Crone v Konig [2001] QSC 284

' . . S (~ Queensland Governm.ent tat e Rep Orting 8 Urea U ~ Departmentoijustlcund Attorncy~ral Transcript of Proceedings Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director, State Reporting Bureau. SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION WHITE J No 4829 of 2001 VICTORIA MARIE CRONE and SIEGFRIED BERNHARDT KONIG BRISBANE .. DATE 19/07/2001 ' JUDGMENT th Floor, The Law Courts, George Street, Brisbane, a. 4000 1 REVISED COPIES ISSUED State Reporting Bureau Date ;l"J! J-! 0 ( Plaintiff Defendant Telephone: (07) 3247 4360 Fax: (07) 3247 5.532 -- 1 of 14 -- 19072001 Tl/TW12 M/T 1/2001 (White J) HER HONOUR: The applicant has brought proceedings seeking an order pursuant to section 286 of the Property Law Act 1974 adjusting the interests of the parties in property. The plaintiff and defendant entered into a de facto relationship which commenced either in December 1996 or March 1997 and which terminated, on any view, by mid December 2000. On 31 May 2001 the parties gave mutual undertakings without any admissions as to liability not to deal with certain described property. The plaintiff gave the usual undertakings as to damages and the plaintiff's application for interlocutory relief was adjourned to 18 July by Mackenzie J. In brief, the plaintiff expresses concern that there is a risk that the defendant may alienate property over which he has the power of disposition so as to defeat any order which she may obtain in respect of her property claim. Much material has been filed in respect of this application. There are many disputed issues of fact. Other family 1 10 20 30 members have become involved, including the plaintiff's · 50 brother and daughter by virtue of the defendant's counter claim. 60 2 JUDGMENT -- 2 of 14 -- 19072001 Tl/TW12 M/T 1/2001 (White J) Mr Morrison, QC for the defendant, and Mr T North, SC for the plaintiff, have taken me fully through the factual issues in dispute. There has been no cross-examination. These issues cannot, of course, be resolved on an application of this kind. The Property Law Act was amended in 1999 by the insertion of Part 9 - Property (De Facto Relationships). Section 255 sets out the main purposes of Part 19, including to facilitate the resolution of financial matters at the end of a de facto relationship; to recognise de facto spouses should be allowed to plan their financial future and resolve financial matters at the end of their relationship co- habitation, or separation agreement; to facilitate a just and equitable property distribution at the end of a de facto relationship in relation to the de facto spouses; and to provide for injunctive relief to help persons protect their existing and adjusted interests in property of de facto spouses. Without attempting a complete description of this part of the Act, and confining my remarks to what is relevant to 1 10 20 30 40 these proceedings, the Act provides for the recognition of · 50 co-habitation agreements for the making of declarations about property rights and entitlements, and the making of property adjustment orders in respect of the property of either or both de facto spouses. 3 JUDGMENT 60 -- 3 of 14 -- 19072001 Tl/TW12 M/T 1/2001 (White J) The jurisdictional basis for making a property adjustment order is that the Court considers it just and equitable to do so. In considering what is just and equitable when considering an application for a property adjustment order, the Court must consider the financial and non financial contributions made directly, or indirectly by or for the de facto spouses, the acquisition conservation, or improvement of any of the property of the de facto spouses, their financial resources and the contributions to the wider welfare of a de facto spouse by the other. By section 333 of the Act the Court has been given extensive powers to make orders relating to property. Inter alia by section 333 (1) (g) it may make an order or grant an injunction for the protection of, or otherwise relating to the property or financial resources of a party to the application. As can be seen, Part 19 resembles many of the provisions found in the Family Law Act 1974 concerning the property of parties to a marriage. I have been referred to no judicial pronouncements on the approach that should be taken to an application for interlocutory relief under Part 19 of the Property Law Act, but both Mr North and Mr Morrison have referred me to 4 JUDGMENT 1 10 20 30 . 50 60 -- 4 of 14 -- 19072001 Tl/TW12 M/T 1/2001 (White J) decisions of the Family Court and submitted that they are a guide which may safely be followed. It is convenient to make reference to the principles to be applied before considering the factual issues for resolution. In Jackson v Sterling Industries Ltd 1987 162 CLR 612, the 1 10 principle majority judgment was that of Deane Jin which 20 Mason CJ, Wilson and Dawson JJ expressed their agreement. Deane J said at 623: "As a general proposition, it should now be accepted in this country that "a Mareva injunction can be granted ... if the circumstances are such that there is a 30 danger of (the defendant's) absconding, or a danger of the assets being removed out of the jurisdiction or disposed or within the jurisdiction, or otherwise dealt with so that there is a danger that the plaintiff, if he gets judgment, will not be able to get it satisfied": per Lord Denning M.R., Rahman (Prince Abdul) v Abu-Taha(30) quoted with approval by Street CJ in Ballabil Holdings (40) ." It is unnecessary to trace the jurisdictional basis for the granting of a Mareva order. It is now well established in this country. A useful description of it is to be found in the judgment of the Court of Appeal in New South Wales in Frigo v Culhaci BC 9803225, an unreported decision of 17 July 1998 referred to and quoted with approval by the High Court in Cardile v LED 1999 162 ALR 294 at 311. At page 7 of the judgment, the Court of Appeal said: 5 JUDGMENT 40 . 50 60 -- 5 of 14 -- 19072001 Tl/TW12 M/T 1/2001 (White J) "A Mareva injunction is an exceptional interlocutory remedy. Its function is to minimise the possibility of an unscrupulous defendant seeking to render himself or herself 'Judgment proof' by taking steps to ensure that no assets within the jurisdiction can be found on the day of judgment: see generally Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 622. However it 1 is drastic remedy which should not be granted lightly. 10 We agree with the comment in Meagher, Gummow and Lehane, Equity Doctrines and Remedies 3rd ed [2188] that: It is obvious that by obtaining a Mareva injunction even an innocent plaintiff can wreak havoc with the defendant's business, and an unscrupulous plaintiff can ruin his opponent ... A Mareva injunction is an interlocutory order which, if granted, imposes a severe restriction upon a defendant's right to deal with his or her assets. It is granted at the suit of a plaintiff whose status as a creditor is in dispute and who need not be a secured creditor. Its purpose is to preserve the status quo, not to change it in favour of the plaintiff. The function of the order is not to 'provide a plaintiff with security in advance for a judgment that he hopes to obtain and that he fears might not be satisfied; nor is it to improve the position of the plaintiff in the event of the defendant's insolvency.' (Abella v Anderson 198712 Qd R 1 at 2-3 per McPherson J). In Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 72 ALJR 873 at 892 Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ approved the following passage from Jackson (at 619): [The Mareva injunction] 'exists not to create additional rights but to enable a court to protect its process from abuse in relation to the enforcement of its orders. It is neither a species of anticipatory execution nor does it give a form of security for any judgment which may ultimately be awarded. 111 Many authorities attest to the care with which courts are required to scrutinise applications for Mareva injunctions. The leading decision in this State is Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319. See generally Alan Sullivan QC, "Mareva Injunctions - Preparation and Conduct of Applications for (and Opposition to) a Mareva Injunction" (1991-92) 8 Australian Bar Review 205; Meagher, Gummow and Lehane, op cit [2185] ff; Kunc, "Mareva Injunctions" in Parkinson ed, The Principles of Equity chapter 20. This is not the occasion for a definitive analysis of the conditions and restrictions attending the exercise of the power to grant this form of injunction. In Patterson, Gleeson CJ said (at 321-2): 6 JUDGMENT 20 30 . 50 60 -- 6 of 14 -- 19072001 Tl/TW12 M/T 1/2001 (White J) The remedy is discretionary, but it has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant's absconding, or of assets being removed out of the jurisdiction of disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied." Proof of the deferidant's insolvency is not itself sufficient: Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545. There must be evidence of at least a more than usual danger of assets being removed: Patterson." Mr North has submitted that the approach of the Family Court to Mareva type orders is of assistance. Both he and Mr Morrison referred to Waugh v Waugh [2000] FAM CA 1183 (9 October 2000) a decision of the Full Court of the Family Court. Their Honours commented that it is important to bear in mind that there may be a distinction to be drawn between proceedings at law for a debt, or damages in which a plaintiff seeks a Mareva order to restrain the defendant from dissipating assets to which it is expected that resort might be had to enforce a judgment obtained in the proceedings, and proceedings under section 79 of the Family Law Act in which one spouse seeks an interlocutory injunction to restrain the other from dissipating assets which represent property of the parties of the marriage, or one of them to which the applicant spouse claims to have made a relevant contribution under section 79 (4) (a), (b), or (c) of the Family Law Act. 7 JUDGMENT 1 10 20 30 40 . 50 60 -- 7 of 14 -- 19072001 T2/CAL14 M/T 1/2001 (White J) In such a latter case there is an essential connection between the substantive proceedings and the relevant property, which usually does not exist in other kinds of 1 proceedings for Mareva orders. The similarly between Family 10 Court proceedings for property orders and proceedings authorised by Part 19 of the Property Law Act is apparent. However, the Court in Waugh observed, at page 11, that notwithstanding those comments: 11 ••• we think it is constructive, in the context of this case, to have regard to the principles which have been developed in other jurisdictions, in relation to the grant or refusal of "Mareva" injunctions or orders, particularly as enunciated and explained by the High Court." Their Honours then discussed the principles drawn from cases such as Jackson v Sterling, Cardile and LED, Frigo and Culhaci and the Queensland decision of Abella v Anderson (1987) 2 Queensland Reports 1 per McPherson J at pages 2 and 3 in order to find a basis for exercising its discretion to restrain a defendant from dealing with his property prior to a judgment favourable to a plaintiff. As the New South Wales Court of Appeal said in Frigo at page 9: 20 30 . 50 "A plaintiff must establish, by evidence and not assertion, that there is a real danger that, by reason of the defendant absconding or removing assets out of the jurisdiction or disposing of assets within the jurisdiction, the plaintiff will not be able to have the judgment satisfied if successful in the proceedings. There has been much debate as to the precise degree of risk which must be shown: see generally Patterson. What is clear is that mere assertions that the defendant is likely to put assets 60 8 JUDGMENT -- 8 of 14 -- 19072001 T2/CAL14 M/T 1/2001 (White J) Schiffahrtsgesellschaft mbH & Co KG [19 8411 All ER 298; Patterson." The plaintiff and defendant are both aged about 50 years. 1 They each have young adult children from previous marriages. 10 Before commencing their relationship the plaintiff sold real estate, achieving, as she deposes, about $50,000 per annum from commissions. She had no significant property assets. The defendant engaged in the business of buying and selling shares, either in his own name or through various companies or trusts, in respect of which he has a sole beneficial entitlement with the exception of two family trusts. The defendant owned a substantial number of shares in Telco Australia Limited, then a private but now a public company. Prior to meeting the plaintiff he owned a unit and other property. Before commencing to live together the plaintiff and defendant signed a Cohabitation Agreement at the request of the defendant. Both, apparently, had independent legal advice. It is not a recognised agreement for the purposes of Part 19 of the Property Law Act but it may be taken into account by a Court when making any adjustment order. In effect, it provides that neither party will have any claim on the other's property after the termination of the relationship. The plaintiff ceased her employment after she commenced residing with the defendant. In the course of the 9 JUDGMENT 20 30 40 . 50 60 -- 9 of 14 -- 19072001 T2/CAL14 M/T 1/2001 (White J) relationship a number of real property assets were acquired. The defendant deposes that they were all purchased and paid for by him or as trustee for a family trust or by him with a directive that the asset be placed in the name of the VMK Trust, of which the plaintiff was the trustee, or by one of the defendant's companies. The plaintiff alleges that she made contributions to the acquisition or improvement of these properties by sourcing or improving them and/or arranging for their resale so as to entitle her to a share in either the proceeds of their sale or in the property. The plaintiff also alleges that she has made a significant contribution to the defendant's businesses as a home maker and business confidante. It is unnecessary in these reasons to set out the details of the real property transactions. When the relationship terminated the defendant informed the plaintiff that he was selling their former home at Clayfield and property at Hamilton on which a dwelling had been commenced, and this was put in train in December and January 2001. The properties have now been sold. 1 10 20 30 The defendant has purchased various parcels of shares which · 50 have been put into the names of inter alia the plaintiff, her children, his children, the plaintiff's brother and other relations and companies. 60 10 JUDGMENT -- 10 of 14 -- 19072001 T2/CAL14 M/T 1/2001 (White J) The evidence suggests that the defendant, in whatever capacity, was responsible for providing the purchase price for these shares. He deposes that they were not gifts to those in whose names they are held. The plaintiff identifies four major events which she deposes have caused her to be concerned that the defendant is seeking to put assets beyond her reach. The most serious seems to relate to the proceeds of the sale of the land at Sefton Road, Clayfield. In part this concern seems to arise because the removal of the funds occurred at the time of the termination of the relationship, as the plaintiff was leaving for a month's holiday in France. It also seems to have been her understanding that she was entitled to all the profits realised on the sale of that land. This is denied by the defendant. 1 10 20 30 The defendant deposes that he provided all the funds and 40 security for the loan associated with the purchase of this property and, although it was purchased in the name of the VMK Trust, that trust had been established by him for various purposes and any profits on the sale of the Sefton Road property were not a gift to the plaintiff. · 50 The plaintiff signed a blank cheque on this account, at the defendant's request, before she left Australia in December last year. She deposes that she was giving the defendant "a loan" of $50,000, only from the proceeds of sale. 11 JUDGMENT 60 -- 11 of 14 -- 19072001 T2/CAL14 M/T 1/2001 (White J) Mr Morrison queries why the plaintiff then did not make out the cheque for the amount of $50,000. A second concern is an order from the defendant to his broker to sell certain parcels of shares standing in the name of the plaintiff, her daughter and other family members. There are aliegations that some signatures on the sell orders are not, in some instances, those of the sellers of the shares and were unauthorised by them. The defendant denies that he wrote those signatures or directed others who were unauthorised to do so. He asserts absolute entitlement to the proceeds of sale because he 1 10 20 provided the purchase moneys and the shares were held on 30 trust for him. A third concern relates to a transfer of shares in June this year, after the undertakings had been given on 31 May. For taxation purposes the defendant's solicitors sought the plaintiff's consent to the defendant arranging for the transfer of Telco shares from one of the trusts to himself. In fact the shares were transferred to ACWS Group Pty Ltd. The defendant maintains that it was his lack of precision in · 50 his instructions to his solicitors which brought about this state of affairs. There is evidence to support his contention that he always intended that those shares should be transferred to ACWS 12 JUDGMENT 60 -- 12 of 14 -- 19072001 T03/MV16 M/T 1/2001 (White J) Group Pty Ltd, a company used by the defendant for some years to contract his services to Telco Australia Pty Limited. The final concern relates to the omission of certain financial information from the defendant's original statement of financial assets of 11 July in conformity with the requirements of Part 19 of the Property Law Act. The defendant has filed a supplementary statement including further assets. The plaintiff has attributed sinister motives to the establishment and maintenance of a company, Briz Trac 1 10 20 Systems Pte, by the defendant in Hong Kong. This company 30 was set up in the course of the relationship. On the present material the suspicions, whatever they are, cannot be sustained. Again, there are allegations about assets in Bermuda, which, on the material are unfounded. 40 The plaintiff lives and works in Australia. All of his family reside in this country. He earns his living particularly from business and share transactions in respect of interests in Australia. I was not persuaded that the evidence reveals an intention to put assets which may · 50 satisfy any order which might be made in favour of the plaintiff pursuant to Part 19 of the Property Law Act beyond the reach of execution, or that there is a risk in the future that this may occur. 60 13 JUDGMENT -- 13 of 14 -- 19072001 T03/MV16 M/T 1/2001 (White J) It is true that the defendant contends that the plaintiff obtained far greater material benefits from their relationship than she gave and is entitled to no adjustment order. But that.view, even in combination with the particular concerns expressed by the plaintiff, in the light of all the material, is insufficient in this case to found a Mareva order. See Abella v. Anderson for stronger facts. The defendant will be stifled in his ability to deploy his assets in the pursuit of his business interests. Any losses so sustained would be difficult and costly to calculate. See SmithKline Beecham (Australia) Pty Ltd v. Herron Pharmaceuticals Pty Ltd BC200101423 at p 3. Finally, it is clear on the plaintiff's material that her undertaking as to damages is worth very little. While in a strong case of high risk this may be of lesser significance, that is not the case here and the defendant would, himself, be left with no recompense. As I indicated yesterday evening, the application is dismissed. As to costs, although the plaintiff has failed, there are numerous factual disputes which will need a full hearing to 1 10 20 30 resolve and the appropriate course is to reserve the costs · 50 of and incidental to the application and continue the reservation of costs made on 31 May. 14 JUDGMENT 60 -- 14 of 14 --