Turner & Anor v Universal Home Loans Pty Ltd & Ors [2004] NSWSC 936

New South Wales Supreme Court

CITATION : Turner & Anor v Universal Home Loans Pty Ltd & Ors [2004] NSWSC 936 HEARING DATE(S) : 6 and 7 October 2004 JUDGMENT DATE : 8 October 2004 JURISDICTION: Equity Division JUDGMENT OF : Palmer J DECISION : Injunctions dissolved.

CATCHWORDS : ASSET PRESERVATION ORDER - Whether sufficient evidence of danger of dissipation of assets to warrant continuance of ex parte injunctions. LEGISLATION CITED : Conveyancing Act 1919 (NSW) - s.37A - Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 CASES CITED : - Jackson v Sterling Industries Ltd (1987) 162 CLR 612 - Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 - Williams v Lloyd (1934) 50 CLR 341 Warren Turner - First Plaintiff Mortgage Elimination Services Pty Ltd - Second Plaintiff PARTIES : Universal Home Loans Pty Ltd - First Defendant Jay Phillip McNabb - Second Defendant Cherie Catherine McNabb - Third Defendant FILE NUMBER(S) : SC 2895/03 COUNSEL : A.J. Sullivan QC, S. Jacobs - Plaintiffs J.S. Drummond - Defendants SOLICITORS : Koffels Solicitors - Plaintiffs Hewitts Commercial Lawyers - Defendants

Introduction

1 This is an application by the Defendants to dissolve a Mareva injunction granted ex parte by Hamilton J on 21 May 2003 and subsequently extended to continue until further order. 2 The First Plaintiff ("Mr Turner") and the Second Plaintiff ("MES"), a company controlled by Mr Turner, the Second Defendant ("Mr McNabb") and the First Defendant ("Universal"), a company controlled by Mr McNabb, entered into a business relationship in late 1999. The business concerned was what is called "mortgage origination". It is not necessary to go into the details of the relationship or of the business. 3 In late 2000, difficulties arose between the parties. To resolve those difficulties, Mr Turner, Mr McNabb and Universal agreed to part company upon terms set out in a document called "Heads of Agreement" dated 4 April 2001. Under the Heads of Agreement, Universal was obliged to pay to Mr Turner certain sums at particular times and Mr McNabb guaranteed performance of Universal's obligations. 4 On 14 June 2001, Mr Turner commenced proceeding against Mr McNabb in the Local Court at Maitland, claiming a sum due by Mr McNabb pursuant to his guarantee of the obligations of Universal under the Heads of Agreement. 5 On 5 February 2002, MES commenced proceedings in the District Court at Maitland against Universal and Mr McNabb, claiming a debt due by Universal and claiming under an alleged guarantee of that debt given by Mr McNabb. 6 On 5 November 2002, Mr McNabb transferred to his wife, the Third Defendant, his one-half interest in their matrimonial home, for no consideration. The matrimonial home is at 5 Shaun Close, East Maitland. 7 In May 2003, Mr Turner asked his solicitor to search the title to Mr McNabb's home. The transfer of Mr McNabb's interest to Mrs McNabb was thereupon discovered. 8 On 21 May 2003, Mr Turner and MES made an ex parte application to Hamilton J as Duty Judge for leave to file a Statement of Claim and a Notice of Motion, returnable instanter, seeking Mareva orders against Mr and Mrs McNabb and Universal. 9 The Statement of Claim is difficult to understand but as far as I can ascertain MES makes a claim against Universal for payment of a debt arising under a Dissolution Agreement and a claim against Mr McNabb under an alleged guarantee of that debt. The Plaintiffs further seek an order under s.37A Conveyancing Act 1919 (NSW) avoiding the transfer of Mr McNabb's interest in the family home to Mrs McNabb as a disposition with intent to defraud creditors. 10 An affidavit dated 20 May 2003 was sworn by Mr Turner in support of the application for Mareva orders. In that affidavit Mr Turner gave particulars about the proceedings commenced against Mr McNabb in the Local Court and against Mr McNabb and Universal in the District Court. He said that he had asked his solicitors to carry out a real property search of Mr McNabb's family home because "I had an uneasy feeling as to what he might be doing with his property". He then gave evidence as to the results of that search and said that he had been told that Mr McNabb had been seen putting up a "For Sale" sign on another property in East Maitland, known as Lot 822 Turnbull Drive. He had asked this solicitor to do a search of the title to that property and said that the search had revealed that the property was owned by Mrs McNabb. That statement was incorrect. The property was in fact owned by Mr and Mrs McNabb jointly. 11 On the evidence in Mr Turner's affidavit, Hamilton J made orders up to 26 May 2003 restraining Universal and Mr McNabb from dealing with any of their respective assets and restraining Mrs McNabb from dealing with the half share in the matrimonial home which had been transferred to her by Mr McNabb. 12 On 3 June 2003, the injunctions were, by consent, continued for a further two days, the orders being varied to permit Universal to carry on its ordinary business and to permit Mr and Mrs McNabb to meet their normal living expenses and legal fees. The matter was adjourned on a number of occasions subsequently, and on 12 June 2003 the injunctions were, by consent, continued until further order. 13 On 8 July 2004, the Defendants filed a Notice of Motion seeking, inter alia, that the injunctions be dissolved. The Defendants assert that the Plaintiffs were guilty of a serious non-disclosure in obtaining the ex parte injunctions in that they deliberately failed to disclose to Hamilton J at the date of the application that Mr McNabb had other real estate besides the matrimonial home in his own name, none of which had been transferred to a related party for no, or inadequate, consideration. A veritable mountain of affidavits has been filed by the parties relating to this issue. 14 Part of the battle came before me as Duty Judge on 7 October 2004. It seemed to me that rather than expending further time and money in a contest as to whether or not the Plaintiffs had made full and frank disclosure when obtaining the ex parte injunctions, the parties would be more profitably engaged in debating the question whether, as circumstances now exist, the Plaintiffs are able to demonstrate any sufficient ground for the continuation of the injunctions. If the Plaintiffs failed in that exercise, the injunctions would be dissolved forthwith and there would be no need to investigate whether the Plaintiffs had made full and frank disclosure in the first place, save perhaps in a limited way when dealing with the question of costs. However, if the Plaintiffs succeeded in demonstrating the need for continuing injunctions, the question could then be debated whether the injunctions should nevertheless be dissolved because of the Plaintiffs' alleged failure to make full and frank disclosure. 15 The parties agreed in this course. Accordingly, I am dealing in this judgment with the first question, namely, whether the Plaintiffs have demonstrated sufficient ground for the continuation of the injunctions. Principles