New South Wales Supreme Court CITATION : AQUASUN P/L & ANOR v COVERDALE RAM P/L [2000] NSWSC 1146 CURRENT JURISDICTION: EQUITY FILE NUMBER(S) : SC 3669 of 2000 HEARING DATE(S) : 4-5/11/00 JUDGMENT DATE : 8 December 2000 PARTIES : Aquasun Pty Ltd and David Thompson - Plaintiff Coverdale Ram Pty Ltd - Defendant JUDGMENT OF : Bryson J at 1 COUNSEL : V. Gray - Pltf; J. Van Aalst - Dft. Henshaws - Pltf; SOLICITORS : Austin & Giugni - Dft. CATCHWORDS : INJUNCTION - Mareva order - plaintiff showed a prima facie case for $100,000 sale commission against a company which had one director resident in Singapore and one in New South Wales - company's one investment was "a loss" and local director had stated that he was impecunious - no evidence of misdealing with assets or funds - no evidence of conduct or events showing risk of frustration of court's process - court rejected propositon that "the fact of residence abroad is sufficent to excite curial intervention" - Mareva order refused. CASES CITED : Cardile & Ors v LED Builders Pty Ltd DECISION : Mareva order refused. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON J. FRIDAY 8 DECEMBER 2000 3669/00 AQUASUN PTY LTD & ANOR v COVERDALE RAM PTY LTD JUDGMENT 1 HIS HONOUR: On 5 December 2000 I dismissed the plaintiffs' application in Claim 3 of the Summons for a Mareva order under which the defendants would be required to set aside $100,000 out of the proceeds of the sale of the property at Sparks Road, Woongarrah. The plaintiffs' evidence shows what I regard as a clear prima facie case in support of their claim for $100,000 commission on the sale by the defendant of his property at Woongarrah to Brick Lane Estates Pty Ltd by contract dated 11 May 2000. Asher Real Estate, the business name of Aquasun Pty Ltd, is named as one of the vendors' agents in the contract itself, and the plaintiffs can establish prima facie that they were retained to sell the property by a Sales Inspection Report and Agency Agreement which bears date 11 February 2000 and was signed by Mr Woods on behalf of the defendants. There are other indications in evidence supporting the view that the defendants were or one of them was retained as agent for the sale, including references in correspondence and a message of 11 May 2000 which became Exhibit E which, on its face, was sent by Mr Woods, a director of the defendant (although Mr Woods does not acknowledge this). 2 The defendant's counsel put forward a number of grounds of defence including a dispute as to Mr Woods' authority to retain an agent, and a dispute as to the terms of the retainer dated 11 February 2000. It is well open to question whether the retainer was materially altered at a later date so as to show Mr Thompson as one of the parties to it. Counsel also put forward statutory defences relating to the sufficiency of the retainer to meet stringent statutory requirements; among other things, the sufficiency of the document was disputed having regard to its form and to alterations in it. There is also some proposed defence relating to statutory requirements of licensing of the principal Aquasun. 3 There are a number of peripheral mysteries in the facts, particularly as to the relationship between Mr Woods and Mr Thompson, to whom at one point Mr Woods referred as his partner, raising consideration of cross-accountability for benefits flowing to Mr Thompson, or to Mr Woods. Other mysteries are shifts and changes in the name of the supposed prospective purchaser, and the circumstances in which a co-agency agreement was entered into, not on the face of things by either of the plaintiffs, so as to involve Bill Hall Pty Ltd as a co-agent, and later altered. There are live issues to be raised in defence to the plaintiffs' claim, the outcome is far from certain and my finding about the existence of a prima facie case is not to be taken as a prediction. However, I am of the view that the plaintiffs have shown a prima facie case of an entitlement to $100,000 commission of sufficient strength to be worthy of interlocutory protection. 4 Mareva orders are not made as of course, and they are not made readily. The state of opinion in the High Court about the principle on which they are made can be seen from the passage at paragraphs [41] and [42] in the leading judgment of the High Court in Cardile & Ors v LED Builders Pty Limited (1999) 198 CLR 380 at 399ff. Their Honours there set out a passage from an earlier judgment in which the principle concerning jurisdiction appears. As there appears, the power is wide and is an established part of the armoury of a Court. Mareva orders must come within the limits set by the purpose which they are intended to serve, that is to prevent the frustration of a Court's process. At paragraphs 50 to 53 their Honours referred to the history of the development of this jurisdiction and to elements of care which are required when it is exercised. The purpose is not to change the status quo in favour of the plaintiffs, and it is not to confer security on the plaintiffs. 5 The facts in evidence reveal no conduct on the part of the defendants which can reasonably be interpreted as potentially having the effect of frustrating the ordinary processes of the Court and enforcement of its judgments, or of being intended to do so, or of being in any way evasive, indicating dishonesty, or otherwise indicating actually or potentially that the assets of the company have been or will be dealt with in an irregular way. I should not assume that the directors would behave irresponsibly or dishonestly unless some substantial ground for fearing that they may do so has been shown. The facts that one of the directors resides in Singapore and that the other resides here is not a basis for finding that there is a risk that assets of the company may be spirited out of the country. It was submitted that "the fact of residence abroad is sufficient to excite curial intervention". I see no basis for this. The fact that the company's investment in the Sparks Road property, which appears to have been its only asset, the company not having significant subscribed capital, is spoken of in the correspondence as a loss is not an indication that the assets such as they are will not be dealt with in a responsible way. Indications that Mr Woods is or in some respects has been impecunious are not indications that it should be feared that he will deal with the company's assets in an irresponsible way or in a dishonest way. 6 It must be appreciated that if a company has made losses, the correct and honest conduct of its affairs may well leave the plaintiffs in a position where they will not recover the whole of any successful claim; further the plaintiffs' position is not much improved if some part of the company's assets is set on one side in a form in which the plaintiffs do not have security over it. It certainly is not the case, as submissions of the plaintiffs' counsel appeared to assume, that if control of a company can be seen to be located overseas a Mareva order will be made. Nothing has ever happened which can be interpreted as a threat to remove funds from the State, or as an indication that such a thing may happen. I have seen no grounds for fearing that the company's funds will not be managed lawfully; and such a fear is an altogether different subject to an apprehension that the company's funds, although properly managed, may not leave enough on hand to satisfy the plaintiffs' claim if successful. 7 If the defendant made a loss and had creditors and set about paying them while the plaintiffs' claim was pending that would be an ordinary and unremarkable thing for its directors to do. The risk of insolvency is an inherent risk of commercial activity, and paying obligations is not dissipation of funds. 8 In these circumstances I was not prepared to make a Mareva order. ******** Last Modified: 12/18/2000 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.