Citation: Commonwealth Bank of Australia v Saleh & Ors [2005] NSWSC 843
Court: Supreme Court of New South Wales, Equity Division
Date: 18 August 2005
Judge(s): Palmer J
Background
The plaintiff bank alleged it had been defrauded of approximately $7 million. It obtained urgent ex parte injunctions in June 2005 freezing funds said to be proceeds of that fraud, including almost $1 million held in the trust account of a firm of solicitors. When the matter returned to court, a series of consent orders were made joining the tenth defendant (a solicitor referred to here as "Mr Edge") to the proceedings and directing that the disputed funds be transferred into a specially named trust account pending resolution of the case.
Those consent orders expressly stated that the funds were held "for the purpose of interim preservation during the course of these proceedings" and restrained Mr Edge from dealing with them otherwise than in accordance with court orders. The orders were signed by the legal representatives of both the solicitors' firm and Mr Edge personally.
Mr Edge subsequently applied to dissolve the freezing injunction against him, arguing that the bank had not established a prima facie case of his dishonest participation in the alleged fraud. The bank opposed the application on two grounds: that the consent orders amounted to a binding contract which could not simply be dissolved on application, and that the evidence strongly implicated Mr Edge in the fraud.
Legal Issues
- Whether the consent orders in which Mr Edge agreed to the freezing arrangement were contractual in nature, such that they could not be dissolved unilaterally through a discretionary application.
- If the orders were of the usual "until further order" type, who bears the burden of proof on an application to dissolve an interlocutory injunction originally made by consent.
- Whether the bank had adduced sufficient evidence of Mr Edge's knowing participation in the fraud to justify continuation of the freezing order.
Decision
Contractual character of the consent orders
Palmer J held that the consent orders were not of the usual "until further order" type that a defendant may bring back for fresh discretionary consideration. The language directing funds to be transferred into a specially created trust account "for the purpose of interim preservation during the course of these proceedings" indicated that the parties intended the arrangement to subsist for the duration of the proceedings, not merely until Mr Edge chose to challenge it. The consideration provided by the bank (discontinuing proceedings against the solicitors' firm) reinforced the contractual character of the arrangement. On that basis, the orders could not be dissolved simply by the defendant exercising a liberty to apply; something more was needed.
Burden of proof on applications to dissolve consent injunctions
The judgment confirmed the general rule that where a defendant has consented to an interlocutory injunction "until further order," the burden remains on the plaintiff to justify its continuation if the defendant brings the matter back before the court. However, Palmer J made clear that this general rule will not apply where the terms of the consent orders reveal a different intention, as was the case here.
Evidence of fraud and Mr Edge's involvement
Palmer J also addressed the merits, finding that the bank had in any event demonstrated a strong case of Mr Edge's dishonest participation. The evidence showed that Mr Edge had misrepresented to bank officers that he was overseas in China for a period immediately following the alleged fraud, when in fact he had never left Australia. That concession was made by Mr Edge's own counsel. Despite facing express allegations of dishonesty, Mr Edge elected not to give evidence and did not appear in person to contest the claims. Palmer J drew the inference that the misrepresentations were made to delay the bank from tracing the funds. Applying the principles from Patterson v BTR Engineering, the court found a real risk of dissipation if the injunction were dissolved.
Orders Made
- Mr Edge's application for dissolution of the interlocutory injunctions against him was refused.
Key Takeaways
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Consent orders for interlocutory injunctions are not always interchangeable with standard "until further order" restraints. Where the terms and surrounding circumstances indicate a contractual intention to preserve the status quo for the duration of proceedings, a defendant cannot simply invoke a liberty to apply to have the injunction dissolved on general discretionary grounds.
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As a general rule, a plaintiff who obtained an interlocutory injunction by consent retains the burden of satisfying the court that the injunction should continue if the defendant applies to dissolve it. The defendant's prior consent does not reverse that burden.
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Where consent orders are found to have a contractual character, supported by consideration already performed, a party seeking to unwind the arrangement faces a higher threshold than simply demonstrating a change in circumstances.
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A defendant's election not to give evidence or appear personally in response to specific and serious fraud allegations can support adverse inferences. In this case, uncontradicted evidence of a false representation about overseas travel, combined with the defendant's silence, was sufficient to ground an inference of knowing participation in the alleged fraud.
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Sufficient evidence of dishonest participation in a fraud, combined with a real risk of dissipation, will justify the continuation of a freezing order under the principles confirmed in Patterson v BTR Engineering.
Legislation and Cases Referenced
Cases:
- Paino v Hofbauer (1988) 13 NSWLR 193
- Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 (principles governing freezing orders and risk of dissipation)
Legislation:
No specific legislation was cited in the judgment.