New South Wales Supreme Court CITATION : Lewis v Nortex Pty Ltd (In liq); Lamru Pty Ltd v Kation Pty Ltd [2004] NSWSC 64 HEARING DATE(S) : 16 February 2004 JUDGMENT DATE : 16 February 2004 JURISDICTION: Equity JUDGMENT OF : Hamilton J DECISION : Money released from Mareva restraint to meet costs of proceedings. CATCHWORDS : EQUITY [340] - Equitable remedies - Injunctions - Interlocutory injunctions - Injunctions to preserve property pending determination of rights - Mareva injunctions - Other matters - Nature of evidence required - Need to fund litigation. 3081/97 Peter Lawrence Lewis (P) Lamru Pty Ltd (Applicant) Kation Pty Ltd (Respondent) Brian Raymond Silvia (Liquidator) PARTIES : 1750/02 Lamru Pty Limited (P) Kation Pty Limited (D1) Peter Lawrence Lewis (D2) Mark Lewis (D3) Nortex Pty Ltd (In Liq) (D4) FILE NUMBER(S) : SC 3081/97; 1750/02 N A Cotman SC & J T Johnson (P L Lewis & Kation P/L) COUNSEL : S J Motbey (Lamru P/L) V R Gray (Liquidator & Nortex P/L) No appearance (M Lewis) Kemp Strang (P L Lewis & Kation P/L) SOLICITORS : Lyons & Lyons (Lamru P/L) Abbott Tout (Liquidator & Nortex P/L) Corrs Chambers Westgarth (M Lewis) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J MONDAY, 16 FEBRUARY 2004 3081/97 PETER LAWRENCE LEWIS v NORTEX PTY LTD (In Liq) 1750/02 LAMRU PTY LIMITED v KATION PTY LIMITED & ORS JUDGMENT 1 HIS HONOUR: There has been an application to vary the terms of a Mareva order which has frozen some $571,000 in a trust account in support of an order against Lamru Pty Limited ("Lamru") for security for costs. Lamru has applied for a variation of the order to permit the payment out of sums totalling not more than $75,000 for the fees, including disbursements, of Mr Stephen Motbey of counsel for Lamru. There is presently an unpaid invoice of Mr Motbey in excess of $40,000 and an estimate of some further $30,000 or more for his fees for the balance of the hearing. 2 The application for the order has been resisted on behalf of the Lewis interests by Mr Cotman of Senior Counsel. The case for the release of the funds is that there is no other source from which the fees may be paid and their non payment is likely to lead to loss by Lamru of the assistance of counsel in the balance of the proceedings. The case on behalf of the Lewis interests is that it is not demonstrated that there are not funds available from other sources to meet Mr Motbey's fees. In particular, there is at present more than $60,000 in credit in the Westpac account of a company called Ecodownunder Pty Limited ("Ecodownunder"). This is the company and the bank account through which Mr Lamb is conducting his present business. It would also appear that it is through this account that he is conducting the financial affairs of Lamru and of himself. Ecodownunder has until recently in effect been a partnership company between Mr Lamb and a Mr Ower Jnr, but that partnership has disintegrated over the last two or three months. This has disrupted the business of that company. It also means that there is a requirement for the repayment of a loan of $200,000 made to that company by Mr Ower Snr to support the operations of the company while his son was a participant in it. This is said to be the destination of the $50,000 arising from disposal of stock, which is part of the $60,000 plus in the bank account. 3 Mr Cotman's submissions have a great deal of strength, arising principally from the complete and discreditable disorder in which the accounting affairs of Ecodownunder, Lamru and Mr Lamb appear to be. There is no doubt that Mr Lamb has been under great pressure (as have, no doubt, others) through the conduct of this massive litigation. However, it cannot be regarded as creditable that the accounting and taxation affairs of various entities, including Ecodownunder, do not seem to have been attended to since accounts were prepared for the year ended 30 June 2000. It is very hard to tell precisely what the state is of the financial affairs of the various entities, including Ecodownunder. However, Mr Lamb has given sworn evidence and been cross examined about the availability of funds. It would seem that non payment of Mr Ower Snr is likely to lead to an immediate claim by that gentleman for $200,000 unless that debt is discharged in a fairly swift and orderly manner. There are not visible resources other than the $571,000 to permit the ongoing costs of this litigation to be met. It is a principle of Mareva relief that the freezing of resources should not be allowed to stultify the proper conduct of the proceedings. 4 Although I have some doubts about the matter because of the disorder in the accounting affairs of the relevant entities, I have formed the view that I should allow the release of some $75,000 from the fund of $571,000 to permit Mr Motbey's fees to be met. 5 Mr Cotman has urged on me that I should not simply release the $75,000 in a permanent and unconditional fashion in the light of the matters that he has put and with that submission I agree. I do not think it very realistic to impose an actual timed instalment program for the repayment of the $75,000 into the account, as urged by Mr Cotman. However, I do think efforts should be made to repay it. I do think that the Lewis interests are entitled to have a monthly progress report of the financial affairs in the Lamru camp, and particularly relating to the affairs of Ecodownunder, while the $75,000 is absent from the account. Mr Motbey does not oppose this course, which is reasonably required, and has brought forward a set of undertakings and orders to achieve this effect. 6 I have already stipulated that the repayment of any loan to Mr Ower Snr must be limited to the $200,000 which has been revealed. I am also not prepared at the present stage to provide for the payment of any stamp duty on the transfer of units in the subject unit trust from Hirmanu Pty Limited to Lamru to be paid in preference to repayments to the security fund. That matter can receive further consideration under the liberty to apply which will be reserved, if and when the question of the payment of stamp duty arises. The form of undertakings and orders has only been recently brought forward and Mr Cotman should have further time to examine those in detail and make any further suggestions for the modification thereof. However, subject to that, I propose to make orders in the general terms of the orders and undertakings brought forward by Mr Motbey. ********** Last Modified: 03/09/2004 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.