DFC of T v HICKEY; DFC of T v HORNE

Judges:
Ipp J

Court:
Supreme Court of Western Australia

Judgment date: Decision delivered 22 August 1996

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Ipp J

On 19 July 1996, on the ex parte application of the plaintiff, I granted Mareva injunctions against both defendants. Included amongst the orders I made were orders requiring the defendants to make discovery on oath of all their property, including all real and personal property, cash and moneys deposited on account with any bank, building society or other lending or financial institution.

The defendant, James Lindsay Hickey (Mr Hickey) filed an affidavit in response to the order, as did the defendant, Heather Horne (Ms Horne). The plaintiff is not satisfied with these affidavits and has now applied for orders that the defendants be cross-examined on them. The plaintiff also seeks orders varying the orders made on 19 July 1996 by making it plain that the injunctions restraining the defendants from dealing with their assets apply to their assets outside Western Australia. The defendants appeared, represented by counsel, Mr Shirrefs, and opposed the application now made by the plaintiff. The two matters are interrelated and my reasons for judgment apply to both.

The plaintiff alleges that as at 19 July 1996 Mr Hickey owed approximately $161,420 in respect of taxation for the financial years ended 30 June 1995 and 30 June 1996. Since then Mr Hickey has paid the plaintiff $8,000 and it is alleged that he presently owes the plaintiff about $153,500 (taking into account interest and penalties). Also as at 19 July 1996, Ms Horne owed the plaintiff about $223,110 for taxation for those financial years and this amount has since increased by reason of interest and penalties. Neither of the defendants has disputed their indebtedness, as alleged.

The plaintiff alleges that between 7 September 1994 and 12 April 1996 the defendants transferred approximately $826,000 from Australia to bank accounts in New Zealand. An affidavit filed by Mr Robert Paul Hornsby on behalf of the plaintiff dealt with the international transfers made by the defendants relating to that sum and alleged that:

``The international funds transfers were made to two New Zealand joint bank accounts in the name of J Hickey and H Horne.

Between 7 September 1994 and 12 April 1996 the total number of international transfers reported was 96. The total amount of funds involved was $826,081. Two transactions were for cash cheques amounting to $19,980. One transaction was for $30,000. The balance of the funds, being a total of $776,101... was transferred in 93 separate transfers of amounts less than $10,000.''

Mr Hornsby alleged further:

``The reporting requirements of the Financial Transaction Reports Act 1988 in respect of cash transactions require cash transactions of $10,000 or more to be reported to Austrac. The activity by which large amounts of funds are transferred in separate amounts of less than $10,000 is commonly known as structuring. It is an offence under s 31(1) of the Financial Transaction Reports Act 1988 to use structured transfers to avoid the reporting requirements of the Financial Transaction Reports Act 1988. I believe that on the information available to me, in particular the Reports, Mr Hickey and Ms Horne have committed an offence under s 31(1) of the Financial Transaction Reports Act.

The schedule shows that of the 93 transactions set out above, 23 of the transactions took place between 7 September 1994 and 30 June 1995. The total amount transferred pursuant to these transactions was $238,119. The (sic) also shows that 67 of the transactions took place between 1 July 1995 and 12 April 1996. The total amount transferred pursuant to these transactions was $537,982.

Between 7 September 1994 and 18 July 1995 I believe that Ms Horne may have also deposited currency to the value of $219,619 to a cash dealer in Australia using the aliases J Thomas, H Thomas, Jody Thomas and Jodie Thomas on 24 separate occasions, which money was then transferred to New Zealand bank accounts in the name of J Hickey and H Horne.''

And:

``On 20 November 1994 and 3 November 1994 I believe that Mr Hickey may have deposited currency to the value of $9,500 and $9,000 respectively to a case dealer in Australia using the aliases J Humpries and James Humpries respectively, which money was then transferred to New Zealand bank

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accounts in the name of J Hickey and H Horne.''

Mr Hickey's affidavit, made in response to the orders of 19 July 1996, disclosed that he has net assets within Western Australia of about $175,607. He listed amongst his assets two New Zealand bank accounts with balances of $171.12 and $690.44 respectively. These are the only assets of Mr Hickey that he identified as being located in New Zealand. Ms Horne's affidavit disclosed that she has net assets within Western Australia of about $173,856. She does not identify any assets located in New Zealand.

The values of the assets of Mr Hickey and Ms Horne are arrived at on the basis of values attributed to a house and an apartment, two vehicles and household furniture. These assets are said to be jointly owned by them. They allege that the value of the house is $320,000 but the plaintiff has adduced evidence from a valuer that the unencumbered market value of that property was estimated to be $300,000. In setting out the net asset values of each of the defendants' assets, I have assumed that the value of the house is $300,000 and that the values of the other assets are the values alleged by the defendants.

The main thrust of the application for leave to cross-examine is that while the defendants appear to have transferred approximately $826,000 to bank accounts in New Zealand between 7 September 1994 and 12 April 1996, those moneys, or assets acquired by those moneys, have not been identified in the affidavits provided (save for the two bank accounts of Mr Hickey to which I have referred).

Mr Shirrefs submitted that a Mareva injunction could only operate within the territorial jurisdiction of the court granting it and, as the order for discovery was ancillary to the Mareva injunction, it could not operate beyond the ambit of the injunction. He contended, therefore, that the discovery affidavits were only required to relate to assets within the jurisdiction of this State, and this was the explanation for the omission to refer to assets elsewhere. I do not accept this submission. The initial order made on 19 July 1996 required discovery to be made of all the property of the respective defendants, without any limitation as to territory, and there has been no attempt to set aside that order. Indeed, as I have pointed out, Mr Hickey's affidavit identified two bank accounts in New Zealand. The affidavits filed by the defendants in response to the order do not appear to have been drafted on the basis that they record only the defendants' assets within the jurisdiction. They purport to set out the assets of the defendants wherever they may be situate.

I should say that I also do not accept the submission that a Mareva injunction can only apply to assets within the jurisdiction of the court. It seems to me to be now generally accepted that the court has power to restrain a defendant from dealing with assets which are out of the territorial jurisdiction:
Republic of Haiti v Duvalier [1990] 1 QB 202 at 213;
Derby & Company Limited & Ors v Weldon & Ors [1990] 1 Ch 48 at 54, 57 and 59-60;
Derby & Company Limited & Ors v Weldon & Ors (Nos 3 and 4) [1990] 1 Ch 65 at 79-80, 92 and 96-97. See also
National Australia Bank Limited v Dessau & Ors [1988] VR 521;
Ballabil Holdings Pty Ltd v Hospital Products Limited (1985) 3 ACLC 220; (1985) 3 ACLC 220; (1985) 1 NSWLR 155;
Yandil Holdings Pty Ltd v Insurance Company of North America (1986) 7 NSWLR 571;
Coombes and Barei Constructions Pty Ltd v Dynasty Pty Ltd [1986] 42 SASR 413. The basis of the court's jurisdiction to grant a Mareva injunction for the preservation of foreign assets is set out by Brooking J in National Australia Bank Limited v Dessau & Ors at 526-527. I would, with respect, endorse his Honour's observations.

I accept the submission of Mr Owen-Conway QC, senior counsel for the plaintiff, that the omission in the affidavits to make any attempt to disclose what has happened to the very large sum of money that was transferred in highly unusual circumstances to New Zealand, prima facie, is a failure to make proper discovery, and, prima facie, is a breach of the discovery orders made previously. He submitted that, in the circumstances, an order for the cross- examination of the defendants should be made. He relied on
House of Spring Gardens Limited v Waite (1985) FSR 173 where Cumming- Bruce LJ said (at 183):

``The court has the power (and I would add, the duty) to take such steps as are practicable upon an application of the plaintiff to procure that where an order has been made that the defendants identify their assets and disclose their whereabouts, such steps are taken as with enable the order to

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ATC 4895

have effect as completely and successfully as the powers of the court can procure... The purpose of the cross-examination would be to elicit with greater particularity the extent and the whereabouts of the defendants' assets. The background of applications for Mareva injunctions is often a situation in which it is urgently necessary for the court to intervene in order to assist the plaintiff to prevent the defendant from frustrating the object of the proceedings. In such a situation an order to cross-examine upon an unsatisfactory affidavit already filed is one of the courses that the court has jurisdiction to take.''

See also
Planet International Limited v Garcia (No 2) [1991] 1 Qd R 426.

In reply Mr Shirrefs submitted that Mr Hickey possessed sufficient assets within the jurisdiction to meet the plaintiffs claim, and for that reason it was unnecessary for him to be cross-examined. I think that this submission has to be upheld, despite the apparent breach of the discovery order of 19 July 1996. I was originally persuaded to grant the Mareva injunction ex parte as I considered that the plaintiff had established a prima facie case that the defendants had disposed of their assets (and there was a prospect that they would continue to do so) in such a way as to frustrate the plaintiff in its attempts to prosecute its claims against them. This finding is required for the exercise of the jurisdiction, which is to render the administration of the law effective and to prevent abuse:
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 8 WAR 183 at 185 and cases cited therein. Nothing I have heard since then has caused me to depart from the view I formed initially. However, once it is established that a defendant has sufficient assets within the jurisdiction with which to satisfy the claim (and once the disposal of those assets is restrained), cross-examination of the defendant cannot be said to be necessary for the protection of the plaintiff's rights. Of course, it would assist the plaintiff, in attempting to recover from Ms Horne, to be able to cross-examine Mr Hickey; but in that respect Mr Hickey would be cross- examined as a witness and not as a party, and that is not legitimate use of a Mareva injunction. The point is that, having regard to the value of Mr Hickey's assets in Western Australia, the plaintiff does not need to cross- examine Mr Hickey in order to protect the plaintiff's rights against him.

Mr Owen-Conway QC referred to the following remarks of Slade LJ in House of Spring Gardens Limited v Waite at 182:

``I think that the proper scope of the cross- examination envisaged must be regarded as being broadly: (a) to ascertain whether or not the first and second defendants respectively have fully and properly complied with the obligations imposed on them... and (b) insofar as they have not complied with such obligations, to elicit the missing information which should have been supplied but which they have failed to supply.''

Mr Owen-Conway submitted that as there was a strong case that the defendants had not fully and properly complied with the obligations imposed on them by the original orders, leave to cross- examine should be granted.

It seems to me, however, that the remarks of Slade LJ presuppose that there are insufficient assets disclosed by the defendant with which to meet the plaintiff's claim. Once there is evidence of adequate assets within the jurisdiction, and once those assets are protected from dissipation by the usual form of Mareva injunction, it would serve no purpose directly related to the claim of the plaintiff to allow a cross-examination.

Finally, Mr Owen-Conway argued that it may well be that on a sale of Mr Hickey's assets the amount realised might not be sufficient to satisfy the plaintiff's claim. There is, however, nothing on the evidence which suggests that the values stated with not be realised. In the circumstances, I must accept those values as reasonably accurate.

In the circumstances, I would refuse leave to cross-examine Mr Hickey.

As regards Ms Horne, however, as I have mentioned, her affidavit discloses a shortfall between the plaintiff's claim against her and the value of her assets within the jurisdiction to the extent of some $52,000. Taking into account all the circumstances, I consider that it would be entirely appropriate for Ms Horne to be cross- examined on her affidavit, and I would grant the plaintiff an order allowing him to do so.

I turn to the issue whether the Mareva injunction should continue to apply to the defendants' assets outside Western Australia.

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ATC 4896

As, on the evidence, the value of the assets of Mr Hickey exceeds the amount of the plaintiff's claim, there is no need for the order to extend beyond the jurisdiction of the State and it should be varied to make this plain. As regards Ms Horne, however, it is appropriate, for the reasons already stated, that the order made should extend world-wide. I would vary the order to make this plain.

I with hear counsel as to the form of order that should be made.