Karl Suleman Enterprizes Pty Ltd (In Liquidation) v Jessie George & Ors

HIS HONOUR : This is the hearing of a notice of motion brought by the fifteenth defendant in the proceedings. The proceedings are ones which are brought by Karl Suleman Enterprizes Pty Ltd (In Liquidation) against some fifteen people.

The claim against the fifteenth defendant is that he was involved in obtaining money which assisted Karl Suleman Enterprizes Pty Ltd. It is alleged that that money was obtained in circumstances which resulted in the fifteenth defendant having an equitable personal obligation to repay some of that money. The claim is put in various ways, including an allegation that he was a trustee and also that there was a claim for equitable compensation arising from a breach of the second limb of Barnes v Addy.

A Mareva order was made against the fifteenth defendant on 3 June 2002. It imposed significant restrictions on the respondent dealing with any of his assets. There was a proviso to the order that said that the order, “(f) shall not prevent the first respondent from: (i) paying ordinary living expenses up to an amount of five hundred dollars ($500) per week; (ii) paying costs reasonably incurred in these proceedings up to an amount of ten thousand dollars ($10,000).”

There is evidence that before that order was made, on 11 April 2002, the fifteenth defendant paid into the trust account of his solicitors, Smith Monti Legal, an amount of $2000. Six hundred dollars of that amount was appropriated in payment of costs on 8 May; that is, before the Mareva order was made. Another amount of $1000 was appropriated on 25 June 2002 – that is, after the Mareva order was made.

There is owing to the solicitors an amount of $4726. There is owing to counsel an amount of $4496. That totals a little over $9200; thus, with the $1000 which was appropriated after the Mareva order, payment of the fees currently rendered would more than exhaust the limit which the Mareva order had placed on payment of legal costs.

The fifteenth defendant seeks a variation of the Mareva order so that a further $8000 could be expended for anticipated future costs in the matter. The evidence in support of that application consists of an affidavit from Mr Kazi, the solicitor handling the matter. He says that he anticipates that a defence on behalf of the fifteenth defendant will be filed and served shortly, that thereafter a significant amount of work will be required in the preparation of affidavit evidence in support of the fifteenth defendant’s defence, as well as appearances at directions hearings. Mr Kazi says that he anticipates that costs to be incurred in drafting and settling affidavit evidence, appearing in court at directions hearings, preparing for final hearing and appearing at final hearing in this matter would easily exceed $4000 on behalf of Smith Monti Legal and $4000 on behalf of counsel.

Counsel for the plaintiff in the proceedings accepts the necessity of the fifteenth defendant having proper legal representation available to him. However, the plaintiff criticises the particularity with which the evidence has been put forward by the fifteenth defendant.

While the evidence is not as particular as one might like, it does come to an explicit conclusion about the total amount which is likely to be expended, and there has been no attempt to cross-examine on that evidence. The evidence that has been presented is, to put it at a very low level, not the sort of evidence which is inherently improbable, and hence I accept the evidence that has been put forward about the likely expenditure.

I vary the order made 3 June 2002, to which I earlier referred, by substituting for “ten thousand dollars ($10,000)” the amount of “eighteen thousand dollars ($18,000)”.

I should say that one matter which I have taken into account in being prepared to make this order, on the basis of fairly slim evidence, is that the expenditure of the money will be under the control of his solicitor. The solicitor will, in consequence, only be able to expend money pursuant to the extension of the order that I have allowed if costs are reasonably incurred.

As well, I have taken into account that, in the context of the fees involved in running large litigation, the extra amount which is sought is not large.

Another variation is sought by the fifteenth defendant. There is, in the trust account of Smith Monti Legal, the proceeds of sale of some real estate which the fifteenth defendant once had an interest in. The solicitors for the fifteenth defendant seek clarification that they are entitled to pay from the trust account an amount of $500 per week for living expenses.

They seek an order that they be entitled to pay out that $500 per week, in place of and not in addition to Order 1(f)(i) of the orders of the Court made 3 June 2002.

It is a fundamental principle upon which Mareva orders are made that a person bound by such an order is entitled to have his or her assets expended for ordinary living expenses. That principle is not challenged here.

The problem is really one of drafting. It arises in circumstances where, I am told from the Bar table, the fifteenth defendant has obtained employment, but the net earnings from his employment are insufficient to cover the amount of $500 per week, or the amount of his ordinary living expenses.

There are two possibilities open to me. One is to simply leave the living expenses order in the form it presently takes. If that were to happen, then it would be open to the fifteenth defendant’s solicitors to release money to the trust account at a rate of not more than $500 per week, provided that they had reason to believe that the release of that money was needed for the purpose of the fifteenth defendant having available to him an amount of $500, in total and from all sources, for the payment of his living expenses each week.

Given the serious consequences that there may be for someone releasing assets to a person who is bound by a Mareva order and the possibility of there being contempt of court if one aids and abets in a breach of Mareva orders, it seems to me that it is not desirable to impose on the solicitors an obligation to make enquiries about how much money the fifteenth defendant has from other sources before releasing any other moneys to him from the trust account.

The preferable course seems to me to be to allow all living expenses to be paid from the trust account but to ensure that the terms of the injunction are such that no other assets from any other source are free to be used for living expenses.

I therefore modify the existing Order 1(f)(i) by adding to the end of it the words, “provided that such expenses are paid only from money standing to the credit of the first respondent in the trust account of Smith Monti Legal, Solicitors."

On 20 June 2002 the interlocutory order that I have referred to was varied by adding a paragraph 1(f)(iii), which aimed to permit the fifteenth defendant to complete the sale of the real estate which I have earlier referred to. That order was made, “on the condition that the net proceeds of sale are paid into and retained in the trust account of Smith Monti Legal, solicitors for the fifteenth defendant, pending further order.”

For the sake of complete clarity, I make clear that the order I have just made is a “further order” within the meaning of paragraph 1(f)(iii). In consequence, it will not be a breach of paragraph 1(f)(iii) if moneys are paid from the trust account of Smith Monti Legal for the purpose of paying living expenses in the manner permitted by the order I have just made.

Otherwise, the notice of motion is dismissed. I note that neither party asks for an order for costs.