Unconventional Conventions v Accent Oz [2004] NSWSC 247

By application filed 20 February 2004 the defendants, as applicants, sought orders for the variation of existing asset preservation orders that were made by Hamilton J in November 2002 and varied in April 2003.

The further variation sought here was a variation to permit the second and third defendants to sell the property they owned at Heathcote, and to discharge all registered securities over the title of that property, and to place the net balance of proceeds of sale in such account as the Court considered appropriate pending the hearing, which was scheduled 6 weeks post.
The primary issue addressed by the Court was whether it is necessary to prevent a defendant from abusing or frustrating the processes of the Court, by removing from the jurisdiction or concealing or dissipating his or her assets or, as the matter was put in PCW (Underwriting Agencies) Ltd –v- Dixon [1983] 2 All R 158 at 162 “to prevent the plaintiffs being cheated out of the proceeds by their action.”

As the High Court emphasised in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 relief of this kind is not intended to operate as a form of de facto security for the claims of a party seeking to impose a restraint. Moreover, the Court must be careful to ensure that orders of this kind do not operate oppressively.

Here that the applicants’ evidence demonstrated the case for modification of the asset preservation order so as to permit the sale of the Heathcote property.

The plaintiff informed the Court that it did not oppose the variation as such, but was concerned to ensure that its position was not compromised through the sale process in the event that the sale is not at arms length at a proper value.

Senior Counsel for the plaintiff drew attention to the amended Statement of Claim, in which it is alleged that the defendants have acted in breach of trust, secondly, allegations of dishonesty on the part of the second and third defendants (a divorcing married couple), and thirdly there was reason to believe that the proposed sale of the East Heathcote property would not be a sale at arms length.

These issued were to be dealt with at trial and not in this application. It was at least hypothetically possible, if no conditions were imposed upon the variation sought by the defendants, that a sale would take place at less than the true value of the East Heathcote property, and the proceeds of sale in fact received would be used to discharge the secured debt with little or no surplus remaining.

Accordingly, some procedural conditions were imposed. The Court’s power to impose conditions on an application for variation is an aspect of the Court’s inherent power to prevent abuse of its own processes; in other words, the power is founded in the source of power for asset preservation orders themselves. It was not necessary, for the Court to reach a conclusion that on the balance of probabilities there was a likelihood or even a risk that, in fact, the property will be sold at an under-value, provided that the conditions are not onerous and are capable of being satisfied inexpensively.

The conditions were as follows:

(a) Within 7 days the second and third defendants are to permit the East Heathcote property to be inspected for the purposes of valuation by a valuer nominated to them in writing on behalf of the plaintiff, such valuer to be independent of the plaintiff.

(b) That the second and third defendants provide the plaintiff’s solicitors with a copy of the draft contract of sale at least 7 days before the contract is made and that during that period of 7 days the plaintiff does not exercise the liberty to apply granted by these orders.

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