Brentwood Village Limited (in liq) v Terrigal Grosvenor Lodge Pty Limited

Federal Court of Australia|2015-08-27|Before: Mr J, Mr P, Gleeson J

Number of paragraphs: 67

Counsel for the Plaintiffs: Mr A Martin SC with Mr J Hynes

Solicitor for the Plaintiffs: Corrs Chambers Westgarth

Solicitor for the First Defendant: M + K Lawyers

Counsel for the Second and Fourth Defendants: Mr JM Ireland

Solicitor for the Second and Fourth Defendants: DC Balog & Associates

Counsel for the Third Defendant: The Third Defendant did not appear

Counsel for the Fifth Defendant: The Fifth Defendant did not appear

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1123 of 2014

BETWEEN: BRENTWOOD VILLAGE LIMITED (IN LIQ) ACN 002 570 087

SCOTT DARREN PASCOE AS LIQUIDATOR OF BRENTWOOD VILLAGE LIMITED

AND: TERRIGAL GROSVENOR LODGE PTY LIMITED ACN 000 868 057

JUDGE: GLEESON J DATE OF ORDER: 27 AUGUST 2015 WHERE MADE: SYDNEY

The plaintiffs' interlocutory application dated 31 July 2015 be dismissed.
The plaintiffs pay the first defendant's costs of the application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1123 of 2014

BETWEEN: BRENTWOOD VILLAGE LIMITED (IN LIQ) ACN 002 570 087

SCOTT DARREN PASCOE AS LIQUIDATOR OF BRENTWOOD VILLAGE LIMITED

AND: TERRIGAL GROSVENOR LODGE PTY LIMITED ACN 000 868 057

JUDGE: GLEESON J DATE: 27 AUGUST 2015 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The plaintiffs seek an order pursuant to rule 14.11 of the Federal Court Rules 2011 (Cth) ("Rules"), and upon the plaintiffs giving the usual undertaking as to damages, restraining the first defendant ("TGL") from dealing with the proceeds of the sale of properties at The Entrance on the Central Coast of New South Wales ("The Entrance properties"), and an order requiring TGL to deposit $4.5 million into court or an account to be held pending the determination of the proceeding. 2 The plaintiffs' original interlocutory application sought an order in the form of relief given pursuant to rule 7.35 of the Rules (a freezing order). The claim for relief in that form was not pressed. 3 The plaintiffs' application is supported by four affidavits of Glenn Livingstone, who is responsible for the day to day management and all aspects of the liquidation of the first plaintiff ("Brentwood"), under the supervision of the second plaintiff ("liquidator"). 4 TGL opposes the application and relies on affidavits of Brian Milton, TGL's financial controller, and Jeffrey Siddle, TGL's solicitor.

Amended statement of claim 5 On 21 August 2015, the plaintiffs were granted leave to amend their statement of claim to include a claim in debt against TGL. 6 The amended statement of claim alleges that, from time to time prior to 31 August 2007, Brentwood loaned monies to TGL (referred to as the "initial advance"). 7 It is alleged that, by a loan agreement dated 31 August 2007, Brentwood agreed to advance $35 million to TGL, and did advance some or all of that amount (referred to as the "loan agreement advance"). It is alleged that, by clause 7 of the loan agreement, TGL acknowledged that The Entrance properties would be charged with the payment of the debt owing to Brentwood and agreed forthwith, upon the request of Brentwood and at its expense, to execute any and all documents required to register caveats or mortgages or any other encumbrance necessary to protect the interest of Brentwood, against the title of The Entrance properties. 8 The plaintiffs allege that clause 7 of the loan agreement created in The Entrance properties, and any proceeds of sale of The Entrance properties, an equitable mortgage in favour of Brentwood. 9 The plaintiffs do not specify a precise sum owing to Brentwood by TGL. It is alleged that TGL remains indebted to Brentwood in the amount of the initial advance and the loan agreement advance, or alternatively, in such amount as remains owing in respect of those advances.

Facts alleged in support of application 10 On 19 October 2007, Brentwood registered a caveat on the titles of The Entrance properties and, on 22 October 2007, Brentwood registered a mortgage to secure the loan under the loan agreement. 11 In November 2007, the National Australia Bank ("Bank") entered into a loan arrangement with TGL. On 16 November 2007, a mortgage held by the Bank and secured over The Entrance properties was postponed pursuant to a registered Postponement of Mortgage instrument, such that Brentwood remained the first registered mortgagee. 12 On 22 August 2008, the third defendant, John Klumper, requested that TGL repay to Brentwood approximately $14 million to assist him to settle a Family Court dispute involving his ex-wife. 13 By email dated 29 August 2008 from the Bank to the fifth defendant, Veronica Klumper-Peters, the Bank referred to a proposal in which TGL was to borrow funds from the Bank and the Bank was to take first mortgages over various security interests including The Entrance properties. The email stated, relevantly: I also understand Brentwood will convert its existing loan to TGL to equity so need [sic] to service the Brentwood facility will be removed. 14 There is no evidence that Brentwood become a shareholder of TGL. 15 On 30 August 2008, TGL's accountant sent an email to the Bank confirming the "intercompany loan arrangement" between TGL and Brentwood and stating relevantly: As previously advised: • There will be no further capital reduction requirement. • There will be no further loan repayments. We also note that a discharge of mortgage has been issued by Brentwood Village to [TGL] thus allowing NAB to register a 1st ranking mortgage… 16 On 30 September 2008, Brentwood's accountant sent an email to the Bank confirming that TGL would borrow $14 million which would be paid to Brentwood in partial reduction of its loan account. 17 On 3 November 2008, a Discharge of Mortgage instrument was registered in respect of Brentwood's mortgage over The Entrance properties ("discharge of mortgage"). 18 The liquidator refers to financial accounts of Brentwood and TGL disclosing that the liability owed by TGL to Brentwood moved from as much as $53 million in 2008 to $30.4 million in 2009 and $18.7 million in 2012. The liquidator's case is that, after Brentwood's winding up in 2013, the accounts "appear to have been effectively re-written" to record no outstanding liability. 19 On the material available to the plaintiffs, it appears to the liquidator that Brentwood received no consideration in respect of the discharge of its security and there is a loan (the precise amount of which is unclear) which remains outstanding.

Brentwood's alleged proprietary interest in The Entrance properties 20 The liquidator contends: (1) The registration of the discharge of mortgage did not have the effect of releasing the debt due by TGL to Brentwood, or otherwise bringing to an end the loan agreement; (2) The security interest created by clause 7 of the loan agreement continued irrespective of the registration of the discharge of mortgage. Clause 7 created an equitable mortgage in respect of The Entrance properties, and in so doing charged any sale proceeds in favour of Brentwood, subject to the interest of any legal mortgagee; (3) To constitute an equitable charge of real property, what is required are words specifically appropriating that property to the discharge of a debt or obligation. It is not necessary that any general words of charge be used: see Cradock v Scottish Providence Institution (1893) 69 LT 380 at 382 and El-Kazzi v Kassoum [2009] NSWSC 99 at [122]; (4) In the present case, clause 7 of the loan agreement specifically provided that The Entrance properties are so charged as security for the payment of the debt due under the loan agreement; (5) If a creditor has an equitable mortgage or equitable charge over land and the land is sold, the mortgage or charge attaches to the fund which is produced by the sale: Avco Financial Services Limited v Commonwealth Bank of Australia (1989) 17 NSWLR 679.

Sale of The Entrance properties 21 TGL has entered into contracts for sale of The Entrance properties for the combined sum of around $21.5 million. It is presently anticipated that the sale will be completed on 31 August 2015, although settlement is not certain and the purchaser has already had one extension of the date for settlement. 22 TGL made an agreement with the purchaser for payment of an "extension fee" of $8 million, which is not presently being treated as a part payment under the contracts for sale, but will be credited towards the purchase price under the contracts if completion occurs on or before 31 August 2015. 23 The extension fee has been paid into the trust account of TGL's solicitors. Of that amount, $3.5 million has been paid to the Bank, which holds a registered mortgage over one or more of the properties. $4.5 million remains in trust. 24 The Bank is owed a further $3 million. 25 If the sale is completed on time, the proceeds of the sale are expected to be approximately $13,757,142.85 comprising the $4.5 million in trust and $9,257,142.85 due on completion.

TGL's evidence 26 Mr Siddle gave evidence of TGL's disclosure of its worldwide assets pursuant to this Court's orders of 10 November 2014. 27 On 20 February 2015, TGL gave the following undertaking to the Court: 1. The first defendant (TGL), the fourth defendant and the fifth defendant (collectively, the defendants) undertake that they will not dispose of, deal with, or take any steps to further encumber any real property owned by TGL, without first providing the plaintiffs, by their solicitors, with 14 days' written notice of an intention to so. 2. At all times prior to settlement of the sales pursuant to the First Entrance Contract and the Second Entrance Contract (Entrance Sales) referred to in paragraph 15 of the Affidavit of Veronica Klumper-Peters sworn 20 November 2014 (Veronica Affidavit), the defendants undertake that they will not take any step that is intended to reduce or diminish the value of any real property owned by TGL. 3. The defendants undertake that they will provide to the plaintiffs, by their solicitors, a copy of any draft and final settlement statements in relation to any sale or proposed sale of any real property owned by TGL, and such draft and/or final settlement statements are to be provided to the plaintiffs within 12 hours of having been received by the defendants or their representatives. 4. The defendants undertake to provide the plaintiffs, by their solicitors, 14 days' written notice of the settlement, or scheduled settlement, of any sale pursuant to the Entrance Sales. 5. Subject to paragraph 6, (a) the first defendant undertakes that it will not incur liabilities that at any point in time exceed $100,000 without first providing to the plaintiffs, by their solicitors, 14 days' written notice of its intention to do so; and (b) the fourth and fifth defendants undertake that they will do nothing to procure or cause the first defendant to breach its undertaking in clause 5(a). 6. Paragraph 5 does not apply to liabilities properly incurred by TGL in the ordinary course of its business. For the avoidance of doubt: (a) TGL is entitled to conduct its defence of these proceedings in the ordinary course of its business; (b) liabilities properly incurred by TGL in the ordinary course of its business include, without limitation, interest payable on its current banking facility with NAB, legal fees and disbursements incurred in relation to these proceedings and taxation liabilities as assessed by or on behalf of the Commissioner of Taxation as payable by TGL from time-to time; and (c) liabilities properly incurred by TGL in the ordinary course of its business excludes, without limitation, liabilities, including tax liabilities, of other entities including related entities of TGL that, for one reason or another, TGL has agreed to pay from time-to-time. 7. The undertakings above do not prevent TGL from completing the Entrance Sales. 8. Subject to paragraph 9, the undertakings above do not prevent TGL from taking any steps to give effect to the agreement to grant a second mortgage over the Entrance Property as referred to in paragraph 22 of the Veronica Affidavit and clause 4 of the Heads of Agreement (Heads of Agreement) between TGL and the Deputy Commissioner of Taxation dated 31 October 2014, a copy of which is at pages 4 to 7 of the Exhibit BM-1 to the Affidavit of Brian Milton sworn 20 November 2014. 9. Paragraph 8 does not allow TGL to grant any further or other security to the Deputy Commissioner of Taxation otherwise than in accordance and in compliance with the undertakings given above, including any further security contemplated by clause 8 of the Heads of Agreement. 28 On 20 July 2015, pursuant to its undertaking, Mr Siddle notified the plaintiffs' solicitors of the settlement of the sale of The Entrance properties. 29 Mr Siddle gave evidence on information and belief from Ms Klumper-Peters that TGL owns property at Burradoo, near Bowral in New South Wales. His evidence is that there is a development approval for the construction of 55 houses in a community title development on the property and that, to date, nine of the 55 houses have been constructed and sold by TGL. 30 The plaintiffs' solicitors were informed of the development by Mr Siddle's letter dated 26 March 2015. 31 By letters dated 8 May and 19 May 2015, pursuant to TGL's undertaking to the Court, the plaintiffs' solicitors were informed of TGL's intention to draw down an amount of $1 million under TGL's facility with the Bank. The 19 May 2015 letter stated that $400,000 of that amount was to be used "in meeting costs associated with stage 2 of the development of the Bowral Property, as referred to in our letters of 26 March 2015 and 29 April 2015". 32 Mr Siddle also gave evidence on information and belief from Ms Klumper-Peters that the next stage of the development of the Bowral property is the construction of 16 freestanding houses. The cost of this stage of the development is estimated to be in the vicinity of $6 million plus GST. Exhibited to Mr Siddle's affidavit is a valuation dated 30 May 2015 prepared by Nelson Partners Australia valuing the Bowral property on an "as completed" basis upon completion of the 16 freestanding houses, and a valuation prepared for the Australian Taxation Office of the land value as at 30 June 2014. 33 Mr Milton also gave evidence about the Bowral property. He said that he was informed by the fourth defendant, Paul Klumper, that the development of the next stage of the property may not result in any income for TGL for 12 to 15 months from the time that the development commences. 34 Mr Milton gave evidence about TGL's cash flow. In summary, TGL's only cash income is rents derived from The Entrance properties which will cease on settlement of the sale of the properties. Accordingly, TGL will have no income from approximately 31 August 2015 until about late 2016. The next stage of the development would be funded by the residual of the settlement sum from the sale of The Entrance properties with the balance being sourced from borrowings on a capitalised basis which, Mr Milton says, is common with these kinds of developments. 35 Mr Milton gave evidence of TGL's major monthly expenses and its current cash on hand, as well as its current liabilities. 36 According to Mr Milton, TGL wishes to use the $4.5 million currently held in trust as follows: (a) $3,394,187.95 in part payment of TGL's liability to the Australian Taxation Office; (b) $711,390.53 in payment in full of other outstanding liabilities (specified in Mr Milton's affidavit); (c) $60,000 to be left in the trust account of M+K Lawyers in relation to matters in which TGL is instructing M+K Lawyers to act on TGL's behalf; and (d) the balance of approximately $334,421.52 as working capital for ongoing business expenses, including wages, legal fees and accounting fees. 37 If the sale of The Entrance properties completes on or before 31 August 2015, TGL intends to use the expected sum of $9,257,142.85 as follows: (a) payment of commissions of $234,651.00, which will become payable upon completion; (b) payment of GST of $1,257,142.85, which would be payable on or before 21 October 2015; (c) payment of approximately $3 million to the Bank, which will pay out the Bank's loan facility in full; and (d) the balance of $4,765,349 towards TGL's ongoing wages and salaries, rent, legal fees, accounting fees and the costs of developing the Bowral property. 38 Mr Milton's evidence is that, if TGL is not able to use the amounts from the sale of The Entrance properties in the manner it contemplates, then the only options he considers to be available to avoid TGL's insolvency are: (a) Sell real property owned by TGL. However, as TGL has not commenced marketing any real property assets for sale, that may not raise sufficient cash in time to meet TGL's liabilities; (b) Find a joint venture partner to fund the development of the Bowral property, which will reduce the profitability of that development to TGL and would not result in TGL obtaining any further cash to meet its everyday expenses, like wages and legal and accounting fees; (c) Borrow funds to develop the Bowral property. However, if TGL were required to borrow the total development costs, Mr Milton considers that it would be extremely unlikely that a financial institution would loan those funds to TGL; (d) Borrow funds to meet its everyday business expenses. However, in Mr Milton's experience, TGL would be unable to do so because it would not have any income to service the interest on such a loan.

TGL offer 39 By letter dated 18 August 2015, TGL's solicitors wrote: …the likely effect of our client being deprived of the proceeds of sale of the Entrance Properties will be catastrophic for TGL and is likely to lead to fire sales of its remaining real property assets or TGL being wound up. Not only is that an undesirable result for a business that is presently a solvent going concern but it also exposes your clients to significant risk in respect of the usual undertaking as to damages that will need to be given to obtain the relief sought. 40 TGL made a detailed proposal "with a view to protecting [the plaintiffs'] position with respect to its alleged entitlement to the proceeds of sale of the Entrance Properties while allowing [TGL] to continue trading and defending these proceedings". It is unnecessary to set out the proposal in detail because it has been rejected by the liquidators. 41 Mr Martin SC, on behalf of the plaintiffs, said that the liquidator had concerns about the solvency of TGL and that the proposal involved the plaintiffs taking security over an asset which would otherwise be available for the benefit of all creditors of TGL. The liquidator is concerned about the risk of the proposed transaction being set aside, in the event of TGL's insolvency.

Plaintiffs' grounds for relief sought 42 The liquidator contends that Brentwood has a good arguable case for the existence of a proprietary interest in The Entrance properties (and any sale proceeds) which warrants protection in the form of the orders sought. 43 The liquidator argues that Brentwood's proprietary interest in the proceeds of sale of The Entrance properties should be preserved to the exclusion of unsecured creditors of TGL. Otherwise, TGL will deal with the proceeds of sale as though Brentwood has no security interest.

Rule 14.11 44 Rule 14.11(2) provides: In a proceeding about the right of any party to a fund, a party may apply for an order that the fund be paid into Court or otherwise secured. 45 The parties did not refer to any case law about the operation of rule 14.11(2). The cases which I have located are concerned mainly with the meaning of "a proceeding about the right of any party to a fund" in analogous Court rules: see Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249; (2008) 163 LGERA 83 and Myers v Design Inc (International) Ltd [2003] 1 WLR 1642. 46 In Myers, Lightman J gave some more general consideration to the scope of the Court's power to make "an order for a specified fund to be paid into court or otherwise secured, where there is a dispute over a party's right to the fund". He stated (at 1645): The provisions of the rule require as conditions for exercise of the jurisdiction to make the order that at the date of the order (1) the person against whom the order is to be made has legal title to or is in possession or control of an actual identifiable fund, colloquially the fund must be in his hands; (2) there is a dispute as to a party's proprietary entitlement to or interest in the fund; (3) the circumstances are such that the fund should be secured by payment into court or in some other way. 47 In my view, this passage applies to rule 14.11(2).

Interlocutory injunctive relief 48 Mr Martin SC argued that the orthodox approach to an application for interlocutory injunctive relief applies in this case. Mr Braham SC did not dispute that proposition, which I accept. 49 In Warner-Lambert Co LLC v Apotex Pty Ltd [2014] FCAFC 59; (2014) 311 ALR 632 at [68]-[70], a Full Court (comprising Allsop CJ, Jagot and Nicholas JJ) set out the principles which govern applications for interlocutory injunctive relief in the following terms: …There are two inquiries that must be undertaken when determining whether an applicant should be granted an interlocutory injunction. The first relates to the strength of the applicant's claim to final relief. The second relates to the balance of convenience or, as it is sometimes expressed, the balance of the risk of doing an injustice by either granting or withholding the interlocutory relief sought. The principles to be applied in determining whether or not to grant interlocutory relief were considered by the High Court in Australian Broadcasting Corporation v O'Neill [2006] HCA 46; (2006) 227 CLR 57, including by Gummow and Hayne JJ at [65]-[72]. Gleeson CJ and Crennan J agreed at [19] with the explanation of the relevant principles in those paragraphs. In O'Neill Gummow and Hayne JJ stated at [65]: The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; [(1968) 118 CLR 618]. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications the court addresses itself to two main inquiries and continued [at 622-623]: The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief ... The second inquiry is ... whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted. By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument [at 620]. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal [at 622]: How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order he seeks. Whether an applicant for an interlocutory injunction has made out a prima facie case and whether the balance of convenience favours the grant of such relief are related questions. It will often be necessary to give close attention to the strength of a party's case when assessing the risk of doing an injustice to either party by the granting or withholding of interlocutory relief especially if the outcome of the interlocutory application is likely to have the practical effect of determining the substance of the matter in issue or if other remedies, including an award of damages, or an award of compensation pursuant to the usual undertaking, are likely to be inadequate. 50 The Court is required to make an assessment of the applicant's case for the purpose of deciding whether it has made out a prima facie case of sufficient strength to justify the grant of an interlocutory injunction: cf Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238 ("Samsung") at [87]. 51 In considering whether to grant an interim injunction, the Court should also weigh up the real consequences to each party: cf Trade Practices Commission v Santos Ltd (1992) 38 FCR 382 at 397. 52 To the extent that the grant or refusal of interlocutory relief is going to have the practical consequence of deciding the applicant's claims for final relief, the applicant is required to demonstrate a relatively strong case: cf Samsung at [87]; Generic Health Pty Ltd v Otsuka Pharmaceutical Co., Ltd [2013] FCAFC 17; (2013) 296 ALR 50 per Emmett J at [26], Bennett J at [121]-[128], and Greenwood J at [253].

Fund 53 In this case, there is a fund, being the fund of $4.5 million in the trust account of TGL's solicitors.

Dispute about proprietary entitlement to fund 54 TGL conceded, for the purposes of the application, that there is an arguable case that TGL owes Brentwood a significant debt, of many millions of dollars. 55 However, TGL disputes that there is an arguable case that the debt is secured. 56 The threshold for a "good arguable case" is a very low one: Curtis v NID Pty Limited [2010] FCA 1072 at [6]. A good arguable case is one "which is more than barely capable of serious argument, and yet not necessarily one the judge believes to have a better than 50% chance of success": Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; The Niedersachsen [1984] 1 All ER 398 at 404 (affirmed on appeal: [1984] 1 All ER 398 at 413); Errigal Ltd v Equatorial Mining Ltd [2006] NSWSC 953 at [12]; Pure Logistics Pty Ltd v Scott [2007] NSWSC 595; Westpac Banking Corporation v McArthur [2007] NSWSC 1347. 57 I accept that there is a good arguable case in support of the plaintiffs' propositions (1) and (3) to (5) set out in paragraph 20 above. I also accept that, in the absence of evidence of any consideration received by Brentwood for the discharge of mortgage, there is a serious question to be tried about whether Brentwood's previously existing security interest ceased to exist at the time of the discharge of mortgage. I also accept that there is a separate question as to whether a charge was created and continued to exist in TGL's favour over The Entrance properties, or was created at the time of the discharge of the mortgage over The Entrance properties, and any proceeds of sale of the properties. 58 The strength of Brentwood's claim to a proprietary entitlement to or interest in the fund depends upon the construction of the loan agreement and the events which happened in connection with the discharge of Brentwood's registered mortgage over The Entrance properties. There will be an issue of construction of the loan agreement whether the parties agreed that the loan agreement advance would be secured against The Entrance properties even where the parties agreed to discharge, and did discharge, the mortgage. 59 The claim has only been articulated very recently. According to Mr Martin SC, the claim was pleaded following the liquidator's receipt of documents this month. In those circumstances, TGL has not had an opportunity to provide a detailed response to the claim and, without knowing that response, I am not able to assess the strength of the claim beyond an assessment that it is a good arguable case.

Circumstances supporting a conclusion that the fund should be secured 60 In substance, the plaintiffs' case was that its proprietary entitlement justified the orders sought, and that, if the fund were not secured, then it would be used as though Brentwood's proprietary right did not exist so that Brentwood would be deprived of that right.

Balance of convenience 61 Mr Martin SC submitted that the Court should not take into account notions of balance of convenience appropriate to a Mareva injunction. While I accept that the danger that a judgment will be unsatisfied is not a threshold criterion for an order under r 14.11, in my view, circumstances relevant to whether to make the orders sought include the potential risks to the plaintiffs if the orders are not made, as well as the likely consequences of the orders. 62 The following considerations lead me to the conclusion that the balance of convenience does not favour the making of the orders sought: (1) The plaintiffs have the benefit of the undertakings given in February 2015; (2) TGL wishes to use the fund for the purposes of conducting its property development business; (3) TGL's financial position will be substantially adversely affected by the proposed orders, in advance of a final determination of Brentwood's proprietary entitlement to the fund, because it requires the funds to develop the Bowral property and there is a real risk that it would be unable to develop the property without those funds; (4) It is not suggested that there is a danger that a prospective judgment will be wholly or partly unsatisfied, of the kind that would be required to be demonstrated to obtain a freezing order. 63 Mr Braham SC submitted that the proposed orders, if made, would determine the substance of the matter in issue: cf Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 535, because the plaintiffs would obtain the security for which they contend. On the other hand, TGL's prospects of continuing to trade and develop its development properties would be "entirely extinguished" and TGL would be "destroyed" as a commercial entity. I am not convinced that this submission is correct. The proposed orders would maintain the status quo and, while the plaintiffs would obtain security, they would not obtain the final relief they seek, which is recovery of a debt. I am also not persuaded that the effect of the orders, if made, would be as catastrophic as Mr Braham SC contended. However, as appears above, I am satisfied that they would have a serious detrimental effect upon TGL and that effect is a significant factor weighing in TGL's favour on the balance of convenience. 64 Mr Braham SC also noted that the proposed orders were more restrictive than the usual terms of a freezing order, in that no provision is made for the payment of business expenses in the ordinary course (including the costs of defending this litigation). I accept that this is another factor weighing in TGL's favour on the balance of convenience. 65 Mr Braham SC submitted that the plaintiffs had not been sufficiently diligent in bringing their new case against TGL, bearing in mind that the allegation of TGL's indebtedness to Brentwood was made in Mr Livingstone's October 2014 affidavit. He also submitted that I should take into account the plaintiffs' failure to comply with an order, made on 24 June 2015, to file and serve their lay and expert evidence in chief by 6 August 2015. It was suggested that the plaintiffs cannot be relied upon to conduct the litigation expeditiously, which is essential if TGL is to suffer the adverse financial impact of the proposed orders. 66 I am not persuaded that I should take these matters into account on this application. However, having decided against making the proposed orders, I would accept that the question of the plaintiffs' proprietary entitlement should be resolved as soon as practicable.

Conclusion 67 The application will be refused with costs. I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

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