Paul Cardile and Ors v Led Builders Pty Ltd
[1999] HCA 18(Decision by: Kirby J)
Paul Cardile and Ors
vLed Builders Pty Ltd
Judges:
Gaudron J
McHugh J
Gummow J
Callinan J
Kirby J
Legislative References:
Business Names Act 1962 (NSW) - The Act
Conveyancing Act 1919 (NSW) - s 37A
Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act") - s 23
Copyright Act 1968 (Cth) - s 115(2)
Trade Practices Act 1974 (Cth) - s 80
Family Law Act 1975 (Cth) - s 114
Workplace Relations Act 1996 (Cth) - s 170NG
Proceeds of Crime Act 1987 (Cth) - Div 2 of PtIII
Crown Lands Act 1929 (SA) - The Act
Conveyancing Act 1919 (NSW) - s 37A
Bankruptcy Act 1966 (Cth) - s 120; s 121; s 122
Corporations Act 2001 (Cth) - s 486A; s 588FA; s 588FB; s 588FC; s 588FD; s 588FE; s 588FF; s 598
Case References:
A J Bekhor
&
Co Ltd v Bilton - [1981] 2 WLR 601; [1981] 2 All ER 565
Abella v Anderson - [1987] 2 Qd R 1
Ascot Investments Pty Ltd v Harper - (1981) 148 CLR 337
Australian Marketing Development Pty Ltd v Australian Interstate Marketing Pty Ltd - [1972] VR 219
Australian Trade Commission v Film Funding
&
Management Pty Ltd - (1989) 24 FCR 595
BM Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd - (1976) 51 ALJR 254; 12 ALR 363
Ballabil Holdings Pty Ltd v Hospital Products Ltd - (1985) 1 NSWLR 155
Bank of Queensland Ltd v Grant - [1984] 1 NSWLR 409
Bass v Permanent Trustee Co Ltd - [1999] HCA 9 at [89]
Bathurst City Council v PWC Properties Pty Ltd - (1998) 72 ALJR 1470; 157 ALR 414
Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation Ltd - [1981] AC 909
Bristol City Council v Lovell - [1998] 1 WLR 446; [1998] 1 All ER 775
Byrne v Australian Airlines Ltd - (1995) 185 CLR 410
CSR Ltd v Cigna Insurance Australia Ltd - (1997) 189 CLR 345
Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd - [1993] AC 334
Colbeam Palmer Ltd v Stock Affiliates Pty Ltd - (1968) 122 CLR 25
Commissioner of Taxation v Murry - (1998) 72 ALJR 1065; 155 ALR 67
Commonwealth v Verwayen - (1990) 170 CLR 394
Corporate Affairs Commission v Bradley - [1973] 1 NSWLR 382
Dalgety Wine Estates Pty Ltd v Rizzon - (1979) 141 CLR 552
Deputy Commissioner of Taxation v Winter - (1988) 92 FLR 327
Doulton Potteries Ltd v Bronotte - [1971] 1 NSWLR 591
Evans v Buchanan - 555 F 2d 373 (1977)
Fejo v Northern Territory of Australia - (1998) 72 ALJR 1442; 156 ALR 721
Galaxia Maritime SA v Mineralimportexport - [1982] 1 WLR 539; [1982] 1 All ER 796
Garden Mews-St Leonards Pty Ltd v Butler Pollnow Pty Ltd - (1984) 9 ACLR 91
Gibbs v David - (1875) LR 20 Eq 373
Gilford Motor Co v Horne - [1933] Ch 935
Gilfoyle Shipping Services Ltd v Binosi Pty Ltd - [1984] 2 NZLR 742
Giumelli v Giumelli - [1999] HCA 10
Glover v Walters - (1950) 80 CLR 172
Grassby v The Queen - (1989) 168 CLR 1
Hannam v Lamney - (1926) 43 WN (NSW) 68
Harris v Beauchamp Brothers - [1894] 1 QB 801
cf Soinco SACI v Novokuznetsk Aluminium Plant - [1998] QB 406
Hatton v Car Maintenance Co Ltd - [1915] 1 Ch 621
Heavener v Loomes - (1924) 34 CLR 306
High v Bengal Brass Co and Bank of NSW - (1921) 21 SR (NSW) 232
Hughes v Metropolitan Railway Co - (1877) 2 App Cas 439
Hunt v BP Exploration Co (Libya) Ltd - [1980] 1 NZLR 104
ICI Australia Operations Pty Ltd v Trade Practices Commission - (1992) 38 FCR 248
In re Judiciary and Navigation Acts - (1921) 29 CLR 257
Industrial Equity Ltd v Blackburn - (1977) 137 CLR 567
Iraqi Ministry of Defence v Arcepey Shipping Co SA - [1980] 2 WLR 488; [1980] 1 All ER 480
Iraqi Ministry of Defence v Arcepey Shipping Co SA - [1981] QB 65
Jackson v Sterling Industries Ltd - (1987) 162 CLR 612
Jago v District Court (NSW) - (1989) 168 CLR 23
Jones v Lipman - [1962] 1 WLR 832; [1962] 1 All ER 442
Knight v F P Special Assets Ltd - (1992) 174 CLR 178
LED Builders Pty Ltd v Eagle Homes Pty Ltd - (1996) 35 IPR 215
LED Builders Pty Ltd v Eagle Homes Pty Ltd - (1996) 70 FCR 436
LED Builders Pty Ltd v Eagle Homes Pty Ltd - (1997) 78 FCR 64
LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 4) - (1997) 38 IPR 107
Lister
&
Co v Stubbs - (1890) 45 Ch D 1
Mareva Compania Naviera SA v International Bulkcarriers SA ("The Mareva") - [1975] 2 Lloyd's Rep 509
Marine Atlantic Inc v Blyth - (1993) 113 DLR (4th) 501
Mason CJ in Jackson v Sterling Industries Ltd - (1987) 162 CLR 612
Mercantile Group (Europe) AG v Aiyela - [1994] QB 366
Mercedes Benz AG v Leiduck - [1996] AC 284
Mills v Northern Railway of Buenos Ayres Co - (1870) LR 5 Ch App 621
Morgan v DPP - [1970] 3 All ER 1053
National Australia Bank Ltd v Bond Brewing Holdings Ltd - (1990) 169 CLR 271
National Australia Bank Ltd v Bond Brewing Holdings Ltd - [1991] 1 VR 386
National Provincial Bank of England v Thomas - (1876) 24 WR 1013
Ord Forrest Pty Ltd v Federal Commissioner of Taxation - (1974) 130 CLR 124
PCS Operations Pty Ltd v Maritime Union of Australia - (1998) 72 ALJR 863; 153 ALR 520
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [No 3] - (1998) 72 ALJR 873; 153 ALR 643
Patterson v BTR Engineering (Aust) Ltd - (1989) 18 NSWLR 319
Pickering v Liverpool Daily Post and Echo Newspapers Plc - [1991] 2 AC 370
Radio Corporation of America v Rauland Corporation - [1956] 1 QB 618
Rahman (Prince Abdul) v Abu-Taha - [1980] 1 WLR 1268; [1980] 3 All ER 409
Richardson v Cummins - (1951) 15 ABC 185
Re East Ex parte Nguyen - (1998) 73 ALJR 140; 159 ALR 108
Ex parte Enrobook Pty Ltd - (1996) 142 ALR 87
Riley McKay Pty Ltd v McKay - [1982] 1 NSWLR 264
Robinson v Pickering - (1881) 16 Ch D 660
SCF Co Finance Ltd v Masri - [1985] 1 WLR 876; [1985] 2 All ER 747
Seaward v Paterson - [1897] 1 Ch 545
Z Ltd v A-Z and AA-LL - [1982] QB 558
See Jackson v Sterling Industries Ltd - (1986) 12 FCR 267
Sheldon v Metro-Goldwyn Pictures Corp - 309 US 390 (1940)
Siskina v Distos Compania Naviera SA - [1979] AC 210
South Carolina Insurance Co v Assurantie Maatschappij "De Zeven Provincien" NV - [1987] AC 24
TSB Private Bank International SA v Chabra - [1992] 1 WLR 231; [1992] 2 All ER 245
Tait v The Queen - (1962) 108 CLR 620
Ex parte Australian Builders' Labourers' Federation - (1957) 100 CLR 277
Third Chandris Shipping Corporation v Unimarine SA - [1979] 3 WLR 122; [1979] 2 All ER 972
Thomson Australian Holdings Pty Ltd v Trade Practices Commission - (1981) 148 CLR 150
United States v Village of Airmont - 839 F Supp 1054 (1993)
Vereker v Choi - (1985) 4 NSWLR 277
Warman International Ltd v Dwyer - (1995) 182 CLR 544
Winter v Marac Australia Ltd - (1986) 6 NSWLR 11
Z Ltd v A-Z and AA-LL - [1982] QB 558
re Symon: Public Trustee v Symon - [1944] SASR 102
Judgment date: 6 May 1999
Decision by:
Kirby J
[78] This appeal was argued as one about the jurisdiction and power of the Federal Court of Australia to grant a Mareva injunction against third parties.
Three defective descriptions
[79] As Voltaire said in another context [105] , none of the three elements of the foregoing description of the appeal is wholly accurate. First, we should expel Mareva to the books of legal history. The case from which the name of the judicial order derives [106] was not even the first in which such relief had been provided. That honour belongs to Nippon Yusen Kaisha v Karageorgis [107] , decided four weeks before Mareva [108] . English lawyers soon settled for Mareva. The word stuck. It soon spread. Yet such have been the changes in the conception of the circumstances in which such orders will be made, and so many and varied are the jurisdictional foundations for the exercise of the power to make such orders [109] , that a continued use of the Mareva label has a potential to mislead [110] . A preferable generic description for the order, called Mareva, would be an "asset preservation order". Henceforth, that is how I shall describe it.
[80] Secondly, the word "injunction" may involve an imprecise use of technical language. It is one thing for the Parliament to use that word in a statute providing specific orders which do not bear all of the characteristics of an injunction as understood by equity [111] . But courts should be careful not to gloss over the differences. Not every mandatory or imperative order is an injunction [112] . The "anti-suit injunction", when not in aid of a contractual stipulation, may be granted to protect the court's processes [113] . The so-called "Mareva injunction" shares similar characteristics which may not exist in an "injunction" in the strict sense [114] .
[81] Thirdly, it is traditional to speak of persons such as the appellants as "third parties". Courts [115] and text-writers [116] so describe them. The reason is clear enough. They are neither the plaintiff nor the defendant in the "main proceedings", in defence of the utility of the judgment in which the orders are sought. However, they are not "third parties" in the sense normally used to describe litigants joined as parties to proceedings in a court because they have a legal liability or entitlement common to the principal litigants. It is the essence of the complaint which persons in the position of the appellants make that they are "non-parties" to the main proceedings so that their property and interests should not be interfered with separately from any substantive claim brought directly against them.
[82] I shall therefore avoid the descriptions used by the parties during argument. For me, the basic issue is whether the Full Court of the Federal Court [117] erred in setting aside the initial order of the primary judge [118] . The latter refused the request of the respondent to make an asset preservation order against the appellants, non-parties to the proceedings in defence of which such orders were said to be "appropriate" [119] . Initially, the appeal to this Court was limited to one from the orders of the Full Court upholding the appeal. However, during argument, at the suggestion of the Court, the appellants sought leave to expand their notice of appeal to include a challenge to the orders made by the primary judge when, at the conclusion of the appeal, the proceedings were remitted to him by the Full Court [120] . Whilst I agree with this enlargement of the appeal, it must not deflect our attention either from the issues which were debated and decided by the Full Court or from those which were raised by the appellants in the original appeal to this Court. Not only do those issues affect questions of costs. They also affect the orders which it is proper for this Court to make in the circumstances.
The facts
[83] It is essential to see the "asset stripping" which the Full Court considered to warrant the making of asset preservation orders in this case, in its context. The litigation which culminated in those orders may be traced to proceedings commenced in the Federal Court as long ago as October 1993. By those proceedings, LED Builders Pty Ltd ("LED"), the respondent to this appeal, sued Eagle Homes Pty Ltd ("Eagle Homes") for infringement of LED's copyright in certain home plans. A second action was commenced in December 1994 with respect to additional plans. The two actions were consolidated. They are "the copyright proceedings".
[84] The hearing of the issues of liability in the copyright proceedings was separated from the other issues. That hearing took place in March 1996. In July 1996, judgment was delivered. It was in favour of LED [121] . Orders were duly made. Being interlocutory, leave would have been required for Eagle Homes to appeal. No application for leave to appeal was brought. Because of the way in which the trial judge expressed his conclusions, founded significantly on his impression of the credibility of Eagle Homes' only director (Mr Paul Cardile), the prospects of a successful appeal looked somewhat bleak. Despite Mr Cardile's protestations to the contrary, the trial judge concluded that Eagle Homes had intentionally and substantially reproduced LED's home designs [122] . The judge expressed himself as not satisfied, by the end of Mr Cardile's cross-examination, that Mr Cardile's evidence was truthful [123] .
[85] Mr Cardile and his wife were the only shareholders of Eagle Homes. What happened to the property and assets of Eagle Homes can only be understood in the light of what was happening contemporaneously in the copyright proceedings. Many questions were directed during the hearing of the latter to elucidate precisely the movement of the assets and property of Eagle Homes. Ultimately, there is not much dispute about what occurred. Relevant findings were made by the primary judge. Concessions were also made in this Court by counsel for the appellants. With the prospect of the loss of the copyright proceedings looming before them, Mr and Mrs Cardile had to face the likelihood of an order against Eagle Homes for damages or an order for an account of profits. In the event, LED elected for the latter. At the time of the hearing of the appeal before this Court, the trial on the account of profits had been concluded but judgment was awaited [124] .
[86] Meanwhile, the Cardiles (effectively Mr Cardile) had set in train steps which, the primary judge concluded, gave rise to an inference that the Cardiles were adopting devices "to remove assets from Eagle Homes which would otherwise be available to satisfy a judgment in favour of LED" [125] . The means adopted were not particularly "sophisticated". Indeed, the primary judge held that the evidence did not suggest that the Cardiles were sophisticated at all [126] . On the contrary, what they did amply warranted the description given by Tamberlin J in the Full Court. It was a "blatant" [127] effort by the Cardiles (whom the primary judge found controlled Eagle Homes [128] ) to alienate that company's assets to themselves and to a new corporate entity which they had created, Ultra Modern Developments Pty Ltd ("Ultra Modern"). The latter was incorporated in May 1995. Like Eagle Homes it was controlled by the Cardiles.
[87] On 6 June 1995 another step occurred. Eagle Homes registered the name "Eagle Homes". Ultra Modern quickly became registered as the proprietor of that name. It appeared as a logo on Ultra Modern's stationery. Although Eagle Homes did not cease trading altogether, it was wound down on the initiative of the Cardiles. The business which it formerly enjoyed was substantially redirected to Ultra Modern. And not just future business. Whilst the proceedings in the Federal Court were on foot, measures were taken to subtract from the funds available to Eagle Homes two large dividend payments declared by that company for the years ended 30 June 1994 and 30 June 1996 respectively.
[88] The profit and loss appropriation statement of Eagle Homes for the year ended 30 June 1994 shows an item "dividend paid $400,000". By a comparison of this item with the financial statement of the company for the year in question, it is clear that Eagle Homes made actual payments to the Cardiles amounting, at least, to the sum of the $400,000 dividend. A similar, but larger, dividend payment was made for the year ended 30 June 1996. I remind myself that this was shortly before judgment was delivered in the copyright proceedings but after the hearing in which cross-examination had exposed the inconsistencies in Mr Cardile's evidence upon which the trial judge commented so critically. According to the profit and loss appropriation statement for that year, Eagle Homes paid the Cardiles a dividend of $800,000. This was done by crediting the shareholders' loan accounts. By a comparison of the relevant items in the balance sheet and profit and loss appropriation statements for the year in question, it is clear that Eagle Homes made actual payments to the Cardiles. These amounted, at least, to the difference between the $800,000 dividend referred to and the increase otherwise recorded during the period in the company's indebtedness to the shareholders. So analysed, the actual payment to the Cardiles must have been, at least, something just short of $660,000. The total dividends paid out of the assets of Eagle Homes to the Cardiles, whilst the copyright proceedings were pending, were therefore more than $1 million.
[89] Taking into account the nature of the civil wrong alleged (and found to exist) in the copyright proceedings, the strong terms in which the reasons of the judge in those proceedings were expressed and the undisguised manoeuvres with the business name and dividend payments, it is hardly surprising that the primary judge should have concluded, as he did for the purposes of the application before him, in favour of the making of asset preservation orders. The primary judge's conclusion was that the Cardiles (and the companies which they controlled) were at least in part motivated by the desire to ensure that the assets of Eagle Homes would not be available to meet any judgment in the copyright proceedings in favour of LED [129] .
[90] It was in these circumstances (which are further elaborated in the reasons of Gaudron, McHugh, Gummow and Callinan JJ) that the application was made by LED to obtain asset preservation orders directed not only at Eagle Homes, but also at the Cardiles and Ultra Modern, non-parties to the copyright proceedings. Uninformed by legal authority, the application would seem on its face to be perfectly reasonable. Pursuit of an asset preservation order against Eagle Homes alone would invite a response expressed in equine terms about stable doors and horses which had bolted. The primary judge found that there was no evidence that either Mr or Mrs Cardile was planning to depart the jurisdiction or to dispose of his or her assets out of the jurisdiction [130] . This finding, however, was by no means an assurance that the Cardiles would not otherwise dispose of the funds and other assets of which Eagle Homes had been denuded, if they retained uninhibited control over them. If they had engaged in asset stripping once, for the purpose of frustrating or preventing the recovery of the judgment ultimately obtained in the copyright proceedings, they might (unless restrained) do so again.
[91] The primary judge made many findings, and drew several inferences, adverse to the Cardiles and Ultra Modern who together with Eagle Homes comprised the defendants before him. He accepted [131] that, if an application had been made by LED earlier, it "may well" be that relief would have been granted which would have prevented the declaration (and payment) of the dividends and the transfer of the business name by Eagle Homes. Yet, in the end, he was not persuaded that LED had made out a case for "Mareva orders" against the Cardiles or Ultra Modern. He made such orders as asked against Eagle Homes. However, he dismissed the proceedings against the Cardiles and Ultra Modern [132] .
[92] No appeal was taken to the Full Court against the order made against Eagle Homes. Given that the liquid funds of that company available to meet an ultimate judgment in favour of LED had already been depleted, there may have been no practical point in seeking to challenge the order addressed to it. However, LED sought leave to appeal to the Full Court of the Federal Court against the dismissal of the application for orders against the Cardiles and Ultra Modern. The Full Court unanimously upheld LED's application. It granted leave. It allowed the appeal. It set aside the order of dismissal. And it remitted the matter to a single judge to make orders in accordance with its reasons [133] .
[93] When the matter was returned, it was heard by the same primary judge. He proceeded to make orders against the Cardiles and Ultra Modern restraining them from disposing of, or dealing with, any of their money, property or other assets other than for specified purposes [134] . In May 1998, this Court granted special leave to the Cardiles and Ultra Modern (the appellants) to appeal from the judgment and orders of the Full Court. Neither the Full Court, nor this Court, would ordinarily become involved in reassessing the purely discretionary considerations which informed the making, or refusal, of interlocutory orders of the kind in issue here. The feature of the matter which was said to warrant the attention of both courts was the scope of the jurisdiction and power of the Federal Court of Australia to make asset preservation orders in the circumstances described, and in particular against non-parties to the main proceedings (such as the appellants) and especially where (as was said to be the case here) LED had no other cause of action against the appellants and the appellants were not shown to hold property belonging to Eagle Homes. This was the issue of principle dealt with by the Full Court. It was the question addressed in the special leave hearing. It was the point raised in the original notice of appeal to this Court [135] .
Decision of the primary judge
[94] The primary judge nominated two reasons for refusing orders against the appellants. First, he pointed out that LED had established no independent cause of action against them [136] . In so far as LED claimed protection of the funds derived from stripping the assets of Eagle Homes, it was to protect possible future proceedings by LED [137] which might otherwise be rendered futile or worthless. However, the judge said that he was unsatisfied that any such claims (assuming them to exist) were in jeopardy without the making of an order, whether of the kind sought or of some other kind, for example, the appointment of a receiver [138] .
[95] Secondly, whilst accepting that, in the past, relief of the kind claimed had been given against non-parties ("third parties") the primary judge pointed out that such relief had only been available where the latter held assets in which the potential judgment debtor had a "proprietary interest" [139] . In support of this approach, the primary judge cited early and local authority [140] rather than later authority in the Federal Court [141] and elsewhere [142] suggesting the availability of a broader power. In particular, there was no analysis in his reasons of the language of, and implications to be derived from, the Federal Court of Australia Act 1976 (Cth) [143] ("the Act"). In this way, the primary judge concluded that LED's application was an inappropriate forum for determining the respective rights of Eagle Homes and of the appellants relating to the funds and assets in question [144] . Because neither a "proprietary interest" nor "control over or access to the assets and funds" had been demonstrated, no relief of the kind sought could, in law, be granted [145] .
Decision of the Full Court
[96] In the Full Court, it appears from the record of arguments advanced for the respective parties that the issue was neither a complaint that the relief sought by LED was impermissibly wide [146] nor that discretionary considerations favoured, or militated against, the provision of the orders claimed. As recorded in the reasons of the Full Court, argument proceeded on the claim by LED that the primary judge had adopted too narrow a view of the availability of "Mareva relief".
[97] All members of the Full Court concluded that the primary judge's approach to the Court's jurisdiction and power had been unduly restrictive. Beaumont and Branson JJ, in joint reasons, approved the approach earlier adopted by Kiefel J in Tomlinson v Cut Price Deli Pty Ltd [147] , where her Honour determined that an asset preservation order might be made against a non-party where it had become "mixed up in the transaction ... and ... where [it had] actively participated in the deliberate removal of assets" [148] . Where the defendant, and potential judgment debtor, controls the non-party, it was held to be within the jurisdiction of the Federal Court to make orders which would render it plain that the defendant was not to act through that non-party, so as to endanger assets which might be called upon to help discharge an eventual judgment. Beaumont and Branson JJ held that the "only real questions" affecting the jurisdiction of the primary judge were [149] :
"[F]irst, whether there was a serious question to be tried as to whether assets presently under the control of [Ultra Modern] and Mr and Mrs Cardile could be available to satisfy a judgment against [Eagle Homes] in favour of [LED], and secondly, whether there was a danger of such assets being dealt with by [Eagle Homes], or [the non-parties], so that the Court's process would be frustrated."
On the undisputed facts, their Honours decided that "suitable Mareva relief" should have been granted against the appellants. [150]
[98] The other judge in the Full Court (Tamberlin J) returned to the principles stated by this Court concerning the basis of the jurisdiction and power of the Federal Court to make orders of the kind in question [151] . Asking whether such relief was to be granted "to preserve funds in the hands of non-innocent third parties in circumstances where there is a significant prospect of an action to set aside the alienation of property from the respondent to those third parties" [152] , Tamberlin J stated [153] :
"There is no reason in principle ... why it is necessary to impose a limitation on the grant of Mareva relief against a third party to the effect that a [plaintiff] must have a proprietary 'interest' in the divested assets. The power is purposive. Its aim is to prevent frustration of the Court's process".
[99] Although expressed in different terms, the essential reasoning of all members of the Full Court was the same [154] . Where there is culpable behaviour by a non-party which may endanger the recovery of the fruits of judgment in proceedings before a court with the requisite powers (and which would thereby frustrate that court's process) the party in peril of that outcome may seek an asset preservation order. The nature of such an order would be to preserve assets shifted from an opposing party to a non-party so as to permit the later exploration of a question whether those assets, although under the control of the non-party, could yet be rendered available to satisfy a judgment and thus to uphold the utility of the court's orders.
[100] All judges in the Full Court agreed to the remittal of the proceedings to a single judge so that, in the words of Beaumont and Branson JJ, "outstanding adjectival questions" [155] could be sorted out. In accordance with the way in which the appeal had been mounted and argued, the Full Court confined itself to the issues of principle. It did not concern itself with discretionary considerations at all. Nor did it deal with the refinement of the orders sought in order to confine the relief given to the minimum necessary to achieve the stated purposes. Those matters were not in contest in the Full Court. If they were in contest at all, the proper place to have raised them would have been when the proceedings were returned before the primary judge following the remittal. As no such objections were then advanced, it is unsurprising that the final form of the order was essentially that which LED had originally sought. The notice of appeal to this Court, and the issues argued on the special leave application, were confined (as the debate in the Full Court had been) to the issues of general legal principle. I shall return to this consideration.
Common ground
[101] Before turning to the elucidation of the questions of legal principle, it is useful, in order to confine the issues for decision by this Court, to record a number of points upon which there was common ground.
[102] First, no constitutional argument was advanced to challenge either the suggested foundation of the Federal Court's jurisdiction to make orders of the kind made here or to question the orders made as being outside the judicial power of the Commonwealth. Although it was contended that the Constitution puts a brake on the expansion of orders of this kind, at least in federal courts, no specific constitutional limitation was argued.
[103] Secondly, the appellants accepted, as LED asserted, that the equitable principles to which they appealed were not set in stone and could be extended incrementally. The debate of principle which they brought to this Court was thus about the increments proper to the present circumstances. LED conceded that there were some limits on the power to make such orders. In particular, LED agreed that such orders could not be "free standing" but had to be incidental, as here, to a "pre-existing cause of action" upon which the Court had power to enter judgment [156] . In this case, the suggested problem did not arise from the absence of a "pre-existing cause of action" in the "main proceedings" (for that had been established by the decision of the trial judge in the copyright suit). What was in issue was the significance of the suggested absence of a "pre-existing cause of action" on the part of LED or Eagle Homes against the Cardiles and Ultra Modern. For the appellants that was a fatal omission. According to LED it was not.
[104] Thirdly, it was accepted by both sides that the orders made did not, as such, put any assets back in the control of Eagle Homes. All they did was to prevent further dissipation of the assets which had been transferred to the appellants.
Asset preservation orders: principles
[105] I take the principles applicable to the provision of asset preservation orders of the Mareva type to include the following elements.
[106] Constitutional context : In respect of orders made by a federal court in Australia, the Australian Constitution takes effect. One source of the jurisdiction of the Federal Court in the present case was said to be the Act [157] and the expressly stated and implied powers of the Federal Court under that Act. As the ultimate source of such powers derives from the Constitution [158] , the grant of power should be read to conform to one which was proper to a federal court exercising the judicial power of the Commonwealth. Relevantly, that means a court applying legal norms. It does not mean a court wholly at liberty to invent, and then apply, rules according to whim or uncontrolled perceptions of "justice" or "fairness" [159] . In the United States of America, the closest equivalent to interlocutory asset preservation orders is the "preliminary injunction" [160] . This is defined as an order "issued to protect [the] plaintiff from irreparable injury and to preserve the court's power to render a meaningful decision after a trial on the merits" [161] . To some extent, the operation of such orders is both sustained and controlled by the constitutional requirement of due process [162] . No specific arguments were advanced as to the application of the Australian Constitution in this case. However, clearly enough the word "matter", referred to in s23 of the Act, carries the same meaning as that word bears in the Constitution [163] . The jurisdiction so conferred on, and powers granted to, the Federal Court are accordingly those proper to a court created within Ch III of the Constitution. The boundaries of the implications to be derived from these powers must await future cases. For the present, it is enough to note this starting point for the elucidation which follows.
[107] Federal statute: The power of the Federal Court of Australia to make orders to preserve assets affected by litigation is principally found in s23 of the Act [164] . That section reads:
"The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate."
[108] S5(2) of the Act is also relevant. It provides that the Federal Court "is a superior court of record and is a court of law and equity". These two provisions afford express powers to the Federal Court. But they also give rise to implied powers, for example to prevent abuse of the process of the Court [165] . Occasionally, it has been suggested that the Federal Court (and the Family Court of Australia) enjoy "inherent" powers [166] . However, because such courts are created by statute (and not, for example, out of the royal prerogative) the better view is that their powers must be found in the express language of enabling statutes or in implications necessarily derived from such provisions. When regard is had to s23 of the Act, its great breadth is immediately obvious. The power is granted "in relation to" matters. Those are words of the widest connection [167] . The power is not confined to the making of orders "in" matters. It is sufficient that there be a relevant connection between the matter and the order in question. When the scope of the orders and their "kinds" are considered, it is left to the Federal Court to make orders of such "kinds" as it thinks "appropriate". The word "appropriate" has outer boundaries. It suggests a limitation derived from legal authority, principle and policy. However, the scope of those boundaries is not narrow. Its breadth is addressed not simply to the "orders" appropriate to the particular case but to the "kinds" of orders, ie the variety and classes of orders which the Court may devise.
[109] The English legislation out of which Mareva injunctions were originally fashioned [168] , reversing earlier authority [169] , was not as broad as that conferred on the Federal Court in Australia [170] . In addition to the express power in s23 (and I would add s5(2)) the Federal Court is cloaked with implied powers simply because it is a court of the kind stated. [171] Many of the problems which are said to have arisen in the development of curial orders for the preservation of property in connection with litigation might have been avoided if courts in Australia had taken the ordinary and, in my view proper, course. This would have involved beginning their consideration with the actual sources of their power rather than endeavouring (as they generally have) to follow, a few years later, the developing jurisprudence of the English courts as they were producing their Mareva progeny.
[110] Powers of courts : There is a further consideration which extends even more widely the powers of the Federal Court to make orders "appropriate" in relation to matters before it. This is the general principle that statutory provisions, conferring jurisdiction or power on a court, are not construed as subject to any limitation which is not strictly required by their language and purpose [172] . Where a court is endowed with a particular jurisdiction, it enjoys the powers necessary to enable it to act effectively within that jurisdiction. Its powers are not ordinarily construed as restricted to defined and closed categories [173] . This is because of the infinite variety of circumstances which may come before a court and require "appropriate" orders [174] . This well established general principle provides a warning against attempts by judges to state closed categories derived from the history of Chancery courts or from recent court decisions in their jurisdiction. To do this would amount to an impermissible gloss on the broad language by which the Parliament of Australia has conferred the power. It would, moreover, shackle the implications which follow from the very nature of the body receiving that power.
[111] The attempts of courts and text-writers to fashion immutable "principles" to harness broad statutory powers, such as those conferred by s23 of the Act, may be understandable from an historical perspective considered from pre-Mareva days. It may be explicable as an attempt to afford useful rules of thumb. But statutory courts should never stray far from their statutory mandate. Nor should they forget the general principles which repeatedly emphasise the broad scope of the power conferred on a court and the need to avoid rigid, restrictive categories. In a particular case, such rigidities could prevent the proper exercise of the court's powers, as the Parliament has provided.
[112] Avoiding rigid rules : Courts exercising equitable jurisdiction - or statutory jurisdiction analogous to that of courts of equity - need to be especially cautious before adopting rigid rules. In the English case Soinco SACI v Novokuznetsk Aluminium Plant, Colman J expressed this thought in terms which I would adopt. Faced with submissions akin to those advanced by the appellants in this case, his Honour said [175] :
"Such ... would involve treating the rules of the Court of Chancery before the Judicature Acts as carved in stone and as expressing immutable principles incapable of development beyond 1873 unless changed by Parliament. This must be wrong in principle. English law has traditionally developed by means of identifying broad but established juridical principles which have been extended incrementally to new factual situations when the interests of justice required such extension. The development of the law relating to Mareva injunctions amply demonstrates that this developing process applies to equitable remedies as to any other."
[113] There are many statements to similar effect. Several such statements have been made in the course of English decisions on Mareva injunctions as they followed their discernible trend away from the strictures expressed in Siskina v Distos Compania Naviera SA [176] in respect of orders affecting non-parties. Thus in Mercantile Group (Europe) AG v Aiyela, Sir Thomas Bingham MR remarked, in response to a suggestion that the English Court had no jurisdiction to make a Mareva order in that case, that if it were so [177] :
"the armoury of powers available to the court to ensure the effective enforcement of its orders would ... be seriously deficient. That is in itself a ground for inferring the likely existence of such powers, since it would be surprising if the court lacked power to control wilful evasion of its orders by a judgment debtor acting through even innocent third parties."
Such words apply with even greater force where the "third parties" do not appear "innocent".
[114] The particular reasons given in disposing of one claim for an asset preservation order should not be converted into universal principles of invariable application. The case law on this topic is a field of single instances, cultivated in a garden of interlocutory orders, nurtured in a wilderness of broad discretions. Unlike many English gardens, this one has a measure of order stamped upon it, brought by analogy from the equitable rules developed for general injunctive relief. But excessive order and rigid rules would endanger the relief in question and be alien to its essential character.
[115] Rationale for relief : In considering the "appropriateness" of an asset preservation order, of the kind in question here, it is proper to remember the explanations given by the courts for the development of such orders. The reasons have involved two basic and interrelated concepts. The first arises from the facts of modern commercial life, of which courts are not ignorant and to which they are not indifferent. Today it is much easier than was previously the case to transfer assets quickly both nationally and internationally. Electronic networks facilitate a dishonest party's frustration of the enforcement of a court's judgment once entered [178] . The courts need to adapt their remedies to this reality. As Brennan J observed in Jackson v Sterling Industries Ltd [179] , the schemes which debtors may devise for divesting themselves of assets are legion. The novelty of such schemes is no objection to the validity of an order seeking to arrest the process.
[116] Secondly, such orders have been developed as much to protect and defend the court's process from abuse as to protect and defend the interests of the potential judgment creditor. This point was made in Canada in Grenzservice Speditions Ges m b H v Jans where Huddart J observed [180] :
"The Mareva and Anton Piller orders were conceived not so much to protect plaintiffs as to protect the court's jurisdiction against defendants bent on dissipating or secreting their assets or evidence in order to render inconsequential the judicial process against them."
[117] To the extent that rules, devised in earlier times, were invoked to require the result that a litigant was powerless to protect itself from being out-manoeuvred by its opponent, they would be liable to derision. To suggest that such rules may deprive a court of power "in relation to" a "matter" before it, because the order contemplated was not capable of being "appropriate", would seem most unconvincing. At least it would be so when the second purpose of such orders is kept in mind, namely to "prevent a defendant from frustrating enforcement of a judgment when obtained" [181] .
[118] Limits on orders : Although the powers of a court, such as the Federal Court, under provisions such as s23 of its Act, are very wide, there are "jurisdictional and other limits" [182] . So much is inherent in the source of the power. In a society such as ours, people are ordinarily entitled to use their property as they see fit. This is a civil right with which the courts will interfere only when the law authorises them to do so, and then for good reason. Those who are non-parties to litigation between others are entitled to expect justification for the making of orders as "appropriate" as against them. The interests of non-parties must be given weight according to the circumstances of the case [183] . The interposition of an innocent non-party presents a serious complication to the making of an asset preservation order which affects the use by that party of what, in law, is its property [184] . It is in this context that courts have propounded principles designed to defend "the business rights of an innocent third party ..." [185] . Many such cases involve the position of banks with whom are deposited the funds stripped from an actual or potential judgment debtor [186] .
[119] Different considerations apply where the non-party is not innocent, is either the controller or under the control of the judgment debtor, or where it has "mixed up" its assets and property with those of the judgment debtor [187] . In such cases, where the non-party has actively participated in a deliberate removal of assets or property and is still in possession of the same, it is much more likely that a court, asked to make an asset preservation order, will do so. Certainly, it is more likely than if the non-party were a complete stranger to the asset stripping and wholly "innocent" of involvement in it.
[120] The suggestion that there is a universal rule that asset preservation orders of the Mareva type may not, or will not, be made against non-parties in the absence of proof that the party seeking such relief has a subsisting cause of action against that party (or that the judgment debtor has a proprietary or beneficial interest in the property held by the non-party), must be rejected. Judicial dicta which propose such strict rules [188] are too broadly stated. At least this is so where such rules are intended to suggest a categorical requirement [189] .
[121] To secure an asset preservation order in a case such as the present, it will be necessary for the party seeking it to show, in addition to the conditions ordinary to the grant of relief injunctive in nature that (1) there is a danger that the non-party will dispose of relevant assets or property in its possession or under its control; and (2) that the affairs of the actual or potential judgment debtor and the non-party are closely intermingled, and that the actual or potential judgment creditor has a vested or accrued cause of action against the non-party or may otherwise become entitled to have recourse to the non-party, its property and assets to meet the claim. Clearly, on the preliminary findings made by the primary judge, these preconditions were established in the present case.
[122] Form of orders : In framing asset preservation orders, certain features must be observed [190] . They take effect in personam. They are thus distinguished from remedies, such as tracing, which affect proprietary rights [191] . They are interlocutory orders, subservient to the main proceedings but potentially vital to their utility. The grant of such relief is discretionary. They must often be provided (or withheld) in urgent circumstances where a propensity to shift assets, apparently to defeat a judgment, has already been manifested. The plaintiff must establish a real risk of assets being disposed of [192] . No such relief should be contemplated without the provision of an undertaking as to damages [193] . This is protective both of the defendant and of non-parties made subject to such orders. It acts as a sanction against ill-considered applications or unjustified orders. It is the duty of the lawyers of the parties to remind the judge of this prerequisite [194] . Various qualifications to the operation of such asset preservation orders are now settled [195] . Thus, provision should be made for liberty to apply to vary the orders on short notice should it emerge that something has been overlooked in the exigencies. Or should some inconvenience arise, proof of which would warrant a variation of, or further exceptions to, the orders as initially framed.
[123] The fact that applications for asset preservation orders must often be decided in urgent circumstances cannot, of course, excuse the making of orders of a kind that are not, in law, "appropriate". The fact that the orders are interlocutory does not relieve the court asked to make them of the obligation to consider their utility and the ultimate right of the judgment creditor to gain access to the assets and property made the subject of them. However these considerations require that a very large measure of latitude be allowed to judges as to when they consider it "appropriate" to provide such relief, with the aim of protecting the position of an actual or potential judgment creditor and the process of the court itself. Few judges, asked for such orders, have the luxury of the extended reflection availed of by appellate courts. In expressing the applicable principles, we should not overlook the practical exigencies in which orders of this kind are typically made.
[124] Minimum disturbance : The restraint against the disposal of assets pursuant to an asset preservation order is usually expressed so that it does not tie up assets and property beyond the extent that the party seeking the orders may be thought likely to recover [196] . This rule is a reflection of considerations involved in the "minimum equity" principle, namely that relief should be confined to the "limits set by the purpose which it can properly be intended to serve" [197] . In the case of orders affecting non-parties, the practice tends to minimise the inconvenience which an asset preservation order may otherwise occasion [198] . A bank or other innocent non-party could not ordinarily be expected to know details of the judgment debtor's assets [199] . Further the rule is, in part, a consequence of an entirely proper desire to limit the ambit of the orders made to that which is truly necessary, given that breach renders the party bound by the orders liable to prosecution for contempt [200] . To the extent that orders for the preservation of property impede the use by a party of its assets beyond that which is essential to the purposes of the preservation, it oppresses the party bound, exposes it needlessly to risk of punishment for contempt, ties up its affairs and finds no justification in either of the reasons which have given birth to this remedy [201] .
Application of the principles to the case
[125] When these principles are applied to the facts of this case, it will be seen immediately that the arguments which the appellants sought to advance before this Court, and upon which they failed in the Full Court, cannot be sustained. The Federal Court was not deprived of jurisdiction to grant orders of the kind sought against the appellants either because, in this matter, there was no established cause of action maintainable on behalf of LED against them or because property in their hands was not available to LED to satisfy a judgment which it might in future obtain against Eagle Homes. To secure such orders, the applicant does not need to prove affirmatively the existence of such a cause of action or right to the property. To so assert mistakes the jurisdiction of the Federal Court which extends, in such cases, to the making of "appropriate" orders designed to respond immediately to conduct apparently taken to defeat the Court's own process.
[126] In saying this, I do not accept that, in the present case, LED had no causes of action available to it by which it might ultimately gain access to the assets and property moved from Eagle Homes to the private accounts of the Cardiles and to Ultra Modern. Where, as here, Eagle Homes had arguably "mixed up" or "intermingled" its property with that of the Cardiles and Ultra Modern, those parties scarcely qualified as "innocent", particularly because it was found that the Cardiles controlled them all. Upon the basis of that finding, and given the purposes of the orders, it was unnecessary for LED to establish conclusively that, in later proceedings it would be able to secure the effective reversal of the asset stripping conduct, whether under the Conveyancing Act 1919 (NSW) s37A, under provisions of the Corporations Law (Cth) [202] or in proceedings for breach of fiduciary duty or civil conspiracy.
[127] In many cases of disputed entitlement and contentious legal claims, it would be wholly unreasonable to impose on the actual or potential judgment creditor the obligation of establishing, in an application for such interlocutory orders, all of the propositions that would be necessary eventually to gain access to the diverted assets or property in later and different proceedings. To the extent that the non-party affected by the order was completely innocent of the diversion of assets and property, a greater measure of satisfaction would be required that such claims would, ultimately, be successful. But where (as here) the diversion was "blatant" [203] and the non-parties were far from "innocent" [204] , it was open to the Federal Court to conclude that resolute action was required to defend the utility of its orders in the copyright proceedings. The established conduct of Eagle Homes and the Cardiles justified such prompt action. Nice disputes about the ultimate remedies available to LED, or to a receiver on behalf of Eagle Homes, to recoup the diverted assets and property would have more persuasiveness in the mouths of innocent non-parties than when advanced by parties such as the Cardiles and Ultra Modern in the circumstances found to exist in this case.
[128] The general liberty to apply, reserved to the appellants, afforded a means to elucidate the prospects of recoupment and the ultimate utility to LED of the asset preservation order which it sought. That was where their arguments should have been heard, once the primary judge made the findings, which he did, concerning the conduct of Eagle Homes and of the appellants. The arguments of the latter, suggesting a jurisdictional impediment (or one of power) were rightly rejected by the Full Court. This Court should affirm the Full Court's approach. It should dismiss all of the original grounds of appeal for, in substance, they (like the appellants' initial submissions to this Court) addressed nothing else than the questions of jurisdiction and power which formed the basis of the appellants' special leave application [205] .
Discretionary considerations and form of orders
[129] The appellants, nonetheless, made a number of telling points in their oral arguments concerning the width of the orders which LED had sought and which, on remitter, the primary judge ultimately made. For example, they complained about the terms of those orders restraining the Cardiles and Ultra Modern "from disposing of or dealing with any of their money, property or other assets" other than for specified purposes. It is difficult to justify an order so broadly expressed. It effectively freezes all of the assets of the appellants subject only to the specified exceptions. The ultimate measure of the property and other assets of the appellants which could properly be made the subject of an asset preservation order is that part of such property and assets which, on a reasonable estimate, would be needed to meet a judgment of the Federal Court in favour of LED in the copyright proceedings. No more. There was no warrant for freezing the assets of the appellants beyond LED's potential judgment. True, it would have been difficult for the primary judge to estimate, with precision, the ultimate recovery of LED, given that the claim for any account of profits had been heard by another judge and reserved. However, it was necessary, in terms of principle, to limit the disturbance of the property and other assets of the Cardiles and Ultra Modern to the potential recovery of LED and nothing more.
[130] Although the orders as made listed many of the exclusions common in such orders, the appellants also complained that the exception for "the ordinary living expenses of [the Cardiles]" was insufficiently broad to permit them to take a holiday. I will not condescend to consider whether this was so for there are three substantial answers to the complaints belatedly made about the form of the orders.
[131] First, the proper place for the appellants to have raised such matters was before the primary judge when the proceedings were returned to him on remitter. It was precisely to permit "outstanding adjectival questions" [206] to be resolved in an efficient way, that the Full Court, instead of fashioning orders for itself (as it might have done), returned the entire matter to a single judge where the "fine tuning" of the orders could more appropriately and effectively be achieved. The fact that the appellants did not raise before the primary judge, on remitter, any of the discretionary considerations or objections to the form of the orders urged upon this Court, is a reason why they would ordinarily not be heard to complain about such matters [207] .
[132] Secondly, the orders as they stand reserve liberty to any party, including the appellants, to apply on short notice to a judge of the Federal Court. The proper place to have raised issues concerned with the suggested over-reach of the orders eventually made, and the re-fashioning of those orders, was before the primary judge. As was demonstrated by the eventual acquiescence of LED before this Court, it was not at all unlikely that, had defects in the terms of the orders been brought to notice, LED would have consented to proper amendments. This is the way in which disputes concerning the form of orders are ordinarily resolved, at least unless the orders are misconceived in law or are so ineptly framed that they are incurably defective [208] .
[133] Thirdly, the complaints about the form of the orders were not the essential matter about which the parties had argued their respective cases. From first to last, the issues in contention were those relating to the jurisdiction and power of the Federal Court to make asset preservation orders at all . Not orders framed in this or that way. There is no mention in the Full Court's reasons of the suggested defects of form. This is because those were not the issues before that court. The only matters of a discretionary character raised in the original grounds of appeal to this Court concerned first, the alleged error of the Full Court in disturbing the order of the primary judge in circumstances where, as it was complained, "there was no evidence that the [appellants] would be or were likely to dispose of their property in circumstances that might constitute an abuse of process" and secondly, that the Full Court had erred in taking into account "the declaration by [Eagle Homes] of dividends out of its profits, the lawfulness of which declaration was not put in issue".
[134] Neither of these specific grounds had legal merit. It was clearly open, both to the primary judge and to the Full Court, to infer that unless restrained by asset preservation orders, the appellants would dispose of the assets which they had received in order to frustrate the utility of the Federal Court proceedings. Such conduct, if ultimately proved, could amount to an abuse of process. Taken in isolation, the declaration by Eagle Homes of the dividends in favour of the Cardiles might have been lawful. But in their context, it was certainly open to the Federal Court to infer that they constituted an endeavour to deplete the assets of Eagle Homes, leaving only a husk to meet any eventual judgment [209] .
[135] In view of the long history of this unfortunate saga, there are strong reasons of convenience to avoid yet a further remitter of the proceedings to the Federal Court to make the variations in the orders which the appellants belatedly advocated. To that end, I agree that the grounds of appeal should be amended to permit the appellants, although long out of time, to bring an appeal from the orders ultimately made by the primary judge, on remitter from the Full Court. I concur in the form of the substantive substituted orders which Gaudron, McHugh, Gummow and Callinan JJ have proposed. They largely follow the document handed to the Court for LED, after the scope of the appeal was enlarged.
[136] Only if this Court were to allow the appeal, might it substitute the amended orders for those made by the primary judge, on remitter. However, for the three reasons which I have mentioned, the enlargement of the appeal should not be at the cost of LED. That party came to this Court to meet arguments of jurisdiction and power. Upon those arguments, it was entitled to succeed. The complaints as to form can, and should, be addressed by this Court. But because they could, and should, have been raised in the Federal Court, the appellants should have no costs of the variation. They lost their substantive arguments. They should therefore pay the costs.
[137] I therefore concur in the orders proposed by Gaudron, McHugh, Gummow and Callinan JJ save that I would order that the appellants pay the costs of the appeal to this Court and I would not disturb the costs order in their favour in the Full Court of the Federal Court.