Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Tomasetti v Brailey [2012] NSWCA 6
• Hearing dates: 30 January 2012
• Decision date: 30 January 2012
• Before: Campbell JA

Decision

Notice of Motion filed 23 January 2012 dismissed.

Applicants to pay costs of Respondents of Notice of Motion.

Costs of application made 22 and 23 December 2011 to be paid by Applicants.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: PROCEDURE - civil - interlocutory issues - Mareva order - appellate jurisdiction - freezing order granted at first instance to now appellant - appellant unsuccessful at trial - appellant seeking new freezing order pending hearing of appeal - power of Court of Appeal to grant Mareva orders under UCPR 25.14 - considerations in granting Mareva order to appellant unsuccessful in court below - refusal to give undertaking not in itself evidence of actual or threatened diminution of assets - orders refused
• Legislation Cited: Corporations Act 2001 (Cth); Fair Trading Act 1987; Supreme Court Act 1970; Uniform Civil Procedure Rules 2005
• Cases Cited: Aspermont Ltd v Lechmere Financial Corporation [2002] WASCA 52; (2002) 27 WAR 1; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; Commissioner of State Taxation (WA) v Mechold Pty Ltd (1995) 95 ATC 4053; Frigo v Culhaci [1998] NSWCA 88; Ghoth v Ghoth [1992] 2 All ER 920; Ketchum International PLC v Group Public Relations Holdings Ltd [1996] 4 All ER 374; Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319; Tomasetti v Brailey [2011] NSWSC 1446
• Category: Interlocutory applications
• Parties: Peter Charles Tomasetti (First Applicant); Sandra Joyce Cordony (Second Applicant); Tomasetti Investments Pty Ltd ATF Tomasetti Superannuation Fund (Third Applicant); Edmund Francis Brailey (First Respondent); John Clifford Fenton (Second Respondent); Christopher Campbell Lane (Third Respondent); TJC Financial Planning Pty Ltd (Fourth Respondent)
• Representation: Counsel; A Maroya (Applicants); C Carroll (Respondents); Solicitors; Heckenberg & Koops (Applicants); Holman Webb (Respondents)
• File Number(s): 2009/297599

Judgment

1 CAMPBELL JA : This is an application by the appellants for a freezing order against the respondents to the appeal.

2 The appellants brought proceedings in the Common Law Division of the Supreme Court in which they made claims against four different defendants. Those defendants were three natural persons, Messrs Lane, Brailey and Fenton, and a company, TJC Financial Planning Pty Limited. The claims alleged the tort of negligent advice, breach of contract arising from the same facts as the tort of negligent advice, misleading and deceptive conduct resulting in a claim under s 42 of the Fair Trading Act 1987 , and breach of fiduciary duty. There was also a claim under the Corporations Act 2001 (Cth) concerning a failure to give certain advice.

3 There was an eighteen-day hearing in the court below. The judge delivered a judgment comprising some 824 paragraphs or 281 pages: Tomasetti v Brailey [2011] NSWSC 1446. The claims of the plaintiffs in the court below were completely unsuccessful and the plaintiffs have now appealed.

4 All of the representations and advice sued upon were, as I understand it, given to the plaintiffs by Mr Brailey. The other defendants became relevant because it was contended that Mr Brailey was acting on behalf of them.

5 On 21 January 2011 Mr Lane transferred his half interest in a property at Killarney Heights to his wife. Valuation evidence shows that that transfer was for full value. The transfer came to the attention of the (then) plaintiffs in February 2011. They took out a Notice of Motion seeking a freezing order against all the respondents. They requested information from the solicitor for the respondents about what had become of the proceeds of sale. Fairly promptly after that request was made they were informed that all bar $38,000 of the proceeds of sale was used to reduce the mortgage on another property at Foster. That property at Foster was later encumbered, to the extent of $100,000, for the purpose of paying some legal fees. Some $37,000 remained in a bank account. That is the only evidence before me of any specific attempt by any of the respondents to dissipate or alter the makeup of their assets.

6 A freezing order was made pending the determination of the proceedings in the Court below. That freezing order was made by consent.

7 The trial judge dissolved the freezing orders when judgment was given in favour of the respondents on 17 November 2011.

8 A Notice of Appeal was filed on 14 December 2011. It raises some fifty grounds of appeal, some of which have sub-grounds.

9 On 15 December 2011 the solicitors for the appellants wrote to the solicitors for the respondents enquiring whether they consented to the continuance of orders pending the resolution of the appeal proceedings in like terms to those that had been made at first instance. That request was declined.

10 On 23 December 2011 his Honour, Rothman J, made a freezing order, in the same terms as that which had applied pending the determination of the first instance proceedings, in terms under which it would expire at 4 pm this coming Friday.

11 On 23 January 2012 the appellants filed the Notice of Motion that I am now dealing with. In broad terms, it sought an order restraining the four respondents until further order of the Court from disposing or dealing in any manner with any of their assets in the amount of $10,000 or greater unless seven days written notice of their intention to so deal with the assets had been given. The order sought made provision for the familiar exceptions to a freezing order, relating to payment of living expenses, legal expenses, business expenses bona fide and properly incurred, medical expenses and expenses necessary for maintenance of the assets.

12 On 23 January 2012 the solicitors for the appellants wrote to the solicitors for the respondents asking that the respondents provide a verified list of all their assets, and an undertaking that they would not dispose or deal with assets in an amount over $10,000 other than as provided for by the exceptions that I have just mentioned. There was no response to that letter.

13 English cases have accepted that the Court has jurisdiction to grant, on the application of an appellant who has failed in the Court below, a freezing order that will apply pending the resolution of an appeal: Ghoth v Ghoth [1992] 2 All ER 920 at 922; Ketchum International PLC v Group Public Relations Holdings Ltd [1996] 4 All ER 374. The latter case has been followed by Hasluck J in Aspermont Ltd v Lechmere Financial Corporation [2002] WASCA 52; (2002) 27 WAR 1. I accept that an appellate court has jurisdiction to grant a freezing order on the application of an appellant who has failed in the court below, though the requirements for the granting of a freezing order must of course be established.

14 In the more familiar situation of a freezing order being granted pending first instance proceedings in the court that makes the order, it must be established that there is a good arguable case on a justiciable cause of action. As well, the Court must be satisfied that:

"... having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:

(a) the judgment debtor, prospective judgment debtor or another person absconds,

(b) the assets of the judgment debtor, prospective judgment debtor or another person are:

(i) removed from Australia or from a place inside or outside Australia, or

(ii) are disposed of, dealt with or diminished in value. "

15 While requirements somewhat similar to those just set out have been articulated in the case law relating to Mareva orders they are now required by UCPR 25.14. As UCPR 25.14 applies throughout the Supreme Court, and the Court of Appeal is part of the Supreme Court (ss 25 and 38 Supreme Court Act 1970 ), those requirements apply when a freezing order is sought in the Court of Appeal.

16 In Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 403-4, [51] the joint judgment of Gaudron, McHugh, Gummow and Callinan JJ approved a statement that had been made in Frigo v Culhaci [1998] NSWCA 88 that:

"[A Mareva order] is a drastic remedy which should not be granted lightly. ...

A [Mareva order] 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' ... Many authorities attest to the care with which courts are required to scrutinise applications for [Mareva orders]. The leading decision in this State is Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319." [citation added]

17 In the present case I am not satisfied that it has been established that there is a sufficient danger that a judgment will be wholly or partly unsatisfied by reason of disposition or diminution of assets. The only specific evidence of disposition of assets is the evidence relating to Mr Lane's transfer to his wife that I have earlier mentioned. That transfer is not shown to have resulted in any diminution in the value of assets available to meet a judgment, except through the provision of security for legal fees. Providing such security would be permissible under the freezing order the appellants seek.

18 In some circumstances, as occurred in Commissioner of State Taxation (WA) v Mechold Pty Ltd (1995) 95 ATC 4053, a failure of a respondent to give an undertaking not to dispose of assets when requested to do so can be relevant material for the Court to take into account in deciding whether there is a sufficient risk of dissipation of assets. In that case, however, there was evidence other than a failure to give the undertaking when requested that went to the prospect that there might be a dissipation of assets. A litigant could not request an opposite party to give an undertaking not to dispose of assets, and then, when that request was not complied with, for that to be in itself a sufficient basis to warrant the Court in taking the significant and intrusive step of issuing a freezing order. In the present case I am not satisfied, on the material before me, that there is a sufficient risk demonstrated.

19 I have been somewhat troubled by how the requirement of UCPR 25.14 for the demonstration of a good arguable case plays out in the context of an application for a freezing order pending an appeal, where the appellant has failed in the court below. When a freezing order is applied for at first instance, it is usual for there to be evidence, beyond the fact that claims are made in an initiating process, to demonstrate that the action has a sufficient prospect of success. In the present case, all that I have before me is the reasons for judgment, and the Notice of Appeal. I find it difficult to form a view about the prospects of success of the appeal on that material alone. I am also troubled by the prospect that an application for a freezing order in a case such as the present could turn into a dress rehearsal of the appeal itself. However, I have reached the view that the evidence now before me does not demonstrate a sufficient risk of dissipation of assets, and it is unnecessary for me to form any concluded view about the way in which an appellate court should approach the requirement for demonstrating a good arguable case.

20 For these reasons I dismiss the Notice of Motion. I order the applicants to pay the costs of the respondents to the motion.

21 There are two additional subsidiary matters. When Rothman J made the freezing order on 23 December 2011 he reserved to this Court the costs of the application that had been made before him. Mr Carroll, for the respondents, seeks today an order that the costs of the application made at first instance on 22 and 23 December 2011 be paid by the applicants. As those costs would depend upon the same questions of evidence and principle as the decision I have made, it is appropriate that the costs of the application made on 22 and 23 December 2011 be paid by the applicants. I so order.

22 Mr Carroll also asks that I vacate the orders that were made on 23 December 2011. Those orders continue to operate until Friday of this week. I am not minded to vacate the orders. Leaving them on foot will provide a small window of opportunity for the applicants to consider whether they wish to question the decision that I have given.

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Decision last updated: 13 February 2012