Georgiou v Spencer Holdings Pty Ltd

REASONS FOR JUDGMENT 1 On 26 May 2011 I heard submissions on two applications made by the applicant in this proceeding. First, by notice of motion dated 19 May 2011 the applicant sought a freezing order against the first and second respondents in the proceeding. Secondly, by oral application the applicant sought an order that as to certain issues raised in the pleadings the second respondent be dux litis. In my opinion both orders should be refused.

The application for a freezing order 2 The applicant did not pursue all of the orders sought in her notice of motion dated 19 May 2011. The orders she did pursue were as follows: 1. That the First Respondent, Spencer Holdings Pty Ld ACN 096 497 148 and the Second Respondent be restrained from removing any assets located in or outside Australia and from disposing of, dealing with, or diminishing the value of, those assets other than for legitimate purposes and upon having provided seven (7) days written notice to the Applicant's solicitors. 2. That an ancillary order be made that: 2.1 the First Respondent, Spencer Holdings Pty Ld ACN 096 497 148: 2.1.1 disclose to the Court and to the Applicant its financial statements and accounts, list of current assets and their value including bank statements from 1 July 2008 to date. … 2.2 the Second Respondent, Kelvin James Spencer: 2.2.1 disclose to the Court and to the Applicant his assets and liabilities and those of any entity in which he has an interest as at 31 December 2009 and as at the date hereof. 3 There may be some difficulties with the precise wording of the first order sought (for example, the use of the expression "legitimate purposes"), but those difficulties would not prevent an order being made if there were otherwise grounds to do so. 4 The applicant's notice of motion was supported by an affidavit sworn by the applicant. In that affidavit the applicant refers to and annexes certain public documents concerning the first respondent and a business name it owned and correspondence which has passed between her solicitors and the solicitors for the first and second respondents. Those solicitors also represent the fifth and sixth respondents. The second respondent's wife was previously the third respondent but on 20 January 2011 I made an order that the proceeding against her be dismissed. The fourth respondent is now separately represented and he took no part in the application. In addition to the applicant's affidavit, the applicant tendered a further letter from the respondent's solicitors. For their part the respondents relied on a letter from their solicitors to the applicant's solicitors in which they ask for details of the applicant's ability to meet an undertaking as to damages. 5 The pleadings establish that the first respondent was previously Stanley Thompson Valuers and that on 1 July 2007 that entity became Spencer Holdings Pty Ltd trading as Propell National Valuers. The proceeding names the first respondent as Spencer Holdings Pty Ltd trading as Propell National Valuers (SA). The first and second respondents admit that the second respondent is a director and secretary of the first respondent and a joint shareholder together with his wife. 6 I turn now to the other matters established by the evidence which I received on the application. 7 Spencer Holdings Pty Ltd was incorporated on 11 April 2001. The second respondent is the director and secretary of the company and he and his wife are the shareholders of the company. 8 The business name Propell National Valuers (SA) was registered by Spencer Holdings on 10 August 2007 and it was cancelled on 11 October 2010. This proceeding was commenced in this Court on 18 May 2010. 9 On 1 July 2007 four State-based businesses including Stanley Thompson joined together under the common banner of "Propell". 10 On 1 January 2011 Propell began operating as a single national entity being Propell National Valuers Pty Ltd. This had been envisaged since 2007. The parties to these transactions saw the advantages of a single national entity. In return for its "contribution" to the "overall national business" Spencer Holdings received 13,619 shares in Propell National Valuers Pty Ltd and that shareholding represents approximately 14 per cent of the issued share capital of the company. 11 It seems then that from 2007 to 2010 the first respondent was part of an alliance of four firms operating under a similar business name. That alliance has now been replaced by a national company which operates the businesses previously operated by the four entities. As I understand it, the first respondent now owns shares in a company which conducts a business at a national level rather than a business. 12 The evidence also establishes the first respondent is the trustee of a discretionary family trust called the Spencer Family Trust. 13 The only evidence put forward on the application concerning the second respondent is that he owns a block of land. 14 The first respondent has offered an undertaking that it will not deal with its interest in the national entity without at least 14 days written notice to the applicant and that it will not dispose of its assets other than in the ordinary course of business without at least 14 days written notice. That offer has been rejected by the applicant. 15 The matters which must be established in order to obtain a freezing order are well-known. They are set out in Order 25A of the Federal Court Rules and are conveniently summarised by Tamberlin J in KGL Health Pty Ltd v Mechtler [2007] FCA 1410. Some of the relevant requirements are also reflected in statements in Practice Note CM 9 "Freezing Orders". 16 The first requirement is that an applicant must establish a good arguable case on, relevantly, an accrued cause of action (O 25A r 5). The Statement of Claim and the Defence in this case contain a good deal of detail as to the respective cases of the parties. However, there is no sworn evidence from either party as to that party's case. When I raised that matter with the applicant's counsel in the course of his submissions he applied to call the applicant (who was in court) to give evidence. Counsel for the respondents opposed that course. I did not think that such a procedure should be allowed. Not only would there be questions about the nature and extent of the cross-examination which ought to be permitted but the hearing would have to be adjourned to enable the respondents to prepare its response. The alternative course of adjourning the application to give each party the opportunity to file and serve affidavit evidence is not warranted. I say that because I have reached the clear conclusion that the applicant's application must fail having regard to the next requirement. 17 Order 25A(4) provides as follows: (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; or (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. 18 With respect to this matter, I do not think that there is any reason to think that the transaction involving the first respondent which occurred in late 2010 was motivated by a desire to remove assets or dispose of, deal with or diminish in value assets. There is no reason to question the statement that the transaction had been envisaged since 2007. If any inference is drawn from a transaction which involved other state-based businesses (as well as the first respondent) and a major national entity it is that it had nothing to do with this proceeding. 19 The applicant pointed to the fact that the national entity may take action which diminishes the value of the first respondent's shares in the national entity. The short answer to that submission is that this is not an application against the national entity. 20 If the transaction involving the first respondent is put to one side (as I think it should be) there is simply no evidence that any judgment the applicant might obtain will be wholly or partly unsatisfied because of any of the matters in O 25A r 5(4)(a) or (b). Even if the national entity did something that diminished the value of the first respondent's shares that could not, without more, justify an order against the first and second respondents about dealings in its assets. 21 The applicant's application for a freezing order must be refused. There is, for the same reasons, no basis for ancillary orders. 22 The respondents raised other objections to the proposed orders. They included a submission that there is no evidence of the likely quantum of damages in the event that the applicant succeeded and a submission that there is no evidence that the applicant would be able to meet an undertaking as to damages. In the circumstances I do not need to address those submissions.