Queensland Independant Wholesalers Ltd v Gubbay [1984] SBHC 17; [1984] SILR 72 (27 April 1984)

[1984] SILR 72

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No. 93

QUEENSLAND INDEPENDENT WHOLESALERS LTD

v

GUBBAY

High Court of Solomon Islands
(John Freeman, Commissioner)
Civil Case No. 93 of 1983

17 April in chambers at Honiara
Judgment 27 April 1984

“Mareva injunction” under High Court (Civil Procedure) Rules 1964 O. 53 - effect of pleading collateral contract - appointment of receiver - when allowed - nature of plaintiff’s claim to funds or property to be administered.

Facts:

The plaintiff company (“QIW”) claimed approximately $500,000 from the defendant under his personal guarantee for the past and future debts of a company which subsequently went into liquidation (see re Trading Company (Solomons) Ltd [1983] SILR 180). At the time of entering into the guarantee, the defendant acknowledged that the company already owned QIW approximately $300,000, and he admitted this in his defence, while not admitting further debts.

However he set up a collateral contract (to which he alleged the guarantee was subject) by way of defence. He also maintained that a receiver could not be appointed in support of an order of attachment under S. 53 unless the plaintiff had some specific right to the property to be attached.

Held:

1. Setting up a collateral contract amounts to alleging “as matter of defence a right to be relieved wholly or partially from (a prima facie) liability” under O. 53 r.1. So in such a case the Court had power to order attachment.

2. A further right to the property to be attached (which the plaintiff will only acquire on final judgment in the action) is enough to justify the appointment of a receiver under O.53 r.6 (1).

Cases considered:

Holmes -v- Millage [1893] 1 QB 557 (CA)
Cummins -v- Perkins [1898] UKLawRpCh 160; [1899] 1 Ch. 16 (CA)

Francis Waleilia for QIW
Andrew Nori for the Defendant

John Freeman: This is an application on behalf of the plaintiffs in this action (“QIW”) for an order under 0. 53 of the High Court (Civil Procedure) Rules 1964. Abridgment of time for service was required: it is not opposed, and is granted. The main order sought is one restraining the Defendant (“Mr Gubbay”) from removing his property from the jurisdiction, so as to defeat QIW’s claim against him. (This claim is founded on a personal guarantee for debts incurred by a Trading Company (Solomons) Limited (in liquidation), (“the Company”). The other orders are required to help enforce the main one.

That is what is known to the courts in England and Wales as a Mareva injunction. However it is quite unnecessary for me to go into their numerous decisions on that subject. Happily the Rules Committee of the Western Pacific were well ahead of them, and it is not suggested I need look any further than the Rules.

It is agreed that QIW need do no more than establish a prima facie case of liability against Mr Gubbay. That is, once they have done so, then I am to turn to the question of whether he has shown an intention of defeating their claim by obstructing execution of any judgment given against him.

Mr Gubbay admits by his Defence that he signed the guarantee, acknowledging that $294,670.66 was owing, and agreeing to pay all further debts of the company on written demand. He also admits that demand has been made of him in writing (though for a larger sum, which he does not admit). So far there is a clear prima facie case of liability against Mr Gubbay for $294,670.66 on his own admission and, on Mr Senescall’s affidavit, for the larger sum. Mr Gubbay however pleads that the guarantee was made on the absolute condition that QIW entered into a joint venture with the company (whatever that may mean). He argues by his counsel that that condition amounted to a collateral contract, (the consideration being the signing of the guarantee). So he says it could be given effect even though the guarantee mentions nothing whatever about any such condition. I think the provisions of 0. 53 r.1 make it unnecessary for me to decide this point. This says “when by any contract a prima facie case of liability is established, and there is alleged as matter of defence a right to be relieved wholly or partially from such liability, the Court ... may order that the amount in dispute be brought into Court or otherwise secured”. There might be some argument as to whether setting up a collateral contract amounted to alleging “a right to be relieved”. But I think it is a general enough term to cover it in this context. The intention of the Rule is plainly that once the contract debt is established (or as here, admitted), the Court must first make sure that what is in dispute does not vanish. Once that is done all matters of defence which do not deny the existence or amount of the contract debt can be argued at the trial.

So in this case I should be entitled on the pleadings alone to order that the $294,670.66 be brought into Court or otherwise secured. By itself that might well be a toothless order which would not achieve its object. So QIW ask me in effect to attach Mr Gubbay’s property within the jurisdiction of the Court. To do this I must be satisfied (under S. 53 r. 2(a) and (c) that he is about to “dispose of or remove his property with intent to obstruct or delay the execution of the judgment”. What has happened is this: Mr Gubbay (who is not a Solomon Islands national) held an entry permit which was to expire on 27th April 1984. On 16 March he applied to the Principal Immigration Officer for an extension, which was refused. On 26 March Mr Gubbay appealed to the Minister for Police and Justice, who on 3 April not only dismissed the appeal, but cut short the existing permit, so that it ended on 17 April. So Mr Gubbay, as I was informed, left the country for Brisbane on that day (whilst argument was in progress on this application). Evidence showed that he had made a number of withdrawals from bank accounts he held here, reducing them to fairly low balances. This would be quite understandable for a man who was about to leave the country on the expiry of his entry permit. If that were all, it would not show an intention to defeat QIW’s claim. But one withdrawal in my judgment shows otherwise. On 11 April Mr Gubbay took out $14,000 from his account with the Hong Kong and Shanghai Bank, reducing it to a balance of $50. Unchallenged oral evidence showed that this withdrawal was made in cash. I can think of no good reason for this, except to prevent the money being traced. Nor could the ingenuity of Mr Gubbay’s counsel suggest any other.

It is argued on Mr Gubbay’s behalf that he is not proposing to disappear with all his assets. He is not forbidden to return to the Solomon Islands and indeed has an application pending for citizenship. By S. 8(2) (a) of the Citizenship Act 1978 10 years’ residence is required, whereas the first record of Mr Gubbay’s presence held by the Immigration Department dates from 1980. Whether that is the best and so the only permissible evidence, is something I need not now decide. It is enough to conclude, as I do, that any prospects for Mr Gubbay’s return to the Solomon Islands look distinctly speculative. He may have applied for citizenship and a new work permit as he says in his affidavit; but there is no evidence that he is entitled to the first, and the second would not allow him to return without an entry permit. It is true as he says that he has not been declared a prohibited immigrant and might be allowed to return; but presumably he would have to produce some very much better reason than he has so far done to persuade the immigration authorities to change their minds. So I take the view that Mr Gubbay foresaw he would be leaving the Solomon Islands for an indefinite period, and decided to remove all or most of his liquid assets. The fact that he took out a very large sum in cash shortly before his departure shows that this decision was not a mere matter of convenience, but more likely than not a deliberate means of keeping the money out of the hands of QIW. It is noteworthy that they are based in Brisbane, where Mr Gubbay has gone.

Mr Gubbay has however left a number of assets here which are not easily realizable (apart from small sums in various bank accounts in his name). There are other accounts in the name of Solomon Seas Shipping and Stevedoring Services Ltd to which he was, but is not now a signatory. There is some question as to whether this is a duly incorporated limited company or not; but whatever the answer, I should not be prepared to attach the money in its accounts unless it or the present signatories were parties to the application. The main items are proof of debt in the liquidation of Trading Company (Solomons) Limited, and two barges. There is only hearsay evidence (adduced without objection on the part of Mr Gubbay’s counsel) that they belong to him, though used by Solomon Seas Shipping and Stevedoring Services Ltd. However I think for present purposes I am entitled to conclude that this is the case. All this property must be kept under the control of the Court, so that if QIW should obtain final judgment against Mr Gubbay, there is something to enforce it against.

How is this to be done? The obvious method, given the nature of the property, is to appoint a receiver. There is express power to do this by interlocutory order under S. 53 r .6(1) in all cases in which it appears just or convenient so to do. I am satisfied in terms of rule 14 that it is just and convenient that a receiver should be appointed, having regard to the amount claimed by QIW, to the amount which may probably be obtained by the receiver, and to the probable costs of his appointment. But counsel for Mr Gubbay argues that a receiver by way of equitable execution may not be appointed unless to administer a fund or other property to which the applicant already has some specific right. Otherwise, he says, the applicant must be left to his remedy after final judgment by way of legal execution. To support this proposition he cites two authorities. First is Holmes v. Millage (1893) 1 QB 557 (CA), where the Plaintiff was in effect asking for an order of attachment of earnings, long before this was made possible by statute. In my view, the reason for the decision is to be found at p. 556 in the judgment of the Court delivered by Lindley CJ:-

“If the earnings could have been reached under a writ of sequestration, a receiver might have been appointed, as in Whitlock v. Terrell, but a writ of sequestration was never issued before the Judicature Acts in order to attach a man’s personal earnings.”

Although in this case some of the proofs of debt may relate to personal earnings, they have I think now lost that character, and both they and the barges are liable to sequestration, and so to control by a receiver.

In Cummins v. Perkins [1898] UKLawRpCh 160; (1899) 1 Ch. 16 (CA) the defendants had obtained judgment for their costs against the plaintiff (a married woman) out of her separate property. That property consisted only of a share, not yet distributed, in the estate of the plaintiff’s deceased sister. So the defendants applied for the appointment of a receiver of the share. The argument turned on whether the defendants could restrain the plaintiff’s dealings with her property until they had a right to legal execution (which would only arise on taxation of costs). It was in those circumstances that Lindley MR referred to the principle that a person who had the right to be paid out of a particular fund could obtain the appointment of a receiver. The question of payment out of a particular fund only arose in that case as a result of the then law of England and Wales on the separate property of married women. To hold otherwise would be both to go against the judgment of Sir Nathaniel Lindley in the earlier case cited, and unduly to restrict the wide express power to appoint a receiver given by o. 53 r.6 (1). QIW do not have a present right to be paid out of Mr Gubbay’s assets; but they will have such a right if and when they get final judgment against him. It is that future right which must be protected. In the same way the future right of the defendant in Cummins v. Perkins (which would only arise on taxation of costs) was to be protected by the appointment of a receiver. The words of Kekewich J. at first instance in that case are to the point “... the introduction of the word “execution” into the matter only confuses the position”.

So a receiver must be appointed. However, as there may be some delay in arranging this, I shall order first that Mr Gubbay give security to my satisfaction for $294,670.66 within 7 days. If he fails to do so, all his assets within the jurisdiction (including bank accounts, proofs in liquidation and barges) are to stand attached, and a receiver is to be appointed for them until final judgment is given, on the usual terms as to payment, security and prior claims. There seems to be little point ordering discovery or injunctions against Mr Gubbay now that he has left the jurisdiction, but I will hear counsel on this if they wish. On the other hand, he seems to have taken with him quite enough money to Supply his personal needs for some time to come, and I do not think it necessary to make any provision for these.

Order to be drawn up by counsel. Costs in any event, to be taxed and paid out of property in the hands of the receiver by him, if appointed.