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R G Munro futures Pty Ltd (in liq) v Starport Futures Trading Corp


[2008] QSC 337






Trial Division





19 December 2008




12 December 2008


Martin J


The applicant is to bring in appropriate minutes of order.


EQUITY - EQUITABLE REMEDIES -  INJUNCTIONS -  INTERLOCUTORY INJUNCTIONS -  INJUNCTIONS TO PRESERVE STATUS QUO AND PROPERTY PENDING DETERMINATION OF RIGHTS -  MAREVA INJUNCTIONS -  where the applicant does not give the usual undertaking as to damages – where undertakings are offered by non-parties - where the mental health of the sole director and shareholder of the respondent is such that business of the respondent is unable to function.

Uniform Civil Procedure Rules, r 264

Active Leisure (Sports) Pty Ltd v Sportsmen’s Australia Limited [1991] 1 Qd R 301

De Boer v Williams [2004] NSWSC 351

Southern Tableland Insurance Brokers Pty Ltd (In liquidation) v Schomberg (1986) 11 ACLR 37


BT Porter for the applicant

M Martin for the first and second respondents

P Schmidt for the first set of third party creditors

SF Miotti for the second set of third party creditors


Allens Arthur Robinson for the applicant

Tucker & Cowen for the first and second respondents

Deacons for the first group of third party creditors

Hunt Lawyers for the second group of third party creditors

[1] On 28 November 2008 Byrne SJA granted the applicant an interim freezing order over the first respondent’s (“Starport”) assets. An undertaking was given by the liquidators of the applicant as to damages which was limited to the net amount available to the liquidators out of the assets of the applicant pursuant to their rights as liquidators of the applicant.

[2] On the return of the application on 5 December the argument concentrated on the value of the undertaking. Starport conceded that it would consent to continuation of the injunction if an unqualified undertaking as to damages was given by the liquidators. That was a concession which was sensibly made given that the material upon which the application was made clearly discloses serious issues to be tried.

[3] Starport pointed out that it was far from clear whether any assets would be available to the unsecured creditors after payment of the liquidator’s remuneration and outlays. In an affidavit filed on behalf of the applicant, it was said that the liquidators have expended approximately $340,000 to this point. Further, the assets which have so far been identified are valued at somewhere between $1.6 million and $4 million. This, though, appears to be based on the assumption that mezzanine loans made by the applicant can be recovered. The material is not sufficiently certain for me to make a finding as to what the likely recoverable amount will be but it is possible that, after payment of the liquidator’s remuneration and outlays, there may be little or nothing left for unsecured creditors.

[4] On behalf of the liquidators it was argued that there was not a realistic risk that an undertaking as to damages would be called on and, further, that the freezing order then in force specifically excluded from its operation:

“8(b)Dealing with or disposing of any of the first respondent’s assets in the ordinary and proper course of the first respondent’s business, including:

(i) paying business expenses bona fide and properly incurred;

(ii) carrying on trading in securities in the ordinary course of the first respondent’s business.”

[5] I decided then that the uncertainty which existed, among other things, as to the efficacy of any undertaking by the liquidators meant that I should not extend the freezing order in the absence of the usual undertaking. On the application of the liquidators the matter was further adjourned until 12 December 2008 to give them time to make arrangements for a further undertaking. On that day appearances were made for some creditors of Starport. There were two groups. The first group comprised three individuals who assert that they are creditors of Starport. They are all American citizens and they were content to give an undertaking of about $333,000 each, thus collectively providing an undertaking of $1,000,000.

[6] The second group of creditors consisted of a company and two individuals who, on the material, appear to be creditors of Starport for approximately $44,000,000. Together, they are prepared to give an unconditional undertaking up to $5,000,000. It was submitted that they might be prepared to give larger undertakings if required.

[7] Starport contended that the proposed undertakings were worthless. With respect to both sets of creditors there was no evidence to establish their worth. With respect to the first group, as United States citizens not living in this country, they present difficulties in enforcement of an undertaking. With respect to the second group, it was said that as creditors they could, if their undertaking was called upon, simply respond by submitting that any claim on the undertaking could be set off against the amount owed by Starport to them.

[8] I should, at this point, turn to the principles which must inform any decision I make on this application.

[9] I refer, first, to Active Leisure (Sports) Pty Ltd v Sportsmen’s Australia Limited[1] in which Cooper J said:


“The adequacy of an award of damages, or the availability or sufficiency of an undertaking on the part of a plaintiff, are two important matters to be considered in the balancing process whereby the court is required to determine where the great convenience lies. In some cases, depending upon the particular facts of that case, they may ultimately as a matter of importance and weight be determinative of the matter. However, they are to be considered to be part of the totality of determining the balance of convenience and not as a step anterior thereto.”

[10] There is also the provision in r 264 of the Uniform Civil Procedure Rules dealing with undertakings. That rule provides:


(1) Unless there is a good reason, the court must not grant a part 2 order until the trial or hearing or until a stated day without the usual undertaking as to damages having been given.”

[11] That is consistent with the provisions of the general law summarised by the author of “Equitable Remedies” in the following way:


“The purpose of requiring an undertaking is simply to enable the court, should it think that the justice of the case requires it, to recompense a person who has been temporarily enjoined, and, as it subsequently proves, enjoined contrary to his rights as finally ascertained, for the damages that he has meanwhile suffered; and in the end the view has prevailed that every plaintiff who is granted an interlocutory injunction ought, in the absence of most exceptional circumstances, to be required to give an appropriate undertaking, especially since by so doing he does not assume a definite liability or obligation but merely facilitates the task of the court, at the final hearing, of making the order that is most just in all the circumstances.”[2]

[12] It follows, then, that in order for an applicant to obtain a freezing order without giving the usual undertaking as to damages, the applicant will need to demonstrate a “good reason”. In this case, the applicant points to the evidence suggesting that Mr Munro, the second respondent, has indicated that he has both the intention and the capacity to transfer assets out of Australia and out of the reach of creditors. That, in itself, is not sufficient to demonstrate a “good reason”. That is, in fact, the usual ground upon which a freezing order is made, namely, the concern that the respondent to the application will put the assets out of reach of the applicant.

[13] It is also appropriate to consider the worth of an undertaking. The undertaking which has been offered by the liquidators cannot satisfactorily be quantified on the current understanding of the finances of Starport.

[14] The undertaking offered by the first set of creditors is insufficient as it is offered by persons who are outside the jurisdiction without providing any security.

[15] As for the second set of creditors a court should also tread warily where an undertaking is offered from a non-party. Young J expressed doubts as to whether a court should accept such an undertaking, where the court cannot be satisfied that an independent lawyer has properly advised the non-party as to all the consequences involved.[3]  His Honour said that a secured undertaking in those circumstances is usually preferable to an undertaking from a non-party. The second set of creditors was separately represented and there was no suggestion that they had not been independently advised.

[16] There is another matter which has particular relevance when the balance of convenience is considered and when assessing whether a proposed undertaking satisfies the requirements of r 264.

[17] Mr Munro, the second respondent, is the sole director and shareholder of Starport. He has not provided any affidavit for use in these proceedings and it would appear that his current state of mental health would preclude him from doing that. Mr Munro’s solicitor swore an affidavit in which he stated that he had been informed by Mr Munro that he was travelling in the United States of America. The exhibits disclose that he was involuntarily committed for medical treatment for his mental illness in the St Francis Memorial Hospital. His solicitor, Mr Tucker, deposes to having difficulty in obtaining his client’s instructions in relation to the matter due to his current mental state as well as his presence in the United States of America and the intermittency of his contact with him via email. He also deposes to having been told by Mr Munro that “he does not object to the continuation of the existing orders until such time as he is able to provide me with proper instructions and take advice about whether the mareva orders should be resisted.”

[18] Exhibited to Mr Tucker’s affidavit is a report from Mr Munro’s treating psychiatrist, Dr Lotz. He diagnoses Mr Munro as having an adjustment disorder with anxiety and depression and, on 7 November 2008, as having been acutely suicidal. He has prescribed a regimen of treatment which includes antidepressants and anti-psychotics. He expressed the view that Mr Munro was too unstable to consider a lengthy examination (by the liquidators) and that his condition continues to be fragile and he is at risk of suicide. Dr Lotz recommends that he not undertake any responsible employment nor embark on any new enterprises. While he believes the prognosis is favourable he says that this will be lengthy. He also goes on to say that, considering the slow recovery to date, he would not anticipate Mr Munro being able to be subjected to an examination by the liquidator for the next three months. Finally, Dr Lotz says:


“Mr Munro has taken the responsibility of the losses of his clients and family’s money heavily, feels that he is a failure and a disgrace, and has spoken about how he would rather ‘disappear’ than face his clients and family especially his wife of 36 years, to explain the losses and his perceived failures.”

[19] On the evidence available the only person who can conduct the business of Starport is Mr Munro. When the matter first came before me on 5 December, the evidence was that Mr Munro was in the United States of America. On 12 December, I was told that Mr Munro had returned to Australia for the preceding weekend and had, since then, returned to the United States.

[20] Rule 261 merely re-states what has always been the price which must be paid for a freezing order[4]. The nature and extent of an undertaking is still a factor to take into account in considering the balance of convenience[5]. Inevitably, then, consideration of whether “good reason” has been demonstrated in r 261 will require, at least, consideration of all the matters which need to be dealt with when assessing the balance of convenience. I think it appropriate, in these circumstances, to take into account the mental state of the guiding mind of Starport and the threats he has made of removing assets from this jurisdiction. It was argued on behalf of Starport that a freezing order would adversely affect the business of that company. It would appear inevitable, though, that Mr Munro’s mental state will result in Starport not functioning for the next few months at least. The history of Starport is one where that company’s clients engaged it because of Mr Munro’s perceived talent in finance and investing. There was no suggestion that any other person had been appointed to carry on the business. Should anything be required to be done, then the exceptions to freezing order will allow anything in the ordinary course of business to be done. It follows, then, that in Mr Munro’s absence, or while he is unable to conduct the business, the risk of loss caused by this freezing order alone is substantially, if not completely, reduced. 

[21] In those circumstances, then, an undertaking of a limited nature is sufficient, when weighed against the risks to which I have referred, for me to continue the freezing order. The undertaking of which I speak will be the undertaking offered by the liquidators together with the undertakings offered by the second set of creditors.

[22] The Applicant is to bring in appropriate minutes of order.


[1] [1991] 1 Qd R 301 at 311.

[2] Spry, Equitable Remedies 7th ed, Thomson Law Book, p 483.

[3] Southern Tableland Insurance Brokers Pty Ltd (In liquidation) v Schomberg (1986) 11 ACLR 37 at 343.

[4] De Boer v Williams [2004] NSWSC 351 at [20] to [26]

[5] See Active Leisure (Sports) Pty Ltd v Sportsmen’s Australia Limited above


Editorial Notes

  • Published Case Name:

    R G Munro futures P/L (in liq) v Starport Futures Trading Corp & Anor

  • Shortened Case Name:

    R G Munro futures Pty Ltd (in liq) v Starport Futures Trading Corp

  • MNC:

    [2008] QSC 337

  • Court:


  • Judge(s):

    Martin J

  • Date:

    19 Dec 2008

Litigation History

No Litigation History

Appeal Status

No Status