(2010) 273 ALR 194
- Jackson v Sterling Industries Limited [1987] HCA 23
Source
Original judgment source is linked above.
Catchwords
(2010) 273 ALR 194
- Jackson v Sterling Industries Limited [1987] HCA 23
Judgment (3 paragraphs)
[1]
Solicitors:
Gadens (Plaintiffs)
Reuben George Lawyers (First and Third Defendants)
File Number(s): 2016/80389
[2]
Judgment - ex tempore
By an application made on 14 March 2016 the Plaintiffs sought, and obtained on an ex parte basis, certain freezing orders under rr 25.2 and 25.11 of the Uniform Civil Procedure Rules 2005 (NSW). Those orders were sought prior to the commencement of proceedings and in circumstances of urgency.
In my ex tempore judgment delivered on that occasion, I noted the circumstances in which the court would make a freezing order, as summarised by the High Court of Australia in Jackson v Sterling Industries Limited [1987] HCA 23; (1987) 162 CLR 612 at 625 and referred to my review of the relevant case law in Re Black Eagle Media Pty Ltd [2014] NSWSC 1778. I there noted that such an order requires that a plaintiff have a good arguable case, and that, in the circumstances, there is a danger that a judgment or prospective judgment may be unsatisfied because the assets of a judgment debtor are disposed of, dealt with, or diminished in value. I also noted that the risk of dissipation of assets, so as to defeat a judgment, may be inferred from conduct of a party which involves potential dishonesty or fraud, as Gleeson CJ noted in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319.
I there referred to evidence which had been led in the application for a freezing order, which included an interim report prepared by Ernst & Young on a range of transactions involving the Plaintiffs, FAL Healthy Beverages Pty Ltd and FAL Retail Pty Limited on the one hand, and the Defendants, Mr Xenos and certain companies which are broadly associated with him, on the other. I there noted that it seemed to me that a good arguable case was established, in respect of the matters alleged by the Plaintiffs, so far as the evidence suggested that the transactions were of significant magnitude and with parties associated with Mr Xenos, and the unlikelihood that transactions of that magnitude, particularly so far as Fence All Australia Pty Ltd ("Fence All") was concerned, reflected legitimate transactions of the Plaintiffs. I also noted that the nature of the matters alleged are such that they indicated a real risk of dissipation of assets so as to defeat the Court's judgment, and that supported a freezing order consistent with the reasoning in Patterson v BTR Engineering (Aust) Ltd above. The freezing order was initially made for a short period, although it has subsequently been extended, with certain exceptions which arose in a further application before me, and presently continues to 5 pm today.
It is important to note, although it is a matter that did not appear to receive sufficient attention in the submissions made on behalf of Mr Xenos today, that the freezing orders that I made, directed to Mr Xenos and other associated parties, contained the usual exceptions which the Court would include where a freezing order is made. Paragraph 10 of the freezing order against Mr Xenos, for example, made clear that that order did not prohibit him from paying his ordinary living expenses or his reasonable legal expenses or dealing with or disposing of his assets in the ordinary and proper course of his business, including paying business expenses, bona fide and properly incurred. I note there, that an issue subsequently arose in a further application before me, as to whether a bank with which Mr Xenos dealt, ING, had interpreted the freezing order in a manner which was inconsistent with the exceptions which the Court had ordered. The Court then made additional orders by way of specific exceptions, to address that particular issue. The evidence which has been led today now leaves the position as to ING's approach unclear, as I will note below.
I should say something further as to the authorities, before turning to the particular issues raised both by the Plaintiffs and the First and Third Defendants, Mr Xenos and Fence All in the application today. First, the decision of the Court of Appeal in Patterson v BTR Engineering (Aust) Ltd, to which Mr Arnott refers in submissions, and to which I have referred above, makes clear that the Court may make a freezing order, notwithstanding that it is not established, by way of direct evidence, that a defendant proposes to transfer monies away in a manner that would defeat a judgment of the Court. That proposition is scarcely surprising, since it would be difficult to establish that proposition in a direct way, unless the defendant specifically advanced the threat of taking that course. In Patterson v BTR Engineering (Aust) Ltd Gleeson CJ observed that the Court may properly draw an inference, in a case involving aspects of dishonesty, that it is reasonable to infer that the defendant would not, unless restrained, preserve his assets so that they may be available to a judgment creditor. Mr Arnott, who appears for the Plaintiffs, also draws attention to the decision in Deputy Commissioner Taxation v Hua Wang Bank Berhad [2010] FCA 1014; (2010) 273 ALR 194, where Kenny J noted that, depending on the circumstances, the interests of justice may support the grant of a freezing order to prevent the dissipation of assets pending a hearing of an action although the risk of dissipation is less probable than not, and referred to authority that what must be established, in a particular case, is a sufficient likelihood of risk to justify an asset preservation order. Mr O'Connor, who appeared for the First and Third Defendants, submitted that that the defendant in that case was a bank situated outside the jurisdiction. While that proposition is correct, the observations of Kenny J to which I have referred were put in general terms, and emphasised the role of a freezing order in preserving the court's jurisdiction, and in ensuring that that jurisdiction is protected against the risk of frustration by dissipation of assets. In Black Eagle Media Pty Ltd above at [8], I, in turn, observed by reference to the observations of von Doussa J in Beach Petroleum NL v Johnson (1992) 9 ACSR 404 at 405-406, that it is sufficient to support a freezing order that the applicants establish that "in the absence of relief, there is a danger that assets will be dealt with in a way which will prevent the applicants recovering the judgment".
I have regard to the fact that, as I noted in that case and the cases referred to in it, a freezing order does not operate as a form of the security for a plaintiff's judgment, but only to prevent the frustration of that judgment by dissipation of assets. It follows that, when a freezing order is justified, it does not operate to prevent a defendant having access to its own assets to the extent necessary to meet legitimate expenses such as ordinary living and business and legal expenses: Clout (as trustee in bankruptcy of the Estate of Dexter) v Anscor Pty Ltd [2001] FCA 174 at [19]. I accept that proposition, but in this case the freezing orders specifically avoid that result, by providing that they do not prevent the incurring of such legitimate expenses.
Turning now to the particular applications which are before me, the Plaintiffs seek to vary the freezing orders made by the Court in two respects. The first is to extend the freezing order until further order of the Court. It seems to me that, if a freezing order is to be continued at all, such an amendment is plainly justified. The matter has now been before the Court on several occasions, and the application today has involved nearly a full day of hearing time. Once the Court determines today's application, the freezing order should continue until further order, unless there is a change of circumstances, or a proper reason established, within the ordinary course, for the Court to revisit an interlocutory order that has been made after a full hearing. Second, the Plaintiffs seek to amend the freezing orders to increase the amount referred to in paragraphs 6 and 12 of them, from $AUD400,000 to $AUD980,000. That reflects an increase in the amount of the Plaintiffs' claim.
The First and Third Defendants, conversely, contend that the freezing orders should not be continued at all, or should be continued only in a lesser amount, or alternatively, that another order should be made, to which I will refer below.
The Plaintiffs relied on the evidence which was read in respect of their initial application for a freezing order, including exhibits to the affidavit of Mr Kahled Ahmed Refaat sworn 12 March 2016. The Plaintiffs also relied on a further affidavit of Mr Benjamin Allen, their solicitor, dated 9 May 2016, which annexed an interim status letter written by a partner of Ernst & Young, reporting on continuing investigations undertaken by that firm. Mr O'Connor fairly drew attention to several significant limitations in that interim status letter, including that it did not involve an audit, that the firm had not verified the authenticity or validity of documentation made available, had not interviewed all parties and had not discussed findings in the document with the persons of interest, including the Defendants, and several other limitations. Mr O'Connor also pointed to the fact that Ernst & Young described their work as an updated preliminary view, necessarily accepting the possibility that the results may be qualified by further inquiry. Mr Arnott who, as I noted above, appears for the Plaintiffs, in turn accepted the possibility that the results of that report may be qualified by further inquiry.
It should be noted, however, that at least some aspects of the material dealt with by the report, including dealings with related parties, have been in issue since the initial freezing order application. Other aspects of that report have only just come to the attention of the Defendants, when Mr Allen's affidavit was served yesterday. I do not draw any inference that evidence which the Defendants might have led in response to that report, and which has not been led, would not have assisted them, given that report was only recently served. I do note, however, that any inference in favour of the Defendants which might have been available from the evidence that they led in explanation of the transactions, had they led such evidence, is not presently available. Mr O'Connor did not seek to adjourn the application to lead such evidence, although he did foreshadow the possibility that further evidence might be led, if the Defendants were unsuccessful today. That possibility must, in turn, be qualified by the fact that parties are not, in the ordinary course, allowed multiple opportunities to re-agitate the same interlocutory application, based on incrementally improving evidence.
The Ernst & Young report identifies transactions involving the Plaintiffs and entities associated with, in a broad sense, Mr Xenos and with third parties, which are described by Ernst & Young as "questionable" transactions. That is again, of course, a somewhat tentative description, falling short of a direct characterisation of the transactions as wrongful. However, there are transactions in the order of $377,394 with Fence All and, as I noted in my initial judgment, it seems doubtful that companies involved in the supply of coconut beverages would have had expenditure of that size with a company which supplied fencing services. There are other third party transactions identified in the order of $470,713 which involve a significant transaction with a company associated with an alleged acquaintance of Mr Xenos, payment of traffic penalties of nearly $60,000, and invoices paid to a Sydney law firm which, Ernst & Young observed, are alleged to have related to services relating to Mr Xenos' bankruptcy.
Mr O'Connor submits that the report should be given no weight. I would not go that far, although I do recognise its tentative character. The report plainly identifies transactions with particular entities, and their amount, and identifies the character of at least some of those transactions, albeit aspects of that evidence would be insufficient to prove the impropriety of the transactions at a final hearing. The evidence is not relied upon, of course, to seek to prove the impropriety of the transactions at a final hearing, but at this point only to establish that the Plaintiffs have a good arguable case which supports a freezing order, if there is a sufficient risk of dissipation of assets, and if the balance of convenience favours that order.
It seems to me that the further Ernst & Young report, and the nature of the transactions described in it, and the inference that may be drawn from the fact that transactions are with related parties, their size and their character are sufficient to establish a good arguable case against the First and Third Defendants in respect of the larger amount which the Plaintiffs seek to recover. In making that observation, I do not suggest that the report establishes that the Plaintiffs would necessarily succeed at a final hearing. No doubt, the transactions may, in part or in whole, be capable of an explanation which Mr Xenos and the other parties have not yet provided. However, it seems to me that, as matters stand, a good arguable case is established, for the same reasons it was established before me when the initial application for the freezing order was made, for the larger amount of the transactions now identified in Ernst & Young's updated report. The result of that, however, is that, to the extent a risk of dissipation of assets is otherwise established and subject to the balance of convenience, the freezing order should be continued in the larger amount, subject to the exceptions which already exist for legitimate transactions.
I now turn to the basis on which the First and Third Defendants submit that the freezing order should not be continued, which reflects the evidence led by Mr Xenos, particularly in his third affidavit dated 6 May 2016. Broadly, Mr O'Connor submits that a danger that the prospective judgment would not be satisfied has not been established, and there is no danger of dissipation of assets by Mr Xenos or the other Defendants. Second, Mr O'Connor refers to evidence of Mr Xenos, that the existing orders are preventing him meeting ordinary expenses, by way of living and legal expenses. That submission faced the considerable difficulty that the orders made by the Court have specific exceptions which permit Mr Xenos and the other Defendants to incur such reasonable living and legal expenses. It could only be sustainable, if at all, on the basis that was put on a previous application, namely, that ING was interpreting the orders in a manner which was inconsistent with their terms. If that were the case, the time may now have been reached that that would be a matter for Mr Xenos and the other Defendants to resolve that issue with ING, which presumably owes them contractual obligations to meet a proper direction given to it, in respect of monies deposited with it. As the evidence has emerged in this application, there is in any event considerable uncertainty as to whether ING is in fact failing to permit reasonable expenses to be paid, and the position as it now emerges is significantly less clear than it was when a submission to that effect was previously put to me, with the result that further exceptions were made. Third, Mr O'Connor refers to the position in respect of Ernst & Young's investigation, to which I have referred above, and submits that there is no demonstration that relevant transactions involved any element of fraud. Fourth, a submission is made, to which I will refer below, that the Plaintiffs do not have sufficient assets to support an undertaking as to damages.
These submissions should be approached by reference to Mr Xenos' evidence, on which Mr O'Connor relies in support of the submissions, although some difficulties have emerged from aspects of that evidence. In Mr Xenos' first affidavit dated 12 April 2016, he set out a statement of his assets and liabilities, and the assets of Fence All and the Second Defendant, EZI Group Pty Ltd ("EZI Group"). He specifically stated, in paragraph 7, that he did not hold or have any assets outside of Australia. He stated that he was the sole shareholder of Fence All Australia, confirming a matter which was one of the matters on which the Plaintiffs relied to challenge the propriety of transactions with that entity, and also said that he was the sole shareholder of EZI Group. It appears that that statement was incorrect, as Mr Xenos acknowledged in a later affidavit, although it appears that Mr Xenos had sufficient knowledge of that company's affairs to provide a statement of its financial position.
Mr Arnott points out that one matter which emerges from that affidavit is that Fence All presently appears to have limited assets, raising a real question, which is presently unexplained, as to what has occurred with the significant payments that had previously been made to it by FAL. EZI Group is stated to have a more favourable asset position, although that position is made up of amounts claimed against one of the Plaintiffs, and that claim is later qualified by Mr Xenos to recognise the fact of payments made by the Plaintiffs, which are, in turn, one of the issues in the proceedings.
A further affidavit of Mr Xenos dated 21 April 2016 reiterates the statement that he does not hold any assets or liabilities outside of Australia and advances the position that, with the effect of the freezing order, he and his family have suffered because he has no other sources of income for reasonable living expenses and has no income or means to pay his reasonable legal expenses. That submission seems to me to have two difficulties. The first is, as I noted above, its inconsistency with the exceptions in the freezing orders, such that it could only be made good if, for some reason that Mr Xenos does not explain in the affidavit, those exceptions were not being given effect. A second and more damaging difficulty, so far as Mr Xenos is concerned, is that the statements that he had no income for living expenses and that he had no income or means to pay reasonable legal expenses were, at best, incomplete, where Mr Xenos had not, as will emerge below, referred to a bank account held in the United States on which he was then transacting, in amounts that are presently unknown, in the relevant period.
Mr Xenos refers to matters which might support a defence in respect of the claims made against him, including a suggestion of disclosure, in respect of EZI Group's affairs, but no evidence is led, beyond the assertion in the affidavit, to establish the fact of that disclosure. That affidavit also suggests that there is a dissipation of the Plaintiffs' assets in Australia, or at least that Mr Xenos is concerned that there has been a dissipation of those assets, a matter to which I will refer below. Mr Xenos denies that the amount of the freezing order of $400,000 is reasonable, although I have expressed the view above that a freezing order in a larger amount is justified if a freezing order is justifiable.
Mr Xenos denies that he poses a risk of dissipation of assets, although the proposition depends, in effect, upon a denial that he would take that step. Given the nature of the allegations which are made against Mr Xenos, and without expressing any view, of course, as to the ultimate merits of those allegations, and conscious of the fact that I have not yet heard the defence of the Defendants to the substantive allegations, it seems to me that, consistent with the reasoning in Patterson v BTR Engineering (Aust) Ltd, the nature of the allegations made against the First and Third Defendants, and the evidence which is presently available to support them, in respect of the nature of the transactions made, is such that the Court should proceed on the basis that, notwithstanding Mr Xenos' denial, there is a risk that Mr Xenos, if not restrained, would dissipate assets in a manner that would prevent a judgment against him being enforced.
In that affidavit, Mr Xenos also submits that, should the Court continue the freezing order, it should be reduced to nil or such lesser amount as the Court sees fit. It does not seem to me that a basis for that reduction has been established. Once a freezing order is justifiable at all, it seems to me that it is justifiable as to the amount for which the Plaintiffs have established a good arguable case, and subject to the balance of convenience, so far as it raises questions of the exceptions to the freezing order and the undertaking as to damages.
Mr Xenos offers to provide security over a residential property he owns, as an alternative to a freezing order, and estimates that he has equity in that property in the amount of approximately $330,070. It seems to me that the evidence which is available would presently not permit the Court to take that course, without exposing the Plaintiffs to an unjustifiable risk that their judgment would be frustrated by the dissipation of other assets. There is, I recognise, evidence of Mr Xenos's estimate of the value of the property in his statement of assets, but it is no more than an estimate of the property's value and the Court must recognise the risk that that estimate may be overstated. There is an indication, in that affidavit, of the amount of the liability on that property, but there is no documentary evidence to support that amount. There is also no other evidence that Mr Xenos owns the property and, with respect to Mr Xenos, he has been mistaken in the proceedings to date as to questions such as which shares he owns, so I cannot assume that his evidence as to his ownership of that property is necessarily correct. In these circumstances, it does not seem to me that that course can presently be taken, quite apart from the fact that Mr Xenos' estimate of the value in the property is not sufficient to meet the amount which it seems to me is properly the subject of the freezing order.
Next, Mr Xenos submits that all freezing orders should lapse, since he requires liquid cash for ongoing living expenses and legal costs. This matter was also the subject of submissions made by Mr O'Connor but, with respect, I found it very difficult to follow those submissions. The orders that are presently in place permit, as I have noted above, the First and Third Defendants to incur reasonable living and legal expenses. In those circumstances, and absent clear evidence that ING is disregarding the terms of those offers, or refusing to comply with its contractual obligations to the First and Third Defendants, to the extent that it is not prevented from doing so by those orders, then Mr Xenos and Fence All are permitted to incur reasonable legal and living expenses. The proposition that Mr Xenos requires "liquid cash" for ongoing reasonable living expenses and legal costs does not assist him, to the extent that the orders permit him access to his own assets for ongoing living expenses and legal costs. What the orders prohibit, and should prohibit, is the incurring of expenditure that is not for reasonable living expenses and legal costs. It seems to me that, with all respect to Mr O'Connor's submissions, he ultimately never satisfactorily answered the question why Mr Xenos or Fence All ought to have an ability to make payments for unreasonable living expenses or unreasonable legal costs, if the basis for a freezing order was otherwise established.
Schedule B to Mr Xenos' affidavit of 21 April 2016 in turn drew attention to monthly income and expenses. The Court was, on one occasion, persuaded to make orders which would permit particular expenditures, on the basis of a submission that ING would otherwise not permit those expenditures to be met. As I will note below, that submission is itself is now under some question. However, in any event, it seems to me that the Court would not be drawn into a position where it is, on an ongoing basis, approving particular expenditures by Mr Xenos. The structure of the orders that it has made, properly and conventionally, permit Mr Xenos to incur reasonable expenses, and it is a matter for him to determine the level of expenses that are reasonable, subject to the significant sanctions which are available under principles of contempt in the event that Mr Xenos does not comply with the order, subject to its proper exceptions.
Mr Xenos and Fence All in turn rely on a third affidavit of Mr Xenos dated 6 May 2016. This affidavit amends aspects of Mr Xenos' earlier evidence, including as to the amount that is alleged to be due by FAL Healthy Beverages Pty Ltd to EZI Group. Mr Xenos also leads evidence, which raises a matter of concern that I have noted above, that it has been brought to his attention by the Plaintiffs' solicitors that he holds a bank account in the United States. In fact, Mr Xenos has recently transacted on that account. Mr Xenos gives the explanation that his belief was that the freezing order was specific to Australian assets, but that proposition does not explain the inaccuracy of Mr Xenos' earlier statements that he held no assets outside Australia, where he held an amount in a bank account in the United States. He also gives evidence, which it is difficult to accept particularly where he has been represented by legal advisers throughout, that he believed that assets meant real property, and he did not hold any real property outside of Australia. As Mr Arnott points out, that proposition raises a further concern, namely that, if Mr Xenos has provided his earlier affidavits on that basis, then it is presently not clear what assets, other than real property, he may hold outside Australia, and adequate disclosure has not been provided as required by the Court's previous disclosure orders in respect of his asset position.
Mr Xenos annexed a statement of dealings on his ING bank account, which he says was not previously available at the time of his first affidavit. That statement in turn indicates that, throughout the relevant period, Mr Xenos appears to have had the capacity to transact on that account. I accept that it is possible that that capacity may, in part, reflect the earlier exceptions which the Court specifically provided to the freezing order. However, the evidence in this respect is presently inadequate, and I am by no means satisfied, on the evidence as it now stands, that the exceptions to the freezing order cannot be given effect in accordance with their terms. I note that the statement which has presently been provided extends no further than 31 March 2016, and a statement made by Mr O'Connor on instructions that, since that date, ING has not permitted ordinary course transactions, does not seem to me to provide sufficient support to proceed on that basis, where that matter is not the subject of any evidence led before me.
For those reasons I am not satisfied that, subject to the remaining issue as to the adequacy of the undertaking as to damages, the freezing orders should be discharged, or that the amounts should be reduced, or that there is any reason not to increase the amount that is the subject of the freezing orders, to the Plaintiffs' claimed loss, on the basis to which I have referred above, but subject to the usual exceptions for reasonable legal expenses and living expenses to which I have referred.
There remains the issue as to the adequacy of the Plaintiffs' undertaking as to damages. Mr Xenos, as I have noted, refers to several matters which, he suggests, indicate that the Plaintiffs may have insufficient assets to meet an undertaking as to damages. That, of course, depends in part on what the undertaking as to damages is likely to attach to, and the evidence presently before me is unclear in that respect, particularly where, as I have now noted on several occasions, the freezing orders contain the usual exceptions for proper expenses. It is, of course, possible, or perhaps inevitable, that the Plaintiffs are now in a weaker financial position than they would have been, had the impugned transactions not occurred. Mr Arnott points to the possibility that the Court should proceed, by applying principles analogous to those applied in a security for costs application, and not have regard to any weakness of the Plaintiffs' position that results from transactions which are the subject of a seriously arguable attack against the Defendants. I do not proceed on that basis, where it is not necessary to do so to determine the application, and that approach would raise significant legal issues which have not been fully addressed in submissions before me.
I do, however, proceed on the basis which is established by the authorities, although it was also not referred to in submissions before me, that the adequacy of the undertaking as to damages is simply a matter to be taken into account in the balance of convenience in determining whether to order or continue a freezing order. In Mr Biscoe's text, Freezing and Search Orders, (2nd ed 2008, (LexisNexis Butterworths) at [6.94], he refers to an unreported decision in Tomlinson v Cut Price Deli Pty Ltd (Federal Court of Australia, Kiefel J, 23 June 1995, unreported), where the Federal Court of Australia made freezing orders notwithstanding its conclusion that an undertaking as to damages by the applicants was inadequate and that the applicants could not provide security, having regard to the strength of the applicants' case. In Active Leisure (Sports) Pty Ltd v Sportsman's Australia Ltd [1991] 1 Qd R 301 at 311, Cooper J observed that:
"The adequacy of an award of damages, or the availability or sufficiency of an undertaking on the part of a plaintiff, are two important matters to be considered in the balancing process whereby the Court is required to determine where the greater convenience lies. In some cases, depending upon the particular facts of that case, they may ultimately as a matter of importance and weight be determinative of the matter. However, they are to be considered to be part of the totality of determining the balance of convenience and not as a step anterior thereto."
In R G Munro Futures Pty Ltd (in liq) v Starport Futures Trading Corporation [2008] QSC 337 at [20], Martin J similarly observed that the nature and extent of an undertaking is a factor to take into account in considering the balance of convenience, and held that in that case undertakings as to damages given by third parties, although potentially of limited value, were sufficient to address the possibility of loss in the particular circumstances.
It does not seem to me that this is a case where freezing orders should be continued if an undertaking as to damages were of no value. However, in this case, the evidence on which the First and Third Defendants rely to support the claim that the undertaking as to damages is inadequate, by reason of insufficiency of the assets of the Plaintiffs, is itself uncertain, and to some extent contradictory. In his statement of assets, Mr Xenos himself allocates significant value to his interest in the Plaintiffs which, if it were extended to the value of the capital of the Plaintiffs as a whole, would reflect a share capital in excess of $4 million. There are, I accept, questions raised by Mr Xenos in his affidavit as to the sufficiency of the Plaintiffs' business income going forward, following the events which have occurred and following his departure from the Plaintiffs. However, it is by no means clear that those matters establish any real risk that the Plaintiffs could not meet an undertaking. In particular, that question should be approached, as I have noted, on the basis that the orders which the Court has made will not prevent the First and Third Defendants from incurring proper legal and living expenses, which fall within the exceptions to them.
I am not satisfied, at this point, that the freezing orders should be discharged, by reason of any question raised as to the adequacy of that undertaking, bearing in mind that that issue is to be approached as part of the balance of convenience generally. In particular, as Mr Arnott points out, where there is now evidence that Mr Xenos has at least one offshore account, and as I have noted above the position as to whether he has other offshore accounts is now uncertain, because of the view which he has taken in respect of the disclosure orders, then there is a real risk that, absent freezing orders, amounts could readily be transferred offshore, in a manner that may practically defeat, or render it very difficult to enforce, the Plaintiffs' claim and my judgment in their favour. On the other hand, it seems to me that the effect of freezing orders, if properly implemented, upon the First and Third Defendants would be limited, and, in particular, will not prevent their incurring proper expenses as I have noted. As Mr Arnott also points out, if the First and Third Defendants at any point seek to undertake a particular transaction, which is a proper transaction but does not fall within the concept of reasonable living or legal expenses, it would then be open to them to seek a variation to the freezing order, either to permit that transaction or, in a proper case, to seek security for the undertaking to the extent that they will suffer foreseeable loss if that transaction does not proceed.
In the circumstances, I am therefore not satisfied that the freezing orders should be discharged or the amount that is subject to them should be reduced, and I am not satisfied that an order should be made to require security for the freezing orders. I recognise that the Plaintiffs, without admission, offered a payment into a controlled moneys account. It does not seem to me that I should make such an order, where it has not been established, as a matter of principle, that that security for the undertaking as to damages is presently required.
Accordingly, I make the following orders:
On the Plaintiffs' continuing undertaking as to damages, each of the three Freezing Orders made by the Court on 14 March 2016 be varied to replace:
(a) Paragraph 2 of each of the Freezing Orders with the following:
"This order has effect until further order of the Court."
(b) In paragraph 6 of each of the Freezing Orders, "AUD 400,000" with "AUD 980,000".
(c) In paragraph 12 of each of the Freezing Orders, "$400,000" with "$980,000".
The First and Third Defendants are to pay the Plaintiffs' costs of and incidental to this application as agreed or as assessed.
These orders be entered forthwith.
[3]
Amendments
23 May 2016 - Para 28 indented quote: lines 4 and 8: correcting typographical errors.
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Decision last updated: 23 May 2016