SUPREME COURT OF QUEENSLAND

[1] FRASER JA:  In January 2007 Ms Brack brought an action in the District Court against her daughter, the first respondent, to recover money or damages for breaches of loan agreements and misappropriations of money and property by the first respondent whilst acting under a power of attorney granted by Ms Brack.  At that time the first respondent jointly owned a house with her husband, the second respondent.  In May 2007 the respondents transferred the house property to the second respondent and he became registered as the sole proprietor.  In 2008, the second respondent was joined as a second defendant to Ms Brack’s claim and an order was made restraining him from dealing with the house property without first giving 21 days written notice of his intention to do so.

[2] Ms Brack died before the trial.  The applicant, who is Ms Brack’s granddaughter and personal representative, was substituted as plaintiff.  In September 2009 the second respondent signed a contract to sell the house property, subject to permission being obtained from the District Court for the sale.  In November 2009 a consent order was made setting aside the restraining order and providing for the net proceeds of the sale to be held in the applicant’s solicitor’s trust account until further order or until dispersed in accordance with the parties’ agreement.  When the contract of sale settled, $50,274.94 was deposited into the applicant’s solicitor’s trust account.  On 15 February 2010 a judge of District Court ordered that the respondents deposit into the applicant’s solicitor’s trust account the additional sum of $3,821.66, which was said to be the balance deposit paid by the purchasers to the second respondent after settlement.  It seems that only part of that additional sum was paid into the trust account.

[3] During part of the time when the applicant’s claim was progressing towards trial in the District Court, Mr Craig Stevenson was retained as the respondents’ solicitor to defend the claim.  Mr Stevenson subsequently ceased to act and the respondents were not legally represented at the trial.  In November 2009 Mr Stevenson sued the respondents in the Supreme Court for $50,000 as legal costs allegedly owing under a deed of settlement.  A consent order was made for payment of that amount and for costs of $2,500.  The total amount was about equal to the amount of money in the applicant’s solicitor’s trust account.  In 2011 Mr Stevenson applied in the District Court for orders that the money in the trust account be paid to him.  That application was adjourned and Mr Stevenson was permitted to participate at the trial between the applicant and the respondents.

[4] The trial was heard in April 2012.  The applicant pursued her claims for money and damages against both respondents.  The applicant also claimed declarations that the respondents had held the house property on a constructive trust to pay the claimed amounts to the applicant and that the money in the applicant’s solicitor’s trust account was held on trust for the applicant.  Judgment upon the applicant’s claims was given on 14 December 2012.  The applicant was given judgment against the first respondent in the amount of $31,513.14, including interest, for the unpaid amount of a loan.  The applicant failed on all other claims against the respondents.  The primary judge held that the applicant had no entitlement to equitable relief, there was no basis for imposing a constructive trust in the applicant’s favour in respect of the house property, and it should not be declared that any part of the money held by the applicant’s solicitor was held on trust for the applicant.  The applicant did not seek to appeal against that decision.

[5] The primary judge observed in his reasons for judgment that the money in the trust account should be refunded to the second respondent, subject to any claim by the applicant.  That issue and the appropriate costs orders were deferred for the hearing of submissions.

[6] At a hearing on 30 January 2013, the primary judge adverted to the possibility that the applicant might apply in the Supreme Court to set aside the transaction between the respondents on the ground that it was a transaction to defeat creditors.  The applicant’s solicitor responded that he had “the application” and “the affidavit” ready.  After hearing argument, the primary judge adjourned the further hearing of the matter to 15 February.  The primary judge observed that, if an application had been filed in the Supreme Court for a freezing order by then, the existing orders of the District Court in relation to the trust money would remain in place until the Supreme Court dealt with the matter; if no such application had been filed the primary judge would then deal with the existing orders about the money in the trust account.

[7] On 12 February 2013, the applicant’s solicitor sent an email to the primary judge’s associate seeking “clarification whether I needed to apply to the Supreme Court”.  The primary judge’s associate responded that it was “a matter for you to decide where the application can be made, and whether the District Court has jurisdiction in that matter.”  It was submitted in the applicant’s written outline that “if a clearer response to the query as to whether the application was needed to be made to the Supreme Court had been received, then the application most certainly would have been filed in the Supreme Court.”[1]  That submission was not pressed in oral argument.  It was without foundation.  There should also not have been any necessity for the email to the associate.  The transcript demonstrates that it was made perfectly clear at the 30 January hearing that what was contemplated was an application in the Supreme Court.

[8] After hearing submissions on 15 February 2013, the primary judge made further orders, including that:

1. The solicitor for the applicant pay the money held in his trust account to Mr Stevenson within seven days. (The primary judge did not adjudicate upon a challenge to the propriety of Mr Stevenson’s conduct in obtaining judgment against the respondents for his costs. Rather, the primary judge made this order on the footing that the second respondent owned the money, it having been derived from the sale of his property, and the second respondent sought the order that the money be paid to Mr Stevenson.)

2. An application filed by the applicant on 14 February 2013 for a restraining order in relation to the money held by the applicant’s solicitor be dismissed.

3. The applicant pay the second respondent’s costs of the proceeding, the first respondent pay the applicant’s costs of the proceeding, and the applicant pay both respondents’ costs of various interlocutory applications.

[9] The applicant has sought leave to appeal against the first two of those orders pursuant to s 118(3) of the District Court of Queensland Act 1967.  The applicant submitted that the primary judge made those orders upon the mistaken view that the District Court did not have jurisdiction to make the freezing order sought by the applicant.  The applicant also submitted that the primary judge erred by failing to transfer her application for a freezing order to the Supreme Court pursuant to s 28 of the Civil Proceedings Act 2011 and by failing to give weight to the consideration that the respondents owed a substantial amount of costs to the applicant pursuant to the costs order after the trial and to orders for costs against both respondents made on various interlocutory applications during the course of the litigation.

[10] As the applicant submitted, s 69(3) of the District Court of Queensland Act 1967 declares that “the District Court may grant a Mareva injunction or Anton Piller order in proceedings in which jurisdiction is conferred under this part.”  The applicant submitted that the jurisdiction of the District Court under s 68 to hear and determine the applicant’s claims had not been exhausted when she applied for afreezing order.  She pointed out that rule 260A of the Uniform Civil Procedure Rules 1999 empowered the making of a freezing order “for the purpose of preventing the frustration…of the court’s process by seeking to meet a danger that ajudgment…of the court will be wholly or partly unsatisfied.”  The applicant argued that such an order should have been made against the second respondent to prevent the frustration of the interlocutory costs orders against him.  It was submitted that the amount owing by the second respondent pursuant to interlocutory costs orders might be as much as $20,000.

Consideration

[11] The application dismissed by the trial judge on 14 February 2013 (which was dated 14 February 2013 but was stamped with a filing date of 1 March 2013) sought orders restraining both respondents from seeking payment of the money held in the applicant’s solicitor’s trust account or from dealing with that money until further order.  Similar orders had earlier been found to be appropriate in support of the applicant’s claims for an equitable interest in the money, but those claims were rejected after a trial and there was no appeal from the decision.  Nor could the claimed orders be justified as freezing orders in support of costs orders against either respondent.  The application should have limited the claimed orders to the period necessary for the applicant to obtain execution upon the costs orders in her favour.  Since the justification for an order freezing the specified fund of money (rather than an order restraining the respondents from dissipating their assets, subject to appropriate exceptions including the payment of just debts and appropriate expenses) seemed to be that the respondents had no other substantial resources, it was also especially important to provide the usual exceptions for just debts and expenses.  In the absence of those exceptions, the effect of the claimed orders would have been to prefer the applicant over the respondents’ creditors by giving her security for her claimed costs where she otherwise had no entitlement to the money.  It would have been wrong to make orders having that effect: see Pelechowski v The Registrar, Court of Appeal (NSW) (1999) 198 CLR 435 at 452 [52]-[53].

[12] Putting aside those issues, and assuming also that the applicant would have proffered the necessary undertaking as to damages and that the evidence established a risk that the respondents’ assets might be dissipated otherwise than by appropriate payments of debts and expenses before the costs orders could be enforced, there remained fundamental obstacles to the application for a freezing order directed at the money in the trust account.  In relation to the first respondent, the obstacle was that there was no extant claim in the District Court challenging the second respondent’s ownership of the house property and the money derived from its sale.  (Since no such claim was even foreshadowed in the District Court, it is not necessary to consider whether the District Court possessed jurisdiction to hear it.)

[13] In relation to the second respondent, the only possible basis for such an order lay in the interlocutory costs orders against the second respondent, but the evidence before the primary judge did not establish that the applicant might become entitled to any net payment from the second respondent.  The respondents were legally represented during part of the proceedings and the trial judge made a costs order in both respondents’ favour.  The evidence adduced by the applicant did not include any estimate of the amount which might become payable by the applicant to the second respondent pursuant to that order or the amount which might become payable by the second respondent to the applicant pursuant to the interlocutory costs orders.  There was no evidence that the latter amount might overtop the former amount.  In the result, there was no evidence that the second respondent might become subject to a net liability to the applicant on account of the relevant costs orders.  Even if so much were assumed in the applicant’s favour, the applicant’s submissions suggested that the amount of the net liability would be far less than the amount of money sought to be frozen and the evidence did not permit the primary judge to make even a broad estimate of the maximum potential net liability for costs.  In that state of the evidence, it would have been inappropriate to accede to the applicant’s argument that the existing restraining order should continue in force or to make any freezing order against the second respondent.

[14] The applicant’s argument that the primary judge wrongly held that the District Court had no jurisdiction to make a freezing order was based upon remarks by the primary judge taken out of context.  At the hearing on 30 January 2013 the primary judge observed that, subject to the transfer of the house property from both respondents to the second respondent being set aside as a transaction to defeat creditors, the proceeds of the sale of the house property appeared to be the property of the second respondent.  It was in that context that the primary judge observed that he might not have “jurisdiction to entertain that application”.  (The view that the primary judge lacked jurisdiction to make a freezing order in aid of a foreshadowed application in the Supreme Court was not challenged in this application.) The applicant’s solicitor then informed the primary judge that the solicitor had “the application” and “the affidavit” ready for filing in the Supreme Court, apparently meaning an application to set aside the transfer and a supporting affidavit for that application.  When the discussion turned to costs orders against the second respondent, the primary judge observed that it would be “reasonable to retain that part of the amount [in the trust account] necessary to discharge that obligation”.  Furthermore, in the course of argument, the primary judge accepted in terms that the District Court might in appropriate circumstances grant a Mareva injunction in support of the applicant’s rights under the interlocutory costs orders against the second respondent, but his Honour observed that any such order in relation to the first respondent would appropriately be granted only if the applicant had applied in the Supreme Court and only to give an opportunity for the applicant to make such an application.  The primary judge said that the issue was whether “I should simply…maintain the status quo for a reasonable time to give the plaintiff the opportunity to start proceedings in the Supreme Court and apply to the Supreme Court for an order that the money be frozen…but unless that is done then I simply proceed on the basis that the only entitlement the plaintiff has in respect to the second defendant’s property is in relation to costs.  Now, that would suggest that perhaps some of the money should be retained but the balance should be paid…”.[2]  Thus the primary judge accepted that the District Court did have jurisdiction to make a freezing order in relation to money which might become payable by the second respondent to the applicant pursuant to the interlocutory costs orders.

[15] The applicant’s argument to the contrary focussed on remarks made by the primary judge shortly after the commencement of the adjourned hearing on 15 February 2013.  The primary judge enquired whether a proceeding had been commenced in the Supreme Court as had been contemplated at the previous hearing.  The applicant’s solicitor responded that an application had been filed in the District Court for freezing orders under r 260A of the UCPR.  In response to a subsequent submission by the applicant’s solicitor that the District Court had jurisdiction under r 260A, the primary judge observed that it did not apply in this case because the claim in the District Court had been determined and there was “nothing in section 68 [of the District Court of Queensland Act 1967] which enables me to set aside the transaction between the first and second defendants, and…unless there is a claim under…section 68 I can’t exercise an equitable jurisdiction under section 69”.  The primary judge added that, having completed the exercise of the jurisdiction given by s 68 the District Court did not retain power to continue the existing restraining order.  Those remarks concerned the application for a freezing order against the first respondent in relation to the money in the trust account in circumstances in which there was no extant claim in the District Court that she held any interest in that money.  The primary judge did not convey that the District Court lacked jurisdiction to make a freezing order to prevent the frustration of that court’s orders, including costs orders.

[16] That the primary judge had not departed from the view expressed on 30 January that the District Court did have such jurisdiction finds confirmation in his Honour’s subsequent observation about the amount of the trust money which should be released.  The primary said that “I can’t really determine whether it’s all or part of the money until I’ve decided what’s happening in relation to costs.  So, in relation to costs, now, you wanted to put some additional material before me.”  Despite that invitation, the applicant did not ask the primary judge to make a freezing order limited to the net amount of any costs which might become payable by the second respondent to the applicant and, as I have mentioned, the applicant did not adduce any evidence upon that topic.

[17] The applicant argued that the primary judge should have adjourned the proceedings on 15 February to permit the applicant to bring an application in the Supreme Court to challenge the transfer of the house property from the respondents to the second respondent.  This argument should also be rejected.  The primary judge refused the adjournment because the applicant had not availed herself of the opportunity to make an application in the Supreme Court between 30 January and 15 February 2013.  The freezing orders sought by the applicant would have restrained the second respondent from dealing with a substantial sum of money which, on the evidence, was his property.  Such a restraint had been in place for a very long time in support of equitable claims against both respondents which were rejected on their merits after a trial.  In those circumstances, it was to be expected that any further application for a freezing order would be pursued promptly.  Although the applicant indicated on 30 January that she was then in a position to apply in the Supreme Court, she had not done so in the two weeks allowed by the primary judge; and that is so even though the applicant had obtained judgment against the first respondent months earlier and she had known of the transfer for years.  Furthermore, since the applicant’s solicitor informed the primary judge on 15 February that the applicant was in a position to file an appropriate application in the Supreme Court, it is not apparent that the primary judge’s refusal of the adjournment resulted in any prejudice to the applicant.  There is no reason to doubt that the refusal of the adjournment was within the primary judge’s discretion.

[18] The applicant’s argument that the primary judge should have transferred the application for a freezing order to the Supreme Court pursuant to s 28 of the Civil Proceedings Act 2011 was correctly refused by the primary judge.  Section 28(2) confers a discretion upon a court which considers that another court has jurisdiction for a proceeding to order the proceeding to be transferred to that other court.  It was open to the primary judge to refuse to exercise that discretion in light of the applicant’s lengthy delay in filing the application for a freezing order, the absence of any reasonable explanation for the application being filed in the District Court rather than in the Supreme Court, and the applicant’s failure to file in the Supreme Court the substantive application (an application to set aside the respondents’ transfer of the house property to the second respondent) in aid of which the freezing order was to be sought.  In those circumstances it was certainly open – in my respectful opinion it was correct – for the primary judge to act under s 28(3), which provides that unless an order for a transfer is made the court must strike out the proceeding and may order the party who started the proceeding to pay the costs of any other party to the proceeding.

[19] I would add that the arguments considered in [17] and [18] seem artificial in light of the information given to the Court that, although the applicant eventually filed an application in the Supreme Court to set aside the respondents’ transfer of the house property to the second respondent, she has not actively pursued that application or applied for a freezing order.

Disposition and proposed orders

[20] I would refuse the application with costs on the ground that the proposed appeal lacks merit.

[21] DOUGLAS J:  I agree with the reasons of Fraser JA and the order proposed by his Honour.

[22] BODDICE J:  I have read the reasons for judgment of Fraser JA.  I agree with those reasons and the proposed order.