Case: Patterson v BTR Engineering (Aust) Limited (1989) 18 NSWLR 319
Outcome: considered
The nature of the remedy was described by Gleeson CJ in Patterson v BTR Engineering (Aust) Limited (1989) 18 NSWLR 319 at 321-322 in these terms: 'The remedy is discretionary, but it has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant's absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.' 5 The issues for determination on this application, therefore, are whether: (i) there is a prima facie cause of action made out against the respondents; (ii) there is a danger that by reason of the respondents disposing of or removing the assets the prospective judgment debt will not be satisfied; and (iii) if the forgoing requirements are each satisfied, the Court's discretion to grant the remedy should be exercised in all the circumstances. 6 The relationships between the parties, the nature of the main proceeding and the chronology and circumstances of the proceeding are set out by the respondents as follows: ' The parties 5. The First to Sixth and Eighth to Ninth Respondents are medical practitioners. The Seventh Respondent is a chartered accountant. They have at all material times been the Directors of Rosanza which owns the property at 12 Macdonald Street, Harbord, in its capacity as Trustee of the Peninsula Private Hospital Trust ("the Unit Trust"). They were previously directors of the Second Applicant (Peninsula Hospital Management Pty Limited) ("Peninsula") before the shares in Peninsula were sold to the First Applicant (KGL). Those Respondents are being sued by Peninsula for alleged breach of directors' duties to Peninsula. They may be conveniently referred to as "the Director Respondents". 6. The Eleventh to Nineteenth Respondents (as well as the Fourth, Sixth and Ninth Respondents) were previously the holders of shares in Peninsula before they sold them to KGL in about March 2004. They may be conveniently referred to as "the Vendor Respondents". Those Respondents also owned the units in the Unit Trust. Chronological Overview .7. From about 1996, Peninsula carried on the business of a private hospital and day procedures centre from the premises which were owned by Rosanza. 8. On about 18 February 2004, the shareholders of Peninsula (being the Vendor Respondents referred to in paragraph 6 above) entered into a Sale of Share Deed with the First Applicant (KGL). Under that Deed, the Vendor Respondents sold their shares in Peninsula to KGL and the Director Respondents (other than the Ninth Respondent) ceased to be directors. Rosanza executed a fresh lease of the premises to Peninsula for a term of six years commencing 3 March 2004 ("the Lease"). The new Directors of Peninsula guaranteed Peninsula's obligations under the Lease ("the Guarantors"). 9. Clause 4 of the Lease required Peninsula to operate the Hospital business from the premises, to maintain the Hospital Licence and to ensure that the premises and the Hospital business complied with all relevant laws and regulations. 10. On or about 13 April 2006, Peninsula ceased to carry on the Hospital business and the Hospital Licence was no longer maintained. 11. After 13 April 2006, Peninsula's then solicitors (Cosoff Cudmore Knox) sent a letter dated 20 April 2006 to Rosanza advising that Peninsula had ceased to carry on the Hospital business because the building on the premises did not meet Australian Building Code Standards and that, as a result, Peninsula was in breach of the Hospital Licence and that it would be unsafe and possibly illegal to continue to operate. Rosanza replied denying the allegations. 12. On or about 30 May 2006, Rosanza received another letter of demand from new solicitors acting for Peninsula (Bruce Stewart Dimarco) dated 30 May 2006 alleging matters not raised in the previous letter from Cosoff Cudmore Knox and alleging that it was a consequence of those matters that the Hospital ceased operating on 13 April 2006. A similar letter of demand dated 30 May 2006 was sent to the Vendor Respondents. 13. Rosanza and the Vendor Respondents (through their solicitors) replied denying the allegations and further correspondence ensued between the parties' legal representatives. 14. On 22 December 2006, the Applicants commenced these proceedings alleging that: (a) the Director Respondents had breached their directors' duties to Peninsula by allowing certain works to be carried out without authorisation (" the Works "); (b) the Vendor Respondents and Rosanza had engaged in misleading and deceptive conduct by making certain representations but failing to disclose matters relating to the Works; (c) the Vendor Respondents had breached certain warranties under the Sale of Share Deed. 15. The Applicants allege in the Statement of Claim that, as a result of the Works, the Licence was liable to cancellation and the continued operation of the Hospital business exposed the current Directors of Peninsula to personal liability.... 16. The Applicants also allege that, when matters relating to the Works came to the Applicants' attention, the Directors resolved to close the Hospital business.... 17. The Respondents deny the allegations in the Statement of Claim. In particular, they deny that the Works were in breach of or threatened the Hospital Licence or were in breach of [the Environmental Planning and Assessment Act 1979 (NSW)] or threatened the continued operation of the Hospital business or that closure of the Hospital business was as a consequence of any matters arising from the Works or an absence of consent or authorisation of those Works related to the Works. 18. On 10 May 2007, Rosanza terminated the Lease. It has cross-claimed against Peninsula and the Guarantors for rent and other debts due under the Lease to the date of termination as well as liquidated and general damages arising from the loss of the Lease. 19. On 22 August 2007, Rosanza entered into a contract for the sale of the premises to a third party who will use the premises as a hospital. That sale is due to complete on 12 September 2007.' 10 The need for evidence to make out a prima facie case is illustrated by Patterson (1989) 18 NSWLR 319. In that case, Gleeson CJ at 321 referred to the need to establish a prima facie cause of action, and also noted at 322 that Giles J was satisfied, as the primary judge, that there was sufficient evidence to satisfy this first condition for grant of the remedy. Giles J only came to that conclusion after carefully considering the extensive and detailed evidence before him, which provided the necessary basis for his finding: see BTR Engineering (Australia) Ltd v Patterson (unreported Supreme Court of New South Wales, Giles J, 1 September 1989) at 3-5; see also Biscoe P, Mareva and Anton Piller orders: freezing and search orders (LexisNexis, 2005) at [2.60]-[2.61].