Eastman v Dodds [2004] NSWSC 186

Reported Decision : (2004) DFC 95-294

New South Wales Supreme Court

CITATION : Eastman v Dodds [2004] NSWSC 186 HEARING DATE(S) : 16 March 2004 JUDGMENT DATE : 19 March 2004 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Application dismissed with costs

CATCHWORDS : EQUITY - asset preservation order - making of order in proceedings under Property (Relationships) Act - (no question of general principle) LEGISLATION CITED : Property (Relationships) Act 1984 (NSW) ss 38, 40 Dridi v Fillmore [2000] NSWSC 175 CASES CITED : Jackson v Sterling Industries Ltd (1987) 162 CLR 612 Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG (The Niedersachsen) [1984] 1 All ER 398 Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 PARTIES : Donna Elizabeth Eastman (P/A) Kenneth Harold Dodds (D/R) FILE NUMBER(S) : SC 4451/03 COUNSEL : M Osterberg-Olsen (P/A) M J Dawson (D/R) SOLICITORS : Adrian & Fellows (P/A) Donovan Oates Hannaford (D/R)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

AUSTIN J

FRIDAY 19 MARCH 2004

4451/03 DONNA ELIZABETH EASTMAN V KENNETH HAROLD DODDS JUDGMENT 1 HIS HONOUR: By her statement of claim filed on 21 August 2003, the plaintiff alleges that she and the defendant lived together as husband and wife on a bona fide domestic basis although they were not married, from May 1994 until November 2001. She seeks relief under the Property (Relationships) Act 1984 (NSW), including: · recovery of 45% of the unencumbered value of a property at 53 Francis Street, Port Macquarie; · an order that the defendant, in his capacity as director and secretary of Shallow Bay Developments Pty Ltd, transfer two of the remaining blocks of land in the Shallow Bay development to the plaintiff free of encumbrances and stamp duty; · an order that the defendant, in his capacity as director and secretary of Chevron Veld Pty Ltd, transfer two blocks of land of her choice of which Chevron Veld is the owner or in which it has an equitable interest, to the plaintiff free of encumbrances and stamp duty; · an order that the defendant do whatever is necessary to assign to the plaintiff any benefits to which she is now or will at any time in the future be entitled in the KH Dodds Discretionary Trust. 2 On 9 March 2004 counsel for the plaintiff approached Bryson J as Equity Duty Judge to seek urgent ex parte interlocutory relief. She relied on an affidavit made on that day by the plaintiff's solicitor, Mr Purcell. He deposed to the fact that the initiating process was served on the defendant on 28 August 2003 and that he had received a letter from Mr Byrnes, a solicitor, who said that he acted for the defendant and would file a notice of appearance. However, no notice of grounds of defence had been served up to 9 March 2004 (and indeed, no defence has yet been served), even though according to Mr Purcell, Mr Byrnes told him on 28 January 2004 that the defence had been drafted. 3 Mr Purcell deposed to a telephone conversation with his client, the plaintiff, on 5 March 2004. According to Mr Purcell, the plaintiff said to him: "Ken Dodds has sold the property he owns at 21 Mermaid Street, Maroubra. It was listed in the Sydney Morning Herald on 22.02.2004 as one of the ten highest sales in the area. It sold for $2.79 million. He has also put the unit at Riana Moorings, at 10/68 Hibbard Drive, Port Macquarie, owned by Shallow Bay Developments Pty Ltd up for sale. There could be a contract exchanged. The tenant has been given notice to vacate because the unit is being sold. Ken and I started Shallow Bay Developments. The company's properties are listed in my Statement of Claim. I am afraid Ken is now selling off and shifting assets because of my proceedings." 4 Bryson J made ex parte orders restraining the defendant from, in effect, dealing with 10/68 Hibbard Drive, Port Macquarie and 53 Francis Street, Port Macquarie, and appointed 15 March before the Duty Judge for the return of the notice of motion. The matter came before me as Duty Judge on that day, and the application was heard on 16 March 2004. It was necessary for me to reserve my reasons for judgment because of the lateness of the hour. 5 At the hearing before me counsel for the plaintiff moved to the continuation of the injunctive orders made by Bryson J. She also moved for some other orders in the notice of motion, including orders restraining the defendant from dealing with any real property of which the registered proprietor is Shallow Bay Developments Pty Ltd, and any real property owned by Chevron Veld Pty Ltd, without the plaintiff's consent. The defendant was represented by counsel, who opposed the proposed new orders and any extension of the existing orders, and submitted that the existing orders should be dissolved. 6 At the hearing on 16 March, I rejected Mr Purcell's evidence of his conversation with the plaintiff on 5 March 2004, which had been one of the foundations for the ex parte orders. Although hearsay evidence is sometimes allowed on interlocutory applications, I decided it was not justifiable to allow the plaintiff's solicitor to give hearsay evidence of the truth of matters told to him by the plaintiff herself, when the matters were of central importance to the application. The plaintiff relied on another affidavit by Mr Purcell deposing to property searches carried out by his firm, and the searches were tendered in evidence. A copy of a page of "Domain Extra" from the Sun-Herald of 22 February 2004, showing "five of the best" auction results including 21 Mermaid Ave Maroubra, sold for $2.925 million, was also received into evidence. 7 Bundles of correspondence were also tendered. Although the tender was irregular, I decided to accept it in the interlocutory circumstances, although I limited the use to which the evidence could be put so that it could not be used to prove the truth of the contents of letters. The correspondence is of no significance in present application. It shows that in January 2002 the defendant's solicitors wrote to the plaintiff's solicitors of that time saying that their client was not in a position to provide financial disclosure of his assets and liabilities because they were subject to a claim by his wife under the Family Law Act which had not been resolved. 8 The defendant gave evidence to the effect that his present solicitor had experienced some delay in obtaining the defendant's file from the previous solicitor, thereby providing a partial explanation for the delay in filing a notice of grounds of defence. In my opinion the question of delay in filing a defence is a side issue which need not be explored further. Failure to file a defence is not, of itself, a justification for the making of an asset preservation order. 9 The defendant gave evidence that he separated from his wife Sandra in 1994. One of their assets was a jointly owned property at 21 Mermaid Ave Maroubra. Their family law property settlement was finalised only by orders of the Local Court at Port Macquarie in July 2003. Under the settlement Sandra received the property at Mermaid Ave and thereafter, the defendant had no interest in it. It appears that Sandra subsequently sold that property. In consequence, the only sale of property that was externally documented, in the pages of the Sun-Herald, was not a sale indicating any disposal of assets by the defendant. 10 The defendant gave evidence that he is the sole registered proprietor of 53 Francis Street, Port Macquarie. His estimate is that the property has a current value of about $1 million, and is incumbered by a registered mortgage to a credit union of approximately $707,000. The property is the defendant's principal place of residence. He says it is not currently listed for sale and has not been offered for sale, but it is his intention to sell the property prior to July 2004 to enable him to complete the purchase of apartment its 610 in the Sandcastle re-development in William Street, Port Macquarie. He has entered into a contract to purchase this apartment "off the plan" for $1.1 million. He says he has paid the deposit and stamp duty. If he is restrained from selling the Francis Street property he will be unable to finance completion of the purchase of the apartment and will forfeit his deposit and other incidental expenditure, in the total sum of $193,000. 11 The defendant says that the registered proprietor of the property at 10/68 Hibbard Drive, Port Macquarie is Shallow Bay Developments Pty Ltd, in its capacity as trustee for the KH Dodds Discretionary Trust. The defendant is a director of the company. The property has not yet been offered for sale, but the defendant intends that it be sold to assist in the financing of the purchase of unit 609 in the Sandcastle development. The defendant estimates that the current value of the Hibbard Drive property is $495,000, and it is mortgaged to the Commonwealth Bank for approximately $163,000. The company has contracted to purchase unit 609 at the Sandcastle for $950,000, and has paid a deposit and stamp duty. The defendant says that if the company is not at liberty to sell the Hibbard Drive property, it will forfeit the deposit of $950,000. 12 It appears from the Consent Orders filed at the Local Court at Port Macquarie in respect of the defendant's property settlement with his former wife that the defendant had, in July 2003, what is called an "interest" in the KH Dodds Discretionary Trust, including the loan account, of a very substantial amount. But under the terms of settlement with his former wife, he was required to pay her a large sum of money in cash as well as transferring to her the Mermaid Street property. 13 The defendant's evidence is that Chevron Veld Pty Ltd is a company incorporated by him in 2002, which has never purchased and does not hold land assets, although it bears the same name as a property development. It appears from the Local Court document that he had at that time a loan account of a substantial amount with this company. 14 The defendant gave oral evidence that a company called Randale Pty Ltd, of which he is director, holds development property as trustee for the Pacific Unit Trust, the units of which are held by him and the KH Dodds Family Trust. Distributions through the Pacific Unit Trust have been made only to the KH Dodds Family Trust. 15 The terms of the trust instrument for the KH Dodds Family Trust, the KH Dodds Discretionary Trust and the Pacific Unit Trust are not in evidence. 16 Although counsel for the plaintiff explored the defendant's evidence as to his assets in cross-examination, there was no challenge to the defendant's credibility on these matters in the interlocutory circumstances. I accept the defendant's evidence to the extent that I have summarised it above. I should say that the defendant also gave evidence denying that the plaintiff had made any contribution to the Francis Street and Hibbard Drive properties, or to any of the other development properties of Shallow Bay Developments Pty Ltd. It is unnecessary for me to make any finding on those matters, and I do not do so. 17 Section 38(1)(h) of the Property (Relationships) Act authorises a court, in exercising its powers under the Act, to grant an injunction relating to the property of a party to an application under the Act. Section 40(1)(b) authorises a court, in the case of urgency, to make an ex parte order for the same purpose. Of course, this Court has inherent jurisdiction and jurisdiction under the Supreme Court Act 1970 (NSW) to grant an interlocutory injunction without relying on ss 38 and 40. I see no reason why, in exercising its jurisdiction under the two sections, this Court would apply discretionary principles different from the principles upon which it generally acts in granting interlocutory relief, although obviously the determination as to whether the plaintiff has a serious question to be tried is affected by the substantive content of her statutory rights: see, generally, Dridi v Fillmore [2000] NSWSC 175 (Hamilton J, 4 February 2000). 18 Essentially the plaintiff is seeking the continuation of asset preservation orders, and the making a new orders of the same kind. The principles upon which this Court determines an application for an asset preservation order are now well settled. In addition to showing that there is a serious question to be tried and that the general balance of convenience favours the making of the order, the applicant must show that there is a danger that, by reason of the respondent absconding or assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, any judgment in favour of the applicant in the proceeding will not be satisfied: Jackson v Sterling Industries Ltd (1987) 162 CLR 612; Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG (The Niedersachsen) [1984] 1 All ER 398; Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319. 19 Here there is no evidence that the defendant intends to abscond or remove assets from the jurisdiction. On the contrary, the evidence is that he operates a substantial property development business within the jurisdiction, and owns real property in his own name, and intends to buy real property in the jurisdiction. He estimates that his equity in the Francis Street and Hibbard Drive properties, directly in the first case and indirectly in the second, amounts together to no less than $600,000. The fact that he intends to sell these properties and buy others does not put the plaintiff in jeopardy that any judgment in her favour will not be satisfied unless it can be shown that the purchase of the new properties (at the Sandcastle development) is at a significant overvalue. There is no such evidence. 20 There is also evidence going to the general balance of convenience, which indicates that the defendant would be seriously prejudiced by the continuation of orders affecting the Francis Street and Hibbard Drive properties, which he needs to realise in order to complete contracts for the purchase of the two Sandcastle units. 21 It follows, in my view, that the case for continuing injunctive orders made by Bryson J, the making the other orders sought an application, has not been made out. The notice of motion should be dismissed. 22 As far as costs are concerned, this is a case where an order should be made that the plaintiff pay the defendant's costs, rather than that the costs should be costs in the cause. The plaintiff made her ex parte application precipitously, apparently doing so when she read of the sale of the Mermaid Street property in the Sun-Herald. It would have been possible for her solicitor, by appropriate searches, to have discovered that the vendor of that property was the defendant's former wife. It would have been possible for some form of demand to have been made upon the defendant by his new solicitor, and if that had occurred, the explanation in fact communicated by the defendant's solicitor by letter of 11 March 2004 would have been provided without the need for any application to the Court. The application was misguided. 23 There is no proper basis for ordering that the costs be assessed and paid forthwith. **********