bank statements was changed to the home of the defendant. The relationship of trust between the plaintiff and her son was such that she never thought to question him until her chance inquiry at the bank revealed the true statement of affairs. 14. The defendant's conduct since that time has been to avoid seeing his mother at all, even though he has to drive past her home to get to work. The correspondence from his solicitors attached to the affidavit of the plaintiff does not mention the sale of the plaintiff's home. Since this was the former family home and was given to him by the plaintiff as a gift, this is a telling omission. (b) Admissions 15. The defendant has served (but not filed) a defence to these proceedings which constitutes a denial of all the matters pleaded. The document is verified (I note it also contains a statement by the solicitor for the defendant that this defence "does not require a certificate under section 347 of the Legal Profession Act 2004"). While the defendant may, from this document, be taken to have denied on oath for the purpose of these proceedings that he converted the plaintiff's money to his own use without her knowledge and consent, it is the plaintiff's case that the defendant did make an admission to her, in March 2008. The conversation deposed to at paragraph 14 of her affidavit is: "Plaintiff: Andrew, what happened to the money? Where has it gone? Defendant: I suppose you could call it gambling. I borrowed from Peter to pay Paul ." 16. Since that discussion the defendant has had no contact with the plaintiff, even though he lives a few minutes away, in a house that she gave him as a gift. This conduct is capable, in my view, of amounting to some corroboration of his alleged admission. This is a matter to which I have given some, but very limited, weight on the issue of a prima facie case. (c) Collateral evidence 17. The plaintiff also discovered, on 1 April 2008 that a finance provider named Simon Hall had registered a caveat for $25,000 for money advanced by Mr Hall to her pursuant to an unregistered mortgage over her own home. The plaintiff says in her affidavit that she has never met Mr Hall or had any dealings with him and never gave him an unregistered mortgage over her property (paragraph 16 of her affidavit). She has not signed any documents for this sum, nor did she receive the funds. Her solicitors subsequently arranged for the defendant to remove the caveat from the title and the plaintiff has deposed to the defendant and his wife entering into a refinancing of their own home for this and other sums. I take into account, in the defendant's favour, that he appears to have consented to this procedure. However, the circumstances in which monies were borrowed, apparently by him, by an unregistered mortgage containing false information, must give rise to concerns as to his honesty. The current level of borrowing is, I note, $1,860,000.00, and this is the property that was placed on the market without the plaintiff being told of its sale. 18. I am satisfied that this collateral evidence may indicate the defendant's intentions. However, this evidence is of a very limited nature. Orders against third parties 19. The plaintiff also seeks freezing orders against the defendant's wife. An application in relation to their two teenage children has not been made. 20. A small number of the amounts withdrawn ($10,000) went through the defendant's wife's bank account, and she is the joint owner of the property. I am satisfied, having regard to the principles set out in Cardile v LED Builders Pty Ltd (1999) 198 CLR 381 at 405 that she is a third party who holds or is about to hold or dissipate or further dissipate property owned by the plaintiff. The plaintiff's wife satisfies the criteria set out by Gaudron J at 405-6 and I note the need for an exceptional case, which I take to have been satisfied here. I am conscious that the District Court's power to make even an ancillary order against a third party is largely unexplored territory, but this is an issue that can, if raised, be dealt with by me when the matter is next in court. Orders 21. I make orders as follows: (1) Until further order, and on the undertaking of the plaintiff as to damages (set out in Schedule A to the Penal Order) I make orders in accordance with paragraphs 5 – 19 of the Penal Order against Andrew Jonathon Watters (the defendant) and Loyis Watters, currently residing at 10 Telopea Avenue, Caringbah. (2) Direct that service of these orders be effected by service of this judgment and the Penal Order: (a) upon the solicitors for the defendant by fax by 6:00pm this evening, and (b) upon the defendants by personal service at their home by midday 6 August 2008 or, if there is no one present in the premises, by affixing a copy of this judgment and the Penal Order to their front door and/or by placing a copy in the letterbox. (3) Costs reserved. (4) Stood over for further directions, including any application to discharge these orders, before Gibson DCJ in Court 13D on Thursday 7 August 2008 at 9:00am. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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