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[2026] NSWCA 135
appellant. Leave to appeal was granted on grounds 1–6 and refused on ground 7. The appeal was allowed. The freezing order was varied to permit Golden Rain to sell Lots 1–4, 6–10 and 12–17 of Folio Identifier...
The Court of Appeal held that a freezing order is not ordinarily a means of stopping a company from selling assets at fair market value to pay genuine debts when those debts fall due. Paying a liability reduces assets and liabilities together, which is different from distributing profits or lending money out of the company. The Court varied the order so Golden Rain could sell specified terraces and use the proceeds to pay its current debts as they fell due. The validity of the security arrangements remained for separate proceedings.
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The dispute arose from two related matters: the owners’ corporation’s claim about allegedly defective apartment works, and Golden Rain’s proposed sale of terraces to repay loans used to fund development.
The Owners – Strata Plan No 97938 had commenced proceedings in May 2022 against Golden Rain and other defendants. It claimed approximately $26 million in damages for allegedly defective works affecting common property, including alleged breaches of statutory warranties under s 18B of the Home Building Act 1989 (NSW) ([3]). The merits of those defect claims were not decided in this appeal.
Golden Rain had developed the apartments and the adjacent Honeycomb Terraces. Its development funding included loans from six related parties. Those loans were originally due for repayment on 18 November 2024. On 24 July 2025, Golden Rain refinanced them, with a new repayment date of 25 July 2026, or earlier on specified events of default ([4]–[6], [22]–[24]). The refinanced debt totalled approximately $25.84 million. At the same time, security was granted over the terraces and other assets, with sale proceeds directed first towards the secured related-party lenders ([5]–[6], [26]).
The owners’ corporation sought a freezing order preventing dealings with Golden Rain’s assets up to the unencumbered value of its claim. Alternatively, it sought an order requiring advance notice before Golden Rain dealt with the terraces ([2]). The primary judge made an order in the alternative form: Golden Rain had to give at least 20 business days’ written notice before dealing with specified lots, subject to three lots already under contracts of sale ([12]). The judge considered that Golden Rain would sell the terraces and use a large portion of the proceeds to pay its existing related-party debt ([58]).
Golden Rain appealed. The Court of Appeal granted leave on grounds 1–6, refused leave on ground 7, and allowed the appeal. It varied the order to permit Golden Rain to sell specified lots for fair market value and use the proceeds to pay its current debts as they fell due ([85]–[92]). The order did not determine whether the security documents were valid. Separate proceedings under s 37A of the Conveyancing Act 1919 (NSW) were listed to determine that issue ([7], [76]).
The central question was not whether Golden Rain was financially weak. The Court accepted that the company’s financial position was delicate and that its liabilities and the owners’ corporation’s claim created an evident risk that the claim might not be met in full ([68], [82], [97]). The question was whether payment of genuine debts from asset-sale proceeds itself created the kind of danger that permits a freezing order.
The Court answered by focusing on the purpose of the jurisdiction. Rule 25.11 describes freezing orders as preventing frustration or inhibition of the court’s process, and r 25.14(4) identifies circumstances in which there may be a danger that a prospective judgment will be wholly or partly unsatisfied ([10]). The Court held that the harmonised rules did not change the principles developed in the earlier Mareva jurisprudence ([32]–[34], [64]).
The distinction between a payment that reduces the debtor’s net assets and a payment that discharges a liability was decisive. At [67], Bell CJ explained that not every dealing with assets creates the required danger. A relevant dealing must have a negative effect on the debtor’s financial position by reducing the pool available for a future judgment. Selling an asset and applying the proceeds to repay an accrued liability ordinarily reduces assets and liabilities together, so it does not diminish the debtor’s net asset position.
The Court contrasted Golden Rain’s proposed payments with distributions of profits or loans to other group companies. Those transactions may remove value from the prospective judgment debtor without discharging its own liability. The Court said the transactions considered in Aqualand involved distributions of profits or inter-company lending, rather than payment of the prospective judgment debtor’s own debts ([72], [98]). In Skyworks, the relevant concern was payment of debt owed by other companies in the group, not repayment of the restrained company’s own debt ([55], [72], [98]).
The Court also identified a causative requirement in r 25.14(4). The danger that a prospective judgment will be unsatisfied must be caused by, or arise from, one of the circumstances specified in the rule. A company’s existing financial weakness compared with the size of a claim may explain why a judgment could be difficult to satisfy, but it does not necessarily show that an otherwise proper payment caused that danger ([68]). The Court therefore rejected the proposition that Golden Rain had to preserve a pool of assets for the owners’ corporation simply because its claim was large and Golden Rain had negative equity ([82]).
The related-party nature of the lenders did not change the result. Bell CJ accepted that this circumstance could invite scrutiny, but held that it was not a reason, by itself, to prevent repayment of an otherwise genuine debt ([73]–[75]). The owners’ corporation had not established that the loans were not genuine, and the appeal proceeded on the basis that the underlying debt was real. The Court said the creditor’s identity should not alter the analysis where the debt is genuine ([73]).
Finally, the Court held that freezing orders are not a substitute for security and are not intended to rewrite insolvency law. If Golden Rain later entered liquidation, statutory insolvency rules might provide a basis to examine payments, if the relevant conditions were met. That was a different question for the appropriate insolvency process, rather than a reason to use a freezing order to protect a prospective claimant in advance ([36], [42], [77], [82]).
The judgment presents its central propositions as a restatement and application of established principles, not as a new statutory scheme. UCPR r 25 was part of the harmonised freezing rules adopted in 2006. Bell CJ relied on earlier authority describing the rules as a formulation or restatement of the existing Mareva jurisprudence ([32]–[34]). The Court rejected the respondent’s submission that the words “disposed of, dealt with or diminished in value” in r 25.14(4)(b) displaced the earlier limits on the jurisdiction ([64], [67]).
Before this decision, the authorities cited in the judgment had recognised that freezing orders could be varied to permit payment of debts as they fell due. The Angel Bell, Barclay-Johnson, AJ Bekhor and Riley McKay were treated as establishing the importance of preserving a debtor’s ability to meet genuine obligations, rather than using a freezing order to immobilise assets for a claimant’s benefit ([39]–[41]). The judgment also referred to Frigo, in which this Court said that provision should be made for access to assets for living expenses, debt payments and legal expenses ([44]).
The judgment clarifies the scope of that principle in three ways. First, it is not confined to trade debts: Bell CJ rejected a limitation to trade creditors and relied on the broad wording of the earlier authorities and the standard form order in Practice Note SC Gen 14 ([46], [69]). Second, the relevant comparison is not simply whether an individual transaction is routine. The judgment noted that an infrequent or unusual transaction may still occur in the ordinary course of business, depending on the course of business as a whole ([47]). Third, a payment to a related party is not automatically excluded from the ordinary debt-payment treatment, although the relationship may call for scrutiny if there is a basis to question the debt’s genuineness ([73]–[75]).
The Court also clarified the relationship between the general financial risk and the particular dealing relied on to obtain relief. A claimant must connect the specified event in r 25.14(4) to the danger that the prospective judgment will be unsatisfied. Financial weakness may be highly relevant context, but the Court held it is not, by itself, proof that payment of an existing debt is dissipation ([68], [82]).
The judgment did not decide that related-party security is valid, or that every debt payment will be permitted in every case. The separate s 37A proceedings remained pending, and the Court expressly said the validity of the security would be determined there ([7], [76], [80]). Its reasoning concerns the proper scope of the freezing-order jurisdiction on the record and arguments before it.
At [67], Bell CJ said that the rule does not treat “any dealing” as enough. The dealing must negatively affect the debtor’s financial position by reducing the pool of assets available for a judgment. In plain English, moving assets around is not automatically dissipation. The question is whether the transaction removes value from the debtor’s net position in a way that threatens the court’s process.
Also at [67], Bell CJ stated: “The sale of assets, however, to repay an accrued liability does not affect or diminish the putative judgment debtor’s net asset position.” This captures the accounting logic underpinning the decision. If an asset is sold at fair value and the proceeds pay a real liability, both the assets and liabilities are reduced. The Court contrasted this with distributing profits or lending value to other entities, where the company may lose an asset without extinguishing its own debt ([72], [98]).
At [68], Bell CJ described a “causative dimension” in r 25.14(4). In plain English, it is not enough to show that a judgment might go unpaid. The applicant must connect that risk to one of the specified events, such as assets being removed, disposed of, dealt with or diminished. The debtor’s pre-existing financial position may make recovery uncertain, but the particular dealing still has to contribute to the statutory danger.
At [73]–[75], the Court addressed related-party lending. A related-party relationship may be a reason to examine the transaction, but the Court found no basis in this case to treat those creditors differently merely because of their relationship with Golden Rain. The Court emphasised that the genuineness of the underlying debt had not been challenged successfully.
Leeming JA’s summary at [94] states two core propositions: a potential judgment debtor’s ordinary repayment of debt does not generally create a risk of abuse or frustration of the court’s process, and a freezing order does not exist to improve the claimant’s position in an insolvency or provide security for a future judgment. In practical terms, a freezing order preserves against process-frustrating dissipation; it does not reserve assets for a claimant simply because that claimant may later obtain judgment.
At [98], Leeming JA restated the key distinction: paying debt owed by the restrained company differs from paying debt owed by other companies. The first ordinarily discharges the company’s own liability; the second may divert the company’s assets to meet another entity’s liability. The judgment’s treatment of Aqualand and Skyworks turns on this distinction.
The decision is most directly relevant where a party seeks a freezing order against a prospective judgment debtor that proposes to sell assets and use the proceeds to discharge an existing, genuine liability as it falls due. The judgment supports distinguishing those facts from transactions that transfer value away without reducing the debtor’s own liabilities.
A lawyer or decision-maker applying the reasoning would need to identify the actual transaction and its balance-sheet effect. Relevant questions include whether the debt is genuinely owed, whether it has accrued or become payable, what the sale price is compared with market value, who receives the proceeds, and whether the payment discharges the prospective judgment debtor’s own liability. These are analytical considerations suggested by the Court’s reasoning, not a substitute for assessment of a particular case.
The precedent also highlights the significance of the cause of the alleged risk. If the asserted danger comes from a distribution of profits, an unsecured or non-commercial loan, or payment of liabilities belonging to another group company, the transaction may have a different effect from repayment of the restrained entity’s own debt ([66], [72], [98]). The case does not say that any transaction labelled “debt repayment” is immune. The judgment’s reasoning depends on the debt being genuine and the payment being for discharge of an existing obligation, rather than a device to remove value or frustrate the court’s process ([71], [73]–[75]).
Related-party arrangements can remain a point of scrutiny. The Court held only that the relationship alone was not enough in the circumstances before it, where the debt’s genuineness was not established to be in issue. It also expressly left the validity of the security documents for separate proceedings ([74]–[76]). A case involving a disputed debt, suspect transaction, undervalue sale, or payment that does not discharge the debtor’s own liability would require separate analysis.
The decision is also relevant where the applicant relies mainly on the defendant’s negative equity or the size of the claim. Those matters may show a risk of non-payment, but the judgment says the applicant must still address the causative link between a specified dealing and the danger in r 25.14(4) ([68], [82]).
The judgment is dated 16 July 2026 and the supplied text contains no later decisions applying or interpreting Golden Rain. It is therefore not possible, from this source alone, to describe how later courts have treated the decision.
The judgment itself considers earlier authority, rather than later treatment of its own holding. It relies on Riley McKay, The Angel Bell, Barclay-Johnson and AJ Bekhor in explaining why debt payments are ordinarily outside the purpose of a freezing order ([39]–[41]). It also discusses Aqualand and Skyworks, distinguishing the relevant transactions because they involved distributions, inter-company lending, or payment of another company’s debt rather than payment of the prospective judgment debtor’s own debt ([55], [72], [98]).
The judgment corrects a material slip in its account of Aqualand. The relevant phrase should have referred to debt “owed by” other companies, rather than debt “owed to” them ([55]–[56], [98]). That distinction matters because the former may divert value from the defendant to pay another company’s liabilities, while the latter can describe repayment of the defendant’s own liability.
The appeal did not decide whether the July 2025 security documents were voidable under s 37A of the Conveyancing Act 1919 (NSW). Those proceedings were listed for hearing on 1 September 2026 ([7]). The Court said the outcome of that dispute did not alter the existence of the underlying loan liabilities or the central principle about repayment, but the security’s validity remained unresolved ([76]–[80]).
The decision also does not define every circumstance in which a debt payment might be restrained. Bell CJ described the ordinary rule and acknowledged that the related-party relationship may invite scrutiny, but the judgment does not comprehensively specify what evidence would justify treating a purported repayment as a transaction intended to frustrate the court’s process ([71], [74]–[75]). The Court’s conclusion rested on the position that the underlying indebtedness was genuine and that no successful challenge to it had been made.
Nor does the judgment decide the treatment of every unusual or non-routine payment. It notes that “ordinary course of business” is not necessarily synonymous with routine or recurrent, but the application of that idea remains fact-sensitive ([47]). The relevant inquiry is the character and effect of the transaction, considered in context.
Finally, the case does not determine how a future court should resolve every interaction between a freezing order, a secured creditor’s enforcement rights and insolvency legislation. It reiterates that freezing orders should not displace insolvency law or give a prospective claimant security, while recognising that particular payments may later be examinable under applicable insolvency provisions if the necessary conditions arise ([70], [77], [82]).
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on, relying on, or using this analysis, have a qualified Australian lawyer check it.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Golden Rain Development Pty Ltd (ACN 166 672 537) v The Owners – Strata Plan No 97938 [2026] NSWCA 135
Hearing dates: 11 June 2026
Date of orders: 16 July 2026
Decision date: 16 July 2026
Before: Bell CJ at [1];
Leeming JA at [93];
Ball JA at [100].
Decision: (1) Grant leave to appeal on grounds 1-6 of the draft notice of appeal, and refuse leave to appeal on ground 7.
(2) Direct the appellant to file a notice of appeal within 7 days, and otherwise dispense with the requirements of service.
(3) Appeal allowed.
(4) Vary order 1 made on 10 February 2026 by adding “Nothing in this order prevents Golden Rain from selling any of Lots 1-4, 6-10 and 12-17 of Folio Identifier SP108772 for fair market value and from using the proceeds of sale to pay its current debts as they fall due”.
(5) Note the undertaking by Golden Rain Development Pty Ltd at [88] of this judgment.
(6) Set aside order 2 made on 10 February 2026 and in lieu thereof order The Owners – Strata Plan No 97938 to pay the costs of Golden Rain Development Pty Ltd of the notice of motion filed 28 November 2025.
(7) The Owners – Strata Plan No 97938 to pay the costs of Golden Rain Development Pty Ltd of the appeal (including the application for leave to appeal).
Catchwords: CIVIL PROCEDURE — Interim preservation — Freezing orders — where owners’ corporation sought to restrain developer from selling its only substantial assets without notice — where developer sought to use proceeds of sale of assets to repay debt incurred from related parties to fund development — where developer granted security over assets to related parties while litigation pending — whether debts incurred in the ordinary course of business — whether sale of assets in order to pay debts as they fell due should have been carved out of freezing order — whether danger that prospective judgment debt would not be paid caused by apprehended payment of existing debts or the financial position of the prospective judgment debtor
Legislation Cited: Conveyancing Act 1919 (NSW) s 37A
Corporations Act 2001 (Cth)
Home Building Act 1989 (NSW) s 18B
Uniform Civil Procedure Rules 2005 (NSW) rr 25.11, 25.14
Cases Cited: AJ Bekhor & Co Ltd v Bilton [1981] QB 923
Aqualand North Sydney Lavender Development Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143
Atlas Maritime Co SA v Avalon Maritime Ltd (The Coral Rose) [1991] 4 All ER 769
Avant Petroleum Inc v Gatoil Overseas Inc [1986] 2 Lloyd’s Rep 236
Barclay-Johnson v Yuill [1980] 1 WLR 1259; [1980] 3 All ER 190
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18
Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552
Deputy Commissioner of Taxation v Huang (2021) 273 CLR 429; [2021] HCA 43
Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (in liq) (2018) 53 WAR 201; [2018] WASCA 174
Filippini v Keystone Asset Management Ltd (Receivers and Managers appointed) (in liquidation) (2026) 316 FCR 159; [2026] FCAFC 71
Finn v Carelli [2007] NSWSC 261
Frigo v Culhaci [1998] NSWCA 88
Herridge v Electricity Networks Corporation (t/as Western Power) (No 5) [2020] WASC 145
House v The King (1936) 55 CLR 499; [1936] HCA 40
Iraqi Ministry of Defence v Arcepey Shipping Co SA (The Angel Bell) [1980] 2 WLR 488; [1980] 1 All ER 480
Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23
Jorgensen v Fair Work Ombudsman (2019) 271 FCR 461; [2019] FCAFC 113
Ling v Enrobook Pty Ltd (1997) 74 FCR 19
Michael Wilson & Partners Ltd v Emmott [2015] EWCA Civ 1028
Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249; (2008) 163 LGERA 83
Palmer v Parbery; QNI Metals Pty Ltd v Parbery [2019] QCA 27; (2019) 136 ACSR 26
PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36
Re Ousley; Ex parte Commissioner of Taxation (1994) 48 FCR 131
Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264
Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102
Skyworks v 32 Drummoyne Road [2017] NSWSC 343
TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196
Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645
The Owners – Strata Plan No. 102081 v Aqualand Construction Pty Ltd [2025] NSWSC 31
Texts Cited: Practice Note SC Gen 14
P Biscoe, Freezing and Search Orders (3rd ed, 2023, LexisNexis)
Category: Principal judgment
Parties: Golden Rain Development Pty Ltd (ACN 166 672 537) (Applicant)
The Owners – Strata Plan No 97938 (Respondent)
Representation: Counsel:
N Kidd SC, J Dooley (Applicant)
F Corsaro SC, PA Horobin (Respondent)
Solicitors:
Allens (Applicant)
Chambers Russell Lawyers (Respondent)
File Number(s): 2026/00091811
Publication restriction: N/A
[This headnote is not to be read as part of the judgment]
The owners’ corporation of a set of apartments brought proceedings against the developer of those apartments, Golden Rain Development Pty Ltd. In the proceedings, the owners’ corporation sought damages in respect of certain allegedly defective works.
The developer had funded the development of the apartments and some nearby terraces using loans from its related parties. While the proceedings were pending, the developer had refinanced those loans and granted to the related parties the benefit of a security over the terraces.
The owners’ corporation sought a freezing order to restrain the developer from disposing of, dealing with, or diminishing the value of its assets in Australia, namely the terraces, up to the unencumbered value of AUD $29,080,012.98. Alternatively, it sought an order restraining the developer from dealing with its proprietary interest in the terraces without giving prior notice to the owners’ corporation of at least five business days. The primary judge made the alternative order sought although his Honour increased the notice period to 20 business days and excepted from the order three of the terraces that were already subject to contracts of sale.
The primary judge held that there was a real danger that the developer would be unable to satisfy a prospective judgment in favour of the owners’ corporation.
Argument centred around whether the primary judge was correct to make the order in circumstances where the developer needed to sell the terraces for the purposes of repaying the substantial and refinanced debts which would fall due on 25 July 2026 or, alternatively, whether the primary judge should have excepted from the freezing order an ability of the developer to sell the terraces for the purposes of raising moneys to pay its current debts as they fell due.
The Court (Bell CJ, Leeming JA and Ball JA agreeing) held, granting leave to appeal and allowing the appeal:
Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249; (2008) 163 LGERA 83; TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196; Finn v Carelli [2007] NSWSC 261; Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102; Deputy Commissioner of Taxation v Huang (2021) 273 CLR 429; [2021] HCA 43; Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23; Filippini v Keystone Asset Management Ltd (Receivers and Managers appointed) (in liquidation) (2026) 316 FCR 159; [2026] FCAFC 71, referred to.
Iraqi Ministry of Defence v Arcepey Shipping Co SA (The Angel Bell) [1980] 2 WLR 488; [1980] 1 All ER 480*;* Barclay-Johnson v Yuill [1980] 1 WLR 1259; [1980] 3 All ER 190; AJ Bekhor & Co Ltd v Bilton [1981] QB 923; Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264, applied.
Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645; Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (in liq) (2018) 53 WAR 201; [2018] WASCA 174; Palmer v Parbery; QNI Metals Pty Ltd v Parbery [2019] QCA 27; (2019) 136 ACSR 26; Herridge v Electricity Networks Corporation (t/as Western Power) (No 5) [2020] WASC 145; Aqualand North Sydney Lavender Development Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143; Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23, referred to.
Avant Petroleum Inc v Gatoil Overseas Inc [1986] 2 Lloyd’s Rep 236; Aqualand North Sydney Lavender Development Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143; Michael Wilson & Partners Ltd v Emmott [2015] EWCA Civ 1028, cited.
Frigo v Culhaci [1998] NSWCA 88; Atlas Maritime Co SA v Avalon Maritime Ltd (The Coral Rose) [1991] 4 All ER 769, cited.
Aqualand North Sydney Lavender Development Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143; Skyworks v 32 Drummoyne Road [2017] NSWSC 343, distinguished.
Iraqi Ministry of Defence v Arcepey Shipping Co SA (The Angel Bell) [1980] 2 WLR 488; [1980] 1 All ER 480; Barclay-Johnson v Yuill [1980] 1 WLR 1259; [1980] 3 All ER 190; AJ Bekhor & Co Ltd v Bilton [1981] QB 923; Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264; Frigo v Culhaci [1998] NSWCA 88; Atlas Maritime Co SA v Avalon Maritime Ltd (The Coral Rose) [1991] 4 All ER 769, referred to.
Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23; Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264; Iraqi Ministry of Defence v Arcepey Shipping Co SA (The Angel Bell) [1980] 2 WLR 488; [1980] 1 All ER 480; Barclay-Johnson v Yuill [1980] 1 WLR 1259; [1980] 3 All ER 190*; AJ Bekhor & Co Ltd v Bilton* [1981] QB 923; Finn v Carelli [2007] NSWSC 261, applied.
Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (in liq) (2018) 53 WAR 201; [2018] WASCA 174; Palmer v Parbery; QNI Metals Pty Ltd v Parbery [2019] QCA 27; (2019) 136 ACSR 26; Herridge v Electricity Networks Corporation (t/as Western Power) (No 5) [2020] WASC 145; Aqualand North Sydney Lavender Development Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143, referred to.
Michael Wilson & Partners Ltd v Emmott [2015] EWCA Civ 1028; Jorgensen v Fair Work Ombudsman (2019) 271 FCR 461; [2019] FCAFC 113, referred to.
“Nothing in this order prevents Golden Rain from selling any of Lots 1-4, 6-10 and 12-17 of Folio Identifier SP108772 for fair market value and from using the proceeds of sale to pay its current debts as they fall due.”
Frigo v Culhaci [1998] NSWCA 88, referred to.
BELL CJ: These reasons relate to an application for leave to appeal from an interlocutory decision of Griffiths AJ (the primary judge) on 10 February 2026 in proceedings in the Equity Division of this Court: The Owners – Strata Plan No 97938 v Golden Rain Development Pty Ltd [2026] NSWSC 37 (PJ or primary judgment).
Before the primary judge, the Respondent (the Owners’ Corporation) applied for a freezing order restraining the Applicant, Golden Rain Development Pty Ltd (Golden Rain), from disposing of, dealing with, or diminishing the value of its assets in Australia up to the unencumbered value of AUD $29,080,012.98 (prayer 1). Alternatively, the Owners’ Corporation sought an order restraining Golden Rain from dealing with its proprietary interest in 18 lots in what is known as the Honeycomb Terraces (the terraces) in Erskineville without giving prior notice to the Owners’ Corporation of at least five business days (prayer 3).
Golden Rain was the developer of the terraces, having also developed and sold 109 apartments on two adjacent blocks and in respect of which the Owners’ Corporation has commenced proceedings in the Technology and Construction List in this Court. In those proceedings, the Owners’ Corporation seeks damages of approximately $26 million in respect of allegedly defective works affecting common property in the apartment blocks. The Owners’ Corporation alleges, inter alia, breaches of statutory warranties under s 18B of the Home Building Act 1989 (NSW). The Technology and Construction List proceedings were commenced in May 2022 and involve multiple defendants in addition to Golden Rain.
Golden Rain financed the development using money borrowed from six lenders on 18 November 2014. Each lender was a related party. The loans were to be repaid by 18 November 2024 with 10% interest per annum. The lenders, however, later waived their rights to this interest. The loans were not secured.
On 24 July 2025, Golden Rain refinanced the loans. The identities of the lenders remained the same, save for one of them being replaced by his son. The loans — which by then totalled $25,838,926.99 — were now to be repaid by 25 July 2026 or on demand upon any earlier event of default: see at [21]-[25] below.
At the same time, the loans were secured. Golden Rain mortgaged the terraces to a security trustee which held the mortgage on trust for the lenders and was required to exercise its powers as mortgagee on their behalf and in accordance with their instructions: see further at [26] below. The mortgages provided that the proceeds of sale of the terraces were first to be paid to secured related parties who were also lenders.
“The court may make a freezing order … against a … prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a … prospective judgment will be wholly or partly unsatisfied because any of the following might occur—
(a) the … prospective judgment debtor or another person absconds,
(b) the assets of the … prospective judgment debtor … are—
(i) removed from Australia or from a place inside or outside Australia, or
(ii) disposed of, dealt with or diminished in value.” (emphasis added)
UCPR r 25.11(1) should also be noted. It relevantly provides:
“The court may make an order (a freezing order) … for the purpose of preventing the frustration or inhibition of the court’s process by seeking to meet a danger that a … prospective judgment … will be wholly or partly unsatisfied.” (emphasis added)
It was conceded for the purposes of the proceedings before the primary judge that the Owners’ Corporation had a good arguable case on an accrued or prospective cause of action that is justiciable in the Supreme Court: see UCPR r 25.14(1).
The order in fact made by the primary judge differed from that sought in both prayers 1 and 3 of the Notice of Motion but was closer in form to that sought by prayer 3. It was as follows:
“Upon the plaintiff giving the usual undertaking as to damages, order that the first defendant be restrained from encumbering, disposing of, or otherwise dealing with Lots 1-18 of Folio Identifier SP108772, apart from lots 5, 11 and 18, without giving prior notification in writing to the plaintiff of at least 20 business days, until final judgment of the proceedings or alternatively, until further order by the Court.”
In November 2014, Golden Rain purchased land in Erskineville on which it intended to undertake its first development**.**
Golden Rain financed the development using money borrowed from six lenders in addition to bank finance. Each of the six lenders was a related party, as explained at [4] above.
The development involved the construction of apartments and terraces. Golden Rain sold the apartments when it obtained an interim occupation certificate for them in November 2020. It used the proceeds of sale to repay a loan from a bank and other development expenses. The developer did not sell the terraces because it could not obtain an occupation certificate for them.
In May 2022, as noted at [3] above, the Owners’ Corporation commenced proceedings against Golden Rain and various other defendants that were involved in the development. For reasons which are unclear, those proceedings are still in the preparation stage: a large number of expert reports have apparently been filed on behalf of the Owners’ Corporation and defences have not yet been ordered. Self-evidently, the proceedings are still a considerable way off hearing or even mediation.
As of 30 June 2024, Golden Rain owed $26,953,463.00 to its related parties. The financial statements for the financial year ending 30 June 2024 recorded that the financial report of Golden Rain had been prepared on a “going concern” basis, notwithstanding its deficiency of net assets, because it had received a guarantee of continuing financial support. The identity of the guarantor, and the terms of the guarantee, were not clear from the evidence.
Golden Rain failed to repay the loans to its related parties by the repayment date on 18 November 2024.
In May 2025, the solicitors for the Owners’ Corporation asked Golden Rain to provide an undertaking not to deal with its assets up to the amount then claimed by the Owners’ Corporation until the final determination of the proceedings.
On 23 July 2025, the solicitors for the Owners’ Corporation again asked the developer to provide an undertaking, but this time merely to not deal with any real property it owned.
The next day, on 24 July 2025, Golden Rain refinanced the loans, as explained at [5] above and security documents were entered into to secure the refinanced loans. The Loan Facility Deeds were in materially identical terms (albeit with different facility limits). The Recitals were as follows:
“A The Lender and the Borrower are party to a Loan Facility Deed dated 18 November 2014 (as amended by a supplementary deed dated 15 August 2019) pursuant to which the Lender advanced money to the Borrower towards payment of Project Costs and business and working capital (the Existing Facility).
B Amounts outstanding under the Existing Facility were due to be repaid on 18 November 2024. The Borrower has not repaid the amounts outstanding under the Existing Facility.
C In consideration for the Lender agreeing not to demand immediate repayment of amounts outstanding under the Existing Facility, the parties have agreed:
• that the Existing Facility will be replaced by a new facility on the terms of this Deed, which supersedes, terminates and replaces the Existing Facility in full and is not a variation, amendment or restatement of it; and
• that the Borrower will grant the Security under the Transaction Security Documents.
D The Borrower and the Lender enter into this agreement for valuable consideration, the sufficiency and receipt of which is acknowledged by each party.”
“With effect from the Facility Commencement Date:
(a) the Lender advances an amount equal to the Facility Limit (being the total amount currently outstanding under the Existing Facility) to the Borrower;
(b) the Borrower directs that the Lender apply the advance under paragraph (a) in repayment and satisfaction of the Borrower’s obligation to repay the total amount currently outstanding under the Existing Facility; and
(c) the Existing Facility is therefore fully repaid and will be cancelled in full and terminated.”
The moneys advanced were to be repaid on or before the Repayment Date, being 25 July 2026 and on demand at any time after the occurrence of certain events including the failure by Golden Rain to pay any amount of principal and interest when due (cl 3(b)(i)).
A Balance Sheet for Golden Rain that was in evidence before the primary judge covering the period from July 2025 to December 2025 evidenced substantial liabilities arising from the lending by the related parties. Although in this Court the Owners’ Corporation asserted in its written submissions at [40] that “[t]he genuineness of the underlying indebtedness … remains unverified and unsubstantiated”, this was inconsistent with the evidence and not developed.
At first instance, the primary judge accepted the following summary analysis of the suite of documents entered into on 24 July 2025 (and that summary was not subject to criticism):
“3. The recitals to those agreements record that the earlier facilities are replaced, and the repayment obligation in clause 2 requires repayment of ‘the money borrowed’ by the Repayment Date. The existing outstanding amounts are carried forward into the replacement facility deed. That conclusion is reinforced by the definition of the Facility Commencement Date, which occurs on execution and confirmation of the documents, not on drawdown.
- There is no condition precedent requiring funds to be advanced before the facilities take effect. The legal effect is that the replacement facilities become operative immediately, notwithstanding that no new money need pass, and is not alleged to have passed, and the existing indebtedness is preserved and re-documented rather than discharged.
- Each Replacement Facility Agreement defines Finance Documents to include the Security Trust Deed (Exhibit 2), the General Security Deed (Exhibit 3) and the Mortgage Terms Deed (Exhibit 1) (the security documents). That incorporation is critical because it subjects liabilities under the Replacement Facility Agreements, including rolled-over historical debt, to the definitions and enforcement machinery contained in the security documents.
- The Security Trust Deed is the central instrument that effects the conversion of unsecured debt into secured debt. Clause 1.1 defines Secured Money as all money which the Borrower is or may become actually or contingently liable to pay for any reason whatever under or in connection with a Finance Document, whether or not currently contemplated.
- That definition is not confined to future advances. It expressly captures liabilities existing at the time of execution, as well as contingent and future liabilities. The legal effect of clause 1.1 is that the historical indebtedness preserved by the Replacement Facility Deeds becomes Secured Money upon execution of the Trust Deed.
- Clause 2.1 of the Security Trust Deed declares that the Security Trustee, MSC Capital Pty Ltd, holds the security on trust for the Beneficiaries [defined in clause 1.1 as including the Security Trustee and any Lender]. Control of that trust is vested in the Instructing Beneficiaries, defined in clause 1.1 as two related parties [acting together], and clause 3.3 requires the Security Trustee to act on their instructions. The effect is that enforcement, timing and distribution decisions are controlled by the same parties whose debt is being secured.
- Events of Default are defined in clause 1.1 by reference to any Finance Document. There is no requirement that a default relate to a new advance. Non-payment of rolled-over historical debt is sufficient to trigger enforcement of the entire security package.
- Clause 4 of the Security Trust Deed governs the application of proceeds and is central to the freezing order.
- Clause 4.1 provides that the distribution regime ‘applies despite any rule of law or equity to the contrary’.
- Clause 4.2 then mandates a strict waterfall. After enforcement costs and any prior ranking securities, proceeds are paid to the Security Trustee for the account of the Beneficiaries towards satisfaction of the Secured Money, before any surplus can belong to the Borrower. Clause 4.2(e) permits application rateably or in any other manner agreed by the Security Trustee and all Beneficiaries. Clause 4.4 permits retention of amounts for contingently owing Secured Money, and clause 4.5 allows, after default and on instruction, all payments to be routed through the Security Trustee.
13. The legal effect of clause 4 is to contractually lock in the priority: sale proceeds are diverted first to secured related parties who are also lenders, with discretion vested in those lenders as to internal allocation, and with the capacity to withhold funds for contingent claims.
- The General Security Deed then gives effect to that structure at the asset level. Clause 2.1 grants a security interest over all present and after-acquired property to secure the Secured Money. Clause 2.2 provides that the security is given in consideration of providing or continuing financial accommodation, confirming that continuation of existing loans is sufficient consideration and no fresh advance is required.
- Clause 19 provides that the security is a continuing security that is not discharged by settlement of account, intervening payment or anything else until final discharge. Clause 5.2(c) warrants that the security interest is and will remain first-ranking.
16. Clause 6.1 confers broad enforcement powers upon the occurrence of an Event of Default. The combined effect of those clauses is that all the assets are encumbered to secure historical debt, the priority of that security is contractually elevated, and the security cannot be neutralised by repayment or re-documentation unless the secured parties choose to release it.
- The Mortgage Terms Deed applies the same structure to the land. By incorporating the Security Trust Deed definition of Secured Money, the mortgage secures the same expansive category of liabilities, including antecedent debt. Clause 16.1 provides that all enforcement proceeds are applied in accordance with clause 4 of the Security Trust Deed. Clause 16.3 permits retention of amounts contingently owing and treats them as due for statutory purposes. The effect is that the proceeds of any sale of the land are fed directly into the trustee waterfall favouring the now secured, same related parties.
- Notwithstanding that both the Recitals of the Mortgage Terms Deed and General Security Deed suggest that they were entered in contemplation of future financial accommodation, the security documents read together demonstrate that in July 2025 existing unsecured indebtedness was preserved, swept into an expansive definition of Secured Money, secured over all assets of the company including the Honeycomb Terraces, and subjected to a mandatory distribution regime that prioritises related party lenders and places control of enforcement and allocation in their hands.” (emphasis added by primary judge)
Between 31 July 2025 and 26 November 2025, the parties exchanged detailed correspondence regarding the form that an undertaking in relation to the sale of the terraces might take. Between August and September 2025, the lenders advanced a total of $1 million in additional loans to Golden Rain. The purpose of these new loans was to pay land tax due on the terraces and other expenses. Interest is payable on that advance at 10% per annum.
By the time of the application for a freezing order, Golden Rain had sold three of the terraces “off the plan”. These were presumably the three excepted from the operation of the primary judge’s order noted at [12] above. Golden Rain intended to sell the remaining terraces, which were valued at $33,090,000.00, once it received occupation certificates so that it could use the proceeds of sale to repay the lenders with any surplus sale proceeds intended to be used to fund future property development projects.
On the evidence before the Court and on the assumption that the sale of the terraces would be for their approximate value, Mr Kidd SC, who appeared for Golden Rain, submitted that an amount of between $8 million and $11 million would remain after repayment of debt.
Subsequent to the hearing of the application for leave to appeal, the Court was informed by the parties that:
“1. On 2 April 2026, Golden Rain gave notice to the Respondent of the intended sale of three terraces.
- On 15 April 2026, the Respondent wrote to Golden Rain seeking undertakings from Golden Rain that (in summary) Golden Rain would not apply the proceeds from the sale of those terraces (or any others) to the repayment of its debt and instead pay the proceeds of sale into a joint trust account. The existence of both the proceedings under s 37A of the Conveyancing Act and the reasons of Griffiths AJ were relied upon in the Respondent's letter. Absent agreement to the undertakings by 17 April 2026, the Respondent foreshadowed seeking, without further notice, an injunction restraining payments being made to MSC Capital or any of the lenders and restraining the payment of the sale proceeds otherwise than into a joint trust account.
- On a without admission basis, Golden Rain subsequently negotiated the terms of undertakings with the Respondent. The parties have reached an agreement on the terms of undertakings that involve payment being made into a controlled monies account pending the determination of the Respondent’s proceedings challenging the security documentation under s 37A of the Conveyancing Act, or until further order of the Court in the s 37A proceedings. The s 37A proceedings have been fixed for a 1-day final hearing on 1 September 2026.”
UCPR r 25 gave effect to the Harmonised Freezing Rules adopted by the Council of Chief Justices of Australia and New Zealand on 5 May 2006. These rules have been adopted in all the Supreme Courts of the Australian States and the Australian Capital Territory and the Northern Territory as well as in the Federal Court of Australia and in New Zealand. They operate as a supplement to the Supreme Court’s inherent and statutory power to grant freezing orders.
In Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249; (2008) 163 LGERA 83 at [43] (Caverstock), Spigelman CJ (Bell JA and Handley AJA agreeing) described UCPR r 25.11 as a “formulation of the Mareva injunction jurisprudence ... based upon the power of a court to prevent the frustration of its process and to ensure that its judgments are not without value.”
In TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196 at [6], Barrett J said of UCPR r 25.11 that “[t]his rule and the more detailed rules that follow it may, I think, be regarded as, in broad terms, a distillation or restatement of the general law or, at least, susceptible to approaches similar to those the general law adopts.” See also Finn v Carelli [2007] NSWSC 261 at [3] (Finn), cited with approval in Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102 at [59]; Deputy Commissioner of Taxation v Huang (2021) 273 CLR 429; [2021] HCA 43 at [17] (Huang); P Biscoe, Freezing and Search Orders (3rd ed, 2023, LexisNexis) at xvii (Biscoe).
The power conferred by UCPR r 25.11 must be exercised for the purpose for which it is conferred: Huang at [17]. In that case, at [18], the plurality held that:
“Since Jackson v Sterling Industries Ltd, it has been accepted in Australia, as a general proposition, that a freezing order could be granted if the circumstances are such that there is a danger of the defendant absconding, or a danger of the assets being removed from the jurisdiction or disposed of within the jurisdiction, or otherwise dealt with so that there is a danger that the plaintiff, if successful in obtaining a judgment, will not be able to get it satisfied. The danger must be sufficiently substantial to warrant the freezing order.” (footnotes omitted)
“… not to create security for the plaintiff or to require a defendant to provide security as a condition of being allowed to defend the action against him. ... It is to prevent a defendant from disposing of his actual assets (including claims and expectancies) so as to frustrate the process of the court by depriving the plaintiff of the fruits of any judgment obtained in the action.”
In Frigo v Culhaci [1998] NSWCA 88 (at 6) (Frigo), in a passage subsequently approved in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [51] (Cardile), this Court said that a freezing order is a “drastic remedy which should not be granted lightly ... Its purpose is to preserve the status quo, not to change it in favour of the [applicant].”
The decision of this Court in Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 (Riley McKay), a joint judgment of Street CJ, Hope JA and Rogers AJA, formed an important component and the foundation stone in New South Wales of what Spigelman CJ described in Caverstock at [43] as “the Mareva injunction jurisprudence”. The decision in Riley McKay traced the development of the concept of the Mareva injunction in the English courts and noted the tension between the emergent jurisdiction and the “long-established principle that a person claiming to be a creditor cannot get an injunction to restrain a person who is alleged to be his debtor from parting with his, the debtor’s, property”: at 270. The Court noted that the jurisdiction emerged in the context of the increased ease with which foreign debtors could remove their assets from the jurisdiction. Forty-seven years ago, this was by means of the “radio telephone” or a few words “tapped out on a telex machine”: Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645 at 670, 671.
In an important passage, the Court in Riley McKay drew attention to the decision of Robert Goff J (as his Lordship then was) in Iraqi Ministry of Defence v Arcepey Shipping Co SA (The Angel Bell) [1980] 2 WLR 488; [1980] 1 All ER 480 (The Angel Bell) which the Court described at 270 as an endeavour to reconcile the emergent injunctive remedy with “the principle giving freedom to debtors to deal with their assets”. The use of the language of injunction in relation to freezing orders has subsequently been eschewed in Australia: see Cardile at [43]. The key passage in The Angel Bell (and one upon which Golden Rain in the present case placed heavy reliance) was as follows at 486-487:
“I find it difficult to see why, if a plaintiff has not yet proceeded to judgment against a defendant but is simply a claimant for an unliquidated sum, the defendant should not be free to use his assets to pay his debts. Of course, if the plaintiff should obtain a judgment against a defendant company, and the defendant company should be wound up, its previous payments may thereafter be attacked on the ground of fraudulent preference, but this is an entirely different matter which should be dealt with at the stage of the winding up. It is not to be forgotten that the plaintiff’s claim may fail, or the damages which he claims may prove to be inflated. Is he in the meanwhile, merely by establishing a prima facie case, to preclude the bona fide payment of the defendant’s debts? When taxed with this point counsel for the plaintiffs suggested that in such circumstances the appropriate course of a defendant's creditors was to proceed to judgment because the enforcement of judgments by execution would not constitute breaches of the Mareva injunction against the defendant. This I consider to be an unsatisfactory answer. It does not make commercial sense that a party claiming unliquidated damages should, without himself proceeding to judgment, prevent the defendant from using his assets to satisfy his debts as they fall due and be put in the position of having to allow his creditors to proceed to judgment with consequent loss of credit and of commercial standing. On the approach of counsel for the plaintiffs a jurisdiction which found its origin in the prevention of an abuse would be transmuted into a rewriting of our established law of insolvency. …
All the interveners are asking is that the defendants should be free to repay such a loan if they think fit to do so, not that the loan transaction should be enforced. For a defendant to be free to repay a loan in such circumstances is not inconsistent with the policy underlying the Mareva jurisdiction. He is not in such circumstances seeking to avoid his responsibilities to the plaintiff if the latter should ultimately obtain a judgment; on the contrary, he is seeking in good faith to make payments which he considers he should make in the ordinary course of business. I cannot see that the Mareva jurisdiction should be allowed to prevent such a payment. To allow it to do so would be to stretch it beyond its original purpose so that instead of preventing abuse it would rather prevent businessmen conducting their businesses as they are entitled to do.”
In Barclay-Johnson v Yuill [1980] 1 WLR 1259; [1980] 3 All ER 190 (Barclay-Johnson), decided in the year following The Angel Bell and also referred to by this Court in Riley McKay, Sir Robert Megarry VC, while confirming that a Mareva injunction could restrain a putative judgment debtor from disposing of assets within the jurisdiction and was not therefore confined to a foreign-country-based debtor, was at pains to point out that that did not mean that “the assets will remain sterilised for the benefit of the plaintiff, for the court will permit the defendant to use them for paying debts as they fall due”: at 194 (emphasis added).
The Riley McKay Court also drew attention to Ackner LJ’s judgment in AJ Bekhor & Co Ltd v Bilton [1981] QB 923 at 941-942 (AJ Bekhor), where his Lordship said:
“The plaintiff, like other creditors of the defendant, must obtain his judgment and then enforce it. He cannot prevent the defendant from disposing of his assets pendente lite merely because he fears that by the time he obtains judgment in his favour the defendant will have no assets against which the judgment can be enforced. Were the law otherwise, the way would lie open to any claimant to paralyse the activities of any person or firm against whom he makes his claim, by obtaining an injunction freezing their assets … The Mareva jurisdiction was not intended to re-write the English law of insolvency in this way. The purpose of the Mareva jurisdiction was not to improve the position of claimants in an insolvency, but simply to prevent the injustice of a defendant removing his assets from the jurisdiction which might otherwise have been available to satisfy a judgment. … The courts must be vigilant to ensure that the Mareva defendant is not treated like a judgment debtor.”
The Riley McKay Court concluded that “the jurisdiction to grant the injunction is not to be exercised simply to preclude a debtor from dealing with his assets, and in particular to prevent him from using them to pay his debts in the ordinary course of business”: at 276. This passage was cited with approval in Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (in liq) (2018) 53 WAR 201; [2018] WASCA 174 at [55]; Palmer v Parbery; QNI Metals Pty Ltd v Parbery [2019] QCA 27; (2019) 136 ACSR 26 at [56]; see also Herridge v Electricity Networks Corporation (t/as Western Power) (No 5) [2020] WASC 145 at [54]; and, most recently, the citation of the passage by this Court in Aqualand North Sydney Lavender Development Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143 (Aqualand) which will be considered in further detail below.
“… cannot beforehand prevent the defendant from disposing of his assets merely because he fears that there will be nothing against which to enforce his judgment nor can he be given a secured position against other creditors. The remedy is not to be used to circumvent the insolvency laws.”
“The practice has developed that such orders may and should be varied to allow payment of debts incurred in the ordinary course of business even if not legally enforceable (The ‘Angel Bell’ [1981] QB [65], at p 73; Bakarim v Victoria P Shipping Co Ltd (The ‘Tatiangela’) [1980] 2 Lloyd's Rep 193; and Riley McKay Pty Ltd v McKay), to allow the defendant sufficient funds to meet reasonable living expenses (PCW (Underwriting Agencies) Ltd v Dixon (1983) 2 All ER 158), and to prevent interference with the rights of third parties: Galaxia Maritime SA v Mineralimportexport (The ‘Eleftherios’) [1982] 1 WLR 539; [1982] 1 All ER 796; Clipper Maritime Co Ltd v Mineralimportexport (The ‘Marie Leonhardt’) [1981] 1 WLR 1262; [1981] 3 All ER 664; and Searose Ltd v Seatrain UK Ltd [1981] 1 WLR 894; [1981] 1 All ER 806.”
“Provision should be made for the defendant to have access to his or her own assets for living expenses, payment of debts and legal expenses. Ideally such a proviso should be included from the outset. If not, it should be engrafted at the earliest appropriate time …” (emphasis added)
“It is to be remembered that the justification for the assumption of the jurisdiction to grant a ‘Mareva’ injunction is, not to improve the position of a plaintiff claiming to have a right against a defendant by giving him security for any possible judgment, but to prevent the abuse which might be caused to such a plaintiff if a defendant, who was so disposed, were free to dissipate his assets, or to spirit them out of the country, with a view to defeating any judgment which might be obtained: see, eg, Iraqi Ministry of Defence v Arcepey Shipping Co SA [1980] 2 WLR 488; [1980] 1 All ER 480. That being so, it has become common, if not customary — again, for what it is worth, it is my own practice — to provide, either at the time of the grant of the ‘Mareva’ injunction — my practice — or by later variation, for the defendant to have access to his assets in order to provide for his living expenses: see, eg, Z Ltd v A-Z and AA-LL to pay debts; see, eg, Iraqi Ministry of Defence v Arcepey Shipping Co SA and to provide for his legal expenses; see A v C (No 2) [1981] Q[B] 961(n).”
“12. The order should, where appropriate, exclude dealings by the respondent with its assets for legitimate purposes, in particular:
(a) payment of ordinary living expenses;
(b) payment of reasonable legal expenses;
(c) dealings and dispositions in the ordinary and proper course of the respondent’s business, including paying business expenses bona fide and properly incurred; and
(d) dealings and dispositions in the discharge of obligations bona fide and properly incurred under a contract entered into before the order was made.”
“… is not necessarily the same as asking whether the payments themselves were ‘ordinary’: it is the course of business that the exception deals with. It is thus the course of business that must be ‘ordinary’.”
Lewison LJ also pointed out that a transaction which is neither routine nor recurrent may well be properly regarded as being in the “ordinary course of business”: at [22]. These observations in Michael Wilson were cited with apparent approval by the Full Court of the Federal Court in Jorgensen v Fair Work Ombudsman (2019) 271 FCR 461; [2019] FCAFC 113 at [166]-[171].
“[8] … the development was completed in July 2021, and ‘[s]ince August 2021, the Developer has been selling the residential units in the ordinary course’: at [11]. Four units, with a total value of some $23.8 million, remained unsold and in the Developer’s name: at [12]. …
[9] … [T]he four remaining residential units were listed for sale on the Domain.com and Aqualand websites …. Although none of the units was placed with an agent for sale at the time of his Honour’s decision (one of the units has since been sold), there was ‘no reason to think the Developer has lost interest in selling those units and every reason to think that, in due course and very likely before the finalisation of these proceedings, it will sell them’: at [13]. The Developer had adduced no evidence to suggest otherwise: at [13]. …”
“[15] The Developer is a special purpose vehicle whose only function was to develop the subject site. Its financial records show that as it has sold the 121 units in the building it has not retained the proceeds of sale of those units. I would infer that, as might be expected of a special purpose vehicle within a large development group such as Aqualand, it has either distributed the profit by way of dividend or, as its financial records suggest, from time to time, loaned some part of the proceeds to other members of the group.
[16] It appears to me reasonable to infer that, absent restraint, the Developer will act in the same way in relation to the remaining four units once they are sold. That would be the normal and commercially rational course for the Developer to follow.”
“[17] A factor pointing in this direction, albeit perhaps faintly, is that on 16 September 2024 the solicitors for the Owners Corporation wrote to the solicitors for the Developer requesting an undertaking from the Developer that it not dispose of the proceeds of sale of remaining lots below the amount needed to meet the plaintiff's claim. The Developer refused to give that undertaking. The Developer was, of course, not obliged to give such an undertaking, but its failure to do so is at least consistent with the inference that I have drawn that, absent restraint, it would continue to deal with proceeds of sale as it has in the past.
[18] The Developer does not point to any prejudice it would suffer were it obliged to, in effect, retain from any proceeds of sale of the four residential units the figure the subject of the plaintiff’s claim.
[19] In all those circumstances, I am persuaded that the requisite ‘danger’ exists and to make the order that the Owners Corporation seeks.”
“… the manner in which it dealt with the proceeds of sale were not ‘ordinary course transactions’ such as might otherwise have immunised them from enjoinder. They were not akin to the payment of trading debts and satisfaction of ordinary trading liabilities, such as paying wages, tax liabilities or utilities. Contrary to the complexion that the Developer sought to place on how his Honour described its activities in his reasons, the primary judge did not treat them as such.”
“As was raised with the Developer during the hearing, the logical conclusion of its submission that this conduct was no more than ordinary was that if it sold the four units and paid any remaining expenses, the Developer would be justified in distributing the net proceeds of sale to the shareholders of the company (or loaning it to other entities in the corporate group) even though it faced claims of defective workmanship. Taking the argument to its logical conclusion, which would, in the words of Riley McKay, have ‘the necessary effect of frustrating’ the respondent in its attempt to seek a remedy, highlights the difficulty with the Developer’s primary contention that ‘something more’ was required than what the primary judge found.”
“Here, the Developer was established as a special purpose vehicle to construct and to sell units in a mixed residential and commercial development and to distribute the profits of the venture to its shareholders. The obvious purpose of the structure was to insulate the other business activities of the shareholders from the financial risks associated with the venture. Apart from the sale of the remaining units and the distribution of the profits generated by those sales, the special purpose vehicle has served its purpose. The clear consequence of permitting it to distribute its remaining profits before defects claims were resolved would be to deny the claimant any remedy if its claims succeed. It is not helpful in that context to ask whether the distribution of the remaining profits was in the ordinary course of business or was something that was ‘extraordinary’. The only source the Developer had to meet claims for defects were the profits it generated from the venture and it was reasonable to infer that unless restrained it would continue to distribute those profits on the sale of the remaining units. In the circumstances of this case, that was sufficient to satisfy the requirements of UCPR r 25.14(4)(b)(ii) and to justify the granting of a freezing order.”
Free JA agreed with both Mitchelmore JA and the separate reasons of Ball JA.
Before leaving the discussion of Aqualand, one further matter should be noted. In the course of her Honour’s reasons, Mitchelmore JA referred to the decision of McDougall J in Skyworks v 32 Drummoyne Road [2017] NSWSC 343 (Skyworks) in which, quoting Mitchelmore JA at [31], “his Honour granted freezing orders in respect of a risk of dissipation of assets by a special purpose vehicle incorporated for the purpose of developing property, which had a pattern of loaning proceeds to other entities within its corporate group”. At [50] of his reasons, McDougall J had concluded that “if the amount of $1.9 million presently held in trust is made available to the defendants to use as they wish, it will be utilised to pay down debt owed by other companies in the HIGA Group” (emphasis added). At [32] of Mitchelmore JA’s reasons, there appears to be an inadvertent slip in the description of McDougall J’s conclusion. Her Honour said:
“Ultimately, his Honour was satisfied that the jurisdiction to grant a freezing order was enlivened because the evidence demonstrated that the respondent’s assets in that case, if available, would be used to pay down debt owed to other companies in the corporate group …”
but it is plain that the statement “would be used to pay down debt owed to other companies in the corporate group” should have read “would be used to pay down debt owed by other companies in the corporate group” (emphasis added).
“Distribution of profits is utterly different from repaying debt isn’t it? One causes the requisite danger and the other as best I can see can’t cause the danger.”
The terms of the freezing order made by the primary judge have been set out at [12] above. As his Honour explained, the order made was “along the lines of the terms of prayer 3 in the plaintiff’s notice of motion, subject to excluding from that order the sale of lots 5, 11 and 18”: PJ [68]. The primary judge noted that, if the existing unrescinded contracts for sale of those lots proceed to completion, Golden Rain should receive proceeds of approximately $4 million which it can use for its ongoing legal costs and other normal expenses. In this way, his Honour in effect contemplated the creation of a fund for payment of some extraneous expenses and legal costs.
A necessary condition of making the freezing order was the primary judge’s holding that there was a danger that a judgment obtained by the Owners’ Corporation would not be wholly or partly satisfied by Golden Rain. The danger arose from the likelihood that the debt would be paid down when it fell due on 25 July 2026. In this context, the primary judge held at PJ [55] that:
“… I reject Golden Rain’s contention that there is no sufficient danger here because there is no evidence of any risk of dissipation of assets. This submission contradicts Golden Rain’s separate contention that it should not be prevented from repaying the existing secured debt which is due to be repaid on 25 July 2026 by selling the Honeycomb Terraces, which will dissipate its assets to a large extent. This contention is also inconsistent with the clear import of the suite of documents. The evidence is clear that, unless restrained, Golden Rain will proceed to sell all 18 terraces and use a large portion of the proceeds to pay the existing debt obligations it owes to the related parties.”
“These observations in Aqualand suggest that transactions in the ordinary course of business can be enjoined if there are appropriate surrounding circumstances which satisfy the real danger requirement. The nature of such circumstances is likely to vary from case to case.” (emphasis added)
“[45] First, I accept the plaintiff’s submission that Golden Rain’s recent financial records, as summarised above, indicates [sic] that it is incapable of satisfying a substantial judgment in the plaintiff’s favour from its existing assets and would need to rely on future transactions and realisations as opposed to an existing pool of preserved assets.
[46] It is notable that Golden Rain’s liabilities are overwhelmingly owed to related parties and not arms-length creditors. This is shown in the extract of Golden Rain’s MYOB Balance Sheet for the period from July 2025 to December 2025 as set out in Annexure A to these reasons, which includes various figures concerning loans to the company from the six related party lenders.
[47] Presumably, these shareholder loans include both the Replacement Facility Agreements and the undocumented $1 million loan referred to above.
[48] Moreover, as alluded to in Note 1(a) to the Financial Statements for the financial year ending on 30 June 2024, Golden Rain’s solvency depends upon a guarantee having been given to its directors of continuing financial support. As the plaintiff correctly points out, this means that Golden Rain’s ability to continue trading depends on ongoing financial arrangements, the servicing of which would necessarily compete with the plaintiff’s prospective judgment. In circumstances where Golden Rain does not have an existing pool of preserved assets, the only realistic source from which it could satisfy a judgment in favour of the plaintiff is by way of future dealings with development assets or proceeds.
[49] Secondly, as Golden Rain acknowledged, it is well settled that the requisite danger need not depend upon establishing misconduct or suspicious dealings. Mr Kidd SC (who appeared for Golden Rain along with Mr Dooley) properly acknowledged that the present case fell into a ‘much narrower type of case’. I consider that the requisite danger in the present case is partly reflected in the fact that servicing the substantial related party loans is almost entirely dependent upon Golden Rain’s future dealings, particularly with the Honeycomb Terraces, which will inevitably deplete the only pool from which a judgment could otherwise be satisfied. There are other relevant matters which also highlight that danger. They include the significance of the timing and effect of the suite of documents executed in conjunction with the Replacement Facility Agreements. These related agreements have the effect of converting what previously were unsecured loans from the six related party lenders to secured loans which give priority to the related party lenders and place control of enforcement and allocation in their hands. I will elaborate upon these matters below.
[50] Meanwhile, it suffices to state in summary form that the requisite danger is established by the combined effect of Golden Rain’s negative equity, its dependence on future realisations, the predominance of related party loans in its existing liabilities, the timing and effect of the suite of documents associated with the Replacement Facility Agreements and undocumented $1 million loan, as well as the absence of any existing pool of preserved assets. The facts and circumstances here differ in some respects from those in Aqualand but those differences do not prevent the application here of the observations in Aqualand, which are set out at [41(c)] above.
[51] Thirdly, as already emphasised, there is the effect of the suite of documents belatedly produced by Golden Rain. The timing of their execution is of significance. They were all executed in July 2025 and on or around the execution of the Replacement Facility Agreements and shortly before the six related party lenders provided the additional $1 million undocumented loan. Thus, these transactions all occurred after the proceedings had been commenced and in the course of detailed preparation for trial.
[52] Turning to the content and effect of the suite of documents, I accept the plaintiff’s submission that their legal effect is to alter the priority and control of Golden Rain’s assets in a way that is directly relevant to the freezing order application. This legal effect is produced by the contractual reallocation of the entitlement to the proceeds of Golden Rain’s assets. The effect of relevant clauses in this suite of documents is that the proceeds of the sale of Golden Rain’s assets will be applied in a manner which, on the basis of the present estimates, leaves no realistic prospect of Golden Rain being able to satisfy in full any judgment in the plaintiff’s favour.
…
[54] Fourthly, for the following reasons, I do not accept Golden Rain’s key supplementary submissions, which are to the effect that these documents are innocuous for the purpose of the present application:
(a) Golden Rain contends that the effect of the documents ‘is to give to MSC a right to enforce a security on behalf of Beneficiaries (which include the Lenders) in the event of a default under the Replacement Facility Agreements’. This glosses over the important fact that, under clause 3.3(a) of the Security Trust Deed, MSC (as Security Trustee) is obliged in the exercise of all rights, powers and discretions on behalf of the Beneficiaries under the Finance Documents to act in accordance with any instructions given by the Instructing Beneficiaries or, where specified, the Beneficiaries. As noted above, this means that decisions concerning critical matters such as enforcement, timing and distribution are controlled by the same parties whose debt is being secured. I do not accept Golden Rain’s claim that this is ‘an unremarkable security structure’. This characterisation fails to acknowledge that the effect of the documents entered into in mid-2025, when the proceedings were well on foot, was to convert previously unsecured loans to secured loans under which priority is given to the six related party lenders who have control over enforcement and allocation.
(b) As to Golden Rain’s claim that it will be prejudiced if it is prevented from fulfilling its obligations under the Replacement Facility Agreements because this will put it in default and render it liable to enforcement action, this claim deserves little weight in circumstances where, under clause 3.3(a) of the Security Trust Deed, MSC is obliged to act in accordance with any instructions of the Instructing Beneficiaries, who currently are two named related party lenders. While MSC is not obliged to seek those instructions, if and when they are received, they necessarily bind the Security Trustee in the exercise of a relevant discretion.”
There were seven grounds of appeal which were detailed and somewhat discursive in character but the first six of these centred around the proposition, derived from the slip in Aqualand and relied upon by the primary judge, namely that “[m]erely because the dissipation of assets might be for legitimate business purposes, including paying down debt owed to other companies in the same corporate group (or, I would add, shareholders) does not mean that a freezing order should not be granted” (emphasis added): see at [55] above. Thus, it was submitted that:
there was a failure to take into account the principle in Riley McKay that a freezing order should not be made to prevent a defendant from dealing with its assets to pay its debts in the ordinary course of business (ground 1);
Aqualand (although followed in terms) involved the slip that has already been referred to and that involved acting on a wrong principle (ground 1);
there was a material distinction between the distribution of profits by way of dividend payments and the use of cash profits to advance unsecured loans to related parties — which were transactions that dissipated and diminished the assets of the company — and the transactions which Golden Rain proposed to enter into, namely, dealing with its assets to pay its debts as they fall due — which would not dissipate or diminish the assets of the company (ground 2);
the fact that the financial records of Golden Rain indicated that it would be unable to satisfy, in whole or in part, a substantial judgment in favour of the Owners’ Corporation did not give rise to the requisite danger justifying the making of a freezing order (ground 3);
the fact that the debts owed were to related parties and not arms’ length creditors was not relevant to the analysis in the circumstances of the present case where there was no finding (and no invitation or basis to make a finding) that the debt liabilities were not bona fide and genuine liabilities (ground 4);
whether or not the debt was secured did not alter the fact that the debt was genuine debt and falls due for repayment on 25 July 2026, and in any event there is no law against a company granting security to creditors when refinancing its outstanding debt obligations (ground 5);
Golden Rain would be prejudiced if it was enjoined from realising its assets to pay that debt, because the creditors would be able to take enforcement action in respect of the unpaid debt including enforcing their security; and creditors would also suffer prejudice if Golden Rain were enjoined from realising assets and repaying the debt, as the creditors would be kept out of their money and might have to take steps to enforce their security (ground 6).
“The court may make a freezing order … against a … prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a … prospective judgment will be wholly or partly unsatisfied because any of the following might occur —
(a) the … prospective judgment debtor or another person absconds,
(b) the assets of the … prospective judgment debtor … are —
(i) removed from Australia or from a place inside or outside Australia, or
(ii) disposed of, dealt with or diminished in value.”
As noted at [33]-[34] above, the formulation of this rule as part of the Harmonised Freezing Rules was not intended to alter the principles upon which Mareva injunctions — or, post-Cardile, “freezing orders” — may be granted.
The remedy has always been concerned with the dissipation of assets to frustrate the enforcement of a judgment or prospective judgment of the Court or, indeed, a foreign court: see, in this respect, PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36. In the early cases, attention was focussed on the spiriting of assets out of the jurisdiction by foreign defendants and then, as the jurisprudence developed, the disposition or diminution of a prospective judgment debtor’s assets within or outside of the jurisdiction. These concerns are reflected in UCPR rr 25.14(4)(a) and (b).
A “disposal” of assets could be effected by the transfer of assets for nothing in return and a “diminution” of them by a variety of means including a sale at an undervalue or lending without security or on non-commercial terms.
While UCPR r 25.14(4)(b) refers to the assets of the prospective judgment creditor being “dealt with”, that phrase must take its meaning from the context of the rule as a whole as well as the history of the jurisprudence that predated it, bearing in mind that the rule was not intended to alter the existing law and principles that had emerged in Australia and England relating to what has always been described as an extraordinary or exceptional form of interlocutory relief. As such, it is not “any dealing” that may constitute the requisite “danger” for the purposes of UCPR r 25.14(4) but a dealing which has a negative effect on the prospective debtor’s financial position, reducing the pool of assets that may fund a future judgment debt. The sale of assets, however, to repay an accrued liability does not affect or diminish the putative judgment debtor’s net asset position. This analysis is wholly consistent with the statements of principle that appeared at an early stage of the jurisprudence in cases such as The Angel Bell, Barclay-Johnson, AJ Bekhor and Riley McKay, all of which have been consistently cited with approval for almost 50 years. It is also reflected in the carve-out contemplated in the standard form of freezing orders in the Practice Note which was also part of the 2006 harmonisation: see at [46] above.
In this context, it may be observed that there is within UCPR r 25.14(4) a causative dimension. The requisite “danger”, viz. that “a prospective judgment will be wholly or partly unsatisfied”, must be caused by or arise from one of the circumstances noted in UCPR rr 25.14(4)(a) or (b). Very often, the requisite danger exists or arises not “because” of any of those circumstances but, rather, by reason of the existing state of the prospective judgment debtor’s finances relative to the size of the plaintiff’s claim. Here, as the primary judge observed, at the time of the application for the freezing order, Golden Rain in fact had negative equity and substantial indebtedness.
“… [I]f the plaintiff should obtain a judgment against a defendant company, and the defendant company should be wound up, its previous payments may thereafter be attacked on the ground of fraudulent preference, but this is an entirely different matter which should be dealt with at the stage of the winding up.”
One issue that arose in the course of the hearing was that the order of the primary judge set out at [12] above did not in terms prevent Golden Rain from dealing with its assets but only required the giving of 20 business days’ notice before any such dealing, presumably to allow the Owners’ Corporation time to actually move to restrain such dealing or to allow the parties to endeavour to reach a negotiated position. Even though this order was not as drastic as it may have been, it did more than to preserve the status quo, and changed the status quo in favour of the Owners’ Corporation: cf Frigo noted at [37] above.
In this context, Golden Rain submitted that:
“… there is no carve-out of the type contained in the form of order suggested by the Practice Note. The orders made by the primary judge, therefore, go further in preventing dispositions of assets than the orthodox position.
This is not an academic point. The order made can readily be seen to have the potential to prevent a sale of the Terraces. For example, take a case where is [sic] there is a marketing campaign of one or more Terraces in advance of an auction on a particular date, where 20 business day[s’] notice is given by the applicant to the respondent of the auction. If a preauction offer is received from a prospective purchaser prior to the expiration of the 20 business days’ notice period which the applicant believes to be on favourable terms, that offer could not be accepted by the applicant and may not be repeated at an auction. That example could hardly be viewed as fanciful or unlikely.
Therefore, the order made by the primary judge does restrain disposition – it does so in terms; without any relevant carve-out; in a way which readily could be seen potentially to prejudice the applicant.”
The primary judge took an adverse view of the timing of the refinancing and the securing of that indebtedness in favour of related parties in July 2025 at the very time that the Owners’ Corporation was seeking undertakings that Golden Rain not deal with any real property it owned: see PJ [49]-[54], reproduced at [60] above. As already pointed out, the efficacy of the securing of the indebtedness will be determined in the s 37A Proceedings and, for the reasons given at [77] above, the principal point of principle at issue in the current case will not ultimately be affected by those proceedings.
At PJ [50], the primary judge summarised his reasons by stating that:
“… the requisite danger is established by the combined effect of Golden Rain’s negative equity, its dependence on future realisations, the predominance of related party loans in its existing liabilities, the timing and effect of the suite of documents associated with the Replacement Facility Agreements and undocumented $1 million loan, as well as the absence of any existing pool of preserved assets.”
“[i]t also needs to be borne in mind that the mere fact that a judgment may not be satisfied for reasons of impecuniosity does not mean that there is an abuse of process. Indeed, it has been pointed out on several occasions that the prospect of impending insolvency is not a reason to grant a [Mareva] injunction.”
Although the primary judge’s concern with the timing and grant of security where related party debts had been unsecured for over a decade prior to the refinancing was understandable, this did not justify the making of an order which precluded (and will preclude) Golden Rain from paying its debts as they fall due. Those debts, under the Loan Facility Deeds, are due on 25 July 2026 and, if not paid on that date, become payable on demand.
It is plain from what the primary judge held at PJ [55] and by his reference to Aqualand that, in rejecting Golden Rain’s contention that there was no sufficient danger in the present case because there was no evidence of any risk of dissipation of assets, his Honour saw the relevant risk as the possibility that Golden Rain might not meet its debt obligations:
“The evidence is clear that, unless restrained, Golden Rain will proceed to sell all 18 terraces and use a large portion of the proceeds to pay the existing debt obligations it owes to the related parties.”
Such a payment would in my view be quite proper and consistent with the authorities set out at some length in these reasons. Restraining such a payment, or even requiring the giving of four weeks’ notice before such a payment could be made, would plainly generate prejudice, in addition to exposing Golden Rain to the risks of a falling market and additional holding costs in relation to the terraces.
For the foregoing reasons, I would uphold grounds 1-6 of the appeal.
Although Golden Rain sought the setting aside of the primary judge’s order and there is much to be said for taking that course, another means of giving effect to its arguments while acknowledging the force of the primary judge’s caution as to the nature and timing of the securing of the refinanced indebtedness is to maintain the order but to vary it by adding the following to it:
“Nothing in this order prevents Golden Rain from selling any of Lots 1-4, 6-10 and 12-17 of Folio Identifier SP108772 for fair market value and from using the proceeds of sale to pay its current debts as they fall due.”
“Provision should be made for the defendant to have access to his or her own assets for living expenses, payment of debts and legal expenses. Ideally such a proviso should be included from the outset. If not, it should be engrafted at the earliest appropriate time”.
“1. Until the final determination of all claims against it in the Supreme Court of New South Wales Proceedings No. 2022/00151309, Golden Rain Development Pty Ltd undertakes to the Plaintiff and the Court that it will provide written notice to the Plaintiff before any steps are taken to:
a) make any distribution of profits to shareholders of Golden Rain;
b) advance any loan to any ‘Related Entity’ of Golden Rain as defined at section 9 of the Corporations Act 2001 (Cth) (Related Entity);
c) enter into any contract for sale of any real property that Golden Rain owns (whether solely or jointly) or has any interest in, except where the contract for sale is for the sale of real property to a party which is not a Related Entity of Golden Rain;
d) otherwise encumber, transfer or dispose of any real property that Golden Rain own[s] (whether solely or jointly) or ha[s] any interest in.
- Written notice must not be less than 30 days unless the settlement period in any contract for sale (including an existing contract for sale) is less than the standard settlement period of 42 days, in which case 10 days’ notice is to be provided.”
It seems to me that the course proposed at [86] above to supplement the order made by the primary judge above is consistent with this re-proffered undertaking.
Ground 7 of the appeal related to the primary judge’s statement at PJ [56] that he attached “little weight to Golden Rain’s contention that, after it has used the sale proceeds from the [terraces] to repay its existing debt obligations, it intends to use surplus sale proceeds to pursue further development opportunities and this intention should not be stymied.” His Honour observed that the available evidence on this topic was “far from compelling”.
This view was certainly open to the primary judge and challenges to interlocutory decisions by reference to the weight attached by a judge to a particular matter in the exercise of his or her discretion will generally not attract a grant of leave to appeal. I would refuse leave to appeal in respect of ground 7 of the draft Notice of Appeal.
Golden Rain has had success in its application and costs should, in my view, follow the event. The Owners’ Corporation should also be ordered to pay Golden Rain’s costs at first instance, not least because it rejected the undertaking offered by Golden Rain as noted at [88] above which, as I have explained, was consistent with Golden Rain’s entitlement to sell the terraces for the purposes of meeting its existing debt obligations. I would make the following orders:
Grant leave to appeal on grounds 1-6 of the draft notice of appeal, and refuse leave to appeal on ground 7.
Direct the appellant to file a notice of appeal within 7 days, and otherwise dispense with the requirements of service.
Appeal allowed.
Vary order 1 made on 10 February 2026 by adding “Nothing in this order prevents Golden Rain from selling any of Lots 1-4, 6-10 and 12-17 of Folio Identifier SP108772 for fair market value and from using the proceeds of sale to pay its current debts as they fall due”.
Note the undertaking by Golden Rain Development Pty Ltd at [88] of this judgment.
Set aside order 2 made on 10 February 2026 and in lieu thereof order The Owners – Strata Plan No 97938 to pay the costs of Golden Rain Development Pty Ltd of the notice of motion filed 28 November 2025.
The Owners – Strata Plan No 97938 to pay the costs of Golden Rain Development Pty Ltd of the appeal (including the application for leave to appeal).
LEEMING JA: I agree with Bell CJ and add the following only by way of emphasis.
The basal propositions central to this appeal are twofold. The first is that, putting to one side the possibility of truly exceptional circumstances, a judgment debtor or potential judgment debtor which repays debt in the ordinary course of business is not thereby doing anything to give rise to the risk that assets will be disposed of so as to abuse or frustrate the court’s process, and thus does not engage the principles which have developed concerning the grant of orders. The second is that the function of a order is neither to improve a plaintiff’s position in the event of the defendant’s insolvency, nor to provide security for the judgment which the plaintiff seeks to obtain.
**********
Revision made to [98], final sentence: "... 'pay down debt owed to other companies' are to be understood as meaning 'pay down debt owned by other companies'." Was changed to: " ... 'pay down debt owed to other companies' are to be understood as meaning 'pay down debt owed by other companies'.”
Golden Rain Development Pty Ltd (ACN 166 672 537)
The Owners – Strata Plan No 97938
[1999] HCA 18
[1936] HCA 40
(1999) 198 CLR 380
(1988) 14 NSWLR 552
(2021) 273 CLR 429
(2018) 53 WAR 201
(2026) 316 FCR 159
(1936) 55 CLR 499
(1987) 162 CLR 612
(2019) 271 FCR 461
(1997) 74 FCR 19
(2008) 163 LGERA 83
(2015) 258 CLR 1
(1994) 48 FCR 131
(2013) 84 NSWLR 141
Leave to appeal was granted on grounds 1–6 and refused on ground 7. The appeal was allowed. The freezing order was varied to permit Golden Rain to sell Lots 1–4, 6–10 and 12–17 of Folio Identifier SP108772 for fair market value and use the proceeds to pay current debts as they fell due. The respondent was ordered to pay Golden Rain’s costs of the first-instance notice of motion and the appeal, including the leave application.
The Court was informed in the course of the hearing of the application for leave to appeal that separate proceedings were commenced in the Equity Division on 18 March 2026, approximately five weeks after the primary judgment, seeking declarations that the Security Documents comprising the New Facility Agreements, Security Trust Deed, General Security Deed and Mortgage Terms Deed were voidable under s 37A of the Conveyancing Act 1919 (NSW) and an “order setting aside the New Facility Agreements and the Security Documents t**o the extent they encumber the 18 lots” (emphasis added) (the s 37A Proceedings). These separate proceedings have been set down for hearing on 1 September 2026 before Parker J.
The primary judge held that “[t]he evidence is clear that, unless restrained, Golden Rain will proceed to sell all 18 terraces and use a large portion of the proceeds to pay the existing debt obligations it owes to the related parties”: PJ [55]. As explained above, Golden Rain has (and had at the time of the application for the freezing order) an existing debt, secured by way of mortgage over the terraces, which is due to be repaid on 25 July 2026.
The real (and commercially important) question that is raised by this case (and is the reason why leave to appeal ought be granted in respect of grounds 1-6 of the draft Notice of Appeal) is whether the repayment of debt (in this case to related parties) amounts to a dissipation of assets so as to engage rule 25.14 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) or whether, as a matter of principle, there should be carved out or excepted from the operation of the freezing order an ability for Golden Rain to sell the terraces for the purposes of repaying its debts when they fall due.
Rule 25.14(4) of the UCPR is entitled “Order against judgment debtor or prospective judgment debtor or third party” and relevantly provides that where the applicant has a good arguable case:
Contrary to the Owners’ Corporation’s submissions, the “exception” or qualification to permit the payment of bona fide debts as they fall due is not confined to payment of the “trading debts” of the prospective judgment debtor and its rationale is not limited to preventing the inhibition of a defendant’s trading capacity. While some cases have referred to payment of “trade creditors” (see, for example, Avant Petroleum Inc v Gatoil Overseas Inc [1986] 2 Lloyd’s Rep 236 at 242) and although Mitchelmore JA made reference to “trading debts” and “trading liabilities” in Aqualand at [19] (see at [51] above), I do not understand her Honour to have been intending to confine the payment of debts in this context to the payment of “trading debts”. No such limitation appears in Riley McKay, Sterling Industries or the standard form orders forming part of the Practice Note and, as Lewison LJ observed in Michael Wilson at [28], “to restrict the scope of the exception to the payment of ‘trade creditors’ is as unhelpful as any other paraphrase”. Indeed, the form of orders proposed in support of prayer 1 of the Owners’ Corporation’s Notice of Motion included in proposed order 10 an exception to the proposed freezing order consistent with the Practice Note permitting the payment of “business expenses bona fide and properly incurred”.
A cognate principle to that identified in cases such as The Angel Bell, Barclay-Johnson, AJ Bekhor and Riley McKay is that “[t]he existence of a freezing order cannot inhibit in any way execution by a third party judgment creditor of the respondent”: Biscoe at [4.106] citing Re Ousley; Ex parte Commissioner of Taxation (1994) 48 FCR 131 at 139, which was approved by the Full Federal Court in Ling v Enrobook Pty Ltd (1997) 74 FCR 19 at 29.
Put slightly differently, a payment of the kind “carved out” of a freezing order in the long line of cases reviewed earlier in these reasons (viz. the payment of genuine or bona fide debts as they fall due in the ordinary course of business) will not be treated or characterised as a payment made for the purposes of frustrating or inhibiting the Court’s process but rather as one made for the purpose of discharging existing obligations. In short, such a payment or payments will not engage the jurisdiction, and the freezing of such payments would be extraneous to the purpose for which the jurisdiction is conferred, namely to prevent an abuse of process.
The payments contemplated in Aqualand, namely the distribution of profits or inter-company lending, were not payments of the prospective judgment debtor*’*s debts as and when they fell due. The same may be said of the payment down of a related party’s debts in Skyworks. There is no reason to doubt the correctness of those respective decisions other than in respect of the slip in language in Aqualand which has been pointed out at [55]-[56] above. To the extent that the primary judge in the present case drew upon that passage in Aqualand, which his Honour undoubtedly did, there was an error of principle (no doubt of an inadvertent kind) which vitiated the exercise of his Honour’s discretion in a House v The King (1936) 55 CLR 499; [1936] HCA 40 sense.
The primary judge also placed some considerable emphasis upon the fact that the relevant debts in question in the present case were owing to related parties. As Golden Rain pointed out, however, why that makes any difference was not explained and there was no suggestion, nor any basis of a suggestion that the debts owed to the related parties were not genuine debts. Golden Rain submitted that “[t]here is no principled reason why genuine debts owed to related parties should be treated any differently from genuine debts owed to arms-length creditors.” The matter may be tested in this way. If the refinanced indebtedness was owing to a bank rather than to related third party lenders, it could not seriously be suggested that the bank’s entitlement to have its debt repaid could be compromised by a freezing order or that the bank’s debtor could be restrained from meeting its obligations by reason of a third party’s application for a freezing order. The identity of the creditor should not affect the analysis and Mr Corsaro SC, who appeared for the Owners’ Corporation, could provide no satisfactory response when pressed with this point in the course of argument. In a different but related context, this Court held that “[t]he sale of an encumbered home unit at a figure above market value does not, standing alone, imply disposal of assets in order to defeat a prospective judgment, even where the purchaser is a close relative”: Frigo at 8 (emphasis added).
That the prospective judgment debtor’s debts were those owing to a related party may invite scrutiny (see, for example, Atlas Maritime Co SA v Avalon Maritime Ltd (The Coral Rose) [1991] 4 All ER 769) but the identity of the creditor as a related party does not seem to me to warrant the creation of a per se exception to an exception, as it were, namely the non-application of the carve-out to permit the payment of bona fide debts as they fall due when the particular debt which is owing is owing to related parties of the prospective judgment debtor.
In this context, it is critical to note that it did not appear to be any part of the Owners’ Corporation’s argument at first instance that Golden Rain was not genuinely indebted to the six related parties under either the original 2014 financing or the refinancing effected by the New Financing Facilities. Indeed, in its summary of the transaction documents accepted by the primary judge and reproduced at [26] above, the Owners’ Corporation referred to the fact that they recorded that “the existing indebtedness is preserved and re-documented rather than discharged”. In this Court, Mr Corsaro accepted that he had no legitimate basis to challenge the 2014 loan transactions and was constrained to accept that there was evidence as to their legitimacy. Further, in written submissions in this Court, the Owners’ Corporation described Golden Rain’s debts as “long-term related-party liabilities, carrying no interest under the Replacement Facility Agreements, not the subject of any demand for repayment, and not due until July 2026”. In this context, it may also be noted that the s 37A Proceedings only seek to set aside the New Facility Agreements and the Security Documents “to the extent they encumber the 18 lots”.
The question of whether the security effected in the context of the refinancing was voidable was not agitated before the primary judge nor before this Court on the hearing of the application for leave to appeal. It will be determined in the hearing of the s 37A Proceedings on 1 September 2026 but whether or not the security documents are set aside is not relevant to the fact of the underlying indebtedness or Golden Rain’s liability to repay amounts owing under the Loan Facility Deeds when those amounts fall due. The loans are repayable irrespective of any security.
If the s 37A Proceedings are not successful, the lenders will be secured creditors of Golden Rain; if those proceedings are successful, any payments made to related parties will be subject to the operation, if applicable, of the Corporations Act 2001 (Cth) in the event that Golden Rain is subsequently held to have a liability to the Owners’ Corporation which it is not able to meet because of its financial position, and is subsequently put into liquidation. As was originally noted by Robert Goff J in The Angel Bell at 486, Mareva injunctions or freezing orders were not intended to interfere with statutory insolvency regimes or to convert an unsecured creditor or putative judgment creditor into a secured creditor:
In answer to those points, the respondent placed heavy reliance upon the formulation of the power to make orders in r 25.14. Those rules are heavily influenced by the pre-existing law, as explained by the Chief Justice. One further way in which this may be seen is that the somewhat awkward text of r 25.14(5)(a) concerning the control over “assets (including claims and expectancies) of the judgment debtor” has been taken verbatim from Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 625; [1987] HCA 23. That is so notwithstanding that “expectancies” are the opposite of assets. An instance where this gave rise to difficulty may be seen in Filippini v Keystone Asset Management Ltd (Receivers and Managers appointed) (in liquidation*)* (2026) 316 FCR 159; [2026] FCAFC 71 where it was emphasised at [88] that an expectancy is not an existing chose in action and therefore not an “asset” as that term is ordinarily understood.
Rule 25.14 uses the language of “freezing order” but otherwise does not depart from the basal propositions which govern this species of relief.
In light of the above, it may be seen that the attention given both at first instance and in this Court to the conversion of unsecured to secured debt is a distraction. The risk that the plaintiff, if successful, would be faced by a judgment debtor unable to meet the entirety of the judgment debt was self-evidently present at the commencement of the proceedings. The plaintiff’s claim for damages exceeding $26,000,000 was a claim which exceeded the defendant’s net assets. As the Chief Justice has observed, once it was conceded that the defendant’s existing indebtedness was real, the solvency risk in the event the plaintiff made good its claim is obvious.
In this area, it is important to distinguish between the repayment of debt and the distribution of profit. The latter may impact upon the ability of a potential judgment debtor to satisfy a judgment – and ordinarily will do so if as here the claim exceeds the net asset position of the defendant – but the former will not, at least in most ordinary circumstances. The precisely drafted language in Skyworks v 32 Drummoyne Road [2017] NSWSC 343 at [50] might make it easy to conflate a judgment debtor using funds to pay down debt owed by it to related companies with a judgment debtor using funds to pay down debt owed by related companies. But there is a world of difference between the two. The former does not diminish the asset position of the potential judgment debtor, while the latter does. Nothing in Aqualand North Sydney Lavender Development Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143 should be understood as eroding that distinction. As the Chief Justice observes, there is a minor slip at [32] and the words “pay down debt owed to other companies” are to be understood as meaning “pay down debt owed by other companies”.
I agree with the orders proposed by Bell CJ.
BALL JA: I agree with the Chief Justice.