Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2004] NSWSC 407

New South Wales Supreme Court

CITATION : Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2004] NSWSC 407 HEARING DATE(S) : 11 May 2004 JUDGMENT DATE : 11 May 2004 JURISDICTION: Equity JUDGMENT OF : Hamilton J DECISION : Further money released from Mareva restraint to meet costs of proceedings (including proceedings related to these proceedings).

CATCHWORDS : EQUITY [340] - Equitable remedies - Injunctions - Interlocutory injunctions - Injunctions to preserve property pending determination of rights - Mareva injunctions - Other matters - Need to fund litigation - Whether moneys may be released for costs of litigation other than proceedings in which Mareva relief subsists. Lewis v Lamb [2004] NSWSC 322 CASES CITED : Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2004] NSWSC 64 Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2004] NSWSC 287 3081/97 Peter Lawrence Lewis (P) Lamru Pty Ltd (Applicant) Kation Pty Ltd (Respondent) Brian Raymond Silvia (Liquidator) PARTIES : 1750/02 Lamru Pty Limited (P) Kation Pty Limited (D1) Peter Lawrence Lewis (D2) Mark Lewis (D3) Nortex Pty Ltd (In Liq) (D4) FILE NUMBER(S) : SC 3081/97; 1750/02 J T Johnson (P L Lewis & Kation P/L) COUNSEL : S J Motbey (Lamru P/L) No appearance (Liquidator & Nortex P/L) No appearance (M Lewis) Kemp Strang (P L Lewis & Kation P/L) SOLICITORS : Lyons & Lyons (Lamru P/L) Abbott Tout (Liquidator & Nortex P/L) Corrs Chambers Westgarth (M Lewis)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J

TUESDAY, 11 MAY 2004

3081/97 PETER LAWRENCE LEWIS v NORTEX PTY LTD (In Liq) 1750/02 LAMRU PTY LTD v KATION PTY LTD JUDGMENT – Re Application for Variation of Mareva Relief (see T907) 1 HIS HONOUR: This is an application for a third release of money from funds held under Mareva relief to pay legal costs, being fees of Mr Motbey of counsel, who has appeared for Lamru in these proceedings and for Russell William Lamb in proceedings in the Common Law Division relating to the registration of a judgment of the High Court of New Zealand. The two earlier releases were effected by judgments of mine, respectively: Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2004] NSWSC 64, and Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2004] NSWSC 287 ("my second judgment"). This application relates to fees of Mr Motbey incurred since that time. It differs from those earlier applications in that they related wholly to costs incurred in these proceedings, whereas the present application includes costs that were incurred in the proceedings in the Common Law Division in which I have delivered judgment: Lewis v Lamb [2004] NSWSC 322 ("my Common Law judgment"). 2 The objections that are taken to this release include that the fund is held by way of security for costs of these proceedings and ought not be allowed to be used in relation to the costs of the Common Law proceedings which are said to be unrelated or not sufficiently related to these proceedings. It needs to be borne in mind that they are held for the security of the costs of Lamru but are funds provided by Mr Lamb, as the person standing behind Lamru and by Ms Tilbury, his wife, out of moneys of theirs received from the sale of a house property owned by them. In a sense the fact that they are Mr Lamb's moneys in my view strengthens rather than diminishes the case for their release. In so far as they relate to the Common Law proceedings, Mr Lamb has engaged lawyers to prosecute a motion for a stay of execution (successfully) without which a judgment for $NZ400,000 would have been immediately executed against him. I have already remarked that Mareva relief will not be allowed to stultify the proceedings in which it is granted. However, equally, in my view, it will not be allowed to prevent persons whose funds are frozen from using those funds to defend other proceedings against them, at least in circumstances where those proceedings have some relationship to the proceedings in which the Mareva relief is granted. That there is some relationship between the two I have already dealt with in my Common Law judgment, since without that relationship a stay would not have been given of the execution of the judgment registered in the Common Law Division. It was said on earlier occasions and has not now been repeated that the work for which payment is sought had already been done. But I think it is fair to say here, as I said there, that the lawyer involved did the work on the faith of the principle I have enunciated, that funds would be released to meet the costs of work reasonably done in or related to the proceedings. I do not therefore think that the fact that the costs are in part costs of the Common Law proceedings, bearing in mind that they have a relationship to these proceedings, is a reason to refuse the release. 3 A number of complaints were made about the form of Mr Motbey's bills, payment of which is sought. It may well be that those complaints do lead to the conclusion which they were put in support of, namely, that Mr Motbey could not sue either Lamru, or, more particularly, Mr Jim Lyons, solicitor (since it is by Mr Lyons that he is engaged) upon the bills as delivered. I do not think this is material. The basis on which the earlier orders were made - and it seems to me that this application falls in the same category – is that, whether or not fees could have been sued for, nothing could have prevented Mr Motbey from withdrawing his services if he did not have some assurance of the payment of his fees. This sanction, in my view, is not precluded by the considerations that Mr Johnson, of counsel for the defendants, has put to me. In addition, it should be said quite specifically that no claim is made on this occasion, as none was made on the earlier occasions, about the rates at which Mr Motbey has charged for the work done, and no complaint is made that the work charged for was not done. I am therefore of the view that the course of releasing the funds ought not be precluded by reason of any consideration arising from the form of the bills. 4 The third matter that is put to me relating to this release is that the evidence is now such concerning Mr Lamb's financial situation that he ought be regarded as being on the verge of bankruptcy, with the $NZ400,000 debt due and owing, even if it is not at the moment, by reason of the stay of proceedings which I have granted, enforceable, and that allowing the release is tantamount to the encouragement or endorsement by this Court of the payment of a preference. All I propose to say about that at this stage is that, whilst there is some talk on both sides of a threat to Mr Lamb of bankruptcy at some stage arising out of these proceedings, I think it is far from clear, whilst the current proceedings are undetermined, as to whether there will at some stage be a bankruptcy of Mr Lamb, or when such bankruptcy, if it ever does occur, will occur. In any event, if by some chance Mr Lamb were suddenly bankrupt, and the payments that will be made pursuant to this release were made at a relevant time, then the law of preferences, if it ever did come to apply, could be applied in the usual way, and against a payee whom one would not regard as being obviously unable to repay the moneys. 5 At one stage there was a suggestion that Mr Lamb was in breach of an undertaking given to provide an accounting of the affairs of the company Ecodownunder each month, but closer examination shows that, whilst there was some unsatisfactoriness earlier in the accounting arrangements, which I commented on in my second judgment, it seems that for the most recent month those requirements have been complied with in a fashion that is not the subject of complaint. I should add that I expect those undertakings to continue to be meticulously complied with, and I also expect, when the affairs of Ecodownunder permit it, replenishment of the amount held subject to the Mareva relief by the amount now to be released, as well as the amounts released earlier. 6 I order that the Mareva order made on 27 June 2003 and varied by orders made on 17 February 2004 and 8 April 2004 be further varied so as to authorise and direct the trustees of the fund to pay out of the fund an additional $16,567.50 to Mr Motbey on account of counsel's fees (and GST thereon) and disbursements (of counsel). Costs of the application are reserved.

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