.,!f,

;1m 387.3 LG32 1991

INTERIM RELIEF: ETHICAL OBLIGATIONS

AND MARGINAL CASES

PAPERS

. ETHICAL OBLIGATIONS IN EX P ARTE The Hon Mr Justice Anderson AND OTHER INTERIM APPLICATIONS

PRE-JUDGMENT ORDERS Mr Alan Galbraith QC CONCERNING IDEAS

PRE-JUDGMENT ORDERS Mr Raynor Asher CONCERNING PROPERTY

LEGAL RESEARCH FOUNDATION

OCTOBER 1991 · AUCKLAND.

The Legal Research Foundation, which operates in association with the Law School of the University of Auckland and the Auckland District Law Society, was established in 1965 to encourage legal research. Further copies of this publication are available from the Secretary, Legal Research foundation, University of Auckland, Private Bag, Auckland.

© Legal Research Foundation, Auckland, 1991.

ISBN 0-908581-57-2

INTERIM RELIEF: ETHICAL OBLIGATIONS

AND MARGINAL CASES

Papers presented at a seminar held by the Legal Research foundation

in Auckland on 3 October 1991

Legal Research Foundation Auckland

i ' j

Other Interim l

Id.eas 7

C0I•,fTRH3UTORS

iv

The Hon

our all affoct2:d

cas:2!§ arc::: condu·:ted so st:3Sf:•rHons niade be:fore the mroce·1f~(trn

Dl ust modifie(l Pr21ctitioners ar,e i::onfrc.r1_ tc:2:cl ch,ent::i\ ,:.,cla, , •. .,".'lrtt !•l·,-,. i,T1•"'v l>l"tP,:>. ?/ '"' .• ~!:::}·t·"'·.•·· ,Al.t,,!". J .. J,u;:,1 . ., l., .,(1~, :il,.i,, \,,.. y , ,{; ( l,..,, ~'l ,iJu.-h!Ji. l:~t cri,p1n1,,,he·l m !11 '(;' ur.cr,,;?nc; .. "· and im~.:ir>rta:r~ce.·.: ~ .._ ... u" . ....,'-'> l, ~. 'J,:': t'), •er ! -·

,:.,vhich predude·s that

:·iot harn:1 'wi.11 fkHN prepared to

nor1n. The recognis,e/3 a yustifoed

''''''tl'•· 1··1·[ ·1-11,"" Il''n1,··t c,,yll·p,dO"]~I'" "']0 ~1.'"'''!1[)"11 tkJ!~. y 1.. , ·t:. 'tl,~ ir,;:,A,,l~'l;;:;JI..:,1.,,. ,~t-tlL, ,JC.11tJ.,..lt,r

a f aHure to a·::t 1;1,ri,thcrut no:t:iLci'.::, mattie;.·s on an inte:rirn basi.s.

deviatkm do

Tl1·;'l1I"e a1•,::,i ,:,1·1fl,"l,C•C' 'Y'·.rlr·1e11 pv IY"',fii-(JI in,1rl1CP,t::,dJ"'[10"' '']1'Cl"j,T Ol1f'l:,j"l,J[Y"Pl'l":::,te .l .... 1,,r. ~~- :J. 2,J.,lt,-&.;;:J t"1 J ••• er,o.1''1,, ,,j'l,;.LJ, lli,6, i""'"'' "''""'~""t"'L., I t);:J' .:I,. 1.C'il.} k,1,1',,1 ll= 'U J~ l,..J. ,-

nonr2!theless require 1:h.e party 1noving 11:o advise ·J'.Jlther side the appHcation. is bei:n,g made:o notion there is som,z benefit to a

,,ll~Stice of ::;tory.

The :,,.,, 1<:n(nt:1·•·i,1=>nned 1.,1~,,. I\. <...~~ 1b1>.o' ,,_1_ ·,;.,. b L.,.,. i.,1~

to focus ori. t1";.e in

respcfftsibiJi ty l.ntierim

the other a

response 1,.vilI ,deny your obtained!. ,2:x parte.

has an ·:J:01:i,ortunit•,r to 11., J, "'

r.i:?'mind,er undert2:ke

ETHICAL OBLIGATIONS IN EX PARTE AND OTHER INTERIM APPLICATIONS

The Hon Mr Justice Anderson

The undertaking as to damages which ought to be given on every interlocutory injunction is one to which (unless under special circumstances) effect ought to be given. If any damage has been occasioned by an interlocutory injunction, which, on the hearing, is found to have been wrongly asked for, justice requires that such damage should fall on the voluntary litigant who fails, not on the litigant who has been without just cause made so.

Graham v Campbell (1878) 7 ChD 490, 494, per James LJ

Observations on material self interest

I have begun this paper with a reference to damage and compensation in conjunction with interlocutory injunctions in order to encourage ethical compliance by way of concern by solicitors and counsel for their own risk. It is of course elementary to lawyers that admission to our profession carries serious ethical responsibilities. The privileges of audience in Court and in a judge's private chambers, of robing, of taking oaths and declarations, of exemption from such responsibilities of citizenship as jury service~ are granted on the irrebuttable assumptions that as well as the duty to a client the lawyer has a duty to the Court, to professional colleagues, and to justice. These duties are and must be reconcilable. Often it seems to judges that their mutuality is overlooked. ,

By way of illustration I invite you to recall the last few occasions you were instructed to advise a potential plaintiff in respect of an intended application for injunction. To what extent did you seek information about and advise upon the damage which might be caused to the intended defendant? What specific advice did you give your client concerning the undertaking as to damages which the client had to sign? Do you in fact know the nature of and principles of assessment of damages contemplated by the usual undertaking? Indifference to such matters or ignorance about the principles involved may render you liable to a client called to pay up on an undertaking after an injunction which, although justifiably granted at an interlocutory stage, has been discharged after trial. The possibility of being sued for negligence may curb indifference. Ignorance may be remedied by reading Dr Spry's Equitable Remedies (4th ed, 1990) 638-645.

Most of us will recall acting for a defendant who has been enjoined at an < •

interlocutory stage and has suffered great disruption to business and peace of mind. Mareva injunctions and Anton Piller orders exemplify the potential

1

2

for mischief in the case of any grant of significant relief at an interlocutory stage. Sometimes of course an injunction may be discharged but even when a defendant acts immediately and successfully the damage is usually considerable. Reluctant thought I am to encourage litigation I suggest that in every case where an interlocutory injunction has subsequently proved unsustainable the defendant's solicitors seek instructions in respect of the plaintiff's undertaking. It is rarely indeed that the Courts are called upon to give judgment on such an undertaking and I have often wondered why this is so. The reason may be that solicitors and counsel overlook that even an unsuccessful defendant at trial may be able to invoke the plaintiff's undertaking if the interlocutory injunction should have proved to be inappropriate, and in such cases the plaintiff may well look to his or her own solicitor for indemnity or lay a complaint against counsel for incompetence. Hence my warning about self interest, although naturally the ethical duties of care and competence should predominate.

Ethical responsibility to the Court

I turn now to the matter of ethical responsibility to the Court. On an ex parte application there is an immediate and constant reminder in the certificate required by r 237(1). It should not be necessary to refer to this requirement but I have to conclude that it is more or less arcane because judges sometimes receive papers with the certificate omitted. Judges always check ex parte applications for the certificate. We do so because we wish to be assured, before contemplating the exercise of our powers without the benefit of adversarial scrutiny, that a solicitor in the capacity of an officer of the Court, or counsel, has thoroughly checked the papers for propriety and correctness. Judges consciously rely on r 237(5). The scope of the responsibility on the certifying practitioners is explained thus in McGeehan on Procedure para 237.02(5):

The practitioner certifying must "personally" satisfy himself that the notice of application and affidavits comply with the code. This requires personal perusal and consideration. The practitioner certifying is not justified in accepting the word of another, whether partner, employee solicitor, or secretary that such compliance exists. Note, however, that his obligation under this heading extends merely to satisfaction that the papers comply with the rules .... The practitioner certifying must also satisfy himself that the order sought is one that ought to be made. It follows that a practitioner should not certify an ex parte motion where upon consideration he reaches a personal view ... that the order involved should not be made. He cannot operate simply on instructions when he believes the order which might be obtained would be improper .... Wilful non-compliance would be a technical contempt, and would also open the practitioner concerned to professional disciplinary action.

3

Some examples

Let us consider situations when it would be improper for an order to be obtained, other than in the obviously contemptuous case of a solicitor wilfully permitting false information to be put before the Court. It will be observed that the ethical duty to the Court confirmed by r 237 is inseparable from a general ethical duty, owed also to clients and their opponents as well as to fellow practitioners.

1 Delaying filing for tactical advantage

The fact that an application for injunction and similar relief is usually an initiating rather than a responsive step in a proceeding means that an applicant has the ability to time the step for tactical advantage. I remember an occasion in practice many years ago when I was instructed for a defendant who was promoting an international sporting fixture and who had been served with an order for injunction in bar of the event virtually on the eve of it. The order had been made in what was then the Magistrates' Court, on an ex parte application, and on the basis of an affidavit sworn three weeks before the application had been filed. Of course the learned Magistrate who made the order might have picked up this unexplained delay, but the solicitor who prepared and filed the application did not bring the fact to the attention of the Court let alone seek to explain it. This incident, occurring back in the 1970s, is still vivid in my memory for the anxiety and disruption it caused my client, and for the abuse of the ex parte procedure for tactical advantage. Practitioners contemplating ex parte applications have a duty to act promptly and to consider whether prompt action will allow an application to be made in the preferable way, that is, upon notice. A Court would have power to discharge an otherwise justified injunction if it were to appear that the ex parte procedure was invoked for the improper purpose of mere tactical advantage.

2 Proceeding ex parte when notice is practicable

Rule 239(1) sets out the conditions when an application may be made without notice. In cases involving urgency the condition is where

Service of notice ... would cause undue delay or serious detriment to the party applying.

Given that by virtue of r 235(2) notice may be very short (and in fact is sometimes a matter of an hour or so in very urgent cases), occasions when urgency alone is invoked ought to be quite rare. In practice judges scrutinise applications for ex parte relief in contentious proceedings to ascertain why the application should not be upon notice, and we expect counsel to make

4

full disclosure of all matters relevant to the issue of claimed urgency, consistent with the ethical responsibilities recognised by r 237. There have been occasions, unedifying to certifying counsel, when applications have been made ex parte without heed to or disclosure of written advice by opposing solicitors that they are authorised to accept service of any application and expect to receive notice. In such cases r 237 cannot have been observed.

3 Failing to disclose arguments available to defendant

A practitioner could not personally be satisfied that the order sought is one that ought to be made unless he or she has fairly considered the factual and legal arguments that in the particular circumstances could be advanced by the intended defendant. Further, counsel would not be acting with due competence if arguments affecting the prognosis for a possible application were not considered and advised to the client, particularly of course in view of the client's possible exposure on an undertaking. Opposing arguments should be disclosed in counsel's memorandum. Counsel's duty of disclosure can be no less compelling than the client's, since the duty is to the Court itself, as confirmed in Digital Equipment Corporation v Darkcrest Ltd [1984] Ch 512, 524. As stated by Isaacs J in Thomas Edison Ltd v Bullock (1912) CLR679,682:

Uberrima fides is required, and the party inducing the court to act in the absence of the other party fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all the material facts which that party would presumably have brought forward in defence of that application. Unless that is done, the implied condition upon which the Court acts in forming the judgment is unfulfilled and the order so obtained must invariably fail.

The duty of disclosure extends to all matters which are within knowledge or would have been discovered by proper enquiry (see Brinks Mat Ltd v Elcombe [1988] 1 WLR 1350) and which are material to the proceeding, and which tend to favour the position of the absent party or parties. The duty is particularly acute in respect of ex parte applications for Anton Piller orders (see Columbia Picture Industries Inc v Robinson [1987] Ch 38 and Brinks Mat Ltd v Elcombe, supra).

5

Duties to fellow practitioners

I do not· intend to expatiate on this facet of professional responsibility. It is sufficient to repeat the concept of mutuality of a practitioner's various responsibilities, to point to the implications of the examples of default which I have mentio.ned above, carrying as they do aspects of professional comity as well as other duties, and to cite the following from Cordery on Solicitors (8th ed, 1988) at 319:

Professional misconduct will include dishonourable conduct on the part of a solicitor in the course of his employment towards his client, the Court or third persons, including his opponent in litigation.

Competence

There is a congruence of ethical punctiliousness and professional competence. The practitioner who has carefully observed the requirements of r 237, and in the process has weighed the factual and legal strengths of the client's case and the opponent's; has, in good faith, disclosed relevant information to the court; has competently advised on the implications of such matters as' undertakings in the case of interlocutory injunctions, and dealt courteously with opposing solicitors and counsel, will demonstrate in a manner apparent from the papers and from any argument a level of competenc~,consistent with ethical duties to the client, the Court and fellow practitioners. There is, however, an aspect of practice which tends to be inadequate. Although more readily perceived as bearing on ability it nevertheless has implications of duty to the Court in terms of assistance. I am referring to the memorandum of counsel in support of an ex parte application. You may be assisted by information about how judges actually deal with applications on the papers. Picture if you will a Duty Judge, half­way through a typically busy week, emerging from Court in the late afternoon and anticipating the amount of reading necessary for the next day's hearings. On entering his or her chambers the judge cannot fail to observe the gargantuan file, sometimes reposing in a carton, which has materialised since the afternoon tea adjournment. The first document is the Notice of Application, ex parte, which is read for content and to check for the r 237 certificate. The notice refers briefly to the relief sought and to the particulars of the numerous deponents in support of the application. Underneath the notice is a Statement of Claim, gross in proportion and complex in structure, which the judge lays aside for the time being in order to learn from the counsel's memorandum what the case is about. One of three types of memorandum comes to hand, to wit:

6

Type A - the Anorexic

This is a document which has and shows little weight. It overlooks the essential issues of fact and law, provides no assistance, and is plainly more concerned with its appearance than its substance.

Type B - the Obese

This type of memorandum is unhelpful because it says too much. It serves no purpose for a memorandum almost to replicate the application, statement of claim and affidavits. Yet this type of memorand um is quite common. Word processors and the tyrannical imperatives of time costing may be an influence.

Type C - the Helpful

This type is lean and muscular. It summarises the cause(s) of action and the nature and purpose of the orders sought. It explains why the application is brought ex parte and sets out, succinctly, the factual effect of the affidavits. It gives the legal principles including those which may not be helpful to the applicant. Its tone is laconic yet it says everything necessary. Such a memorandum informs the judge at the outset of the factual and legal issues raised by the application, expedites assessment of all the relevant documents, and naturally evokes prompt and appreciative judicial attention.

Barrister u ncl

patents or inti:2::nded te b,e

the title

Drobablv Jc .,

drcurnsta.11.iees

the inteHectual ,.::o·:,r···J1I" 0 ~'·-'l0 lf'h7"l '\..~,· tj~ ~~v !._,,,., •

b,;?:ing the iexpression

pn2:-judgn.1ent pn)tr-!cHon of i'trea "id.f:!as"' 1:heir

bec:cini.e rPnrfl·s,entPd t=-"cr r·o1 1,ur'' o+. t ... ,,1,.. ,,..:i,., ,..., ''"" ·,1 ,..._..!!':,li ""' }~ }' . .i;:Jr...,,i

In :rurea th<2 p2iradig1m e::,::mrrpl.e 1:::•1"e-jud,grn112nt orders l'l'here the rust'! of biood and oi th1:1: sittiation crm c:ive to acuite ,?:,

Anti0t1 ie)r,dE:r. i,,Vhik:: tthesie ord,.ers to have eirnjoye,d a son111;2v1rh?tt short booim Nr«?.·1.,~r Zc::,a1and as

they a:re ilh.1.strat,e:

flexible ne,N rem12dies;

the:sf:?. ratls

r·p·~r"n1·1c:,1·\, ii::, . .,., C1'., ...JI._,. 1.,,,l~I, ,,,.d,,JLJ.ll. f

' .I pnc,·11 th;:, fr,,.r:ral .. ,.,r, ,._,..... 1,,-., .... e,'"

applicant such rernedy to einsun2: !:had: st1.ch brought;

to be thre inteHectual

This: paper reviev:i? th.e jurisdiction in thait conta::xt, ·~Jriefly az alternative r12nledies and

a.1.:e to b,~ in resp1:::ct the c.rders"

Anton Piller orders

1 Development

8

The earliest reported case of an Anton Piller order being granted is EMI (Australia) Ltd v Pandit (1975] 1 WLR 302, which was approved by the Court of Appeal in the case which gave the order its name, Anton Piller KG v Manufacturing Processors Ltd (1976] Ch 55. However, it is said that these orders had first been made in the Chancery Division in England in 1974 as a response to growing problems of piracy in the areas of copyright and trademark: Gaze, 'The Anton Piller Order - A Review of its Development and Scope' (1985] Australian Business Law Review 354.

The justification for these new orders arose out of developing technology, particular! y in the video and recording areas. The low cost of copying videos and records and the avoidance of royalties gave impetus to a lucrative business for pirates who could sell these unauthorised copies to a mass audience at an effective discount price. In seeking to prevent such piracy, plaintiffs faced the difficulty that in an organised piracy operation the ultimate seller, who was identifiable, would be the last link in a chain stretching back possibly even to a foreign copier. Using the conventional procedure of a trap purchase and the issue of proceedings there would be time for stock to evaporate and a probable loss of memory or records in relation to names of customers and suppliers. The plaintiff would recover only modest damages and the piracy ring would continue to flourish through other outlets. These piracy problems subsequently went far beyond copying of videos and records and the misuse of famous trademarks or passing off of goods under famous brand-names is well known.

With developing computer technology the problems probably now arise in their most acute form in respect of computer software. As with the advent of the photocopier and the multiple breaches of copyright that photocopying has brought with it, it is now commonplace for software to be copied without authority. The ability to erase a software programme by a simple command can make the detection of software piracy particularly difficult to counter: Maybury, 'The Search for Software' (1991] Computer & Law 12. It is in these areas that Anton Piller orders have a legitimate role to play in appropriate circumstances. However, problems arise where enthusiasm for the remedy is not bounded by satisfactory legal and Court surveillance.

In the original Anton Piller case ex parte orders were made requiring the defendants to "permit" representatives of the plaintiff to enter the defendants' premises to inspect and remove documents r~levant to the plaintiff's claim of breach of copyright and misuse of confidential information. The purpose was to obtain and preserve evidence which it was alleged might otherwise be destroyed.

9

Comparison with a search warrant naturally springs to mind but, of course, no search warrant can be issued in civil proceedings. Lord Denning MR dealt with that issue in this way (at 60):

Let me say at once that no court in this land has any power to issue a search warrant to enter a man's house so as to see if there are papers or documents there which are of an incriminating nature, whether libels or infringements of copyright or anything else of the kind. No constable or bailiff can knock at the door and demand entry so as to inspect papers or documents. The householder can shut the door in his face and say "Get out". This was established in the leading case of Entick v Carrington (1765) 2 Wils KB 275. None of us would wish to whittle down that principle in the slightest. But the order sought in this case is not a search warrant. It does not authorise the plaintiff's solicitors or anyone else to enter the defendants' premises against their will. It does not authorise the breaking down of any doors, nor the slipping in by a back door, nor getting in by an open door or window. It only authorises entry and inspection by the permission of the defendants. The plaintiff must get the defendants' permission. But it does do this: It brings pressure on the defendants to give permission. It does more. It actually orders them to give permission - with, I suppose, the result that if they do not give permission, they are guilty of contempt of court.

Ormrod LJ emphasised the extraordinary nature of the jurisdiction (at 61):

The proposed order is at the extremity of this Court's powers. Such orders, therefore, will rarely be made, and only when there is no alternative way of ensuring that justice is done to the applicant.

Lord Denning stated three basic requirements for the exercise of the jurisdiction:

(a) It must be essential that the plaintiff should have inspection so that justice can be done between the parties; and

(b) There is a grave danger that, if notice were given, vital evidence would be destroyed, papers burned, lost or hidden or taken beyond the jurisdiction, and so the ends of justice defeated; and

(c) The inspection would do no real harm to the defendant or his case.

Ormrod J stated three preconditions in slightly different terms:

or D1USt

that t.he or thh12§, and

'-' .

sw:~h materia]

·,n,·"l'a 7{l~' h",;:> .'.l" .... !I. ',oJ;, l~ ~d''\..>

'!~~""I! "!I.J~ ~ i1"~ <1,""'1 ~r'~:'1 ~·t:l~ -t°~n ~,o'('~O"''''l~''''' 1':!t, ~ ~ \'" ,_."'." 0:< j!IJL,.L.'I.,:l"C . dl ,1 '"t" ,!:;,.I. ~;!lI!C~l·1 d"

exu'eI:llitv PO'VtT€R'S bf: nCI~ in England.

Vi/ere niade betwe,en and 1980 in the Cha.~,lcery since then. 'n"H2 of such ord.12:rs has ~ed OXt8

to unforbnl(11l:ely

"'''Tn ,y,;I-.,·,1"" f"'\f""C~'k"f'v[r .J..\' .1LII.,I:-;"l...tX,,,J}l l.:1.,, L.,.,V u ~;'4>.1l C .... t'

app1eE1ri:h2:t this prX'ic:tkt3: the objl?(ti vHy of

COI:lrts th,~ necessary 1"J..'econ.c,1Ii:lO:t18

to

~,J ·,j,r. 1.,";<\'''.1'', "'.' tl" p O"']"'"n ;"'n t;r:;' " ,~, .• , ~ll"'1 o'I]',f'ip~' I"'" _t,o _.,VUi.J.Li'.'l"t ,fl .... ~!jI.t,Q ill.,J.J.'"~ry t,,)lkol'.,_llJi. a u. _~k~'-"',b>.b." £l'. interin1 injuncticm.s, A1are'?:Jt1 or lod'H2!PAXiSI'2!.r are oft,:en NeT:N 1m,)ader aerie-a litigation than simply hllteHectua.l prope]~ty for .:at

strategic l'2:nd, and now, I are instan.ces sumrn.a:ry judgm~~nt applications of the saml2 111otivatiOJ.l.,

such orders ,cl.nes caution ,2]1 inIllE;;rent for rniGusl~ of such pll"e~empthle prrJcecltJlT,I2;s,

The original

, . ' i· e);:'dl"Y l1lIWOr pn;!r1rds€s by repr,esentatives Tl221evant hC1p(2:d, '\I'\i'Ould

ThE:' more cm:n.l1l0n

other ~7:videnc2:,

not only evj[denc~~ of

discevverv

to search dOCUITI.€nts, it Vla.:.::

defenda:n.1:s' breach not

11

(i) Orders for safe custody or storage of items which are delivered up including orders as to the cost of storage, insurance etc.

(ii) Orders requiring the defendant to provide information on affidavit as to his suppliers, customers etc. This order raises issues of self-incrimination.

(iii) Orders not to disclose to certain persons, eg customers or suppliers, the existence of the order so that the plaintiff may proceed to obtain orders against those persons also. In this context the quite proper emphasis of Tipping J in Benefis Systems Ltd v Dyer (HC Christchurch, CP 413/88, 9 August 1988) on the need for cogent evidence to justify such an order is to be applauded.

The procedure therefore effects both discovery and preservation of evidence as well as serving an information gathering function.

(b) Attempts have recently been made to combine Anton Piller orders with the other recent judge-made pre-emptive order, the Mareva injunction. The purpose is to utilise discovery and seizure as an aid to the enforcement of the Mareva injunction. Provided each order can be justified on its individual and accepted jurisdictional base, there can, in my view, be no objection to this combination. What is objectionable is the loose quick-step from that accepted but limited jurisdiction to the kind of claimed overriding principle of the nature argued for but rejected in Bekhor Ltd v Bilton [1981] 1 QB 923.

The issue in Bekhor was whether the Court had jurisdiction to make a discovery and interrogatory orders in support of a Mareva injunction. The purpose of the orders would be to identify property to which the Mareva injunction could attach. Ackner LJ accepted that such a jurisdiction existed in appropriate circumstances to make such ancillary orders in "aid" of a Mareva injunction because of the statutory authority for such injunction contained in s 45(1) of the Supreme Court of Judicature (Consolidated) Act 1925. He rightly rejected an argument that the existence of discovery and interrogatory procedure in respect to Anton Piller orders necessarily meant that the same jurisdiction was available in this different context. As he emphasised, the special feature of the Anton Piller jurisdiction is that it is made ex parte because of the risk of destruction of evidence. The problem and the purpose was quite different from the Mareva injunction situation where what is being sought is pre-judgment security where the assets being restrained may have nothing whatever to do with the issues in the case.

12

In my opinion a later decision in Johnson v Philatelics Ltd [1981] FSR 286 was incorrectly decided. There an Anton Piller order was used to aid enforcement of a Mareva injunction, which is not the proper purpose or basis for an Anton Piller order.

In CBS United Kingdom Ltd v Lamber [1982] 3 All ER 237 (applied in Sterling Industries Ltd v Nim Services Pty Ltd (1986) 12 FCR 164) a claim was brought in relation to record piracy. It was alleged that some of the proceeds of sale of the pirated records had been invested in some expensive motor cars. An Anton Piller order in usual form was sought, as was a Mareva injunction, together with orders for disclosure of the defendant's assets and delivery up into custody of the plaintiff's solicitors of the motor vehicles. At first instance Goulding J granted the Anton Piller orders and the Mareva injunction but not the ancillary orders. On appeal the Court of Appeal granted these ancillary orders. The question whether the jurisdiction was statutory or inherent was left open. While the Court of Appeal'~refer to "piling Piller on Mareva", the judgment purports to follow Bekhor v Bilton and, in my view, is correctly explained as the exercise of either a statutory or inherent jurisdiction ancillary to the power to grant a Mareva injunction and not an extension of the jurisdiction in respect to Anton Piller orders.

That interpretation is supported by the decision of Rogers J in Hospital Products Ltd v Ballabil Holdings Ltd [1984] 2 NSWLR 662, where it was held that the Court had an inherent jurisdiction to grant discovery in aid of a Mareva injunction. No attempt was made to claim resort to the Anton Piller jurisdiction. In the Ballabil case there was justification for the extended order because there was evidence of attempts by the defendants to avoid the consequences of an earlier Mareva injunction to render themselves judgment-proof. In those circumstances the Courts are justified in claiming the ability to make their orders effective but that is a separate jurisdiction relating to security which is distinct from the Anton Piller jurisdiction.

The very recent judgment of Temm J in Zietlow v Simon (HC Auckland, CP 1336/91, 23 August 1991) does not specifically discuss this issue but seems to maintain the proper distinction of the Anton Piller orders, which were there made in association with wide-ranging Mareva orders, being for the purpose of preserving evidence.

(c) The same tendency to blur the different jurisdictional bases for these pre-emptive remedies can be seen in Bayer A G v Winter [1986] 1 All ER 733. In that case, in addition to Mareva and Anton Piller orders, the Court granted injunctions requiring the first defendant' to deliver up his passports and restraining him from leaving the jurisdiction until the Anton Piller order had been executed. This further relief was

·1

'

This a probleri:rnHc 2;n::a Ic~gislative H !T'dght

p:i:ocedm:,2J 1cn1 to il.!1 e:ir.

rno:re app::rop:rdatr::ly exercised. in uJ1d,er fhe faUJ:d

in that Companies Act for cornpany case:

;'roving" ,c·irders,, ,n,,11'C[1,:•·1•5,, A\:'\ t';r'~,,::,; 1~:er'C1,.'l0 p·t1'. 0!'' ,i:;•p,ir:r,J·,c,,t:efi·· '.,h,o . ...,, .11. • _ ..., r.,.. .... . l',ti""' v1 ,:J "'"JL .. ,., ,_ w. ,.,., _,.~,i:,,,'5""'':,"'1~."' ,~.i,,l,l,",

'ilvb.o are unknovrn granted. Th1ese drcm11stances

there is to be i, pop conc1E!rt and th.er1.2 is v1m exist,, for appreher,sion th£~ 1:::::a;nad.ian

sale of nnauthorlsed of soLnrenir In I'.!, r:n1p"'ii1"'''1T(' 1Ui"•>;;·"d1'c,f ~'1"'11"'' ~.]11?,:.S:f-' 01.t,J.1r.1[f.0: .i,,.tl:..JU,,11. .... ..'L.a-lCJ."-"R .. .J ~,IJ..r..,,t .. ,,._.Ji.li,..,,.ll.1.t...'l t- = r.1- ..,,,.._'\~ 11::::.. .,,

Doe th,5;.n s1erved. upon :~itn~et

shnHar typ1e Kudluziii' [198.5] FSR

ENIJ Records e117c,1ss,.:,IT- c, rb>("'~ (;r,/.:,(["l\.,tJ,l,.,f1~ 'Ll.. 1..,,.,c.~•\),.!'.Ji

71

pe:r·som;, any c.-n,o, .• ,:; c1· C,,•'I :;, ., ··, .·-1 1· c·i-~) :'t" ~l\...£1 r,;;,lt,,,, ·~U,li,ol'.1,,l.

cc,ss,1e1ttes. The afi:11:!r Tvvhkh

11",.e wdt f:J(eat regno hats purpose. Untili its issttf,: tn last reported su,ccef:,5fol Felton ·o 1 QB

fa.Jicile,son [J.937] r•1iLJ

a:ny Sl1lCh · l ., 1 ,, J cassedes v;nu ,c,t ,J,r2 s,e1zen.

had bee:t'l in 1893. Sze for z,nc1 for OJ]ifi,.lrJn,cent: iVHtcheU (1987] L21v,r ·~P,mn,i•·u

3 EU''R l\Tot.e in N,ew Zealand s 55 of the l\IZLJ(

14

I am not aware of such an order having been made in New Zealand. Nor am I aware of the acceptance of any similar John Doe jurisdiction in New Zealand. However, it seems to me that if at least one link in the chain could be identified it may be possible to obtain such an order against that named party and, for example, their employees, agents etc or, alternatively, their suppliers and other agents and employees of the supplier. In that manner the range of persons to whom the order applies may be able to be substantially widened.

(e) It should also be remembered that Anton Piller orders are not necessarily confined to the intellectual property area. This follows from the basic justification for the jurisdiction which is to ensure that justice is ultimately done in a case by providing an effective remedy to discover and preserve evidence. Accordingly, where the pre-conditions can be made out there is no reason why an Anton Piller order should not be sought and obtained in any inter partes litigation. In England Anton Piller orders have been made in respect of:

(i) matrimonial litigation: Emanuel v Emanuel [1982] 2 All ER 342;

(ii) a tracing action: A v C [1980] 2 All ER 347; Bankers Trust Company v Shapira [1983] All ER 359;

(iii) an action between principal and agent: Yousif v Salama [1980] 3 All ER 405;

(iv) an action in fraud: Tate Access Floors Ltd v Boswell [1990] 3 All ER 303;

(v) supporting execution of a judgment: Distributori-Automaci Italia v Holford General Trading Co Ltd [1985] 3 All ER 750.

There is potential for similar use in New Zealand. However, such orders in an extended area of civil litigation must, in my view, be confined to cases of necessity where the purpose of the order is to preserve evidence from destruction. If such orders became a general interlocutory remedy not only would it undermine the existing provisions of the High Court Rules but it would undermine the quite proper assumption of our procedure that orders in litigation should be made inter partes because until proved the plaintiff's allegations are only that.

15

3 Basis of the jurisdiction

In the United Kingdom the jurisdiction was clearly based on the inherent jurisdiction of the Court: see Anton Piller, 61; Rank Film Distributors Ltd v Video Information Centre [1982] AC 380. In New Zealand the Court of Appeal in Busby v Thorne EMI Video Programmes Ltd [1984] 1 NZLR 461, 466 found the New Zealand jurisdiction to order impounding of articles and documents in rr 478 and 604 of the Code of Civil Procedures and the inherent jurisdiction. It would now be recognised as based on rr 9, 322 and 331 of the High Court Rules and the inherent jurisdiction. The jurisdiction to require the provision of information was said to come from the equitable jurisdiction to order interrogatories.

4 Limitations

(a) Self-incrimination. The Courts in the United Kingdom and New Zealand have reached differing conclusions on this issue. The extension of the original Anton Piller orders to include the requirement to answer questions brought into the open the underlying problem of self-incriminationt In Rank Film Distributors Ltd v Video Information Centre [1982] AC 380 this issue was successively dealt with by Whitford J, the Court of Appeal and the House of Lords. Whitford J held that there were no reasonable grounds for believing that disclosure would tend to incriminate the defendants; in the Court of Appeal the majority took a different view (Lord Denning dissenting) and the House of Lords upheld that majority decision. It is probably a correct analysis of the House of Lords' decision to say that their Lordships were not much concerned with the statutory offences under the Copyright Act but were concerned with the potential exposure of a defendant to a criminal charge of conspiracy to defraud. The result in England was s 72 of the Supreme Court Act 1981, which provided that the privilege cannot be invoked in civil proceedings for intellectual property infringement or passing off.

That concern in England has been repeated recently in Tate Access Floors Inc v Boswell [1990] 3 All ER 303. In that case, Mareva injunctions and Anton Piller orders were sought in an action where it was alleged that former employees of the plaintiff had defrauded that company and its United Kingdom subsidiary by raising false invoices and authorising payments to be made to offshore bank accounts controlled by the defendants. Browne-Wilkinson VC held that as s 72 only removed privilege against self-incrimination in intellectual property cases the general rule against self-incrimination applied and the Anton Piller orders must be set aside. Because of some doubt as to the parts of the order in the Ra n k case which the Court there had regarded as offending against privilege, he had the actual Rank order

16

brought before the Court. That disclosed that the self-incrimination privilege applied not just to the requirement to answer questions on affidavit, ie as to customers and suppliers etc, but also to the order for the seizure of documents. Those documents were to be regarded as potentially self-incriminatory.

The consequence of the Tate decision in England is therefore that the prospect of self-incrimination at least in respect of the possibility of a criminal charge of conspiracy will be sufficient to set aside Anton Piller orders outside the intellectual property area. The same view was taken by the Court of Appeal in Sociedade Nacional de Combustiveis de Angola v Lundqvist [1990] 3 All ER 283, where an order for discovery was sought ancillary to a Mareva injunction. Because there was a reasonable apprehension that a prosecution for conspiracy to defraud might be brought, the Court upheld the claim for privilege in relation to the ancillary order for discovery. Accordingly in England the scope of the Anton Piller jurisdiction is in most cases controlled by statute.

The issue of self-incrimination came before the New Zealand Court of Appeal in Busby v Thorne EM! Video Programmes Ltd [1984] 1 NZLR 461. A majority, Cooke P, Bisson J, was prepared to develop a new judge-made principle of evidence to avoid the effect of the privilege, whereas Somers J, who dissented, took the view that any such exception required statutory authority as in England. In effect the majority held that if a defendant was required to provide information or documents which might include evidence of criminal offences then the Court could apply conditions that prevented this information or documents being used for the purpose of a prosecution.

Cooke P expressed the restriction in this way (at 474):

First, the Court can hold, as a general rule regarding criminal evidence, that the documents and information will not be admissible against such a defendant in any criminal proceedings for an offence relating to the intellectual property or any other subject-matter of the action in which the order has been made. I would hold this to be the rule; it is a reasonable corollary of the order. Nor is there any threat to the public interest. Essentially what are being protected are the private property rights of the plaintiff. The law enforcement agencies of the state have no particular interest in prosecuting the defendant; the public peace and the protection of citizens from violence are not involved.

17

Secondly, as an aid to ensuring observance of that rule, the plaintiff can be put on terms. In addition to the undertakings set out in the Chief Justice's orders the plaintiffs here should now be required to undertake that (except for the purposes of proceedings for perjury or contempt of court) they will not, either directly or indirectly, use any document which is a subject of the order or any information obtained from it, or from any answers by the defendant under the order for the purpose of any criminal prosecution of the defendant, nor make the same available to the police for any purpose.

Cooke P went on to say that if there were a real risk that the handing over of documents would entail self-incrimination for an offence not connected with intellectual or other property which was subject of the action the ordinary privilege could be claimed.

I confess to having some personal sympathy for the view taken by Somers J. However, the Busby decision obviously binds the New Zealand Courts and has stood since 1984. I would make three comments:

(i) Where Anton Piller or analogous orders are sought outside the area of intellectual property it may not be correct to say that the law enforcement agencies have no interest, eg, the Serious Fraud Office.

(ii) Accordingly, it seems to me that this judge-made restriction on the availability of such information or discovery may not be supported when outside the intellectual property area.

(iii) Given the powers conferred under the Serious Fraud Office Act I cannot see how the restriction against handing over documents or information to the Police could operate against that Office, even if indeed it can operate against the Police.

5 Confidentiality

It has been clearly stated that the general principle in discovery that the party obtaining them are not to use the documents for any collateral or ulterior purpose applies to discovery obtained in respect of an Anton Piller order: Soft-Tech International Pty Ltd v Ball [1990] 2 PRNZ 254. The leave of the Court must be obtained before they can be used in another proceeding: Riddick v Thames Board Mills Ltd [1971] QB 881; Crest Homes Ltd v Marks [1987] AC 829.

18

In addition to this restriction there can obviously be questions of confidentiality which arise. In appropriate cases the Courts have always been prepared to restrict inspection to certain advisers of a party, such as a party's solicitor, counselor an independent expert, possibly even to the exclusion of the party to whom discovery is made. An example is Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354. There is an issue, in my view, in respect of the latter restriction but no issue but that it may be appropriate to restrict unlimited access by the party to the other party's confidential documents. That issue should be addressed in the application and granting of an Anton Piller order. It was an issue considered by Chilwell J in the Soft­Tech case.

6 Preservation

A further limitation which some cases would suggest has not always been applied in practice but which, in my view, does apply is that a plaintiff should be permitted to take o1).ly those documents necessary for preservation purposes. This limitation was emphasised by Henry J in D B Baverstock Ltd v Haycock [1986] 1 NZLR 342. It follows from the fundamental basis upon which Anton Piller orders should be granted: that vital evidence might otherwise be destroyed and hence justice would not be done. In the particular case it was held that the seizure of documents that were being held by Baverstock's solicitor could not be justified. His Honour emphasised that it was in his view important "that this extraordinary remedy be kept within the principle of its formulation and not sought to be used as a matter of course in intellectual property disputes".

7 Safeguards

Apart from the safeguards implicit in the matters already referred to there are three undertakings which are normal prerequisites to the granting of an Anton Piller order. These are:

(i) an undertaking as to damages by the plaintiff which may in appropriate cases be required to be supported by security;

(ii) an undertaking to inform the defendant of the right to seek and obtain legal advice before complying with the order. This undertaking may be qualified by a requirement on the defendant to seek such advice promptly or even within a specified time;

(iii) an undertaking to preserve a copy of the proceedings, ie the statement of claim, the order and the evidence upon which the order was obtained upon the defendant.

19

There may be additional undertakings appropriate to the actual circumstances. These may include undertakings that any document or goods seized will be retained in safe custody with the plaintiffs or their solicitors etc. The three principal undertakings are important safeguards for a defendant suddenly surprised by a troop of pinstriped men and smartly tailored women who arrive on the doorstep claiming the right to enter and search the premises.

8 What should the plaintiff do m execution?

The first and most obvious pre-requisite for successful execution of an Anton Piller order is to make sure that the order which has been obtained precisely fits the circumstances: ie, identifies the individuals who will execute the order, identifies the precise premises, identifies the nature of the documents to be sought, anticipates the defendant's absence and hence provides for execution to "the person appearing to be in charge".

When attending to execute the order the first step must be to identify the person appearing to be in charge. It is on that person that copies of the order, proceedings and evidence must be served and to whom a clear explanation of the effect of the order must be given. It is fundamental that the explanation must be accurate. The unhappy situation of the solicitor in VDU Installations v Integrated Computer Systems [1989] SFR 378 can so easily happen. The plaintiff's solicitor did not have with him and had not read the affidavit which set out the scope of the order. In explaining the terms of the order to the defendant he said that it permitted search of the defendant's premises generally but with a view to finding any property of VDU. This was a misdescription of the order, which was considerably more restricted. Knox J found the solicitor guilty of contempt because of his negligence. In the circumstances no penalty was imposed on the solicitor other than costs on an indemnity basis. However, the case illustrates the importance of a strictly accurate compliance with the terms of the order. It also emphasises the obligations which are imposed upon solicitors and counsel in this type of jurisdiction where obligations to the Court are so obviously paramount.

Because the defendant will be permitted the opportunity to seek legal advice there will be some necessary delay in executing the orders while contact is made with a lawyer. It is important during that time to ensure that the person in charge of the premises does not communicate with other persons who may then take the opportunity of destroying or hiding documents. This can be of particular concern in respect of computer software copying where a simple command to a computer may be sufficient to delete ~ll evidence of that copying. It may be possible so to frame the Anton Piller order as to permit the person in charge to communicate with a lawyer, but require any legal advice to be obtained within, say, 30 minutes, and to restrict

communication by that person to any other person on the premises of the fact Anton Piller order pending the search commencing: see the comments in Benefis Systems Ltd v Dyer (HC Christchurch, CP 413/88, 9 August 1988, Tipping J) and in Bhimji v Chatwani (1991) 1 All ER 705.

It is also fundamental to execution of the order that, when searching, the scope of the order is not exceeded. In particular, care must be taken to ensure that documents are not removed that are outside the ambit of the order: A B v C DE [1982] RPC 509.

A sensible precaution for any plaintiff is to make contemporaneous notes of everything which takes place in the course of the execution and contemporaneous lists of all documents or other material which are removed. Indeed, the requirement for a detailed contemporaneous receipt was one of the safeguards suggested by Scott J in Columbia Picture Industries Inc v Robinson [1987] Ch 38.

The Columbia case arrested an apparent decline in the strict observance of the preconditions for the issue of an Anton Piller order and of its manner of execution. In my view there are elements of an acceptance of that decline in standards reflected in certain of the judgments of the New Zealand Court of Appeal in Busby's case. However, the English courts have returned to a stricter line since Columbia.

Although the plaintiff succeeded in the Columbia case in establishing infringement of copyright, trademarks and passing off, the defendants were successful in obtaining damages under the plaintiff's undertaking for wrongful seizure, unjustified retention and for loss of materials.

Scott J's judgment records that the plaintiff's solicitors gave evidence that since 1974 they had obtained and executed approximately 300 Anton Piller orders and, indeed, that they had never been refused an order by the Court. It also appeared that this was the first case in which the propriety of the obtaining and the execution of an Anton Piller order had been examined at a substantive hearing.

Having reviewed the practice that had grown up Scott J commented:

[T]he practice of the Court has allowed the balance to swing much too far in favour of Plaintiffs and ... Anton Piller orders have been too readily granted.

He went on to make five recommendations

21

(i) Affidavits should err on the side of excessive disclosure. The judge, not the plaintiff's solicitors, should be the judge of relevance.

(ii) The order should be drawn so as to extend no further than the minimum extent necessary to achieve the preservation of documents or articles that might otherwise be destroyed or concealed. An order allowing the plaintiff's solicitors to retain documents could not be justified. Once copies had been taken all documents should be returned.

(iii) The plaintiff's solicitors should be required to deliver material taken from the defendant's premises to the defendant's solicitors as soon as those solicitors were identified on the undertaking of those solicitors to retain that material for production in court.

(iv) The solicitor who executes the order should be required to make a detailed record of the material taken before it is removed from the defendant's premises.

(v) The executing solicitor should not take material from the defendant's premises unless it is clearly covered by the terms of the order.

In the particular case the consent of the defendant had been obtained for the removal of additional material. Scott J said that this practice was wholly unacceptable and that he would not be prepared to accept that such a consent had been freely given unless the defendant's solicitor had been present at the time.

Not only did he find that there had been material non-disclosure in relation to the granting of the order but he held that the plaintiffs and their solicitors had abused the Anton Piller procedure in its execution. He found that the plaintiff's solicitors' behaviour in executing the order and in subsequently failing to return property of the defendant was oppressive and an abuse of the position of power in which they had been placed by the order of the Court. He also came to the conclusion that the order had been applied for with the motive, by that means, of summarily closing down the defendant's business. Damages of ten thousand pounds were awarded to the defendant under the cross undertaking.

A practice which has been adopted in New Zealand has been the attendance on execution of an independent solicitor. This is, in my view, a desirable safeguard both for the plaintiff and the plaintiff's representatives who are executing the order, and for the defendant. It seems to be a practice that should be encouraged by the Court. However, that solicitor must appreciate the reliance which has been placed upon her or him and the responsibility which is being undertaken.

22

9 What should the defendant do?

Obviously the first thing that any defendant should do is ring his lawyer. The question then is what the lawyer should advise.

If you are telephoned by a client who has suddenly had an Anton Piller order thrust upon him or her then it is a situation where you need to get to the scene immediately. Your obligations to your client cannot be discharged over the telephone. You should ask to speak to the plaintiff's legal representatives who are in attendance at the scene and seek an assurance that the order will not be executed until you have arrived and had a chance of advising your client.

When you get to the scene you obviously need to read the proceedings which have been served and then advise your client of the consequences of the orders which have been obtained. Your client must be told that he does not have to allow the plaintiff in and that the plaintiff cannot force entry. However, he must also be told that failure to allow entry is a contempt of Court and one of the penalties for contempt is imprisonment. It is, of course, possible for the defendant to apply to have the order set aside, but this also has its risks.

Obviously, when looking through the documents which have been served you must look to see whether there has been any significant non-disclosure, whether the affidavit does disclose a cause of action, and whether there might be an issue of privilege against self-incrimination. You should also ensure that whatever the terms of the order they are strictly observed if your client does decide to permit the search to proceed.

There is a dilemma in deciding whether to advise compliance pending an application to set aside or vary, or non-compliance involving the risk of a contempt order.

The risk in advising non-compliance is that a party is in principle bound to obey the order while it stands at the risk of contempt proceedings. This was made clear in Wardle Fabrics Ltd v Myristis Ltd [1984] FSR 263. Goulding J said (at 271-272):

It seems to me the system of administering justice would break down if the subjects were permitted to apply their own or their advisers' ideas to the possibilities of subsequently setting aside an order and to disobey on the strength of such private judgment and then, if the judgment turned out not to have been <right, be free from all penalty.

)

23

If the decision is made to refuse entry and to apply to discharge the order then the application must immediately be made to the Court, inter partes, and supported by affidavit evidence. If that course is to be taken you must make sure that your client realises the gravity of the risks and the potential consequences. In particular you must make absolutely certain that the client realises that no document should be removed or destroyed while that application is pending. If they are, then the Court is likely to visit a very severe penalty upon the transgressor: WEA Records Ltd v Visions Channel Four Ltd [1983] 1 WLR 721.

Some encouragement for the view that the Court will not impose a penalty on a party refusing entry pending an immediate and bona fide application to set aside or vary is to be found in the recent illuminating judgment of Scott J in Bhimji v Chatwani [1991] 1 All ER 705. I have sympathy for his Honour's description of Anton Piller orders, which applies equally to other ex parte pre-emptive orders (at 712):

But it is not the whole story, and I come back to consider Anton Piller orders and their nature. They stand, as has been said on many occasions, at the extremity of the court's jurisdiction. Some may think that they go beyond it. They involve the court in the hypocrisy of pretending that the entry and search are carried on because the owners of the premises have consented to it. They impose on plaintiffs' solicitors the almost impossible task of describing fairly to non-lawyers the true effect and nature of the orders. They present respondents with orders of great complexity and jurisprudential sophistication and give little time for decisions to be taken as to the response to be made to them. They vest the plaintiffs, one side in what is usually highly contentious litigation, with the trappings of apparent administrative authority to carry out the search. The usual presence of a policeman adds to the illusion.

Scott J set out several factors to be taken into account in deciding whether a refusal should be punished as contempt. These are summarised in the headnote as:

... where the defendant, acting on legal advice, makes an application to discharge or vary an Anton Piller order and declines to allow execution in the meantime but at the same time makes a reasonable offer to protect the relevant documents for a short period to enable him to make his application and there is no evidence of subterfuge or impropriety, the defendant's refusal to allow execution until after his application will not justify a finding of contempt.

24

I would hope that Scott J's second intervention in the area of Anton Piller orders will have the same salutary effect as his earlier intervention in Columbia.

Of course, if the decision is made to allow entry and the search to proceed then the defendant's solicitor's task is to ensure that the search stays strictly within the terms of the order. Again the guidelines set down by Scott J in the Columbia case are useful.

10 Grounds for discharging order and damages

The approach of the Court to an application for discharge will vary depending upon the time of the application. If an application is brought prior to execution of the Anton Piller order then it would seem proper that this be dealt with on the same basis as any other application to discharge an ex parte order, ie there should be no presumption in favour of the order. However, as it would be usual for an application for discharge to be heard by the same judge who has made the order the absence of such a presumption may be a legal rather than factual reality. It would seem that the strongest grounds for setting aside an order prior to execution would be:

(0 self-incrimination - but noting the limited scope of that objection in New Zealand;

(ii) material non-disclosure.

Once an Anton Piller order has been fully executed there are authorities indicating a restrictive attitude towards setting aside such an order prior to trial. In Anvil Jewellery Ltd v Riva Ridge Holdings Ltd [1987] 1 NZLR 35 Henry J said that it ~as only appropriate to make a pre-trial order for the discharge of a fully executed Anton Piller order if:

(0 it had been obtained mala fide;

(ii) or as result of material non-disclosure;

(iii) or if there were other special circumstances which clearly demonstrated a need for immediate relief;

(iv) or if, implicitly, there was an abuse of process.

If the only reason for seeking a discharge was to enforce the undertaking as to damages then in his view the order should in general be left to be dealt with at the trial. His Honour had expressed a similar view ih DB Baverstock Ltd v Haycock [1986] 1 NZLR 342.

25

'iN'he:re

coimpany.. be rro ente:r the d,Nr?Hing hou<::t~ out that p)l.adnti.ff's 1viTas 2tlso

plaintiff's. cbtri.t?f executiv12!, Thr:?: order 'iNas set aside rmi

:i.nalterial

thesE ord.:ers, if s:uffident

[1989]

order stated of th1e plain.tiff

the DE:Jf<erild,,2mt'". of

grounds:

'YVZl.S wrongly to permH

H should hav,e required of entry.

It ",vas inappropriate that the supervising the order should have a p(::rsonal th1e plaintiff

'iii) \.

VVhilEi it be conver,ti,2:nt d,r2t,ermi11ation of a:n applkation to set th c,u 2:ht thee;; 0_1rpr,essi v,e

" J ~'·,eo.... .t -

:ma:nnr,2r 1,vhkh it i;:3 obtained, and th,z Hkely dishiCH1,·2st'yF o:rn the 1oart of

" .i,\,

.circumstances jt:Isfdfy ,-1ppHcardon br2ing

ad.minis to postporu2 aside until t:ria.L I '1J1rouJd

or,dzr, ex parte

in nornli?d manner.

said abov.;:?

daLln.;lges

the Cmnt still 11l1B1tI2:ria.l non-disclosure etc,

the (dEfendant eithf~T by nO't 5121:

(']If

of any cDnsideration an r.:rv!lardl 'L1i:UYI2l.fl:eS

~~.) pnru:lpies to be applied to ;;nl'larding

e:I;]:::mpla.ry tmdl'2r the

1 HlCf t'rtlJdn I)" .. c. ,j,,..,, .,t;.., ', .• L:\I b'~ apprIYV l2Ci by Gaulft J ] ~ F,U!"'rFl:1irl' <~,_, 0 "'=-. ",i . ~ '_-A>~ .'

the U!lrd.ert,cl.kin.g discretionary hut unless rche p;:u~y s(:;i;"!:king eruorc:!i;'!1tne.nt has guilty 11Cl.iscond.uct that ';il~r':Juld

render i~ h~ll,?quitabl!e' trc:) enforce undi2Thl kin f%, defenda.n.t I I~'

recom./Je1f15€d for thAi'! C.IL""".ltO".,"",";::;'''' suffered ellS 2L of .,

ErLE,ult'Cel,]!1€:tlt l!J.:nd.lS!.tt;;a.kIng not to C21SI.2:S· 1Y11tH2re th.en:, bee2l son-l.e I(ielfauh on th.e PS?,:"t of ·[the pla.in.tHf

party 5eeYJ.ng to enforce the undlertaki:Cllg to provf2 that was ,cau.sed making of tnle o:rder,

'fh3 Idefendant to be reoompenElied only for dalI",lage' a n21.tlu:al a.nd dh'i:!ct of glt'j'ultlng of inJunction, Tl1is

d.l2Ii::::J.1Ld.ant 1~lmuId usirH~: a '"hut - , .• c <.;, .,

i~ q~.H~:stiO)tl of

Quan tUl!I12rnd )l":ernoteru::ss ~lPiJln '~'\I'hj[(:h damages for bJrieach

th.€ bie\~n a <:Olltract

sufjf,ered Vl~rltel:hr2l"

if :;~l iiJ"Tr.t:.:JJ,\Qt)I;"'~ ,. o,·,-,-"t

not to pr2venlc the d(2'foe1l1<l:llZll1t doing that r:f!strainEd. kJi1,o'1r'ii'liedgle th4:: parth:!s andd1l:lt which Hu:y conterrqJilat:ed ad: i:hr2

injunction 'v'l3lS g.'nuJJted an:? rele'Ylan.t to issue: Jr2:nloteness, . ,

relarna(;r,es ". as to· damages

""lill

area than where, for example, an interim injunction has been obtained to preserve property pending determination of a specific performance action.

11 Off the rails

There is much to be learned from cases which have gone wrong. Two recent examples in England illustrate the way in which this procedure can go off the rails.

In Swedac Ltd v Magnet & Southern PIc [1989] FSR 243 Anton Piller orders had been obtained and executed in an action based on an alleged infringement of intellectual property rights. When the issues came to be examined on a motion by the defendants to discharge the Anton Piller orders Harman J held:

(i) that there was no evidence supporting the assertion by the plaintiff that it had copyright in certain drawings; indeed, the drawings were dated some months prior to the incorporation of the plaintiff;

(ii) that there was no trace of a reputation in the plaintiff to found an action in passing off;

(iii) the cause of action for breach of confidence was "a hopeless case";

(iv) and no tort existed of fraudulent interference with trade as alleged.

Despite the obviously threadbare nature of the plaintiff's case, the ex parte Anton Piller orders had been granted and executed, and the defendant had been subjected to court-directed entry into its premises. When it is remembered that such entry almost inevitably carries with it the potential for seriously damaging commercial confidence in the defendant as well as undermining staff loyalty, the risk of exposing the defendant's own trade secrets to the plaintiff, and even the possibility or in many cases the likelihood of terminating the defendant's business activities altogether, the greatest injustice can be done if an order is wrongly made as in Swedac. Clearly solicitors and counsel for the plaintiff must bear the bulk of the responsibility for that occurrence but the Court, which granted the order, must share some blame. Where such orders are being sought there is a need for absolute vigilance by solicitors, counsel and the Court.

A second salutary example is Lock International PIc v Beswick [1989] 1 WLR 1268. There Anton Piller orders were executed at the business premises of the defendants and at the homes of certain defendants. The Anton Piller searches did not yield any evidence supporting the plaintiff'saUegations, but instead the plaintiff got access to the defendant's own confidential documents and prototypes. The judgment records that twelve cardboard

28

boxes of documents, five filing cabinet drawers and five prototypes were removed by the plaintiff's solicitors to which 32 or 33 employees of the plaintiff subsequently had access. On an application by the defendants to discharge the Anton Piller orders Hoffman J held:

(i) that the plaintiff had not made a fair disclosure of its financial position in connection with its undertaking in damages - that this was material and justified discharge of the orders;

(ii) that. the evidence did not justify any form of ex parte relief, let alone an Anton Piller order;

(iii) accordingly, it was appropriate to discharge the orders immediately to show that no prima facie case of dishonesty had been made out against the defendants.

How then were the orders obtained in the first place? It is apparent from the judgment that the affidavits were drawn containing allegations that Hoffman J, on examination, described as "scientific banalities". These were supplemented "by the liberal accusations of fraud, theft and perjury with which the plaintiff's affidavits are sprinkled". The report goes on: "The plaintiff's solicitor Mr Rose swore a triumphant affidavit saying that he had uncovered a 'conspiracy on a major scale'." In the light of the Court's finding that "there is nothing in the evidence on this motion to cast any doubt on the honest and good faith of Mr Beswick and the rest of his technical team", justification not only for the plaintiff's initial assertions but also for the involvement of its solicitors in the initial application is obviously highly questionable.

Hoffman 1's judgment provides some further informative comments (at 1280):

Anton Piller orders are frequently sought in actions against former employees who have joined competitors or started competing businesses of their own. I have learned to approach such applications with a certain initial scepticism. There is a strong incentive for employers to launch a pre-emptive strike to crush the unhatched competition in the egg by causing severe strains on the financial and management resources of the defendants or even a withdrawal of their financial support. Whether the plaintiff has a good case or not, the execution of the Anton Piller order order may leave the defendants without the will or the money to pursue the action to trial in order to enforce the cross undertaking in damages.

And again (at 1281):

In cases in which the plaintiff alleges misuse of trade secrets or confidential information concerning a manufacturing process, a lack of particularity about the precise nature of the trade secrets is usually a symptom of an attempt to prevent the employee from making legitimate use of the knowledge and skills gained in the plaintiff's service. That symptom is particular evident in this case. Judges dealing with ex parte applications are usually also at a disadvantage in dealing with alleged confidential knowledge of technical processes described in technical language, such as the electrical circuitry in this case. It may look like magic but turn out merely to embody a principle discovered by Faraday or Ampere.

And beyond the merely factual basis for the allegations Hoffman J said (at 1281):

Even in cases in which the Plaintiff has strong evidence that an employee has taken what is undoubtedly specific confidential information, such as a list of customers, the Court must employ a graduated response. To borrow a useful concept from the jurisprudence of the European Community there must be proportionality between the perceived threat to the plaintiff's rights and the remedy granted. The fact that there is overwhelming evidence that the defendant has behaved wrongfully in his commercial relationships does not necessarily justify an Anton Piller order. People whose commercial morality allows them to take a list of the customers with whom they were in contact while employed will not necessarily disobey an order of the Court requiring them to deliver it up. Not everyone who is misusing confidential information will destroy documents in the face of a court order requiring him to preserve them.

In my respectful view these comments should be engraved in the minds of all litigation solicitors and counsel, not just those involved in the intellectual property area. They are pertinent to any pre-trial pre-emptive application. It is vital that solicitors and counsel maintain their objectivity in the face of either the possibly deliberate use of such applications to crush the egg or "the extravagant fears which seem to afflict all Plaintiffs who have complaints of breach of confidence, breach of copyright or passing off": Booker McConell Pic v Plascow [1985] RPC 425, 441. It can be seductive to seek over-willingly to facilitate the desires of one's client but for those who are professionally engaged in litigation it is fundamental to remember the obligations which are owed to the Court. The examples that I have given above illustrate how easily that objectivity can be lost. When it is lost there is a likelihood of injustice to another party, the risk of damages and costs to your client (Systematics Ltd v London Computer Centre [1983] FSR 313; Busby, supra; Jeffrey Rogers, infra) but, most importantly, the loss of your

11. a. I:Url:!

Iud at:>'> to ret" a~o l.past ) ' .. 51""-' .... · ~",1f., ~. &1 •• ~", w

certifvinl2' ~ '-.--~

cou

These are myseH:

fU.nd.aIn·:en.taJ oblig21Hnn of COlms.e]. is that J rnean obje~j:iv'e j}"lclzpen:r.:i:leri.tElvdv:i.c;'2 not

wa."" COIT,~?rOm]sed 1.:,)y a, d'c!3ire to fhe ",That it -';!'iTaJrlits, If the .J ,r cJ

advi.,:c;;: is that it 01." shouh.i I10,ii; b,e d,,'[l!11,e then :so That ,''',,1"''11,,"",'11""11

im.p'ortan!: in an an:'!Jl as thls} of

The f'lJlnd.an(u:~rtl:al ob'ligati.on to ClJ'urt ,,~s poinfcl2d O~i1t in Cohnnbia, HV,el"Y difficult for .a jll.dge f21J,)ed lNith 81. Pj'l',r::plJl.re,d2x

10 , '1, 'h'" ",t: "I" 1 app lC81tl0ll1l trD tll2U accept T~\r .,at 15 Sal(~\ at J.ac(;-; va.nue, t :;n tl€

nature of tb.e tlh'jr?::h:: pl,'e~e:!.1[llptive apJ?lkaii:ion:s tIl,21tHl'::!)! aJ('(e }'n"epaned ull(Ie:r pressure an.d in haste, As Tiu:nn.as J co,mrne:nfc.e,d in til') n tv i d,r~

f1 Security Ltd 'V Van L:eetfW:ftrden (He cp 19 Octo,ber 1990):

aU the more reason. exerds,e the greatest care to the :colCiltained affidavits ensu.r::! that COtU~t

fuHyarJd properly

1l'lature em

the .AJ1ton is

in reL:'Lt:km to an ex parbe .E'verl4rlt

b,efore (Orni:ClLg to court (Jeffrey [198:5] FSR

on';[E:f II1U.sl:

relating to

31

of the Defendant which they can suggest points to the probability that in the absence of an Anton Piller order material which should be available will disappear.

Alternative remedies

A number of possible alternative or associated remedies have been noted in passing: the Mareva injunction, the writ ne exeat regno, the powers of arrest under s 55 of the Judicature Act, and the Bayer jurisdiction.

More usual alternatives can be found in the High Court Rules: the ability to apply for pre-commencement discovery under r 299; non-party discovery under r 301; an order for inspection under r 322 or a preservation order under r 331. As well, the original jurisdiction under Norwich Pharmacal Co v Customs & Excise Commissioners [1974] AC 133 may remain where identity is an issue.

Conclusion

Pre-emptive remedies have their place in the armoury of the law. Anton Piller orders have met a need, particularly in the intellectual property area, but they also have a wider potential application. The trick is for the courts to be responsive in deriving such remedies to meet new demands without foregoing the fundamental basis upon which our civil and criminal law is based: until the case is proved it is only an allegation.

The best safeguard against the improper use of such pre-emptive orders is the independent professional assessment and involvement of solicitors and counsel who are fully appreciative of their objective responsibilities. Indeed, in a recent reference to the European Court of Human Rights in Chappell v UK 1989, series A, vol 152, a case involving an Anton Piller order, that Court in upholding the legitimacy of the procedure said:

It is true that a solicitor executing such an order may find himself faced with a conflict between his obligations to his client and his duty to the Court, as one of its officers. However, a solicitor who fails to abide by an undertaking of his incorporated in the order lays himself open to heavy penalties even to the point in some circumstances of putting his professional career in jeopardy.

See Mowbray (1989) 133 Sol Jnl 1022; Collins (1990) 106 LQR 173. The position can be no different in New Zealand: s 21 of the New Zealand Bill of Rights Act 1990.

PRE-JUDGMENT PROPERTY ORDERS

Introduction

Mr Raynor Asher Barrister

Auckland

The financial world is becoming more international by the day. More and more corporations and persons have a multi-national presence or connection, and the ability to move their operation from one jurisdiction to another. Money and assets can be transferred from person to person and jurisdiction to jurisdiction by a telephone call or the touch of a few computer keys, and debtors appear to be showing less and less hesitation in taking all available steps to avoid the rigours of a judgment by reshaping their asset positions. Creditors are often thwarted by unscrupulous debtors dissipating assets before judgment.

This international problem has not yet turned inter-galactic, but if it has a Jedi it must be Lord Denning who, in what he has described with custo.mary modesty as the most important judicial innovation of his time, created or re-created the pre-judgment non-disposition of property order, now known as the Mareva injunction. And other procedures exist to assist the hapless pla,intiff.

The available remedies

The three most commonly used remedies are the pre-judgment charging order, the preservation order under r 331 and the Mareva injunction. There are others, of course, such as the appointment of a receiver by the Court, but this paper will be limited to those three.

There are real conceptual differences between the three, although they are often lumped together in a scatter-gun approach.

The pre-judgment charging order is directed against a particular asset. There is an actual charge over that asset, and the charge may be registered against land. This has the great advantage of being, in respect of land, a procedural bar to disposition. It has the demanding threshold requirement of proof of intention to defeat creditors.

In contrast, the Mareva injunction does not create any charge over specific assets, although it may be directed to restraining the disposition of a specific asset. The threshold requirement was uncertain at first and_may have come • close to proving an intention to defeat the interests of creditors, but that threshold test has now been lowered, and the decisions of the 1980s make it

32

33

clear that in addition to the other threshold requirements, there only needs to be proven a risk that the defendant's assets will be dissipated thus frustrating the plaintiff from executing the judgment. In general terms the Mareva injunction is not focused on an intention to defraud by disposing of a particular asset as is the pre-judgment charging order. Rather, it is focused on the Courts' wish not to see its jurisdiction and procedure defeated by the dissipation of assets between the issue of proceedings and the execution of a judgment. It is an in personam remedy, rather than an in rem remedy.

While the interim charging order and the Mareva injunction have clear conceptual links, focusing as they do on defeating the interests of creditors, the preservation order is a remedy of a different type. It is not linked to the frUl~tration of the right of execution of a judgment, but rather to preventing property that is the subject matter of the proceedings from dissipation before the actual court hearing. One of the traditional and major aspects of r 331(3) is the preservation of evidence prior to the hearing. However, the aspect of the rule which is relevant to this paper is that aspect that preserves the specific property or fund that the parties are arguing about.

It is important to emphasise that none of these remedies can be used for the improper purpose of tying up a defendant's funds against the da,y of the judgment. More than a general wish to obtain pre-judgment security must be proven. This has been emphasised in respect of all three of these remedies - for interim charging orders see Jones v Poffenroth (HC Auckland, CP 188/86, 10 March 1986, Smellie D; for preservation orders see Rapid l\1etal Developments (NZ) Ltd v Rusher [1987] 2 PRNZ 1985; and for Mareva injunctions see Whitmarsh v A'mon Corporation Ltd (HC Christchurch, CP 282/88, 9 June 1988, Hardie Boys D.

The pre-judgment charging order

The present r 567 is derived from the former r 314. It existed long before the Mareva injunction was a gleam in Lord Denning's eye.

The criteria are as follows:

(a) A reasonable cause of action. The test here may come close to the Mareva injunction test of a "good arguable case". In Jones v Poffenroth relief was refused because the cause of action was perceived to be hopeless.

(b) Proof that the debtor is making away with his property or is absent from or about to quit New Zealand. Some reasonable proof of this must be put to the Court. The quaint phrase "making away with the property" means dissipation - some sort of sale or disposal of the assets.

an intention to ci!::!fe<lt 0PllUDJll.r are :not r;;;niQugh. (''''1 C[lD?'·'] ,e'~LR ',' .... 7 'otH2r "I",j'l (;b_J, <'~

iLJa (He l~.w:kland, iJ!. 853 probabilities, accepting that ~)'J;;:'~"",.Ujl.'j,

even a proof":

the1'[2 pIcvof ()J['l the d5r~ct (p!'~ri,:dt!er:"c(? and that it n11JSt be illflerr,ed

IlD aouJJ,t l:hat21 su'~pkio':Ui.s:::lI'ctunstaljn,C(2p even

.Finance Udi? 989]BCL a '},fer,!'? transie:c:'l"ingEL h()llS,e iJlltlJ) the I:he

husband, ]enl'Hng lu~r haH rdl!2; ~trlcl rll:;;o~ivh'ig an ad:no'Nledlg:n1.ertt of def£ItiLif.:1Zlnt imf:JHdHy his

110(: to "iNe';Jlken his T/lfife'g, u:ntU th!2'; Cllrre:nlt action ~N';;'l5

P, "'p_11Q rl ,::77"<'! I:""n)' 11.."1' a T n'1'l~'1 o· 011'(:112'1'<:: ~ l. '- j .... ,"""- t:l.ilJ.\!'~""J., I' ~>, ,,<L 'If]!,1 ""''-'0 ~ '. t",,> """ l,)

n:!gistra.tiolt1 thr2:chargingo1'cler agahmt the 1NiH IJI'e'fl121lt itItlle « .. ')11: ;,~ p~I' '"""I';.(~' ~l''Ilr ppIF'Tnprt,r "'~, ,rl 11]'1" "rrl""t·If..(Qj ]C) ii :0,; ".,.I'Jl:.I;',I(: ~3, , ... 'Y:'p1"'I"'h"{'~ "'"'1' '""Y~ ,p,O .. '. ;-,i, [::tJ..i"' .... b iM1" 'L".u.1l.i r),-' .if 1r;tL!l:r..I", ,]51" 'lfjl;; I-,.JLI.~ r.!LtrLid,l'.fO-I .. Lt. ,:;;,JJ. ... " wk ll,"" _,.I'Jl.l'bthlL li,. I!v~

nJ,'l I.", h"ll, ;1~,dl"rm,n"i"lI'!1. I·,O! .~"de "'~1'''"r'IlY'~'''''IY CU"'I":l''''f 1'1;' {rl",i l'l>"l!~,:!f~ Ic.~' .1.,.< L{A"L~J.IL J .. .I, ~) (;;:,ti.~" tt ;b),It'LL v ~P~,I1C-U, oJ\."l,rLt-, U'Ju ",-,11.1-;;" "~ '" 11:;_ ~""",

ChUl'g:1?8 Ia11.d tar the dl,m:ging orde'L Kt is only tru? hlt(en::st of the judgment debtor at regis[lr'ation that lean blE':

chargl2'd: Hindle: & Shn, Land 8.163, VVhereas thll:! sanction breach I::ontempt procrE~ec1lil1gs.r or defendant beh1 .. g; dehaJr1'i2(:l lfrrel111. d.iefend.:.ng, f'812::isteredl. pre-~udl'D'm(ent !(:har(;;:in!;f actua!l.v' ]'I:lC()'jsi1'1l~~ti(1'1ll t~J' .:l. J' b C, ~ .... '! '-' '~~<:J) .'___'t,,. "" ,'-" '.,

J.nstru.xnerl.t .of th.'£:refo1'l.:! preVE~nts ac~ioll15 in

derived fn)l1l thi2 fOI'lll'?[ rr r r "'''lICl,"4cJr ,""~ ,'h1e"o,po ··""'1 ",,\.1'p'r 1) (J~~';;,Ji. il.,) "' _I.o_'./_ ... U. hl.it:LUi"." the ac1ti:on" or property in matl2~ria1 question This

the new rule.

'Ht.r2 ne"~l rule vlidest posslbl!;: terms. are On Ct intf~rpn'!tation I=:very plaintiff can seek iIlCl .. mediate securHy ()il{~r all the assetEi.Floliilev'2r, it has not be,2n iJ.'l.t,erpreted in this 11\lay.

r.nost G15€5 on r inten(k>'cl to Pl'O'ilid!e

broad. 1~vordsf 111,tlSt

property or a fund involved in the litigation itself so that claims are not rendered nugatory by the time of the hearing. The property must be tangible and capable of being preserved. In other words, the new rule is not so different from the old.

An ongoing busin~ss is not such property: Moffatt v Chambers (HC Auckland, CL 19/89,20 October 1989, Henry D.

Not just any such property will be made the subject of an order. It is necessary generally to show some risk of dissipation or damage: Lewis v Poultry Processors (Holdings) Ltd [1987] 2 PRNZ 64,508, 64,513.

Moreover, in so far as a fund is concerned, there must be an identifiable and existing aggregation of money. Lewis v Poultry Processors (Holdings) Ltd stands for the proposition that the plaintiff must have a right to the particular fund (at 64,512). Its mere existence is not enough. There is no power to apportion a fund - the order must relate to the whole fund.

The order is discretionary. In Lewis v Poultry Processors (Holdings) Ltd Tipping J stated that while it was not always mandatory for an applicant under r 331 to demonstrate a risk of destruction or dissipation of the asset, this will be an important matter to consider in the exercise of the discretion. In Sharplin v Walding (HC Wellington, CP 586/89, 17 November 1989) Master Williams QC concluded that there must be some risk to the property, while not stating that this was a mandatory requirement. Furthermore, there must be some challenge or issue that specifically relates to the property: Marketing Management Holdings v NZI Securities Ltd (HC Auckland, M 1068/89, 17 August 1984, Henry J).

In an appropriate case a I'reservation order may be made against a person not a party to the proceedings: Ireland v AGC (Wholesale) Pty [1983] 1 VR 222; Hibbs v Towle (HC Auckland, A 341/83, 19 May 1988, Gault J). However, the order cannot apply to property not owned by the defendant: Moffat v Chambers.

The order can only secure - it cannot provide for payment out: Allison v Bolton Enterprises Ltd (HC Christchurch, A 10/84, 15 October 1986, Williamson D.

The Mareva injunction

There is probably no single legal development which has led to such a fusillade of legal writing. The reason for this probably derives from the fact that a Mareva injunction is entirely judge-made. It is effectively a piece of modern judicial legislation, which has had to be thought out by the judges as they have gone along. Its future for a while was in doubt, but it has proven very popular, and is now in everyday use.

The ju,risdiction for the Mareva injunction is derived from s 16 of the Judicature Act 1908, which declares that the Court shall have all judicial jurisdiction which may be necessary to administer the laws of New Zealand. Its existence in New Zealand was affirmed (and perhaps created) by Barker J in Hunt v BP Exploration Co (Libya) Ltd [1980] 1 NZLR 104, in the course of a detailed analysis of its origins which has generally been accepted here.

There is now a detailed rule dealing with Mareva injunctions in the United Kingdom. There is no such rule in New Zealand. However, r 236B of the High Court Rules, introduced in 1988, states that it is "declared" that the Court may grant an interlocutory injunction restraining a party from removing assets from New Zealand, or otherwise dealing with assets in New Zealand, whether or not the party is domiciled, resident or present in New Zealand.

The new rule makes certain things clear. Mareva injunctions can be . obtained by a party to prevent another from removing assets from New

Zealand, and also from dealing with assets within New Zealand. The party may be domiciled either in or out of New Zealand.

However, as the rul~ is carefully expressed as being "declaratory", the body of English and New Zealand decisions on this subject continue to determine the ambit of the injunction. The words of the rule cannot be regarded as words of limitation.

There are many issues that have arisen in relation to Mareva injunctions, some of which have given rise to a great deal of academic writing. Various staged tests have been propounded by judges. One that has been referred to on a number of occasions in New Zealand is that propounded by Hillyer J in Wilsons Cement v Gatz:'Fuller [1985] 2 NZLR 11, 21. This is:

(a) A need for a good arguable case.

(b) The defendant has appropriate assets within the jurisdiction.

(c) A need to show risk of dissipation.

The need for a "good arguable case" is a more stringent test than that which normally applies to interim injunctions. However, it was made clear in Wilsons Cement v Gatz-Fuller that the case need not be strong enough to entitle the plaintiff to summary judgment. Thus it is more than a "serious question to be tried" and less than "no arguable defence". At the end of the day a Court is only likely to act if it has some real confidence that the plaintiff's claim will succeed. Perhaps the best analogy is back to the traditional interim injunction concept of "strong prima facie case".

This test in the rule does not contain two limitations that were previously thought to exist. The first was that there had to be a need to show a risk of removal of the assets out of the jurisdiction. It is clear now from the New Zealand case-law and r 236B that this is no longer a requirement.

It is also clear that there is no need to show an intention to defraud creditors. All that is required is a risk of dissipation. The Court will consider such risks as a prudent or sensible commercial person would: Third Chandris Shipping Corporation v Unimarine SA [1979] 2 All ER 872, 972, 985 per Lawton LJ.

A detailed analysis of all the controversial issues is not attempted in this paper, but the following points of significance can be noted:

(a) There is debate as to whether there is any need for an undertaking as to damages. Quilliam J in Frances v Supreme Services Ltd (HC New Plymouth, CP 26/87, 25 May 1987) concluded that as the Mareva injunction relied on the inherent jurisdiction of the Court, an undertaking as to damages was unnecessary. In McGeehan on Procedure para 236B.04(5), however, the view is expressed that based on English practice an undertaking as to damages should be filed. It is to be noted that no such undertaking is required in relation to r 331 orders or pre-judgment charging orders. This is, therefore, a disadvantage of the Mareva procedure.

(b) In an important decision, Ashtiani v Kashi [1986] 2 All ER 920, it was held that discovery can be ordered in a Mareva context, ie discovery of all relevant information relating to assets. It has been held in New Zealand, following this decision, that discovery is available as to assets within the jurisdiction, but not as to assets outside of the jurisdiction: see Countrywide Finance Ltd v Kirk (HC Auckland, CP 351/91, 8 April 1991, Wylie J).

33

an ac(:rut::d cause of before ,i:'t

g1·~,1·, 1,,:~1d Fi,/'r"·•':"Hu·'n,Jl L~r)?l'.'}'"!"'1'·1:,irini• 1 t·d 71, Jl.w,• :r..,.~ " Jk';l,, .,.l't'/,,Jif."-1, LJ&l:,,·, 11,,.!,f, u·111Jj. ,,il.~,, .ll..J ,, ,,,.,

CL 76/90, Iv:Tard11991, B,uker the d,.ebt a.:,.:rued. 2tt a date. of

to risk, non-dis.dosc1re , ·~ ' " " • r, 'I . • ,!" . , tJ:1e ,;uJu1rt ,ara1v,nng: 2:11 1nJt,,,~rence m: t,,le J1J11se.,1cho1l,. and an

in:ier,r2n,c:r: of dissipation: BNZ v Hifm1kir..s 1 PRT·•,.IZ

(:2,1 The juriE,dktion

(f)

to Ltd 1.1

l"Vefofon [1 ~\H ER I00'.2,; [1989] 1 ,All ER ,:1320, Thfa has at1t1-.:1cit:ed ,r,vide interest Thi:': concept ~1s1-?d in }tus'itraHa in of a::.sets ou.tside th,e Ccn1rt::;' h::r1dtori~1J {;SaUubiJ 1-Ioldini:r P,~i/' Ud 01 .._,

them::! Inj1:;r~ctio:as ;;u:,e to be-:! gri?il,Lt,i::d in sp,erc:,,aJ, dr,::nrn,;;!!:z,n,r.J::::s only,, v;rhi'2!r,e ther,e iiUe i:nsuffkfo:ii:11.t lo,cal su.bstantlal forf2:ign ,£ss,£.'1Sic and a hig:111. degr,ee of that the defenc:fant 1ivill disipose c,f them (C'.app2r, 'V1/,nrkhvide 1Vfrue1,t1 5,:1 330., 344).

rights c:;f third partier;, or s,eek

An order cl"'.,efond.'2;nt

The ,Nh.etlU:T

third narti,es 1vm bt? taken

[1984] 2 jurisdi ctio111 expenses

.. a.n

:ev!on:!overr

by the ll/I1ue1Hi ai.ction: PnPffct Securities [1 1 .1\ltineralimportrexport ER

'i,iVh~:?re restrained~ f to cHsi,ose rnr oth,:::rv,,ise

not ,~stabH1::,h1.::~d that v cm (198'.7] 2

p ., '! cl.t.il rt::2,S011'.c:tb.1L2

parties S/i

Iv1arit:ime

likely,

+1·11e, ,-, 1 ~, 1 ·,·t i-1" ·''f o/ I_.,~ ~,., l"'' ,,.1_._....,,..,l l, ! .!l. judg;;occfmt, thie b12 deli v,ered V

(1)

ri .. ot inti::!rvene: sirnply ti::ii

evlloi<ern~e that ,'ll defe:nd.an.t existing debt, thus leaving

""" A t . - (~ t,, tr 1""1 rnon Lorporco,on

9 June 198B, fr:Iardie Boyrc; J).

Th1f2 jurfodiction v11h1en?

l·n 1:r,c"'l1l. ec:i11"'t11 ·h:.r·r,,, s 1-l,1 e'i'',1"' faii. 1Cf-b>', . .tC ll,,·.:-J....tA..tG..' 1,1,,,,_.,.,u,,,,..

]nack..:. Th,e Ccrurt co,n v1:::nie11t:

!·~ 1:Tf"'"S 1,J,, t:i '.~~ J .....

imn'.l,i::di;:\te!.y remov12d v,ra::r r,efu:s:,ed: Rocket

rn:ay

'"l':tl.""1;,1'," t_;u. ~, 1"'' I)1~'C, "'1

a as to consider 1Nhether

A,!ru·i ni A i.iis/::nrUci

order Is just and

'}.('1zcl~

dear the lav, is still to devek)Jpn:llf:!iH 011c at ,casie by case Eurcmational Corporation Bank; NkKCli!f Pty

Limitea1 v iVlcKay l•JSvVR 264, So there is stm sm:ne opportunircy here creative

(JJr of cUssipation intentio,n to plaintiff J.S

;,,i,rish to

be giv,,:::

beyond it:!?:

cn2,:;.Ht1'.J,rs: exists. ;;m r&ppiicaHcm the prc,pexty

b1~ •Driv,en to CJ ..

d12ie•1d2cnt, to

it ,?1 true pr,e-;udgrnein.t charging a creddtor acting a ·1i1va7 th,it Z!.n h1tentiou. to of th,2 plaintiff, it g,ercerally bt~ appropriate to s,eek rr:L ~.njuriction c:.s i:11;12:lL

thr1e:,e criteria fo:r a irdun.ction are Hkel·.i: to J' '"

11 ,i<"il (JC71'l,;t~'I ,,;, rh ;;,, rrrfin (Y flI"·f1 er ; " ;~ ~.·,''8]0 , ! ;1,•J._l1"" .. ,, a~Y"'r:~is J-~•,,.Ji.,;::,.ll..u.'1,-o![SC.<t, L ..... in';;J, ... ,5, ... ., ..... ,f:::1 ..,. . ... _.l..,,d> .i;.:;:; ~ .... _..lL!l,u, ·-. ~- .... -- ..

;.1!1'"1° ,o,1°"'! ; ,,~ !·i' ,(·· ·n a,· :n 1,.. ::•. J .I/, i:JI 1,/L.l't,.,'"-', Jll.i &1.t,J,, -,;,(

As indicated earlier, the preservation order stands aside from the other two applications. This is because there is not necessarily any misconduct on the part of the defendant or immediate and urgent risk to the plaintiff. It may be necessary to seek a preservation order against a perfectly scrupulous defendant, to preserve a particular asset or fund. Thus with notice applications will ten~to be more appropriate in the r 331 situation, although it will still often be the case that an ex parte application is necessary.

Clearly on occasions it will be necessary to seek all three orders, because there is an intention being shown to defeat the interests of creditors, and a relevant asset is the subject matter of the litigation. A typical situation is an application under s 60 of the Property Law Act 1952 to set aside a fraudulent preference, where there is danger of further dissipation.

The plaintiff should submit detailed affidavit evidence in respect of all three of the applications. As has been suggested, the pre-judgment charging order contains the most formidable threshold. Documentary evidence supporting the claim should be attached if possible. Everything possible should be done to show the strength of the claim and any misconduct on the part of the defendant. All credible evidence, including (if a proper basis can be shown) hearsay, should be put forward, providing the full background to the claim. The affidavit in support, preferably under headings, should "prove" the substantive claim. If time allows, it is desirable to follow a format similar to an affidavit in support of a summary judgment action, stating on oath, all the facts relied on in the claim. The facts relied on in respect of assets and risk should be dealt with fully, and preferably under headings.

Counsel's memorandum should summarise the cause of action, the existence of assets, and the evidence of risk. It should specifically address the urgency issue, and the reasons for the ex parte nature of the application. It should be a neat summary, able to guide the judge quickly through all important issues.

As has been mentioned above, where a Mareva injunction is sought it is desirable to file an undertaking as to damages.

A defendant should appreciate that, except in the case of a very weak claim, it is necessary for a defendant, if it wishes to discharge an ex parte order or defeat an application on notice, to establish bona fides. It is dangerous to adopt a "you prove it" stance. This is likely to backfire, as happened in BNZ v Hawkins. A defendant should, where possible, give details of assets and intentions, preferably with some corroborative evidence to establish bona fides. If this is done it may be sufficient to defeat any of the three applications. At the end of the day the Court intervenes because some action, by the defendant which will defeat the interests of the plaintiff is believed to be a possibility. If the Court is satisfied that it is not unlikely, it will not

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intervene. Unfair as it may be on occasions, there is a sort of reverse onus upon a defendant in these situations which it would be unwise to ignore.

Future directions

There are two competing interests in the area of pre-judgment property orders. On the one hand there is the obvious need to protect property that is the subject of litigation, and the assets of the debtor, so as not to make a farce of the Court process by allowing defendants to avoid the execution of a judgment or defeat the Court process. On the other hand there is the necessity to protect defendants from plaintiffs who will seek pre-judgment security simply as a comfort, and also as a source of embarrassment to the defendant, forcing a settlement.

It would be generally accepted that prior to the Mareva injunction there was a deficiency in this area of the law from the plaintiff's point of view. It is likely that the protection that exists now for a plaintiff has developed as far as it should. There will continue to be a battle-ground in the Courts as the legitimate interests of plaintiffs meet the legitimate interests of defendants. But now that the Mareva injunction applies in and out of the jurisdiction to all cases of serious risk of dissipation, the substantive reform has gone as far as it should go.

Of course there is room for further refinement, and this is likely to be seen particularly in the area of third party interests and discovery and interrogatories. The interesting question arises as to whether it is fair to require a defendant to disclose his or her asset position in full. Will it extend to the disclosure of recent dispositions? It would be quite unfair for defendants as a matter of course to have to make such disclosure. But it is appropriate in a case where a plaintiff has shown an intention to defeat creditors on the part of the defendant.

There does not seem to be any reason in logic why an undertaking as to damages is not required in respect of all of the orders. They can do a great deal of damage if obtained improperly. The undertaking requirement should be extended to all pre-judgment property orders.

Although there is great overlap between the three remedies, each has its own particular place and it is not suggested that they should be amalgamated. The higher burden relating to the pre-judgment charging order is appropriate, given the more draconian nature of the order. The preservation order, limited as it has been by the Courts has its special place. The present range of remedies appears to be adequate, and any major tampering from above with the situation that has evolved through the 1

Courts in response to "market demand" is unlikely to improve things.