Audio Products Group Pty Ltd v Mamone & Ors [2005] NSWSC 982

New South Wales Supreme Court

CITATION : Audio Products Group Pty Ltd v Mamone & Ors [2005] NSWSC 982

HEARING DATE(S) : 20 September 2005

JUDGMENT DATE : 20 September 2005

JURISDICTION : Equity Division

JUDGMENT OF : Palmer J

DECISION : Application to dissolve injunction refused.

CATCHWORDS : ASSET FREEZING ORDER - THIRD PARTY - First Defendant misappropriates Plaintiff's funds - First Defendant a director and shareholder of Second Defendant - Plaintiff obtains asset freezing order against Second Defendant - whether Court has jurisdiction to make order - whether order should be dissolved.

CASES CITED : Cardile v LED Builders Pty Ltd (1999) 198 CLR 380

Audio Products Group Pty Ltd - Plaintiff PARTIES : Antonio Mamone - First Defendant ADM Developments Pty Ltd - Second Defendant

FILE NUMBER(S) : SC 6301/04

Ms K. Dixon (Sol) - Plaintiff COUNSEL : V.R Gray - Defendants

Clayton Utz - Plaintiff SOLICITORS : Cumberland Frank - Defendants

LOWER COURT JURISDICTION :

Ex tempore

1 On 24 November last year I made orders by consent in this matter, one of which was to impose an asset freezing order on the Second Defendant. The Defendants now seek to have that injunction dissolved. The circumstances may be briefly described as follows. 2 The First Defendant ("Mr Mamone") was an employee of the Plaintiff, Audio Products Group Pty Ltd. Last year it was discovered that Mr Mamone had been defrauding the Plaintiff on a systematic basis for some time. When his frauds were detected and Mr Mamone confessed to some wrongdoing, the Plaintiff commenced detailed investigations to ascertain the extent of the frauds and where the proceeds of the frauds had gone. There is evidence to the effect that Mr Mamone placed some of the proceeds of the fraud in the names of his wife and of his parents. Mr and Mrs Mamone are each 50% shareholders of the Second Defendant ("ADM Development"). They are also the two directors of the company. The Plaintiff has not uncovered any evidence so far to suggest that any of the proceeds of the fraud have been passed by Mr Mamone to ADM Developments. 3 ADM Developments is carrying out a real estate development at Nelson Bay. It says that the terms of the asset freezing order are severely impairing its ability to proceed with that development. In particular, it says that it is not able to borrow on its assets to fund that development because its ability to borrow on its assets is rendered unclear by the terms of the asset preservation order. 4 Mr Gray, who appears for the Defendants, says that the injunction restraining ADM Developments should be dissolved for two reasons. The first is that this Court has no jurisdiction to make an asset freezing order against ADM Developments in the circumstances which I have narrated. A second basis is that the terms of the order are so wide and unfair as to be impractical and unworkable. 5 In support of his submission that this Court has no jurisdiction to make an asset freezing order against ADM Developments, Mr Gray relies heavily upon the decision of the High Court in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380. That case deals extensively with the jurisdiction of the Court to make orders of a Mareva type against third parties, that is, parties not directly involved in particular litigation against whom no relief is directly sought by a plaintiff. That is this case. 6 Mr Gray draws attention to the fact that the proceedings so far instituted by the Plaintiff, which are embodied in a Summons which the Plaintiff seeks leave to file in the Commercial List of this Court, contain claims only against Mr Mamone and not against ADM Developments. Mr Gray says that the asset freezing order against ADM Developments does not fall within any of the categories envisaged by the High Court in Cardile in which such an order may be made against third parties. 7 The High Court enunciated in broad terms the situations in which an asset freezing order may be made against third parties in paragraph 57 of the judgment of Gaudron, McHugh, Gummow and Callinan JJ. That paragraph is as follows: "What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word "may", be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which: