New South Wales Supreme Court CITATION : Megna & anor v Marshall & anor [2005] NSWSC 1347 HEARING DATE(S) : 22 November 2005 JUDGMENT DATE : 22 November 2005 JUDGMENT OF : Brereton J DECISION : Paragraphs [10], [11], [12]. CATCHWORDS : EQUITY – Remedies – Injunctions – Asset Preservation Order – in aid of potential cross-claim for contribution - in and of proposed third party proceedings under Family Law Act 1975 (Cth) to set aside financial agreement – against third party. Family Law Act 1975 (Cth), Part 8B, s 90K LEGISLATION CITED : Defamation Act 1974 (NSW), s 7A Conveyancing Act 1919 (NSW), s 37A Re Wakim; Ex parte McNally (1999) 198 CLR 511 CASES CITED : Cardile v LED Builders Pty Limited (1999) 198 CLR 380 Michael Megna (first plaintiff) Russell James Lloyd (second plaintiff) PARTIES : David John Marshall (first defendant) Richard Martin Tory (second defendant) FILE NUMBER(S) : SC 10261/04 J Wheelhouse (plaintiff) COUNSEL : D Marshall (in person) (first defendant) A T S Dawson (second defendant) Etheringtons Solicitors (plaintffs) SOLICITORS : Osborne Bricknell Howell (second defendant) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION BRERETON J Tuesday 22 November 2005 10261/04 Michael Megna & Anor v David John Marshall & Anor JUDGMENT (ex tempore) 1 HIS HONOUR: By notice of motion filed in this Court on 14 November 2005, the second defendant, Richard Martin Tory, seeks an order restraining the first defendant, David John Marshall, and his wife Shirley Irene Marshall, from in effect taking any step to carry into effect what appears to be a financial agreement entered into between them under Part 8B of the Family Law Act 1975 (Cth). That financial agreement was entered into on 3 September this year in circumstances where, after protracted, extensive and hard fought defamation proceedings, a jury had returned verdicts for the plaintiff, Mr Megna, against both defendants, Mr Marshall and Mr Tory, pursuant to a Defamation Act 1974 (NSW), s 7A trial, finding that numerous imputations alleged by Mr Megna were conveyed by the matter complained of and were defamatory of Mr Megna. 2 Damages are yet to be assessed, and those proceedings are to return before the Registrar in the near future for the purpose of further directions. An application is to be made by Mr Megna for an order that the defendants pay the plaintiffs' costs of the s 7A trial, which took some three weeks, following, as I recall it, an earlier trial or proceeding before O'Keefe J which did not proceed to finality. Mr Wheelhouse informs me that the plaintiffs' costs amount to in excess of $600,000. There is evidence before me that the current outstanding costs are some $300,000. There is evidence of a Certificate of Taxation of Assessment in respect of an earlier proceeding in favour of Mr Megna against Mr Marshall for almost $16,000, although I note that Mr Marshall informs the Court that that has been paid. 3 Mr Tory proposes to apply to the Court to have the financial agreement set aside pursuant to s 90K of the Family Law Act and, alternatively, perhaps pursuant to s 37A of the Conveyancing Act 1919 (NSW). It is unnecessary to consider on this application whether jurisdiction under s 37A survives in this context of the enactment of s 90K of the Family Law Act, or whether s 90K covers the field. In any event, it is clear that so much of the cross-vesting jurisdiction as survives Re Wakim; Ex parte McNally (1999) 198 CLR 511 is sufficient to vest in this Court the jurisdiction of the Family Court of Australia under s 90K of the Family Law Act, and that proceedings for the setting aside of the financial agreement may be brought in this Court. 4 What is sought at this stage is in effect a Mareva injunction to prevent further alienations or dispositions or the removal of assets from the reach of the plaintiff and Mr Tory pending determination of the claim to set aside the financial agreement. 5 Mr Marshall is, of course, a party to the proceedings already. Mrs Marshall is not, although she is named as a second respondent to the notice of motion. In Cardile v LED Builders Pty Limited (1999) 198 CLR 380, the High Court held that a Mareva order may be appropriate against a third party in either of two circumstances. The first of those is if the third party holds or is using or has exercised or is exercising a power of disposition over, or is otherwise in possession of assets, including claims and expectancies, of the judgment debtor or potential judgment debtor. The second is if some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a receiver, trustee in bankruptcy, liquidator or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor. 6 In this case it seems to me both of those limbs are capable of application. If the binding financial agreement is set aside, then it will follow that the third party, Mrs Marshall, is in possession of assets or property - being such property as, if any, as has been transferred to her under the financial agreement - which ought to be Mr Marshall's and ought to be available to satisfy a judgment against him. As to the second, a process – namely, an application under s 90K of the Family Law Act - is available to the potential judgment creditors to bring assets which have been transferred to Mrs Marshall under the financial agreement back into the hands of Mr Marshall so as to be capable of being used to satisfy a judgment. In those circumstances, subject to questions of notice and the other usual criteria for a Mareva order, it is appropriate that an order be made against Mrs Marshall notwithstanding that she is not a party. 7 Of course, a precondition to a Mareva order is that the creditor or potential creditor demonstrate a prima facie case for final relief. So far as Mr Megna is concerned, he has in effect a judgment for damages to be assessed - although I appreciate that questions of what defences might be available are yet to be determined against both defendants - and it follows that he has a prima facie case at least for recovery of damages from Mr Marshall and Mr Tory. So far as Mr Tory is concerned, although no monetary order has yet been made against him in respect of which Mr Marshall is liable to contribute, the fact that what is effectively a judgment for damages to be assessed for defamation, subject to any special defences, has been given against both defendants, provides a strongly arguable case that Mr Tory will have a claim for contribution against Mr Marshall. 8 Another requirement for a Mareva injunction is that a sufficient risk of dissipation of assets be established. In this case, the fact of dissipation or its imminence has been proved by the tender of the financial agreement and the tender of evidence which shows that it appears that attempts are being made to obtain the certificate of title and have a transfer of Mr Marshall's interest in their principal property to Mrs Marshall registered. It is difficult to imagine a stronger case of proof of actual or threatened dissipation. 9 I appreciate that it is normal to limit a Mareva injunction to the amount of the likely judgment; however, in this case what will be sought ultimately is to set aside a financial agreement and, if successful, that application would result in the return to Mr Marshall of all assets which might have been transferred under it, not just sufficient assets to satisfy a judgment. In those circumstances, I do not think it is necessary to limit the injunction to the amount of a potential judgment. In any event, on what little information has been provided at this stage as to the amount of costs incurred, coupled with the potential range of damages for defamation, there is at least a significant risk that the damages and costs for which Mr Marshall might be liable would equate or exceed a half interest in the pool of matrimonial property, which pool seems to amount, on the limited evidence available, to about $1.5 million or slightly less. 10 For those reasons, in my opinion it is appropriate to grant the relief sought by Mr Tory, and supported by Mr Megna. 11 I make the following orders. 1. Upon the second defendant/applicant, Richard Martin Tory, by his counsel, giving to the Court the usual undertaking as to damages, and upon the undertaking of Richard Martin Tory that he will commence proceedings for an order setting aside the financial agreement between the first defendant, David John Marshall, and Shirley Irene Marshall dated 3 September 2005 within 14 days of this date, I order that until further order David John Marshall and Shirley Irene Marshall be restrained from by themselves, their servants or agents alienating, transferring, encumbering, further encumbering or otherwise adversely dealing with any of their respective rights, title or interest in and to the property situate at and known as 1 The Esplanade, Drummoyne, being the land comprised in folio identifier 1/250661 and from otherwise doing anything or taking any step to perform or carry into effect or execution the said financial agreement. 2. I reserve leave to David John Marshall and Shirley Irene Marshall or either of them to move for the dissolution or variation of this order upon 48 hours notice. 3. I stand the proceedings over to Tuesday 13 December 2005 at 9.45am for further mention. 4. I reserve all costs of this application. 12 Ultimately, costs should probably be costs in the s 90K of the Family Law Act proceedings, but I will deal with that later. ********** 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.