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Prasad v Prasad [1992] FJHC 45; Hbc0411d.92s (2 October 1992)

IN THE HIGH COURT OF FIJI
At Suva
Civil Jurisdiction

CIVIL ACTION NO. 411 OF 1992

Between:

1. KRISHNA PRASAD
2. VIJAY LAKSHMI PRASAD
d/o Gauri Pratap
Plaintiffs

- and -

1. VISHNU PRASAD
s/o Balessar Mishra
2. RAJ LAKSHMI PRASAD
d/o Gauri Pratap
Defendants

Mr. S. Parshotam for the Plaintiffs
Messrs. S.M. Koya, S. Sharma and S. Stanton for the Defendants

RULING

On the 17th of September this Court granted what has become commonly known as a 'Mareva injunction' on the plaintiff's ex parte application filed on the 16th of September 1992. On the 21st of September the defendants moved inter partes setting out 9 grounds for the dissolution of the injunction and the matter was argued at length in chambers over the 24th and 25th of September.

The brief background to this case may be outlined as follows:

The plaintiffs who are medical practitioners and citizens of Australia are related not only by marriage but also through blood ties to the defendants who are residents of Fiji. During the course of their relationship a proprietary company entitled Burcrest Pty. Ltd. (hereafter referred to as 'Burcrest') was incorporated in October 1984 with the first plaintiff and first defendant as directors. Subsequently in April 1988 the second defendant was also made a director.

On the 24th of March 1988 the plaintiffs executed amongst other securities a guarantee in favour of the Commonwealth Bank of Australia (hereafter referred to as 'CBA') securing all moneys lent to Burcrest.

Prior to their executing the aforesaid guarantee the plaintiffs allege that the defendants "... orally promised and represented to the plaintiffs that if they signed the guarantee, the defendants would indemnify and keep indemnified the plaintiffs from any liability, costs or expenses incurred in connection with the guarantee ...". This is denied by the defendants.

Thereafter on the 20th of October 1990 the first plaintiff resigned as a director and secretary of Burcrest and a year later on the 18th of November 1991 CBA demanded from the plaintiffs payment of a sum well in excess of $Aust 2 million under the terms of the guarantee executed by the plaintiffs.

Since the CBA demand various efforts have been made by the plaintiffs through their solicitors to obtain from the defendants and various named companies a written Deed of Indemnity without any success.

Finally on the 16th of September 1992 the plaintiffs issued proceedings in this Court for various orders and obtained ex parte a 'mareva injunction' which the defendants now seek to have dissolved.

I trust that I shall be excused if I do not deal seriatim with each and every one of the defendants grounds which when argued appeared to over-lap in several respects. Instead in this ruling I shall deal with those matters raised which appear to be material in disposing of this application.

At the outset learned counsel for the defendants sought to argue that no sufficient grounds had been advanced to warrant the Court entertaining an ex parte application from the plaintiffs in the first place.

I cannot agree. The matter is clearly within the discretion of the Court and as learned counsel for the plaintiffs correctly points out the submission has been clearly overtaken by events. No authority has been cited to the Court to support the view that this Court can, at the inter partes hearing for the dissolution of an injunction, reconsider and review the exercise of its discretion to accept an application for an injunction at an earlier ex parte stage.

Needless to say in entertaining an application for an injunction ex parte, "urgency" is but one of several factors that the Court is directed in terms of Order 29 r.2 (as amended) of the High Court Rules to consider.

The others being, "irreparable harm or serious mischief".

Neither in my view ought "urgency" necessarily to be considered in the context of when the applicants' 'cause of action' first arose rather it should be considered broadly with particular regard to events more closely connected with the application itself.

In this particular case having regard to the close blood ties that exists between the spouses of the principal protagonists I do not consider it unreasonable for the plaintiffs after receiving the CBA demand, to seek to exhaust all avenues (out of Court) to obtain the written indemnity before resorting to litigation.

It is also well to bear in mind the observations of Lord Denning M.R. in Third Chandris Shipping v. Unimarine (1979) 2 ALL E.R. 972 at p.985 when he said of the practice of granting 'mareva injunctions' ex parte:

"In it speed is of the essence. Ex parte is of the essence. If there is delay, or if advance warning is given, the assets may well be removed before the injunction can bite. It is rather like the injunction in Chancery, the Anton Piller, injunction, which has proved equally beneficial. That must be done speedily ex parte before the incriminating material is removed. So here in Mareva injunctions before the assets are removed."

Also as a preliminary observation Counsel for the defendants also sought clarification of the jurisdiction of this Court to grant a 'Mareva Injunction'. In this regard reference was made to the statutory power in Section 37(1) of the Supreme Court Act 1981 (U.K.) which expressly gives the Courts of the United Kingdom power to grant a Mareva injunction and the absence of any corresponding legislative provision in Fiji.

I can do no better than to refer to the judgment of Cullinan J. (as he then was) in Robert Rogers v. Pacific Hotels & Development Ltd. Civil Action No. 1132 of 1985 in which the learned judge in a 44 page judgment reviewed no less than 34 decisions of English and other Commonwealth Courts and then after referring to Sections 22 and 18 of the Supreme Court (now High Court) Act (Cap. 13) said at p.35 of his judgment dated the 6th of January 1986:

"... powers of the High Court in England to grant injunctions, that is, before the introduction of the 1981 Act, as a matter of sustained judicial interpretation of high authority, arose out of legislation based on and similar to that which applies to this Court. The power of the Supreme Court of Fiji (now the High Court) in the matter is statutorily equated to that of the High Court in England. In effect therefore the interpretation placed upon the 1873 provisions by the Court of Appeal in England is binding upon this Court. Accordingly I hold that this Court has the power under the latter provisions to grant a Mareva injunction.

I am further of the view that this Court has an inherent jurisdiction in the matter. ... As I see it, the inherent power arises simply from the necessity, as expressed by the Court of Appeal of N.S.W., to prevent conduct tending to stultify the Court's powers."

I also note that in dismissing the appeal in Leslie Redvers Martin v. B.N.Z. and F.D.B. Civil Appeal No. 73 of 1984 in July 1986 against a 'Mareva injunction' granted by Kermode J. (as he then was), the Fiji Court of Appeal did not in any way cast any doubts on the Supreme Court's jurisdiction to grant the particular injunction as one would have expected or of its appropriateness in that case.

In the circumstances I take it as firmly established that this Court has jurisdiction to grant a 'Mareva injunction' in appropriate cases where the plaintiff has established a good arguable case and where there is a "real risk" that unless restrained the defendants will remove from or dissipate his assets within the Court's jurisdiction.

Then counsel complains at the absence of any 'cause of action' disclosed in the plaintiff's Writ nor of the fact that an injunction was being sought. I can dispose very shortly of this submission which ignores the clear wording of Order 6 r.(2)(1)(a) and Order 29 r.(1) of the High Court Rules.

Order 6 r.(2)(1)(a) permits a Writ to be issued so long as it is endorsed -

"... with a concise statement of the nature of the claim made or the relief or remedy required in the action begun thereby."

In similar vein Order 29 r.1 provides:

"An application for the grant of an injunction may be made by any party to a cause or matter ... whether or not a claim for the injunction was included in that party's writ ..." (my underlining)

I am not unmindful of the dictum of Lord Diplock in "The Siskina" (1977) 3 ALL E.R. 803 where he said at p.824:

"The right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependant on there being a pre-existing cause of action against the defendant ..."

But I do not read that dictum as in anyway restricting or confining the Court's attention to the Writ filed by the plaintiff as the only source of information to which a Court exercising its discretion to grant or refuse an injunction must have regard in order to ascertain the existence or otherwise of a 'cause of action'.

In this latter regard the plaintiffs' affidavits (which includes an affidavit deposed by their accountant) plainly reveals that the plaintiffs claim is based on an alleged oral 'contract of indemnity'. Such a contract is defined in Section 2 of the Indemnity, Guarantee and Bailment Act (Cap. 232) as being:

"A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person ..."

Learned counsel for the defendants however, without conceding that the oral contract (if any) that existed between the parties was one 'for indemnity', nevertheless, argues that the plaintiffs' action is caught within the terms of Section 59(b) of the Indemnity, Guarantee and Bailment Act which provides:

"59. No action shall be brought -

(b) whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person;

unless the agreement upon which such action is to be brought or some memorandum or note thereof is in writing and signed by the party to be charged therewith ..."

This latter provision has its origins in Section 4 of the Statute of Frauds 1677 (U.K.) which in turn has been the subject matter of a number of judicial decisions as to its meaning and ambit.

Suffice it for present purposes to say that on the affidavit evidence presently before the Court it is not possible nor in my view desirable for the Court to form any concluded view on the nature and legal effect of any oral contract that may or may not exist between the parties.

As was said by Lord Diplock in delivering the judgment of the House of Lords in American Cyanimid v. Ethicon [1975] UKHL 1; (1975) 1 ALL E.R. 504 at p.510:

"It is not part of the Court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature consideration. These are matters to be dealt with at the trial."

In my considered view there are serious questions both factual and legal to be tried in this action and for which oral evidence must inevitably be led and detailed legal argument and mature consideration taken if they are to be properly resolved and determined.

The defendants have also raised the question of 'non-disclosure' on the part of the plaintiffs in seeking the dissolution of the injunction. This is said to arise inter alia from an undertaking given by the plaintiffs' solicitors whilst acting for the defendants' former solicitors and as set out in the 'Terms of Settlement' filed in Civil Action No. 377 of 1992 in which the present defendants sued their former solicitors for breach of legal professional privilege.

More particularly learned counsel for the defendants submitted that the plaintiffs' solicitors are themselves bound by the 'Terms of Settlement' insofar as they are within the category of persons contemplated by the phrase "... their servants and agents," commonly appended in such orders as a matter of drafting technique.

I confess that this submission is a little difficult to follow in that the present plaintiffs were not a party to Civil Action No. 377 of 1992 and as such cannot be expected to be aware of the details of the settlement reached in that case nor in my view ought they to be 'fixed' with such knowledge merely because their present solicitors acted as solicitors in the earlier action.

The headnote to Brinks - MAT Ltd. v. Elcombe (1983) 3 ALL E.R. 188 contains the following relevant passage dealing with non-disclosure in ex parte applications:

"Whether a fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issue to be decided by the judge on the application. The fact that the non-disclosure was innocent, in the sense that it was not known to the applicant or that its relevance was not perceived is an important, but not decisive, consideration in deciding whether to order an immediate discharge. However, the Court has a discretion notwithstanding proof of material non-disclosure which justifies the immediate discharge of an ex parte order, to continue the order or to make a new order on terms."

Lord Justice Ralph Gibson in his judgment at pp. 192 and 193 (ibid) enumerated no less than 7 relevant "principles" of which the second reads:

"(ii) the material facts are those which it is material for the judge to know in dealing with the application as made; materiality is to be decided by the Court and not by the assessment of the applicant or his legal advisors."

In this instance, at its highest, assuming that the defendants are able in a separate action to prove that there has been a breach of the undertaking given in terms of paragraph 'A' of the 'Terms of Settlement', that would merely disentitle the plaintiffs present solicitors from continuing to act for them and not, I might add, the plaintiffs from making the application.

If I may be permitted to say so such a finding would involve the Court accepting the rather unusual and far-reaching proposition that an undertaking given by a client 'through' (not by) his solicitor personally binds the solicitor where the undertaking is drafted so as to include the client's "servants and agents".

In the absence of detailed submissions on the issue I am not at all certain of the 'materiality' of the non-disclosure in these present proceedings nor am I convinced that this is the appropriate occasion "... to go into the huge complexities involved in seeking to disentangle ... whether there was full disclosure when the ex parte order was obtained." (per Browne-Wilkinson V.C. in Dormeuil Freres v. Nicolian Ltd. (1988) 3 ALL E.R. 197 especially at pp. 199 to 201).

In any event having considered grounds 5, 6, 7 and 8 the defendants inter partes summons and the submissions of learned counsels in that regard I am not satisfied that there has been such a material 'non-disclosure' as to have materially altered my earlier decision to grant the plaintiffs' application.

Complaint has also been made as to the breadth of the injunction granted and how it will materially and prejudicially affect innocent third parties such as shareholders, directors, creditors and bankers of several named companies which the plaintiffs allege are wholly owned or controlled by the defendants and are used as 'mere vehicles' to enable them to pursue their business activities and which the first defendant has categorically denied.

In dealing with this ground I am reminded of the observations of Lawton L.J. in the Third Chandris Shipping case (op cit) when he said at p.986:

"Nowadays defaulting on debts has been made easier for the foreign debtor by the use of corporations, many of which hide the identities of those who control them ..."

and later:

"The difficult cases are firstly and most commonly those which arise when the other party to a contract meets unexpected trouble for himself after he has entered into it, ... and, secondly when there is something akin to a long term fraud by the built-up of confidence to be followed by default."

Learned counsel for the defendants strenuously argued that there is no evidence of any actual transfers of assets by the defendants or by any of the named companies restrained in terms of the paragraph B(c) of the injunction granted to the plaintiffs and whilst that might be so such information is not critical to the grant of a 'mareva injunction'.

As Lawton L.J. said at p.987 (ibid):

"In my judgment an affidavit in support of a mareva injunction should give enough particulars of the plaintiff's case to enable the Court to assess its strength and should set out what enquiries have been made about the defendants' business and what information has been revealed, including that relating to its size, origins, business domicile, the location of its known assets and the circumstances in which the dispute has arisen. These facts (which need not necessarily include proof of previous defaults or specific incidents of commercial malpractice) should enable a commercial judge to infer whether there is likely to be a real risk of default."

Furthermore the first defendant's responses to the plaintiffs' assertions regarding the ownership and control of the named companies has ranged from "neither admit nor deny" in his first affidavit of 21st September 1992 to a bare denial 2 days later in his third affidavit of 23rd September, and both replies contrasts starkly with an earlier affidavit of the first defendant filed in Civil Action No. 377 of 1992 in which he freely admits being a director of 8 of the 9 named companies and "... as such am able to make this affidavit for and on their various behalfs" without any apparent authorisation.

If I may say so such inconsistent and evasive responses on matters that ought properly to be within the first defendant's personal knowledge does little to engender in this Court a feeling of reassurance that the execution of any judgment which the plaintiffs might obtain would not be defeated.

Indeed the first defendant has supplied no information as to the shareholdings or directorships in any of the named companies or explained in what ways (if any) the injunction is affecting or likely to detrimentally affect the various companies business operations (again, if any) I note in passing that at least 5 of the 9 named companies are described as 'holding' or 'investment' companies.

I am not unmindful that the defendants bear no onus in the matter but the very vagueness and generality of the first defendant's affidavits unfavourably reflects in my view a patent unwillingness on their part to disclose the full extent of their 'control' of the named companies to the Court.

As was said by Megaw L.J. in Dunhill (Alfred) Ltd. v. Sunoptics S.A. F.S.R. 337 (a passing-off case on appeal) at p.476:

"It is, of course, for the plaintiffs to make out their case for an interlocutory injunction. But when, on these questions of balance of convenience, it emerges that the evidence adduced by the defendants is so defective in such important respects, ... that is a factor which cannot be said to be irrelevant in assessing the balance of convenience.

Furthermore in S.C.F. Finance Co. Ltd. v. Masri and Anor (1985) 1 W.L.R. 876 in which the bank accounts of the defendants' wife were effectively frozen by the injunction granted by the Court and which the Court refused to vary, it was

"Held: ... that where the Court granted the injunction it was not obliged to accept without inquiry an assertion by the defendant, ... that the assets belonged to a third party; that in deciding whether to accept such an assertion without further inquiry, the Court will be guided by considerations of justice and convenience between all the parties concerned ..."

In this latter regard it is to be noted that none of the companies that are supposedly "affected" by the injunction have sought to intervene in these proceedings nor indeed have any of them provided affidavits in support of the first defendant's bald assertion.

There is also Clause 'E' in the injunction order which permits the payment of various enumerated expenses which I would add is additional to the Courts inherent power in interlocutory proceedings to vary, suspend or discharge any order upon sufficient grounds being shown in an appropriate application (per LLoyd L.J. in the S.C.F. Finance Co. case (ibid) at p.880).

In all the circumstances I consider that the defendants have failed to make out any of their 9 grounds seeking the dissolution of the injunction and accordingly the defendants' application is dismissed with costs to the plaintiffs.

Having thus disposed of the defendants application for dissolution, what then should this Court do? Mr. Koya for the defendants firmly stated that he had not come prepared to answer an oral application for extension which by virtue of Clause 'G' of the interim order required that 3 clear days notice be given in the event.

With all due respect to the submission I cannot agree. Clause 'G' is clear in its terms and intention. It expressly refers to a "formal" application in the event that there is no application for dissolution brought before the date fixed for the expiration of the interim injunction. In this instance the defendants application has in my view rendered otiose the requirements of Clause 'G'.

In my view upon an inter partes application to dissolve or discharge an ex parte injunction the Court has the opportunity and the duty to examine the entire matter upon the basis of the affidavits and submissions placed before it at the inter partes hearing and may in exercising its discretion afresh in the matter dissolve, vary suspend or extend and may even grant a fresh injunction as in its discretion appears just.

I am fortified by the observations of Browne-Wilkinson V.C. in the Dormeuil Freres case (op.cit) when the learned Vice-Chancellor said at p.199:

"I will deal first with the application to set aside the ex parte order. It is a basic principle, applicable to all ex parte applications, that a plaintiff seeking ex parte relief must make full disclosure to the Court of all facts which are material to the exercise of the court's discretion whether or not to grant the relief. If such disclosure is not made by the plaintiff, the Court may discharge the ex parte injunction on that ground alone. But if, in the circumstances existing when the matter comes before the Court inter partes, justice requires an order either continuing the ex parte injunction or the grant of a fresh injunction, such an order can be made notwithstanding the earlier failure to make such disclosure. Moreover, there is authority that, contrary to the law as it was originally laid down, there is no absolute right to have an ex parte order obtained without due disclosure set aside: there is a discretion in the Court whether to do so or not."

Accordingly the injunction granted by the Court on the 17th of September is hereby extended until further order with liberty to the defendants to apply to the Court generally in respect of their assets which will undoubtedly be disclosed in terms of Clause 'D' of the injunction.

(D.V. Fatiaki)
JUDGE

At Suva,
2nd October, 1992.

HBC0411D.92S