CSR Ltd & Thiess Bros Pty Ltd v South Blackwater Mines Ltd & Ors [1990] QSC 328

( 10 20 30 50 60 IN THE SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION No. 116 of 1989 .... tU..1fV.-.--,-~_,.,,,._ ..... ---., BEFORE MR. JUSTICE DERRINGTON BRISBANE, 30 AUGUST 1990 REVISED CO?I.ES ISSUED l Court Rep,:·:•i:;!lg Bureau l ,I Date, 2 / Cj / f'?_ (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter,Court Reporting Bureau.) BETWEEN: CSR LIMITED -and- THIESS BROS. PTY. LIMITED -and- SOUTH BLACKWATER MINES LTD. (formerly Penceal Limited) -and- PENNANT HOLDINGS LIMITED -and- JOHN HOLLAND HOLDINGS LIMITED JUDGMENT First Plaintiff Second Plaintiff i I First Defendant Second Defendant Third Defendant HIS HONOUR: Because future events of the utmost :significance are imminent, it is necessary to treat this matter as urgent and deliver judgment now. The plaintiff has brought an action against the three defendants for the balance of moneys and interest alleged to be payable on the sale of a coal mine some years ago. The first plaintiff is the purchaser with the primary obligation and the second and third defendants are, in effect, guarantors whose defences are completely on the merits raised by the first -----------------·-·----------~ Govt. Pririter, Old. 1 10 20 30 50 -- 1 of 6 -- 10 defendant and in no way related to their status as guarantors; and it should be added that if any amendment is attempted to be made to that pleading in that respect, then it should be refused because of their reliance upon its present state here. On the evidence the third defendant has very substantial assets and the plaintiff has not shown anything to the contrary, though the onus lies upon it to do so. The claim is partly denied and there are very substantial counterclaims amounting to a sum in excess of the claim. It is impossible to know whether these are in fact arguable and no 10 20 attempt has been made to demonstrate that they ·are not so. The· 20 applicant plaintiff has pointed out that whereas its claim is liquidated and prima facie justified upon the original contract, the counterclaim is of a different quality depending very substantially upon the validity of allegations which are 30 said to be made by the defendants as a means of avoiding their 30 liability and giving them time to dispose of these assets. The first defendant has now contracted to sell its assets, which consist of the mine and its accoutrements, and will have in excess of $100 million surplus from the sale, all in money. -u , The plaintiffs seek a Mareva injunction because of its .,., apprehension that these moneys will be lent or in some other · way disposed of t6 the second defendant, which is in serious .financial difficulty with its financiers and other creditors, so that the second defendant will be kept afloat but be :-O . incapable of repaying the moneys advanced by the first :,,_; i ! i -----~--- 60 _ defendant; and that consequently the plaintiff will be left with a barren j udgment because the first defend ant's only : assets will at the best be an irrecoverable debt owing by the second defendant. Govt. Pr:nter, QlJ. 2 -- 2 of 6 -- 10 Its apprehension is founded upon a statement by the principal officer of the second defendant in a letter to the Sydney Stock Exchange indicating, albeit rather ambiguously, the intended application of large funds from this sale to the second defendant which will even then have very substantial debts otherwise. The apprehension is enlarged by the first defendant' s refusal on the eve of settlement of its sale to continue an undertaking for the retention of sufficient of the sale price to meet the claim, and its failure to tell this Court of its intentions towards this loan or advancement of I ! lmoney to the second defendant, and the details of it, although its material discusses other features of the subject. The first defendant submits that the basis of the Mareva, injunction has not been demonstrated by the plaintiff in that it has not shown that the first defendant intends to dissipate 10 20 30 its assets with the motive or for the purpose of defeating any 30 j udgment. Without adding to the many reviews of the law on this topic, it might be said simply that it matters not if the purpose is not primarily to frustrate any judgment providing it is designed to benefit the first defendant in some way and to ! its knowledge has the ef feet of frustrating any j udgment of the -10 ·court. After all, the essential principle is one of conscience where a defendant is guilty of an abuse of process in knowingly. ,frustrating a judgment by dissipating its assets in a way which. !is of benefit to it (including the benefit of a relative) in a so !way which is unconscionable. This is distinct from the case so I !where it applies its assets normally in its business, though I ithat may have the effect of depleting those assets. The first I ! defendant's perseverance in trying to read the judicial ! I !pronouncements on this point like a Statute rather than accept ! --------- --------·- ··~--------·--J (() Govt. Printer, Qld. 3 -- 3 of 6 -- the principle's concept, and its reluctance to discuss merits no doubt supported the suspicions harboured by the plaintiff. i I ,. I. I the l II I Howev~r, al though the plaintiff's anxiety is obviously i I genuine, there are factors which militate against an order in 10 this case. They are as follows: 10 20 i 1. The. directors of the first defendant are aware of their liabilities under s.229 of the Companies Code and thes~ proceedings will go to disable any defence on their part if the moneys are unsafely lent in a way which conflicts with their duties or are otherwise disposed of in this manner. ' 2. The use of the moneys and the payment of creditors of I l the second defendant is not shown to be other than a genuine business dealing without any benefit to any persons associated with the first defendant except that it may help to ensure that 30 j the second defendant remains afloat. That alone, however, in 30 my view, is not sufficient to meet the principle upon which a Mareva injunction is granted. 3. It is not shown that any indebtedness which would I iaccrue to the first defendant or other right resulting from the I ·lO I advance would be worthless. ! That is not to say that it would not be so but it is not to be assumed. If it is so, then the directors will be responsible and hopefully will pay very dearly , for conduct in that direction. It is, however, difficult to believe that the injection of a substantial sum of money into ~}C the second defendant will not in some way relieve it of 1 50 its problems to the extent at least of permitting recovery by the first defendant of sufficient to meet any claim as to which the plaintiff may be successful. Further, any fraudulent payments to the second or third defendants should, it would seem, be God Printc·r, Qltt 4 -- 4 of 6 -- iO 20 30 ~o recoverable. In addition to the foregoing, because it is prima facie established that the third defendant is a defendant of substanc well able to meet any liability of the first defendant for which the third defendant would also be liable, that should providl the plaintiff with a safety net which would dispel the need foJ 10 I a Mareva injunction, which will not be granted if the plaintifl I is adequately safeguarded for the enforcement of any j udgment which· it may obtain. Accordingly, the application for the Mareva injunction is dismissed with costs. The plaintiff has also made an application for an order for security for costs from the first defendant. In theI present circumstances there is every indication that iiI presently has very substantial assets; considerably more thanI 20 I 30 would be necessary to meet even the extremely high costs I ianticipated in this litigation. It is true that the plaintiffI has led some evidence to demonstrate the possibility that thosJi 'assets may pass from its hands, at least in cash form, but foi i the reasons given above it cannot be assumed that sufficient I funds will not be available to meet any order ·for costs. In addition to that, it might also be said that a refusai ' , to grant security for costs at this stage is far from final because as the matter proceeds towards trial the plaintiff may I well be able to keep track of the first defendant's financial'I 40 I 50 position in that respect and, if it did become possible to I demonstrate that in some way or other, the costs of the action I :would be lost to i it by reason of the first defendant's conduct) !then at a ! later stage up to and including the time of trial !1 plaintiff could renew its application upon the basis of ! i the IanyII GO 6C1 ··------------+----- -------------------- Go1 ,! Printer, Old. 5 -- 5 of 6 -- evidence of a more substantial nature which may become available to it at that time. It is not a matter of criticism - I but it is a fact that the application of the plaintiff is, to I- say the least, premature. That application is also dismissed with costs. 10 10 20 30 30 Go\! Pnn:er, Old 6 -- 6 of 6 --