Federal Court Orders Third Party to Disclose Financial Status

OUTCOME: Allowed

CATCHWORDS PRACTICE AND PROCEDURE - application for interlocutory relief - application for affidavit to be sworn by [NAME] [APPELLANT] disclosing [NAME] [APPELLANT]'s financial status - whether Court has power to grant such relief - information in affidavit relevant to any subsequent application for a [NAME] injunction - consideration of principles to guide discretion to grant application for affidavit - whether there is a danger that [NAME] [APPELLANT] may dispose of assets in order to defeat any judgment that might be obtained - application granted Federal Court of Australia Act 1976 (Cth), s 23 [NAME] v [COMPANY] (1987) 162 CLR 612, cited [NAME] v [NAME] ([APPELLANT] (1989) 18 NSWLR 319, cited [APPELLANT] & CONSUMER COMMISSION - v - [APPELLANT] [COMPANY], [APPELLANT] and [APPELLANT] No NG 782 of 1996 Tamberlin J [APPELLANT] 16 May 1997

IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) No. NG 782 of 1996 GENERAL DIVISION ) BETWEEN: [APPELLANT] & CONSUMER COMMISSION Applicant [APPELLANT]) [APPELLANT]: 16 MAY 1997 [APPELLANT] THE [APPELLANT] THAT:

1. A full affidavit be sworn and served by [NAME] [APPELLANT] on or before 23 May 1997 which sets out full details as at today's date, 16 May 1997, as to: (a) the name and address of any bank, [COMPANY] or other financial institution at which there is an account in the name, or under the control, of [NAME] [APPELLANT], together with the number of such account and the balance therein; (b) the name and address of any person or persons indebted to [NAME] [APPELLANT] and the amount of the debt or debts owed by such persons; (c) an itemised inventory of any business assets owned by [NAME] [APPELLANT];

(d) an itemised inventory of any other property, whether real or personal, owned by [NAME] [APPELLANT] or in respect of which [NAME] [APPELLANT] has an interest; (e) in respect of any of the real or personal property referred to above, whether it has been given as security for any debt, and, if so, the nature of the security and the debt so secured. 2. [NAME] [APPELLANT] pay the costs of the applicant of this application. NOTE: Settlement and entry of [APPELLANT] is dealt with in accordance with Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) No. NG 782 of 1996 GENERAL DIVISION ) [APPELLANT] & CONSUMER COMMISSION Applicant [APPELLANT] (ACN [[APPELLANT]]) [APPELLANT] [APPELLANT] [NAME] [APPELLANT] [APPELLANT] [APPELLANT]: 16 MAY 1997

REASONS FOR

JUDGMENT TAMBERLIN J: The applicant by Notice of Motion filed on 28 February 1997 seeks a [NAME] injunction to restrain [NAME] [APPELLANT] from dealing with any real property and from disposing of the proceeds of the sale or disposition of any real property, including four specified properties at [NAME]. A further order sought is that, within a specified time, [NAME] [APPELLANT] should file and serve a verified list of documents relating to the disposition of the four specified properties; a verified list of documents relating to a discharge of mortgage over the properties between [NAME] [APPELLANT] and his father, dated 26 May 1992; and finally an affidavit to be sworn by [NAME] [APPELLANT] which sets out particulars as to all bank or other accounts under his control, details of his debtors and of any debts due to him, an inventory of business assets, an itemised inventory of all other property and details as to whether any of his property is security for any debt. It is in relation to the last mentioned affidavit that the dispute before me arises. The applicant asserts that it has good prospects of success in the proceeding. [NAME] [APPELLANT] did not seek to argue that there was no prima facie case. The applicant seeks compensation and damages. The applicant also asserts that there is a real risk of [NAME] [APPELLANT] dissipating his assets prior to the conclusion of the proceedings and so defeating any award of compensation or damages. When the matter came before me on 14 March 1997 [NAME] [APPELLANT] proffered and the applicant accepted an undertaking in terms of the [NAME] injunction sought. However, that left outstanding the question of the verified lists and the above affidavit. [NAME] [APPELLANT] asserts that the four specified properties have now been sold. It appears that all the proceeds therefrom were fully expended prior to the date the undertakings were given on 13 March 1997. [NAME] [APPELLANT] resists an order that the affidavit be sworn by him disclosing the financial details requested, in substance, for these reasons.

1. There is no [NAME] injunction in force because there has been an undertaking accepted in relation to the real estate and the proceeds. The real estate has been sold and the proceeds have been expended. Therefore since the affidavit sought can only go to supporting a [NAME] injunction, the [APPELLANT] should not be made.

2. There is no reason to conclude in fact that there is any danger that [NAME] [APPELLANT] is likely to dispose or dissipate any assets. He asserts he has no assets. Therefore the affidavit can serve no useful purpose. It is clear that the Federal Court has power to issue a [NAME] injunction. So much was established by the High Court decision in [NAME] v [COMPANY] (1987) 162 CLR 612 at 622 where Deane J said:

"[APPELLANT] preventing a defendant from disposing of his assets so as to create a situation in which any judgment obtained against him would not be satisfied may be of a comparatively recent development. They have, however, become an accepted incident of the jurisdiction of superior courts throughout most of the common law world. In this country, the jurisdiction to make such [APPELLANT], commonly referred to as '[NAME] injunctions', has been progressively asserted and exercised by the [NAME]...." [NAME] went on to affirm that the power to grant such relief in relation to a matter in respect of which the Federal Court has jurisdiction is conferred by s 23 of the Federal Court of Australia Act 1976 (Cth) which gives power: " to make [APPELLANT] of such kinds, including interlocutory [APPELLANT], and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate. " Indeed, [NAME] considered that, even absent s 23, the Federal Court has such power as an incident of the general grant to it, as a superior Court of law and equity, of jurisdiction to adjudicate on proceedings before it (at 623). The wording of s 23 is wide and general. This wide language should be given full effect and its terms should not lightly be constrained by implicit limitations. In the present case I am satisfied that the Court has power to order [NAME] [APPELLANT] to make the affidavit sought regardless of whether or not a [NAME] injunction is sought. The information sought is clearly relevant to any subsequent application that may be made for a [NAME] injunction. In the present case, the applicant fears dissipation, transfer or disposal of assets and wishes to see if there are any other assets which may be disposed of. The primary question for determination is whether there are any reasonable grounds for such a belief which would enliven the power. The underlying principles which justify the grant of a [NAME] injunction are capable of applying with equal force in an appropriate case to the type of affidavit sought by the applicant. In [NAME] v [NAME] ([APPELLANT] (1989) 18 NSWLR 319 at 325 Gleeson CJ said: "I consider that [NAME] J was correct in taking the view that the evidence as to the nature of the scheme in which the appellant was allegedly involved, which established a prima facie case against him, was such as to justify the conclusion that there was a danger that the appellant would dispose of assets in order to defeat any judgment that might be obtained against him and that such danger was sufficiently substantial to warrant the injunction." (Emphasis added) The question in the present case is whether the evidence discloses a danger that [NAME] [APPELLANT] may dispose of assets in order to defeat any judgment that might be obtained against him and whether such danger was sufficiently substantial to warrant the exercise of discretion to grant the injunction. [NAME] [APPELLANT] asserts that he gave Mr [COUNSEL], his solicitor, instructions during 1996 to act for him in relation to the four home units at [NAME]. He also says that he mentioned the sale of the home units to Mr [NAME] in early 1996 but did not give instructions specifically to act on the sale of the home units till mid-May 1996. Mr [NAME] did not give evidence in the proceedings. On or about 17 May 1996, the applicant notified the respondents of complaints concerning franchises marketed by the [APPELLANT] and sought a written response. The respondents wrote to the applicant on 21 May and 28 May 1996, seeking an extension of time for reply and further particulars of the complaints. The applicant replied on 31 May 1996. Detailed correspondence then took place between the parties up to July 1996 when a very detailed letter, responding to the complaints, was sent to the applicant. No reply was made to this letter and on 9 August a follow-up letter was sent by the second [APPELLANT]. There was no substantive response to this until 20 September 1996 when the solicitor for the applicant wrote to the [APPELLANT] stating that she had been instructed to pursue the matter by commencing proceedings in the Federal Court.

In the meantime [NAME] [APPELLANT] gave instructions to Mr [APPELLANT] for home units 2 and 5 to be sold. Contracts for sale were prepared on 30 May 1996. He gave further instructions on 23 October 1996 for the sale of home units 3 and 8. The former date was 13 days after the first letter from the applicant referring to the complaints. The second instruction was given one month after the letter from the solicitor for the applicant indicating that action would be taken in the Federal Court. The dates of the contracts were 30 October 1996, 9 November 1996 in respect of two contracts, and, in the case of the last contract, 5 January 1997. The transactions were settled as to two properties on 16 December 1996. A further property was settled on 17 December 1996. The final settlement date appears to be 6 February 1997. [NAME] [APPELLANT] says that he received only $32,640 in hand as the net proceeds of the sale after discharge of mortgages to various lenders. This included a mortgage of $100,000 which he claimed to have granted to his father in May 1992. The circumstances in which the alleged mortgage was drawn up, are to say the least unusual. [NAME] [APPELLANT] says that his sister owned a [NAME] provided to her by their father in the early 1980's. His sister and father allowed him to collect and use the rents from that property for his own benefit provided the money was repaid. In May 1992, because no repayments of the moneys had been made by him he says a mortgage was agreed. His father, who did not own the [NAME], was named as the mortgagee because it is asserted he wanted to be an intermediary between [NAME] [APPELLANT] and his sister if any dispute were to arise. He says that it is customary in [NAME] for the father as head of the family to act in such a role. The mortgage was prepared some time after the date which it bears. It was back-dated to 26 May 1992. Stamp duty was not paid until 23 August 1996. [NAME] [APPELLANT] says that the mortgage was prepared on the date upon which he met Mr [NAME], his accountant. It is said Mr [NAME] advised him as to the agreement for mortgage. There are photo-copies of some diary notes of Mr [NAME] from May 1992 and November 1993. Mr [NAME] was not called. No explanation was given for this, apart from an assertion that he was no longer the accountant for [NAME] [APPELLANT]. His notes are inconclusive and in my view cannot be given any significant weight. The applicant was unable under cross-examination to specify the exact amount of the mortgage. Nor is there any evidence that any attempt was made to claim the interest said to be payable under the mortgage which was said to be 12% reducible to 9%. I am of the opinion that to protect the father's "interest" there is a danger that [NAME] [APPELLANT] will dispose of any other assets he may have in order to defeat any judgment which might be obtained against him. Such danger is sufficiently substantial to warrant the order sought as to the making of the affidavit to enable the applicant to consider whether it should seek an injunction to restrain disposal of any assets. In reaching this conclusion I have taken into account the following considerations:

1. That the [NAME] and the rent are said to belong to the sister but the mortgage was given to the father. The explanation proffered that the father was to be an intermediary is unconvincing. 2. [NAME] [APPELLANT] was not able to specify the exact amount of the advances received except to say that they were somewhere between $100,000 and $120,000.

3. The mortgage was only prepared two years or so ago. It was falsely back-dated. It was not stamped until August 1996. No caveat was taken out to protect the claimed interest of the father, under the mortgage, until 23 October 1996.

4. The timing of the instructions to Mr [NAME] were in relatively close proximity to the first intimation by the applicant that it had received complaints and in relation to the later date, namely 22 October 1996, the instruction was one month after the solicitor for the applicant indicated that court proceedings would be initiated.

5. The "notes" of Mr [NAME] are equivocal.

6. Neither Mr [NAME] nor Mr [NAME] gave evidence. They could have corroborated to some extent important assertions made by [NAME] [APPELLANT]. No explanation was given as to the absence of Mr [NAME] apart form the fact that he was no longer the accountant.

7. Clause 14 of the affidavit of [NAME] [APPELLANT] is internally inconsistent as to the date of preparation of the mortgage. No explanation was given in evidence as to this.

8. The speedy disposition of the $100,000 claimed by the father and the $32,640 net proceeds received by [NAME] [APPELLANT].

9. The sister and the father reside outside Australia. However, the father was in Australia in the period October 1996 to March 1997 which is the period during which the contracts for sale were signed and the transactions completed.

Accordingly, I propose to grant the application and I propose to order that:

1. A full affidavit be sworn and served by [NAME] [APPELLANT] on or before 23 May 1997 which sets out full details as at today's date, 16 May 1997, as to: (a) the name and address of any bank, [COMPANY] or other financial institution at which there is an account in the name, or under the control, of [NAME] [APPELLANT], together with the number of such account and the balance therein; (b) the name and address of any person or persons indebted to [NAME] [APPELLANT] and the amount of the debt or debts owed by such persons; (c) an itemised inventory of any business assets owned by [NAME] [APPELLANT]; (d) an itemised inventory of any other property, whether real or personal, owned by [NAME] [APPELLANT] or in respect of which [NAME] [APPELLANT] has an interest;

(e) in respect of any of the real or personal property referred to above, whether it has been given as security for any debt, and, if so, the nature of the security and the debt so secured. 2. [NAME] [APPELLANT] pay the costs of the applicant of this application. I certify that this and the preceding eleven (11) pages are a true copy of the Reasons for Judgment herein of [NAME]. Associate: Date: 16 May 1997 Counsel for Applicant: [redacted] Solicitor for Applicant: [redacted] Counsel for [APPELLANT]: [[APPELLANT]] Solicitor for [APPELLANT]: [COMPANY] of Hearing: 14 May 1997 Date Judgment Delivered: 16 May 1997