Australian Turf Club Limited v Wallace

Supreme Court of NSW|2012-03-26|Before: Johnson J, Davies J, Hulme J, Schmidt J

Judgment 1JOHNSON J: By Statement of Claim filed 13 February 2012, the Plaintiff, Australian Turf Club Limited, commenced proceedings in this Court against the Defendant, Mark Julian Wallace, seeking the recovery of a sum of $127,574.04 together with interest. 2The Statement of Claim asserted that the Defendant, a thoroughbred horse trainer, owed this sum to the Plaintiff as fees for the use of training facilities. The Statement of Claim asserted that, from April 2010, the Defendant had failed to make payments in the total sum claimed.

The Freezing Order 3With the commencement of proceedings on 13 February 2012, the Plaintiff made application that day for a freezing order under Rule 25.11 Uniform Civil Procedure Rules 2005 ("UCPR") and ancillary orders. An ex-parte hearing proceeded before Schmidt J and her Honour made the orders sought by the Plaintiff. At that hearing, the Plaintiff had relied upon an affidavit of Phillip Anthony Clark. Upon the basis of the evidence adduced on the application, her Honour was satisfied that the Plaintiff had an arguable case as to the claims advanced in the Statement of Claim and that the material disclosed that there was a danger of the Court's processes being frustrated. Her Honour was satisfied that the balance of convenience favoured the making of the orders sought. 4Since 13 February 2012, the proceedings have been before the Court on a number of occasions. On 9 March 2012, a solicitor appeared for the Defendant before RA Hulme J and the freezing order was continued until 16 March 2012. 5On 16 March 2012, Mr Chui of counsel appeared for the Plaintiff and Mr Stitt QC and Ms McBride of counsel appeared for the Defendant. An affidavit of the Defendant sworn 15 March 2012 was filed in Court. The Court was informed that the Defendant would oppose the extension of the freezing order. The proceedings were stood over until 26 March 2012 with further procedural orders being made in anticipation of a contest as to whether the freezing order ought be continued.

The Hearing on 26 March 2012 6On 26 March 2012, the proceedings came before me in the Duty Judge List. Once again, Mr Chiu appeared for the Plaintiff and Mr Stitt QC and Ms McBride appeared for the Defendant. Initially, it was indicated that rulings were needed concerning Notices to Produce which had been served by each side of the proceedings. After discussion with counsel, it was accepted that issues concerning the Notices to Produce could be placed to one side with the Court moving directly to a hearing on the question whether the freezing order made on 13 February 2012 should continue. 7At the hearing before me, Mr Chui read the affidavit of Hector-Mario Menendez sworn 23 March 2012. Mr Stitt QC read the affidavits of Mark Julian Wallace sworn 15 March 2012 and 23 March 2012. 8Both Mr Menendez and the Defendant were cross-examined on their affidavits. 9Although the Plaintiff's application was that the freezing order made on 13 February 2012 ought be continued, I indicated to the parties that I would approach the application before me upon the basis that it was a contested application for a freezing order, at which both the Plaintiff and the Defendant appeared, and with evidence adduced by both sides and tested by cross-examination. 10In truth, the application was in the nature of a de novo application for a freezing order, with a different evidentiary foundation to that which was before Schmidt J on 13 February 2012. The affidavit of Mr Clark which was relied upon at the hearing before Schmidt J was not read at the hearing before me. 11At the conclusion of the hearing on 26 March 2012, I adjourned the proceedings until 27 March 2012 for decision. On 27 March 2012, I made orders declining to extend the freezing order made on 13 February 2012 and dissolving that order. I adjourned the proceedings further until today so that I could give reasons concerning those orders and to receive written submissions from the parties on the question of costs, the Defendant having indicated an intention to seek an order for costs on an indemnity basis. 12I indicated as well that it was my intention to make an order today under s.146 Civil Procedure Act 2005 transferring the proceedings to the District Court of New South Wales. 13This judgment contains my reasons for the orders made yesterday.

14As already mentioned, these proceedings involve a claim for a debt in the sum of about $127,000.00. In the ordinary course, proceedings of this type would be commenced in the District Court of New South Wales and not this Court. To the extent that the Plaintiff sought a freezing order in the proceedings, it seems that such an order could have been sought as well in the District Court: s.46 District Court Act 1973. 15Counsel for the Plaintiff informed the Court that the selection of the Supreme Court as the appropriate venue was influenced by issues concerning service of the Defendant which may have arisen, involving the prospect of overseas service. 16In any event, the proceedings were commenced in this Court and have progressed so far before Judges of the Court. 17With the resolution of the freezing order issue, it is appropriate that the proceedings be transferred to the District Court and I will, in due course, make that order. The Plaintiff does not oppose that course.

18The Court may make a freezing order, with 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: Rule 25.11(1) UCPR. 19In the present case, the Plaintiff submits that the Court should be satisfied that there is a danger that any prospective judgment will be wholly or partly unsatisfied because the Defendant might abscond, or because he will remove or dispose of his assets in Australia: Rule 25.14(4) UCPR. 20A freezing order should be viewed as an extraordinary interim remedy because it can restrict the right to deal with assets even before judgment, and is commonly granted ex-parte: Clause 6, Practice Note SC Gen 14 "Supreme Court - Freezing Orders (also known as Mareva Orders or Asset Preservation Orders)"; Cardile v LED Builders Pty Limited [1999] HCA 18; 198 CLR 380 at 403-404 [51]-[53]. 21The purpose of a freezing order is to prevent frustration or abuse of the process of the Court, not to provide security in respect of a judgment or order: Clause 5, Practice Note SC Gen 14; Jackson v Sterling Industries Limited [1987] HCA 23; 162 CLR 612. 22The onus is on the Plaintiff to establish that the circumstances exist for the grant of this extraordinary interim remedy. The remedy is discretionary. The Plaintiff will need to establish a prima facie cause of action against the Defendant and the 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 it succeeds will not be able to have its judgment satisfied: Patterson v BTR Engineering (Aust) Limited (1989) 18 NSWLR 319 at 321-322; Frigo v Culhaci [1998] NSWCA 88 at page 6. 23The Plaintiff must establish by evidence, and not assertion, that there is a real danger of these events coming to pass: Frigo v Culhaci; Electric Mobility Company Pty Limited v Whiz Enterprises Pty Limited [2006] NSWSC 580 at [5]. It is necessary for the Plaintiff to establish facts in evidence which reveal conduct on the part of the Defendant which can reasonably be interpreted as potentially having the effect of frustrating the ordinary processes of the Court and enforcement of its judgments: Aquasun Pty Limited v Coverdale Ram Pty Limited [2000] NSWSC 1146 at [4]-[5]; Electric Mobility Company Pty Limited v Whiz Enterprises Pty Limited at [7].

24Mr Chiu pointed to the strength of the Plaintiff's case. He submitted that no proper defence was disclosed and no cross-claim suggested, and relied as well upon the simplicity of the Plaintiff's case in debt together with the likely time before judgment might be enforced. 25With respect to the danger that a prospective judgment will be wholly or partly unsatisfied because the Defendant might abscond or remove or dispose of his assets in Australia, Mr Chiu submitted that: (a)the Defendant had a poor history with respect to his response to his debts, including a breach of a previous repayment plan, the absence of a response to correspondence about the present debt, debts arising from aspects of the Defendant's lifestyle, the bringing of bankruptcy proceedings in Australia as a result of a debt in the United Kingdom (which was ultimately paid out by the Defendant's brother) and the Defendant's response to his indebtedness being to travel overseas on holiday to South Africa and Bali (26 March 2012, T21-22, 28, 31); (b)the Defendant's limited prospects to derive an income in Australia as he was presently unemployed, with his training licences cancelled and with no explanation as to how he will repay debts (26 March 2012, T32); (c)the prospect that the Defendant may seek employment overseas given the fact that he came to Australia to work as a horse trainer and that he cannot do so, that he is a successful horse trainer, and the fact that he holds an Irish passport (26 March 2012, T31, 34); (d)the freezing order does have practical value to the Plaintiff as two thoroughbred racehorses, Rasanka and Callmewhatyalike, are subject to the orders, with both horses being kept (and one of them being trained) so that they are of some value, despite the Defendant's evidence that they are "essentially worthless" (26 March 2012, T33-34); (e)any hardship which the Defendant suffers from the freezing order, as a result of publicity given to the order, was the product of the Defendant having unpaid debts more than the suggestion that he has debts and may flee the jurisdiction; (f)there is a bare assertion only by the Defendant that he intends to remain in Australia and defend the proceedings; (g)it is difficult to enforce a judgment in Ireland: s.5 Foreign Judgments Act 1991 (Cth); Foreign Judgments Regulation 1992 (Cth). 26Mr Stitt QC submitted that the Defendant was not and never had been a flight risk and that the Plaintiff, at all times, had access to the Defendant's mobile phone number and email address so that his whereabouts could be ascertained if need be. 27Mr Stitt QC submitted that the very fact that the Defendant had appeared in the proceedings with senior and junior counsel demonstrated his intention to participate in the proceedings, and that this was entirely inconsistent with an intention to depart the jurisdiction. He submitted further that no basis had been demonstrated for a conclusion that the Defendant would seek to remove the two named horses from the jurisdiction, with the horses, in any event, on the evidence, having very little value. 28It was submitted for the Defendant that media publicity of the making of the ex-parte freezing order had caused damage to the Defendant's professional reputation. It was submitted that, against this background, the Defendant would be unlikely to depart the jurisdiction in circumstances where such a step would potentially attract further adverse publicity. 29Mr Stitt QC submitted that the Defendant's cash flow problems, on the evidence, resulted from his inability to recover judgment for the sum of 100,000 pounds sterling in the United Kingdom and that the debt which gave rise to the bankruptcy proceedings in Australia had been paid in full. He submitted that a freezing order is not to be used as an order for security for judgment. He submitted that the evidence did not demonstrate any foundation for the making of a freezing order. 30Mr Stitt QC advanced further submissions as well that an improper purpose was revealed for the making of the freezing order application. In this respect, he sought to rely upon the evidence of the Defendant in his affidavit sworn 23 March 2012 (to which further reference will be made).

Should the Freezing Order be Continued in this Case?

31The issue for determination is whether, as at 26 March 2012, the Plaintiff has demonstrated that a freezing order should be made against the Defendant in these proceedings. That decision is to be made by reference to the evidence adduced on this application, and by reference to the principles set out earlier in this judgment. 32It is necessary for the Plaintiff to demonstrate that there is a danger that any prospective judgment will be partly or wholly unsatisfied because the Defendant might abscond, or because he will remove or dispose of his assets in Australia. 33At the outset, it must be said that the Defendant has been engaging, in an intensive fashion, in this litigation at least since 16 March 2012. He is represented by senior and junior counsel. Strong submissions have been put on behalf of the Defendant to the Court concerning the orders which have been made and media publicity which has been given to those orders. In my view, these very steps operate in the Defendant's favour when it is submitted for the Plaintiff that there is a danger now that he will flee the jurisdiction. One possible consequence for him if he took this course would be further adverse publicity (26 March 2012, T34.25, 48.29). 34It is true that the Defendant has limited ties in this jurisdiction and has encountered difficulties in earning income here. However, the Defendant has given evidence concerning his circumstances and his intentions and I am not persuaded that he constitutes a flight risk. 35In reaching this conclusion, I have taken into account the submissions made for the Plaintiff and the Defendant, including the Plaintiff's submissions concerning the Defendant's indebtedness and his sources of income in Australia and overseas. 36With respect to the question whether the Defendant may remove or dispose of assets in Australia, the evidence has focused upon the horses, Rasanka and Callmewhatyalike. The evidence indicates that Rasanka was most recently sold for $6,750.00 and Callmewhatyalike was most recently sold for $42,000.00. However, the evidence also suggests that the value of these horses (insofar as it can be determined) may be considerably less than these sums. The prospect of the Defendant seeking to undertake the no doubt complicated and expensive process of removing these two horses from the jurisdiction does not seem a likely one. Sale of the horses within the jurisdiction is possible, but the value of the horses is not great and I do not consider there is a real prospect that the horses will be sold. 37I bear in mind that the quantum of the claim is relatively small ($127,000.00) and that a freezing order is an extraordinary interim remedy which is not be used to provide security in respect of a judgment or order. 38I am simply not persuaded on the evidence before me that a freezing order should be made or maintained in these proceedings. The relevant criteria contained in Rules 25.11 and 25.14 UCPR have not been established in this case. 39The Defendant's submission of improper purpose has not been taken into account in reaching this conclusion. If the submission is maintained, it may bear upon the question of costs. [Counsel addressed as to costs]

40I have given judgment today, containing reasons for my decision and orders yesterday declining to extend the freezing order made on 13 February 2012 and dissolving that order. What follows is my judgment on the costs application. 41The Defendant indicated yesterday that an order for costs was being sought, whereby the Plaintiff should be ordered to pay the Defendant's costs of the proceedings before RA Hulme J on 9 March 2012, before Davies J on 16 March 2012 and before me on 26, 27 and 28 March 2012, with those costs to be assessed on an indemnity basis and to be payable forthwith. 42The Plaintiff accepts that it is appropriate for the Court to order the Plaintiff to pay the Defendant's costs of the application on 26 March 2012, but submits that should be on the ordinary basis and that costs not be payable forthwith. The Plaintiff submits that the ordinary process, where an interlocutory costs order is not to be enforced until the end of the proceedings, should stand: Rule 42.7(2) UCPR. 43Having been informed yesterday that a significant dispute arose on costs, I directed that the parties provide written submissions on that question and I adjourned the matter until today. Those written submissions have been received. 44Consistent with other aspects of this litigation which have now been argued over (parts of) three days, there is some vigour in the arguments which have been advanced. 45I will approach the matter upon the basis that it may be taken that I propose to order the Plaintiff to pay the Defendant's costs with respect to the hearing on 26 March 2012 before me. So much is accepted by the Plaintiff. This judgment will now deal with the arguments advanced, in some little detail, as to the basis upon which that order should be made, with a further application by the Defendant that the costs be assessable forthwith. 46I commence by observing that all of this occurs in the context of a claim by the Plaintiff against the Defendant for the sum of about $127,000.00 where, in all the arguments I have heard so far (and it may be that it has not arisen yet) there has been no suggestion that the indebtedness does not exist. The Defendant has appeared with senior and junior counsel to contest an interlocutory aspect of the proceedings, and with a measure of success. 47Of course, the proceedings will remain on foot in the District Court, and it will be a matter for the Defendant to participate in that litigation by either filing a Defence or not and, if not, with the matter going forward in the way in which proceedings ordinarily do so in a claim of this type. 48The only issue that was before me was the question of the freezing order. The written submissions filed on behalf of the parties on costs are on the file and I do not propose to rehearse them in this judgment. 49Insofar as the Defendant seeks to support his costs application by reference to the fact that these proceedings were commenced in this Court, and not the District Court, it does not seem to me that this is a pertinent factor. If the proceedings were commenced in the District Court, with an application being made for a freezing order, the position would undoubtedly be the same except this discussion would be taking place before another Judge in a different building. 50The question comes down to whether a basis has been demonstrated by the Defendant for a costs order on an indemnity basis. Costs, of course, are in the discretion of the Court. The Court has power to order costs on an indemnity basis, which involves the question whether there is some unreasonable conduct or misconduct on the part of the litigant against whom the indemnity costs order is sought. 51Following a hearing on the merits where both sides were heard and adduced evidence, I have determined that the freezing order should not be continued. It does not seem to me that any aspect of the hearing that took place before me on Monday activates a basis for a costs order on an indemnity basis. 52Extensive argument and counter-argument have been put in written submissions concerning how easily the Defendant could have been found, if he was telephoned or emailed and matters of that sort. As against that, it was the fact that the Defendant was overseas at different times in February. 53It is not my responsibility to review what happened on 13 February 2012 before Schmidt J. I am considering what happened before me this week. Having considered the various arguments with respect to the Defendant's ties, his indebtedness, his employment status in Australia and potentially overseas, his travel movements and his property, including the two nominated horses, I formed the view that the exceptional remedy sought by way of a freezing order should not be granted in this case. 54What then is left in the Defendant's application to support a claim for costs on an indemnity basis? The basis to which I have given particular attention is that which flows from part of the affidavit of the Defendant sworn 23 March 2012, in which he refers to a conversation he had with Mr James Van Beek, Financial Director of the Plaintiff, on 24 February 2012 at the Plaintiff's office at the Randwick Racecourse. This discussion is set out over a number of paragraphs in the Defendant's affidavit of 23 March 2012. 55The discussion touched upon an article that had been published in "The Daily Telegraph" shortly before, giving publicity to the judgment of the Court on the ex-parte application made on 13 February 2012. In the course of that conversation, the following is recorded as having been said. Mr Wallace said to Mr Van Beek: "Don't you think that the ATC has gone overboard considering that you know those horses aren't worth anything?" Mr Van Beek responded: "I know they aren't worth anything, but we have to be seen to be doing something and taking strong action because there are another half a dozen people that we will be taking to Court. It's our prerogative to do what we want to recover the money." 56I note that the Defendant was not cross-examined on that part of his affidavit. Mr Chiu accepted that I should approach the costs application, made by reference to this part of the affidavit, upon the basis that those words are not challenged. The question is what flows from that statement. 57It is submitted for the Defendant that this conversation is evidence that the proceedings were maintained for an ulterior purpose. The argument is put, not that the debt recovery proceedings were maintained for an ulterior purpose, but that the freezing order application was brought for an ulterior purpose. 58I can understand that the Defendant's submission does not seek to impugn the decision to bring the debt recovery proceedings, because nothing has been said so far before me which puts in issue the Defendant's indebtedness to the Plaintiff in the sum for which he is sued. The issue before me has concerned the freezing order. 59The Defendant submits that this statement constitutes, in effect, evidence of ulterior purpose by the Plaintiff - that the freezing order application was brought for the reason stated by Mr Van Beek, and that this infects the application in a way that should attract an order for costs on an indemnity basis. 60Mr Chiu submits that a proper construction of Mr Van Beek's words should be that he asserted no more than: (a)the Plaintiff was taking strong action against the Defendant to recover its money, and wanted to be seen as taking strong action, and that it wanted other debtors to see that it was doing so, and, (b)that it was the prerogative of the Plaintiff to do what it can to recover its money, including an application for a freezing order to preserve assets against disposal prior to judgment. 61Insofar as the affidavit of Mr Wallace involves Mr Van Beek saying that he knew that the two horses "aren't worth anything", Mr Chiu submitted that this comment did not operate in a way which assists the Defendant on an indemnity costs application. 62Since this hearing commenced on Monday, I have made clear that my function is to look at the evidence before me and to decide the issues in dispute on that evidence. I have, for that purpose, looked at the material which is exhibited to the affidavit of Mr Menendez. That material indicates what was known about the movements of the Defendant and his level of indebtedness. 63I am not seeking to review what happened before Schmidt J on 13 February 2012. However, to the extent that the current submission is that I should order indemnity costs against the Plaintiff on the basis that there was an ulterior purpose in bringing the proceedings (based upon the words of Mr Van Beek) that issue cannot be determined without considering the material attached to the affidavit of Mr Menendez, which is said to relate to events as they stood in February 2012 and since. 64One of the few things not disputed (so far at least) in this litigation is that there is indebtedness, so that the bringing of the debt proceedings has not been impugned. The freezing order application has been controversial and has attracted the Defendant's intensive response. 65The particular part of the UCPR, to which I have referred in my judgment on the freezing order, requires attention to be given to the prospect of the Defendant remaining in the jurisdiction, and being in a position to meet any judgment. If it be the case that there are other persons against whom the Plaintiff may also wish to bring proceedings who are in a position which is said to be in one way or another similar to the Defendant, the fact that this consideration might be taken into account does not seem to me to render a decision to use this process improper, or to demonstrate an ulterior motive. 66If, of course, it could have been said that there was simply no basis whatsoever in the first place for the proceedings or the application, the position might be different. However, I do not reach such a conclusion in this case. 67As to the question whether the two horses are or are not worth anything, there seems to be evidence before the Court in the Defendant's affidavit which indicates that they are worth something. The opinion of Mr Van Beek, as stated in the conversation with the Defendant, does not operate to neutralise the evidence before me. 68The real question is whether the Defendant has established a foundation for an order for costs on an indemnity basis. This involves demonstrating unreasonable action or relevant impropriety, in accordance with the principles and the authorities referred to in the Defendant's written submissions. 69I am not persuaded that the conversation between the Defendant and Mr Van Beek recorded in the Defendant's affidavit, provides a foundation for such a conclusion. 70The balance of the submissions do not demonstrate a basis for an indemnity costs order. 71Thus, the Defendant is entitled to a costs order against the Plaintiff, but on the ordinary basis. 72The remaining question is, having regard to Rule 42.7 UCPR, whether the Court should order that costs be payable at an earlier time than the conclusion of the proceedings. 73It is true that the present application is discreet. It will be the last aspect of these proceedings that are in this Court, before their transfer to the District Court. These proceedings may be over relatively soon, depending upon what happens in the District Court. There is no indication at present that they are likely to have a protracted history. 74I am not persuaded that an order should be made, for the purpose of Rule 42.7(2) UCPR, that costs be payable forthwith. The order for costs which I ought make will be payable on the ordinary basis and, in accordance with Rule 42.7 UCPR, will not become payable until the conclusion of the proceedings. 75The Plaintiff submits that the costs of the hearing before RA Hulme J and Davies J should be costs in the cause. 76In my view, the costs of the hearing before RA Hulme J should be costs in the cause. However, the costs of the hearing before Davies J, when the contested application on the freezing order was well identified, should be included in the costs order in favour of the Defendant and against the Plaintiff. 77Insofar as the Plaintiff submits that the Defendant should pay the Plaintiff's costs of the costs application of 27 and 28 March 2012, I am not persuaded that that is an appropriate order. It seems to me, even though an indemnity costs order is not to be made, that in the end a more favourable order than that accepted by the Plaintiff will be made, as it extends to the proceedings before Davies J. I propose to include the costs of yesterday and today. However, I observe that yesterday's hearing was very brief and today, likewise, has involved a relatively short process.

Orders 78I have already made orders declining to extend the freezing order made on 13 February 2012 and dissolving that order. 79It is appropriate to make orders to bring to an end other interlocutory steps which have been taken in this Court, before making an order transferring the proceedings to the District Court. 80I make the following orders: (a)The Plaintiff's Notice to Produce served on 22 March 2012 is set aside. (b)The Defendant's Notice to Produce served on 15 March 2012 is set aside. (c)The Plaintiff's Notice of Motion filed on 23 March 2012 is set aside with no order to the costs of that Motion. (d)The Plaintiff is ordered to pay the Defendant's costs of the appearances before Davies J on 16 March 2012 and before me on 26, 27 and 28 March 2012 on the ordinary basis. (e)I decline to make an order, for the purposes of Rule 42.7(2) UCPR, that the costs order made in paragraph (d), will be payable forthwith, with the result that the costs order does not become payable until the conclusion of the proceedings. (f)The costs of the hearing before RA Hulme J on 9 March 2012 are to be costs in the cause. (g)I make an order under s.146(1) Civil Procedure Act 2005 transferring the proceedings to the District Court of New South Wales.

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: 04 April 2012

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