[1987] HCA 23
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 72 ALJR 873
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Catchwords
[1987] HCA 23
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 72 ALJR 873
Judgment (7 paragraphs)
[1]
Introduction
The plaintiff, by summons filed in Court on 27 October 2023, seeks a freezing order, pursuant to r 25.11 of the Uniform Civil Procedure Rules 2005 (NSW) ('the UCPR'), against the first defendant, as well as final relief against the first and second defendants. The plaintiff secured interim relief, ex parte, by orders made by Ierace J on 27 October 2023.
The summons was, by order made on 27 October 2023, returnable on 30 October 2023. On that occasion there was no appearance by the defendants. It is returnable again today.
Neither defendant have appeared, although I am satisfied the first defendant has notice of the application by reason of what Mr Cobb-Clark has advised me, but in particular based on the contents of exhibits B to D inclusive, which confirms that the solicitor for the first defendant has knowledge of the application and of the orders so far made.
[2]
Background
Apollo Blinds Australasia Pty Ltd v Messner [2023] NSWSC 1319 | Case summary | Zoe
The facts, for the purposes of the present application, can be shortly stated.
On or around 19 December 2018 the plaintiff entered into a franchise distribution and security agreement with SJM Coffs Harbour Pty Ltd ('SJM') and at that time the first and second defendants, who were the directors and shareholders of SJM, jointly and severally guaranteed SJM's obligations under that franchise agreement.
The plaintiff alleges that it is owed $242,925.96 under the franchise agreement - the amount representing blinds and other products provided by the plaintiff to SJM; the cost to the plaintiff to fulfil contracts between customers and SJM that SJM had failed to perform; as well as costs associated with the plaintiff's attempt to recover the outstanding debt and the losses that it has suffered.
On 5 May 2023 an administrator was appointed to SJM. On 17 May 2023, SJM was issued with a notice of breach of the franchise agreement.
On 14 June 2023 the solicitor for the plaintiff sent a Notice of Termination to SJM and the first and second defendants. Subsequent to this, the first and second defendants have been called upon, pursuant to the terms of the guarantee, to make good the obligations of SJM. The first and second defendants have failed to pay the amount alleged to be owed, or any amount at all.
On 14 October 2023 - a Saturday - the solicitor for the plaintiff received communication from the first defendant's conveyancer advising that settlement of the sale of a property owned by the first defendant had been scheduled for 27 October 2023.
On 23 October 2023 the plaintiff's legal representative was contacted by the first defendant's conveyancer with a proposed statement of account relating to the distribution of proceeds from the sale of the property. The statement of account proposed that the plaintiff receive $134,000, rather than the full amount alleged to be outstanding. On 24 October 2023 the first defendant sent a text message to Mark Ronan, a director of the plaintiff, essentially to the effect that the plaintiff should accept the amount offered ($134,000) and forgive the balance of the debt.
A subsequent text message sent by the first defendant to Mr Ronan stated: "But I'm sure you know what my next step is if you don't accept the offer".
On 25 October 2023, the plaintiff's solicitor sent an email to the first defendant's conveyancer - and others - seeking an explanation for the "next step" referred to in the first defendant's message, but there has been no response to that enquiry.
On 26 October 2023, the second defendant's solicitors proposed that the net proceeds of the sale of the property (following discharge of the mortgage over that property) be held in the first defendant's conveyancer's trust account pending resolution of the claims by the plaintiff against the first and second defendants, and pending resolution of amounts allegedly owed by the first defendant to two financing companies.
The plaintiff's solicitors advised that they were agreeable to this proposal, but the first defendant did not agree to it.
These events caused the plaintiff to seek, ex parte, the freezing order by way of interim relief on 27 October 2023. As I have noted, orders were made on that day and the order is capped at $242,925.96.
[3]
Legal principles: freezing orders
Rule 25.11 of the UCPR provides:
(1) The court may make an order (a freezing order), upon or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the court's process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.
(2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.
Rule 25.14 of the UCPR is also relevant, and the provisions within it relied upon by the plaintiff are as follows provides:
(1) This rule applies if -
(a) …
(b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in -
(i) the court, or
(ii) in the case of a cause of action to which subrule (3) applies - another court.
(2) …
(3) …
(4) The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur -
(a) the judgment debtor, prospective judgment debtor or another person absconds,
(b) the assets of the judgment debtor, prospective judgment debtor or another person are -
(i) removed from Australia or from a place inside or outside Australia, or
(ii) disposed of, dealt with or diminished in value.
The relevant principles are well-established. They are as stated by Gleeson CJ in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, 321-322 ('Patterson'):
The remedy is discretionary, but it has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant's absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.
Further, in an application for a freezing order, it is important to bear in mind three key principles.
First, the onus is upon the plaintiff to prove the requirements of the rule and the entitlement to the relief: Drama Unit Pty Ltd v Cook [2019] NSWCA 276 at [29] (Leeming JA).
Secondly, the purpose of the order is to prevent an abuse of the process of the Court, not to provide security in respect of a judgment or order. The Mareva injunction "exists not to create additional rights but to enable a court to protect its process from abuse in relation to the enforcement of its orders. It is neither a species of anticipatory execution nor does it give a form of security for any judgment which may ultimately be awarded": Jackson v Sterling Industries Ltd (1987) 162 CLR 612, 622; [1987] HCA 23; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 72 ALJR 873, 892; [1998] HCA 30 (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ); Practice Note No SC Gen 14, par 5.
Thirdly, having regard to the fact that the Mareva injunction is an exceptional interlocutory remedy which "should not be granted lightly", the duty of the Court is to carefully scrutinise applications for such relief: Frigo v Culhaci [1998] NSWCA 88, 6; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 403-404; [1999] HCA 18 (Gaudron, McHugh, Gummow and Callinan JJ).
[4]
A prima facie claim
In relation to the first matter - viz., that the plaintiff has a "prima facie claim" or, adopting the words of r 25.14(1)(b) of the UCPR, "a good arguable case"- I am satisfied this has been demonstrated to the requisite level.
In this respect it is significant to note that in an email dated 23 October 2023, the first defendant's licensed conveyancer sent a response to the plaintiff's solicitor (that followed a claim for the amount of $242,925.96 by email on 19 October 2023) that relevantly provided:
"I am instructed by the [first defendant] … my client is in a position to pay your client $134,000 upon settlement…provided your client forgives the balance of the debt owed by my client ...".
As I have earlier set out, the first defendant had offered a "payout figure" of $134,000 - together with a request to "forgive the rest" - by way of text message sent from the first defendant to the director of the plaintiff, Mr Ronan, on 24 October 2023.
In my view, this evidence establishes, to the requisite level, the indebtedness of the first defendant to the plaintiff in the amount claimed.
[5]
A real danger of any prospective judgment being frustrated
The second matter - viz., that there is a danger that any judgment secured against the first defendant would be frustrated because the assets of the first defendant (being the funds available to the first defendant following the sale of the property) would be "disposed of, dealt with or diminished in value" - requires further discussion and analysis.
There have been different formulations of the test to be applied, but the Courts have so far been reluctant to provide greater precision - other than to note that "important guidance is also to be found in a consideration of the nature and purpose of the remedy in question": Patterson (at 324).
The evidence relied upon by the plaintiff to support a finding that there was a danger of the requisite kind was as follows:
1. First, the second defendant, through her solicitors, agree that, following discharge of the mortgage, the proceeds of the sale of the property should be held in the trust account of the first defendant's licensed conveyancer - pending resolution of the claims against the first and second defendants by the plaintiff, and pending resolution of the amounts allegedly owed by the first defendant to two finance companies: letter from Bryant McKinnon lawyers dated 26 October 2023.
2. Secondly, the plaintiff, through its solicitors, sought confirmation of that agreed position from the first defendant through his licensed conveyancer, by email sent on 26 October 2023 at 10:14 am, but no response of any kind was received to that communication by the time the matter was first before the Court, or to today's date.
3. Thirdly, the second text message sent on 24 October 2023 from the first defendant to the director of the plaintiff, Mr Ronan, (a message that followed the text message that included the "payout figure" offer earlier referred to) which said: "But I'm sure you know what my next step is if you don't accept the offer".
The focus (here) is upon the conduct of the first defendant. In TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196, Barrett J said at [26]:
A general law freezing order is warranted only if, in the words of Bryson J in Acquasun Pty Ltd v Coverdale Ram Pty Ltd [2000] NSWSC 1146, there has been "conduct on the part of the defendants which can reasonably be interpreted as potentially having the effect of frustrating the ordinary processes of the court and the enforcement of its judgments or of being intended to do so or of being in any way evasive indicating dishonesty or otherwise indicating actually or potentially that the assets of the company have been or will be dealt with in an irregular way".
See also In the matter of C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 at [197]-[198] (Ward J, as her Honour then was).
In my view the conduct of the first defendant identified above satisfies me that there is a danger of the requisite kind; that is, a real danger of any prospective judgment being frustrated. In particular, I consider that the second text message sent, together with the failure to respond in any way to the communications by the solicitors for the plaintiff, satisfy me that there is the very real potential of the proceeds of the sale of the property being dealt with in an irregular way.
[6]
Orders
For these reasons, I make the following orders:
1. Noting the plaintiff, by its counsel, giving the undertakings in Schedule A of Annexure A to the orders made on 27 October 2023, the Court extends the freezing order made on 27 October 2023 in respect of the First Defendant in the form of Annexure A to those orders until further order.
2. Grant liberty to apply on two days' notice.
3. These orders to be entered forthwith.
4. Costs of, and incidental to, the application for interim relief including the appearances on 27 and 30 October and 1 November 2023 are reserved.
[7]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 03 November 2023