Bennett (bht Jones) v State of New South Wales & Anor.

Legal principles: freezing orders

1. 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.
2. 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.
3. 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.
4. Further, in an application for a freezing order, it is important to bear in mind three key principles.
5. 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).
6. 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; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 72 ALJR 873, 892 (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ); Practice Note No SC Gen 14, par 5.
7. 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, p 6; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 403-404 (Gaudron, McHugh, Gummow and Callinan JJ). A similar point was made in Z Ltd v A-Z and AA-LL [1982] 2 WLR 288, 306, by Kerr LJ (Eveleigh LJ agreeing) ('Z Ltd') who said the court must ensure that the jurisdiction is not abused: "…being applied for and granted in circumstances in which there may be no real danger of the defendant dissipating [their] assets to make [themselves] 'judgment proof'; where it may be invoked, almost as a matter of course, by a plaintiff in order to obtain security in advance for any judgment which [they] may obtain; and where it's real effect is to exert pressure on the defendant to settle the action".
8. There is, in this case, an anterior issue that requires consideration - viz., whether this application should proceed ex parte. There are two parts to this issue. The first is whether the basis for proceeding in that way is made out; the second is whether there is any utility in making the order sought ex parte.
9. I will deal with these issues first, before addressing the substance of the application.

The basis for proceeding ex parte

1. As a matter of principle, orders in civil proceedings without notice to the other side should not be made unless there is a good reason for departing from the general rule that notice must be given. In Ansah v Ansah [1977] Fam 138, 142 Ormrod LJ (Stamp LJ and Sir John Pennycuick) stated these basic, yet fundamental, principles thus: "Orders made ex parte are anomalies in our system of justice which generally demands service or notice of the proposed proceedings on the opposite party: see Craig v Kanssen [1943] KB 256, 262. None the less, the power of the court to intervene immediately and without notice in proper cases is essential to the administration of justice. But this power must be used with great caution and only in circumstances in which it is really necessary to act immediately." See also Thomas A Edison Ltd v Bullock (1912) 15 CLR 679, 681 (Isaacs J); The Commissioner of Police v Tanos (1957) 98 CLR 383, 395-396 (Dixon CJ and Webb J); Hoskins v Van Den-Braak (1998) 43 NSWLR 290, 293-294 (Mason P); Moat Housing Group-South Ltd v Harris [2006] QB 606, 625 (Brooke LJ; Judge and Dyson LJJ agreeing).
2. Rule 25.11 of the UCPR, by its terms, envisages that applications may be made ex parte. Nevertheless, as the above authorities make clear, the exceptional nature of the order, and possible adverse consequences that can follow if made, make it undesirable for this to occur unless there are substantial reasons for doing so.
3. What, then, is the evidence in this case requiring the application to proceed ex parte?
4. The plaintiff submitted that the circumstances giving rise to the need for the order - that is, the risk of the second defendant's assets being disposed of, dealt with or diminished - supported the plaintiff proceeding ex parte. I do not agree.
5. In my view no case for proceeding ex parte has been demonstrated by the plaintiff: no reason (nor any substantial reason) for proceeding in this way has been established. At its absolute highest for the plaintiff, all that is shown is that the plaintiff has an arguable case against the second defendant, and that the second defendant owns unencumbered real property in New South Wales. Nevertheless, there is no suggestion, at all, that the second defendant has dealt with, or proposes to deal with, that property. (I will return to this issue when dealing with whether there is a real danger of the second defendant dissipating his assets: see [30], below).

Utility

1. The exceptional nature of proceeding in this way is also reflected in the fact that it is usual practice to grant an ex parte injunction for a confined number of days until the return date of the summons or notice of motion: Resort Hotels Management Pty Ltd v Resort Hotels of Australia Pty Ltd (1991) 22 NSWLR 730, 731 (McLelland J); Lake v Crawford (No. 2) [2010] NSWSC 419 at [15] (Harrison J). The "injunction is such a serious matter for all concerned that… [they] should be given the earliest possible opportunity of being heard": Z Ltd at 299 (Lord Denning MR; Eveleigh LJ agreeing).
2. Although it would be open, in a given case, to grant an injunction "until further order", I would not be disposed to do so in this case. (In fairness, the plaintiff accepted as much). Indeed it is, in my view, a clear case where, if an ex parte injunction were granted, I would only do so in accordance with the usual practice and have the notice of motion returnable, at the latest, later this week: Practice Note No SC Gen 14, par 9. In those circumstances, there is to my mind no utility in the plaintiff proceeding ex parte: the injunction would be for a finite period, limited to a number of days, and then there would be a hearing of the plaintiff's application once the second defendant had been served.
3. There is, in my view, a further discretionary reason why I will not permit the application to proceed ex parte: the evidence does not make out a basis for relief. Specifically, for the reasons that follow, I consider that the plaintiff has failed to demonstrate an entitlement to the orders sought in the notice of motion.

The application: the pre-conditions considered

1. There is, as I have earlier identified (see [8]-[10], above), two matters to be demonstrated in order for the Court to be satisfied that a freezing order should be made. In short, there is a need to demonstrate a good arguable case and, further, a real danger of any prospective judgment being frustrated.

A prima facie claim

1. It may be accepted that 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"- at least in relation to the offence to which the second defendant pleaded guilty. A plea of guilty is an admission of all the elements of the offence: The Queen v Olbrich (1999) 199 CLR 270; [1999] HCA 54 at [4] (Gleeson CJ, Gaudron, Hayne and Callinan JJ).

A real danger of any prospective judgment being frustrated

1. The second matter - viz., that there is a danger that any judgment secured against the second defendant would be frustrated because the assets of the second defendant (being the real property) would be "disposed of, dealt with or diminished in value" - requires further discussion and analysis.
2. 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).
3. The evidence relied upon by the plaintiff to support a finding that there was a danger of the requisite kind was as follows: 1. Evidence from the plaintiff, to the effect that he was "worried" the second defendant might try to sell the property: affidavit of John Bennett sworn 15 August 2022, par 19. 2. Evidence from the plaintiff's solicitor that it was "reasonable to assume" that the second defendant would seek to dispose of the property bearing in mind the "serious nature of the offences alleged, which go to his character"; and, later, that there was "a real danger" that the second defendant will dispose of his assets" in light of the criminal charges in the current proceedings: affidavit of Thomas Felizzi affirmed 12 September 2022, pars 36 and 38. 3. Evidence from the plaintiff's solicitor that the second defendant's "ability to easily and quickly move and further, send funds electronically is aided by current technology available": affidavit of Thomas Felizzi affirmed 12 September 2022, par 37.
4. The focus (here) is upon the conduct of the second 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).
5. In my view the plaintiff has failed to demonstrate not only that there has been steps taken to dispose of the property, but has also failed to demonstrate that there was any real risk of this occurring. There is no evidence at all seeking to establish that the second defendant has, to this point, taken any step which might lead to an inference arising that he might, in order to frustrate the processes of the Court, dispose of the property. The plaintiff submitted that the allegations are serious, and that is a matter that can inform whether there is a real danger of asset dissipation. In a given case, that may well be so; but in this case, without more, I am not prepared to draw that inference, let alone find it might exist.
6. The authorities "emphasise that it is insufficient for an applicant to merely assert that the other party was likely to put assets beyond the applicant's reach": Byron v J BG Contractors (NSW) Pty Ltd [2021] NSWSC 549 at [18] (Garling J); Frigo p 8; Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102 at [57]. That is the position here, in my view: the "evidence", such as it is, rises no higher than assertion. No basis for a finding that there is a "real danger" of the requisite kind has been demonstrated so as to warrant the granting of the exceptional remedy the plaintiff seeks.

Orders

1. For these reasons, I make the following orders: 1. Dismiss the plaintiff's notice of motion filed 12 September 2022. 2. No order as to costs such that the plaintiff bear his own costs of, and incidental to, the notice of motion. 3. Direct that, to the extent that leave under s 4 of the Felons (Civil Proceedings) Act 1981 (NSW) is necessary to commence these proceedings, any notice of motion be filed and served by 31 October 2022, 5pm.

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