Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd

The orders sought to be varied 2 On 4 August 2015, Justice Middleton as duty judge made an ex parte freezing order against the first and second respondents. The orders extended to two third party companies, Swishette Pty Ltd ("Swishette") and Letore Pty Ltd ("Letore"), each of which on the evidence is associated with Mr Laski. Mr Laski is the sole director of both Swishette and Letore, its sole shareholder. Swishette is also the sole shareholder of Letore, although Mr Laski has deposed Swishette holds all its assets as trustee for the Second Rodney Laski Family Trust. 3 Briefly, the evidence to which his Honour had regard included affidavit evidence concerning the sale of a four-bedroom house at 5 Maroona Road, Brighton of which Swishette was the registered proprietor and where Mr Laski had resided, Mr Laski's alleged plans to relocate overseas and Mr Laski's alleged prior conduct and insolvencies. Some of that evidence was given by a former acquaintance of Mr Laski, Ms Lauris Fahey. The Commission also relied on an affidavit sworn by its solicitor Ms Kimberley Lloyd in which she referred to the final relief sought in this proceeding including an order that the respondents be directed to refund all fees paid by clients of Clinica, and deposed that, based on her review of materials relevant to the Commission's investigation, clients had paid to Clinica fees in excess of $766,000. As to penalties, the Commission noted the maximum applicable civil penalty under s 224 of the Australian Consumer Law is $1.1 million for a body corporate and $220,000 for persons who are not a body corporate. 4 Pursuant to the order, each of the four respondents to the freezing order was prohibited from removing from Australia or disposing of, dealing with or diminishing the value of any of their assets in Australia or overseas. In respect of the sale of the Brighton property, the freezing order provided that the proceeds of the sale be paid into a trust account in the name of the applicant's solicitors, to be held until the hearing and determination of the proceeding or until further order. 5 The order also provided, as an exception, that Mr Laski was not prohibited by the order from paying up to $2,000 per week on his ordinary living expenses or from paying $20,000 on his reasonable legal expenses. 6 The order was to have effect up to and including 12 August 2015, when the matter returned before me for a further hearing in respect of the freezing order. The order was duly served on the respondents on the afternoon of 4 August 2015. 7 When the parties appeared before me on 12 August 2015, the respondents indicated they were not in a position to contest the application on or near the scheduled return date, and sought an extended timetable. One of the reasons given was Mr Laski's ill health, as well as his absence overseas. Accordingly, on that day I extended the freezing order made by Middleton J on 4 August 2015 up to and including 21 October 2015, being the first day of trial, subject to any further order and on the basis that the respondents' ability to apply to vary or vacate the freezing order before trial was preserved. To accommodate the respondents' difficulties in complying with the existing timetable, I varied the time by which the respondents were required to file and serve the financial information Middleton J had ordered they provide. I also gave further directions for the filing of any further evidence and submissions on which the parties wished to rely in relation to the vacation or variation of the freezing order. 8 The parties each filed further evidence and submissions, and the respondents subsequently requested the matter be listed for hearing on the terms of the freezing order. I listed the matter for 9 September 2015. In proposed orders filed and served prior to the hearing, the respondents sought a variation to paragraph 11 of Middleton J's orders, but did not seek a vacation of the freezing order itself. Nor did the respondents press for the applicant to give an undertaking as to damages.

The proposed variations 9 In their proposed form of order provided prior to the hearing, the respondents sought that the freezing order be varied to allow the respondents to make the following payments: (a) the sum of $55,000 for legal fees incurred to date and for the ongoing legal fees of the respondents up to and including the trial in this proceeding; (b) the sum of $2,000 be paid weekly to Mr Laski for ordinary living expenses; (c) the sum of $680 be paid on a quarterly basis to Medibank Private for Mr Laski's health insurance; (d) the sum of $517.60 be paid monthly to Letore for payments to the ANZ Bank for the shortfall in mortgage payments for the property owned by Letore at 2 Vallence Court, Wallan; (e) the water rates, council rates and land tax be paid for the property and land owned by Letore at 2 and 2A Vallence Court, Wallan; (f) the sum of $1,157.17 be paid monthly to Macquarie Leasing Pty Ltd for car lease payments; (g) the sum of $8,650.70 be paid to Master Relocations; (h) the sum of $300 be paid for general cleaning of 5 Maroona Road, Brighton; (i) the sum of $80 be paid for lawn and gardening services at 5 Maroona Road, Brighton; (j) the sum of $955.50 be paid for the conveyancing expenses for the sale and settlement of 5 Maroona Road, Brighton; (k) the payment of $50,000 to Swishette for its reasonable legal expenses in Victorian Supreme Court Proceeding No SCI 2015 4467.

THE PARTIES' RESPECTIVE POSITIONS 10 By the time the matter was called on for hearing, the dispute between the parties about the nature and extent of the variations to paragraph 11 of Middleton J's order had narrowed. 11 The parties were agreed that funds should be released in accordance with the respondents' proposals as to subparagraphs (a), (d), and (j). 12 Subparagraph (b) of the respondents' proposal was in substance the same as the existing paragraph 11(a) of Middleton J's orders, as extended by me. 13 Subparagraph (e) was agreed with some minor variations suggested by the applicant, which were not contradicted by the respondents in oral submissions. 14 That left for substantive determination the release of funds for the purposes set out in subparagraphs (c), (f), (g), (h), (i) and (k). I deal with those matters in turn below.

RESOLUTION OF THE APPLICATION 15 As Kenny J indicated in Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014; 273 ALR 194 at [5], the purpose of a freezing order is to prevent frustration of the process of the Court. I accept the respondents' submission that a freezing order is a drastic step, and not to be used to provide a form of security for the applicant nor to improve an applicant's position in the event of the respondent's insolvency: Cardile v LED Builders Pty Ltd [1999] HCA 18; 198 CLR 380 at [50]-[51]. The relevant principles in respect of a freezing order against a prospective judgment debtor were summarised by Gordon J in Deputy Commissioner of Taxation v Vasiliades [2014] FCA 1250 at [35]-[36], and I have had regard to them, although in the end the continuation of the order was not contested by the respondents and I am satisfied it is appropriate for the order to continue to trial at least, subject to the variations I propose to make. 16 The applicant has agreed to the release of funds to pay reasonable legal expenses connected with the trial of this proceeding, and that is an appropriate concession: see Deputy Commissioner of Taxation v Bollands [2012] FCA 1050; 90 ATR 679 at [22] per McKerracher J. In my opinion, a similar approach should be taken to the legal expenses likely to be incurred by Swishette in its Supreme Court proceeding, although I have reached a different conclusion on what is a reasonable allowance on that matter to the one initially proposed by the respondents. 17 An important additional fact, which was not the subject of evidence, but was agreed between the parties at the hearing, and followed from the affidavit evidence of Mr Laski on the application for variation, is that settlement of the sale of the Brighton property occurred on 8 September 2015, as arranged. The parties agreed that the Court could approach this application on the basis that the sum of approximately $800,000 either had, or would be (there being apparently two tranches of payment) transferred into the trust account of the applicant's solicitors, as contemplated by paragraph 8 of Middleton J's orders.

The removal expenses (subparagraph (g)) 18 The invoices in evidence from Mr Laski post-date the freezing order. There is no evidence of payment and the respondents submitted I should infer these amounts had not been paid by Swishette. Indeed, if they had, it might be a contravention of the freezing order itself. Although Mr Laski deposes that Swishette has incurred these expenses, the invoices are addressed Mr Laski and are on their face invoices to move the effects of Mr Laski. I accept it seems a relatively large sum of money for removal expenses, however on the invoices the expense was incurred over three and a half days, including a day of packing and two and a half days of moving. The applicant did not submit the invoices were false. Given the agreed fact that settlement of the Brighton property has occurred on 8 September, the date on the invoices for the relocation (5, 6 and 7 September) supports the inference that these services were provided. In my opinion it is reasonable that funds be released to pay for these expenses.

Swishette's legal expenses in the Victorian Supreme Court (subparagraph (k)) 19 The applicant correctly submitted that, on the evidence, much of any legal expenses to be incurred in the Supreme Court proceeding will be incurred (if at all) after the trial of this proceeding. The evidence reveals the caveat issue has been resolved and the Supreme Court proceeding concerns an allegation by Ms Fahey of a debt due to her from Swishette. There is a directions hearing to be scheduled for after 23 November 2015, and that is the next scheduled step in the proceeding. In my opinion Swishette must be able to expend funds to prepare for that directions hearing and to accommodate the case management requirements of the Supreme Court, including briefing counsel. Swishette must act through a legal representative unless given leave to do otherwise: Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 1.17(1). The respondents submitted orally that legal costs were unlikely to exceed $10,000 and that seems to me to be an upper limit. I propose to allow funds to be expended on submission to the applicant of an invoice, taking into account the obligations of a legal practitioner under s 172 of the Legal Profession Uniform Law to ensure the legal costs charged are no more than fair and reasonable, and are proportionately and reasonably incurred. That will accommodate any unexpected developments in the Supreme Court proceeding, the proper preparation for the directions hearing in or after November and any attendant case management matters, as well as a capacity for Swishette to negotiate a resolution to the proceeding.

Private health insurance (subparagraph (c)) 20 There has been some evidence of Mr Laski's ill health. Given the proximity of these variations to the trial in this matter and the fact that not many payments will be required, I consider this is a reasonable expense, in addition to the living allowance.

The Mercedes Benz lease (subparagraph (f)) 21 Although there is no express evidence as to when the lease was taken out, I infer from the fact the car is a 2010 model that this lease has been in existence since approximately 2010. The evidence is that Mr Laski uses this car. In my opinion, again given the proximity of the trial and therefore the likelihood of only one or two payments needing to be released, I consider it is unreasonable to force Mr Laski to find a new mode of transport for less than two months, notwithstanding one might say the lease payment is relatively high.

Cleaning and gardening expenses for the Brighton property (subparagraphs (h) and (i)) 22 I see no basis to order the release of funds for these items. The evidence is Mr Laski has paid these expenses. There is no basis for him to seek reimbursement from funds subject to the freezing order.

Other matters 23 The respondents correctly submitted that a small amendment should be made to subparagraph (a) to add the word "accounting" after the word "legal" to reflect the fact a payment needed to be made to the respondents' accountant in relation to the preparation of financial statements required by Middleton J's orders. 24 The parties agreed it was appropriate to proceed on the basis that each party, and the third parties, would have the opportunity to make any application they saw fit at the conclusion of the trial in this matter concerning the terms and continuation of these orders, if the Court reserves its decision in the proceeding. The orders will be expressed to continue "subject to further order" on this basis. 25 The costs of this application will be reserved. The parties will be given with these reasons a form of order the Court proposes to make. The parties will have, as I foreshadowed at the hearing, an opportunity to check the orders as proposed and to make short submissions on any necessary changes. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mortimer.