Piccolo & Anor v McVeigh (No.2) [2002] FMCA 34 (1 March 2002)

Last Updated: 16 April 2002

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PICCOLO & ANOR v McVEIGH (No.2)

[2002] FMCA 34

ORDERS - Variation - Injunction.

Applicant:

SHARON DENISE PICCOLO & WOODARDS (CENTRAL) PTY LTD

Respondent:

DEAN ROYSTON McVEIGH

File No:

MZ 21 of 2002

Delivered on:

1 March 2002

Delivered at:

Melbourne

Hearing Date:

16 January 2002

Judgment of:

Connolly FM

REPRESENTATION

Counsel for the Applicant:

Mr J Tsalanidis

Solicitors for the Applicant:

Best Hooper 563 Little Lonsdale Street MELBOURNE VIC 3000

Counsel for the Respondent:

Mr A Rodbard-Bean

Solicitors for the Respondent:

Abbott Stillman & Wilson Level 4, 575 Bourke Street MELBOURNE VIC 3000

ORDERS

(1) The Respondent's application for a variation of paragraph one of the Order made 15 January 2002 be dismissed.

(2) That both parties costs be reserved.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE

MZ 21 of 2002

SHARON DENISE PICCOLO & WOODARDS (CENTRAL) PTY LTD

Applicant

And

DEAN ROYSTON McVEIGH

Respondent

REASONS FOR JUDGMENT

The proceedings

1. These proceedings were commenced by the Respondent who sought to apply on 16 January 2002 for a variation of paragraph 1 of the Orders made on 15 January 2002, whereby the Respondent was restrained from dealing with certain money paid to him by the First Applicant.

The draft minute of the variation to paragraph 1 of the Order made

15 January 2002 sought inter alia:

(1) The Respondent whether by his servants, agents or otherwise howsoever be restrained until the hearing and determination of this proceeding or further order from disposing of, applying or otherwise dealing with any money paid to him by or on behalf of the First applicant pursuant to the Terms of Settlement being exhibit SDP 12 to the affidavit sworn by Sharon Denise Piccolo on 11 January 2002, save and except:

(a) the reasonable legal expenses of the Respondent incurred in defending this proceeding in the future but limited to an amount of no more than $30,000 or such other amount as may be agreed to by the parties in writing or otherwise ordered by the Court;

(b) the reasonable legal expenses of the Respondent incurred in defending the interlocutory application of the Applicants made 11 January 2002 but limited to an amount of no more than $15,000 or such other amount as may be agreed to by the parties in writing;

(c) the legal expenses of the Respondent incurred in prosecuting the partition proceedings commenced in the Supreme Court of Victoria between the Respondent and the First Applicant No 5819 of 2000 ("the partition proceedings") but limited to an amount of no more than $62,055 or such other amount as may be agreed to by the parties in writing;

(d) the legal costs of the National Australia Bank ("the bank") ordered to be paid by the Respondent to the bank in Federal Court proceedings V 200 of 1999 and on appeal thereafter, [see McVeigh, In the matter of Piccolo v National Australia Bank Ltd [2000] FCA 187];

(e) the costs of the bank arising from the partition proceedings but limited to an amount of no more than $8,757.20;

(f) the reasonable legal expenses of the Respondent incurred in defending the appeal commenced by John Peter Piccolo ("the bankrupt") as to the orders of Deputy President Forgie in AAT proceeding [2001] AATA 623 in relation to various income assessment notices issued against the bankrupt but limited to an amount of no more than $30,000 or such other amount as may be agreed to by the parties in writing;

(g) the ordinary business expenses of the Respondent incurred in the administration of the Estate of the bankrupt, but not including Trustees remuneration.

2. The Applicant sought to have the Respondent's application for the variation of the injunction dismissed or in the alternative sought to impose conditions on the variation of the orders as follows:

Conditions to Order for payment of the Respondent's legal costs

(1) Nothing in this Order should deprive the Applicant from any claim they have to the money being allowed to be used by the Respondent for his reasonable legal costs ("the said monies").

(2) The Respondent undertakes to the Court:-

(a) to make good personally any amount of the said monies that he spends on costs which are found to come out of property to which the Applicants are otherwise entitled;

(b) to rely on the indemnity of the Respondent's indemnifying creditor and/or other real property registered in the name of the Respondent in order to pay the amount in (a).

(3) The Applicants be permitted to take part in a taxation of the Respondent's costs that are allowed to be paid out of the said monies and the Respondent's costs, at the option of the Applicants, be taxed on a solicitor and client basis and be paid by the Respondent as aforesaid.

3. The Respondents application for variation of the Order was supported by:

a) the affidavit of the Solicitor for the Respondent, Mr Hannan sworn 16 January 2002.

4. I incorporate the reasons given for making the Order of 15 January 2002 in these reasons.

Competing proposals

5. What is argued by Mr Rodbard-Bean in support of his submission that various legal expenses ought to be excepted from the provisions of the injunction is that it is established practice in relation to the application of Mareva Injunctions that the Order should contain an exception in regard to ordinary business expenses and reasonable legal costs. He relied on Dr Spry's, Text on Equitable Remedies and also referred to Williams, Civil Procedure - Victoria, paragraph 38.01 at page 45:

The Court will by its order limit the operation of a Mareva Injunction to assets of the defendant which in value are sufficient to meet the amount of the claim. It is not right to prevent the defendant dealing with the excess.

6. He further referred to Sir Robert Megarry VC in Barclay Johnson v Yuill (1980) 2 All ER 190 at page 193:

The purpose of the Mareva jurisdiction was not to improve the position of claimants in an insolvency but simply to prevent the injustice of a defendant removing his assets from the jurisdiction which might otherwise have been available to satisfy a judgement It is not a form of pre trial attachment but a relief in persona which prohibits certain acts in relation to the assets in question.

7. Finally he placed reliance on the decision of Clout (Trustee) v Anscor Pty Ltd, a decision of the Federal Court by Drummond J [2001] FCA 174. That was a case where the Mareva injunction only went to part of the Respondent's assets and the parties came back to court and sought a variation of the orders in relation to previous legal expenses and legal expenses to be incurred in the future . Counsel for the Respondent referred me to paragraphs 18 and 19 where his honour held:

18. These two bases are, first, that an intention to use frozen assets to meet ordinary expenses does not give rise to such a risk of dissipation of assets as can justify Mareva relief or continued Mareva relief and, secondly, it was said, a question has arisen as to the worth of the trustees undertaking as to damages given in connection with the Mareva restraints obtained and sought.

19. This first submission by the respondents can be accepted. The principal is sometimes put on the basis that a Mareva injunction cannot be used to give the applicant security in respect of an as yet unliquidated claim, that its sole legitimate object is to prevent a respondent pending final adjudication from disposing of assets where the respondent's object in doing that is to abuse the process of the Court by ensuring that if the applicant is successful in the litigation, its judgement will be an empty one. It is plain that even in a case in which a Mareva restraint is justified it can never extend to prevent a respondent from having access to its own assets to the extent necessary to meet legitimate expenses such as ordinary living and business and legal expenses.

8. Mr Rodbard-Bean then went on to particularise the various amounts of legal costs that he was seeking to have excepted from the Order which totalled some $282,388.25, together with an unspecified amount for McVeigh's ordinary business expenses.

9. Mr Tsalanidis says that what the Respondent has sought to do in his Application is to revisit what was argued before me on 14 January 2002. He submitted that the Court has already determined that there was sufficient argument to quarantine those monies pending the hearing of the substantive proceeding.

Conclusion

10. I am satisfied that the Application of the Respondent ought to be dismissed. Mr Tsalanidis spoke on 14 January of an injunction disguised as a Mareva injunction.

11. He accepts the principals with respect to Mareva injunctions that a party should not be prevented from defending proceedings where the party's own assets (its assets or his or her assets) are the subject of an injunction.

12. However, if Mrs Piccolo is successful in her claim she will establish that the monies injuncted are monies paid to the Respondent on her behalf or monies to which she has an equitable entitlement. It is her claim that these monies are hers and not McVeigh's. The two substantive arguments put forward on Mrs Piccolo's behalf (she paid one half of the co-surety's debt and that the payment of her Husbands fixed amount of the debt) would if accepted establish the amounts claimed as a liquidated amounts. I am satisfied that I have an unfettered discretion with respect to the granting of the injunction and it is a discretion that I have already exercised in my determination on 15 January 2002 and to vary the injunction in the way that the Respondent seeks would be to predetermine the issues that ultimately need to be decided.

13. Further, Drummond J in Clout (Trustee) v Anscor Pty Ltd [2001[ FCA 174 at page 9, paragraph 20 said:

"But at least where as here a Mareva restraint is imposed only on part of the assets of a respondent in action the respondent who seeks a relaxation of the restraint has an evidentiary onus, if not a full persuasive onus to show that it has no other assets beyond those covered by the injunction to which it can resort to meet the expenses in question. In A v C (No 2) [1981] 2 All ER 126, Robert Goff J held that on an application to vary a Mareva injunction that had been granted over part only of a respondents assets to permit the payment of legal costs of the action out of the assets the subject of the restraint that it was not enough for the respondents to merely state it owed money to someone but had instead to show that it did not have any other assets available out of which the expenses could be paid. Rogers J took the same approach in Australian iron and Steel Pty Ltd v Buck [1982] 2 NSWLR 889 at 890. See also Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552 at 568 to 569."

14. Leaving aside the argument as to whose money it is, there is clearly an onus on McVeigh to show that he has no other assets beyond those covered by the injunction to which he can resort to meet the expenses in question. In Exhibit DRM 4 to McVeigh's affidavit which are the minutes of a meeting of creditors, Mr Luntz the proxy for Mrs Piccolo asked McVeigh whether he had an indemnity from the major creditor with him. McVeigh advised that he did not, but that he would make the indemnity available for inspection. At the time the matter was before me the terms of the indemnity had still not been disclosed nor was there any evidence that it was not available to McVeigh. I am satisfied that McVeigh has not discharged the onus on him to show that there are no other assets to which he can resort.

15. Finally it was put to me by Mr Tsalanidis that even if I were to vary the injunction that I should only do so on certain conditions or provisos and to that end he relied on the decision of Chancery Division of the High Court in England, United Mizrahi Bank Ltd v Doherty and Others 2 All ER at 23:

The judge ordered that the defendants would not be in breach of a Mareva order by utilising certain assets held by them to fund their reasonable legal costs, but added a proviso that nothing in his order should deprive the bank of any proprietary claim it had on those assets.

16. Given that I have determined to dismiss the Respondent's application it is not necessary for me to determine this issue. I make orders accordingly.

I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Connolly FM

Associate:

Date: 1 March 2002