Gordon v Glowberth Pty Ltd

PROCEDURAL HISTORY

1. The proceedings have involved repeated appearances before duty judges of this court, between which times the pleadings have been filed.

Freezing Orders

1. On 20 September 2023, Mr Gordon commenced the proceedings by filing the summons in court before me as duty judge. As well as abridging the time for service of the summons on Glowberth, the form of the freezing orders which were made ex parte by me on 20 September 2023 (with effect up to and including 22 September 2022) were as follows: 6. (a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of your assets in Australia ('Australian assets') up to the unencumbered value of AUD$1,363,000 ('the Relevant Amount'). (b) If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount. (c) PROVIDED THAT nothing in this freezing order prevents you from completing the sale of the property known as 258 Sackville Ferry Road, Sackville (Lot 233 in DP 752025), or paying the ANZ Bank such amount as is necessary to discharge the mortgage on that property. 7. For the purposes of this order, (1) your assets include: (a) all your assets, whether or not they are in your name and whether they are solely or co-owned; (b) any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and (c) the following assets in particular: the proceeds of sale of the property known as 258 Sackville Ferry Road, Sackville (Lot 233 in DP 752025); (2) the value of your assets is the value of the interest you have individually in your assets.
2. These freezing orders were varied inter partes by me on 22 September 2023 by consent and without admission to operate until further order and with the addition of the following sub-paragraphs to order 6 made on 20 September 2023: (d) The defendant is entitled to pay the costs of sale from the proceeds of the property known as 258 Sackville Ferry Road Sackville. (e) The defendant is to provide the plaintiff with the settlement sheet 24 hours before settlement.
3. In this judgment, I will refer to orders 5 and 6 made on 20 September 2023, as varied on 22 September 2023, together as the Freezing Orders.
4. On 22 September 2023, it was specifically noted in the orders made that on any application by the defendant to vacate or vary the Freezing Orders, the plaintiff will have the onus.

Statement of claim

1. On 10 October 2023, Mr Gordon filed the statement of claim, the principal relief sought being an order that Glowberth pay Mr Gordon the amount of $360,000 as a debt due to him and damages for breach of contract arising from the terms of a residential tenancy agreement dated 22 May 2014 between Glowberth as landlord and Mr Gordon as tenant. It is alleged that Glowberth breached its obligations under special conditions contained in the tenancy agreement (which provided that Mr Gordon would have the right of first option to purchase the Sackville Property and that any net sale proceeds received for the Sackville Property in excess of $750,000 would be divided equally between them) after it entered into a contract of sale for the Sackville Property for $1,470,000 with a third party. The amount of the debt ($360,000) was calculated by dividing the difference between $1,470,000 and $750,000 ($720,000) by two.
2. On 18 October 2023, the proceedings came before Henry J, at which time procedural orders were made for the filing of pleadings and any application by Glowberth to vacate or vary the Freezing Orders, which included the notation that Mr Gordon would have the onus on any such application.

Defence and cross-claim

1. On 2 November 2023, Glowberth filed the defence and statement of cross-claim.
2. The defence specifically raised the issue of Mr Gordon becoming bankrupt on or around 2 July 2015, being an undischarged bankrupt until about 2018, and presently being a discharged bankrupt.
3. In the defence, while admitting the tenancy agreement, Glowberth denied that the parties intended to be bound by the special conditions. Glowberth said that if there was such an intention, it was predicated on an oral agreement made prior to the execution of the tenancy agreement, the terms of which were that Mr Gordon was to reside at the Sackville Property for no more than 12 months. It was alleged that within that time, Mr Gordon was granted the opportunity to undertake and complete a development and construction of the Sackville Property involving its subdivision at his own expense and, if he performed those obligations, he would be offered the first right to purchase the Sackville Property.
4. The cross-claim alleged repeated breaches by Mr Gordon of the tenancy agreement in relation to the Sackville Property, consisting in his failure to pay rent, following which, on 14 March 2023, orders were made by the New South Wales Civil & Administrative Tribunal (NCAT) for the termination of the tenancy agreement and possession to be given to Glowberth on 14 March 2023. Mr Gordon was then refused leave to appeal by the appellate division of NCAT on 5 September 2023. The cross-claim seeks judgment in favour of Glowberth against Mr Gordon in the sum of $364,800, being the alleged amount of unpaid rent from 22 May 2014.

Vacant possession of Sackville Property and Official Trustee in Bankruptcy joined

1. On 20 November 2023, the proceedings were before Lindsay J, at which time orders were made that: 1. by no later than 12 noon on 23 November 2023, Mr Gordon was to deliver to Glowberth vacant possession of the Sackville Property; 2. the Official Trustee in Bankruptcy be joined as a party defendant in the proceedings; 3. Glowberth be designated as the first defendant; 4. the Official Trustee in Bankruptcy be designated as the second defendant; and 5. Mr Gordon have leave to amend the statement of claim.
2. At the hearing on 20 November 2023, it was noted that there were questions arising as to the standing of Mr Gordon to bring the proceedings. Glowberth contended that by virtue of s 27 of the Bankruptcy Act 1966 (Cth) the court had no jurisdiction to entertain Mr Gordon's claims and that further consideration should be given as to whether the proceedings should be cross-vested to the Federal Court of Australia.

Amended statement of claim

1. On 23 November 2023, Mr Gordon filed the amended statement of claim (ASOC). In addition to an order that Glowberth pay Mr Gordon the amount of $360,000 as a debt due to him, in the ASOC Mr Gordon amended the relief sought by seeking damages against Glowberth for breach of contract or judgment for debt, or alternatively, an order that Glowberth pay to the Official Trustee such amount as is found to be payable.
2. In the ASOC, Mr Gordon also sought a declaration that the special conditions in the tenancy agreement remained valid and in effect as at 23 June 2023, and a declaration that upon completion of the contract of sale of the Sackville Property, Glowberth is obliged to pay Mr Gordon the sum of $720,000.
3. At the conclusion of the ASOC, Mr Gordon pleads that: 1. on 2 July 2015, he was made bankrupt, a sequestration order was made against his estate, and the Official Trustee was appointed as trustee of his sequestrated estate; 2. on 24 July 2018, he was discharged from bankruptcy; 3. the causes of action contained in the ASOC did not accrue to Mr Gordon until 23 June 2023 at the earliest; and 4. as a result, the causes of action in the ASOC are neither property nor after-acquired property within the meaning of ss 5 and 58 of the Bankruptcy Act, meaning that the causes of action in the ASOC do not vest in the Official Trustee.
4. In the ASOC, Mr Gordon states, in the alternative, that if (contrary to his position) the causes of action in the ASOC vested in the Official Trustee, then Glowberth is liable to pay the Official Trustee the amounts claimed in the ASOC.

Defence to cross-claim

1. On 24 November 2023, Mr Gordon also filed the defence to cross-claim, in which Mr Gordon alleges that Glowberth represented that the lease under the tenancy agreement was only for the purposes of obtaining finance, and that Glowberth would not enforce any claim for rent, on which representations Mr Gordon relied to his detriment (to the knowledge of Glowberth), resulting in Glowberth now being estopped from claiming rent from him.
2. In his defence to the cross-claim, Mr Gordon also pleads that any claim for rent due for the period 22 May 2014 to 1 November 2017 is statute-barred by the Limitation Act 1969 (NSW), and claims a set-off pursuant to s 23 of the Civil Procedure Act 2005 (NSW).

EVIDENCE

1. At the hearing, Mr Gordon relied on the following evidence: 1. affidavit of Jerry Gordon sworn 20 September 2023 and the exhibit to that affidavit; 2. affidavit of Djimi Barber sworn 20 September 2023; 3. affidavit of Tony Barber sworn 20 September 2023; 4. affidavit of George Laliotis sworn 1 November 2023; and 5. affidavit of George Laliotis sworn 16 November 2023;
2. At the hearing, Glowberth relied on the following evidence: 1. affidavit of Haley Lena Gul sworn 2 November 2023; 2. affidavit of Mohamed Elnajjar sworn 6 December 2023; 3. document titled "Notes of Submissions made on ex parte application for Freezing Order on 20 September 2023 before McGrath J"; and 4. paragraphs 1 and 5 of the affidavit of Jerry Gordon sworn 9 November 2023.
3. The Official Trustee did not rely on any evidence.
4. Mr C Wood with Mr V Misra appeared for Mr Gordon instructed by Laliotis Xuereb Lawyers. Mr D Allen appeared for Glowberth instructed by Avondale Lawyers. Mr C McMeniman appeared for the Official Trustee instructed by the Australian Government Solicitor.

LEGAL PRINCIPLES

1. The legal principles relating to the discharge of freezing orders and the making of new ones are not in dispute. They are helpfully summarised in Tyche Asset Management Pty Ltd v Flyland Development Group Pty Ltd [2021] NSWSC 1283, by Henry J at [37]-[42] as follows: 37 As applicants for ex parte freezing orders, the plaintiffs had an obligation to make full and frank disclosure to the Court of all facts that are material to the determination of their entitlement to the orders, which includes disclosure of possible defences and facts adverse to and known to them. Utmost good faith is required and it is no excuse for an applicant to say that they were not aware of the importance of those facts: Papas v Grave [2013] NSWCA 308 at [71] (Emmett JA, Basten JA and Sackville AJA agreeing); Thomas A Edison v Bullock (1912) 15 CLR 679 at 682; [1912] HCA 72. 38 The non-disclosure must be material in the sense that it is information that is relevant to the Court's determination and a matter of substance in the decision-making process. It is sufficient if it could be expected that the opposing party would have wanted to bring the information to the Court's attention and the Court would have wanted to consider it before making the order: Savcor Pty Ltd v Cathodic Protection International APS (2005) 12 VR 639; [2005] VSCA 213 (Savcor) at [35] (Gillard AJA, Ormiston and Buchanan JJA agreeing); Principal Financial Group Pty Ltd v Vella [2011] NSWSC 327 at [17]. 39 A failure to bring forward all the material facts which the absent party would presumably have brought forward in their defence to the application will ordinarily warrant discharge of the ex parte order made and lead to it being set aside: Aristocrat Technologies Australia Pty Ltd v Allam (2016) 327 ALR 595; [2016] HCA 3 at [15]; Mineralogy Pty Ltd v Western Australia [2020] QSC 344 (Mineralogy) at [86]-[89]. 40 However, non-disclosure or error in presenting material facts to the Court on an ex parte application does not necessarily lead to automatic discharge of the orders. The Court retains a discretion to nevertheless continue the order or make a new order on the same or different terms. The Court may treat the non-disclosure as leading to discharge and then require the party to make a further application for freezing orders or similar relief at the hearing or at a later time: see, for example, Hayden v Teplitzky (1997) 74 FCR 7; Cenric Group Pty Ltd v Bundanoon Sandstone Pty Ltd (No 2) [2018] NSWSC 1878; Nutek Constructions Pty Ltd v Slotwinski [2017] NSWSC 1795 at [23] . 41 The exercise of the discretion whether to set aside or continue the ex parte orders takes into account all of the circumstances, including the importance and materiality of the statements and the non-disclosure, the merits of the case, the practical effect of setting aside the orders, and whether the applicant acted culpably in the sense that the non-disclosure was deliberate: Gold Ribbon (Accountants) Pty Ltd (in liq) v Sheers [2003] 1 Qd R 683; [2002] QSC 400 at [51]-[54]; Savcor at [33]-[35]; Nexdius Pty Ltd v Exposure Scientific LLC [2017] NSWSC 1608 at [83]-[93]. 42 In order to satisfy the Court that the Freezing Orders should be continued and apply to the third defendant, the plaintiffs bore the onus of demonstrating that: (a) they have a good arguable case for final relief, in the sense that the case is more than barely capable of serious argument, although not necessarily one which the Court considers has a chance of success above fifty percent; (b) there was a danger that the defendants' assets might be disposed of, dealt with or diminished in value such that any judgment or prospective judgment of the Court would be wholly or partly unsatisfied; and (c) the balance of convenience and discretionary considerations favour the orders being made. See Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 25.11; Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321-2 (Gleeson CJ), 326 (Meagher JA); Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [53]; Samimi v Seyedabadi [2013] NSWCA 279 at [68]-[69], [72]-[75]; Axis Medical & Rehabilitation Pty Ltd as trustee for Axis Trust trading as Astir Australia v Tuantab [2020] NSWSC 486 (Axis Medical) at [10]-[11].
2. Freezing orders should, in general, be supported by an undertaking as to damages: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18, Gaudron, McHugh, Gummow and Callinan JJ at [43], Kirby J at [122]. In an interlocutory setting, there is no inflexible rule that a plaintiff should be denied interlocutory relief if it cannot offer a meaningful undertaking: Organic Marketing Australia Pty Ltd v Woolworths Ltd [2011] FCA 279, Katzman J at [69], citing Caravelle Investments Ltd v Martaban Ltd (1999) 95 FCR 85; [1999] FCA 1505 Finkelstein J at [25].

ISSUES

1. There were numerous issues raised at the hearing. I have set out below the parties' submissions in relation to each of these issues and my determination of them.

Mr Gordon's failure to disclose material facts before Freezing Orders obtained

1. Glowberth says that at the time Mr Gordon applied for the Freezing Orders, he knew that the date of the tenancy agreement was 22 May 2014 and that he had been made bankrupt on 2 July 2015. Glowberth submits that these were material facts which were not disclosed by Mr Gordon and which provide a basis for the discharge of the Freezing Orders, applying the following principles expressed in Town & Country Sport Resorts (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540; [1988] FCA 557 by Davies, Gummow and Lee JJ at 543: The failure of the applicants to make full disclosure of all facts relevant to the application for an interim injunction in itself necessitated the discharge of the order granted. A party who seeks the granting of an injunction on an ex parte basis has a duty to place before the court all relevant matters including such matters which would have been raised by the respondent in his defence if he had been present. As was stated by Isaacs J in Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 at 681-2: ... it is the duty of a party asking for an injunction ex parte to bring under the notice of the Court all facts material to the determination of his right to that injunction, and it is no excuse for him to say he was not aware of their importance. Uberrima fides is required, and the party inducing the Court to act in the absence of the other party, fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all the material facts which that party would presumably have brought forward in his defence to that application. Unless that is done, the implied condition upon which the Court acts in forming its judgment is unfulfilled and the order so obtained must invariably fall. The rationale behind the principle is clear; it is of the utmost importance in the due administration of law that the Courts and the public are able to have confidence that an ex parte order has been made only after the party obtaining it has complied with its duty to disclose all relevant facts. The principle applies to an application to discharge or dissolve an ex parte interim injunction; the discharge of that injunction does not prevent a fresh application being heard and determined in the light of all relevant facts: see Barneys Blu-Crete Pty Ltd v Australian Workers' Union (1979) 43 FLR 463 at 475.
2. Mr Gordon says that even if there was non-disclosure of material facts at the time the Freezing Orders were sought, the principles stated in Town & Country and in Baycolt Investments v Raynard [2002] WASC 11 by Pullin J at [36] make it clear that: …Even if there has been non-disclosure, this does not necessarily prevent the Court in the proper case from re-granting the injunction forthwith on notice and on the merits [citation omitted].
3. Mr Gordon said that if I was minded to discharge the Freezing Orders for non-disclosure, he forthwith applied for freezing orders in the same terms.
4. The date of the tenancy agreement was disclosed as a material fact at the hearing on 20 September 2023 through the specific reference to it in the affidavit of Mr Gordon sworn 20 September 2023 and a copy of the tenancy agreement in the exhibit to that affidavit which became evidence on the application for the Freezing Orders.
5. The fact of the bankruptcy of Mr Gordon was, however, a material matter which should have been disclosed by Mr Gordon at the time he applied for the Freezing Orders on 20 September 2023 and the variation of those orders on 22 September 2023. It was clearly a material matter, especially because it is now a central factual matter in the ASOC and the defence. It is telling that in the affidavit of Mr Gordon sworn 20 September 2023 he refers to a conversation with Phillip De Parma about Mr De Parma becoming a bankrupt and Mr Gordon referring to the potential effects of it.
6. Applying the principles set out in Town & Country above and those summarised in Tyche at [38]-[39], because of the non-disclosure of Mr Gordon's bankruptcy on or around 2 July 2015, I consider that the Freezing Orders must be discharged.
7. However, applying the same principles in Town & Country and those stated in Tyche at [40], Mr Gordon has applied forthwith for freezing orders in the same terms as the Freezing Orders and therefore it is appropriate that I consider whether orders should be made afresh in those terms.
8. Whether I should do so depends on my determination of the other issues raised on the application, to which I will now turn.

The issue of Mr Gordon's standing

1. Glowberth submits that Mr Gordon must prove that he has standing to bring the proceedings because the tenancy agreement was made on 22 May 2014 and he was made bankrupt on 2 July 2015. Glowberth says that standing is a mandatory precondition to the exercise of the court's discretion that Mr Gordon has a legal right to protect, relying on Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63 (although no particular passage was cited in submissions).
2. Glowberth also relied on the following passages from Samootin v Shea [2010] NSWCA 371, Campbell JA (with whom Beazley and Hodgson JJA agreed) at [63]-[65], [67]-[70], [74], [86]-[88] and [95] saying: 63 It is a fundamental principle on which the legal system operates that a question can be brought for determination before the Court only by a person who has standing to raise that question. 64 Any proceedings that are brought by a person who lacks standing are incompetent… 65 The court has power acting on its own motion to dismiss proceedings brought by a person who does not have standing to do so, as it is an abuse of process for a person who lacks the legal right to do so to commence or continue court proceedings. Because the court should not permit an abuse of its process to occur, the court should exercise its power to dismiss proceedings once it is satisfied that proceedings are incompetent. … Property Vesting in Official Trustee 67 Section 58(1) Bankruptcy Act 1966 provides, so far as presently relevant: Subject to this Act, where a debtor becomes a bankrupt: (a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee … and (b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee … 68 Section 5 Bankruptcy Act says: property means real or personal property of every description, whether situate [sic] in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property. 69 This "vesting" is a transfer, by automatic operation of the statute, to the Official Trustee of title to all the "property", as defined, of the bankrupt. Such a vesting by operation of statute has been a feature of bankruptcy law since the 1831 English statute 1 & 2 Will 4 c 56 s 25 introduced it, dispensing with the former need for there to be a deed of assignment of the property of the bankrupt executed by the commissioners: Rogers v Spence (1844) 13 M & W 571; 153 ER 240 at 573, 240 per Sgt Byles arguendo. (Those commissioners had been men appointed by the Chancellor, by commission under the Great Seal, to exercise the power of the Chancellor over the person and property of a bankrupt: Holdsworth, A History of English Law Vol 1, 7th ed 1956 p 470.) 70 Any equitable interest that Ms Samootin had in the two items of real estate at Oxford Falls was clearly property that vested in the Official Trustee upon her bankruptcy. … 74 In so far as the claim against Ms Wagner sought compensation for loss of Ms Samootin's property, the right to sue was property in the form of a chose in action, and vested in the Official Trustee: Faulkner v Bluett [1981] FCA 3; (1981) 52 FLR 115. … 86 In Rochfort v Battersby [1849] 11 HLC 387; 9 ER 1139 Lord Cottenham LC said, 409, 1147: The insolvent under the Insolvent Debtors Act is not considered by the Court as having any such interest in the property as entitles him to enter into any litigation respecting it. 87 He continued, at [410], 1148: Then, my Lords, the question is, whether you can hear him as an appellant? The moment you show he had no recognised interest in the property or in the matter, there is an end of his competency to raise the question. 88 Though many of the principles of bankruptcy law have changed since 1849, the principles just quoted have not changed. In Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 136 Brennan CJ, Gaudron and McHugh JJ held that: … a bankrupt has no right to bring or prosecute proceedings to protect, enhance or add to the property of which he has been divested on bankruptcy. … Effect of Discharge on Standing … 95 That discharge of a bankrupt from bankruptcy does not cause any assets that have vested in the Official Trustee to revert to the bankrupt, is also the implicit basis of the High Court's judgment in Official Receiver in Bankruptcy v Schultz [1990] HCA 45; (1990) 170 CLR 306…
3. Glowberth also points to the confirmation of these principles from Samootin in Garrett v GEL Custodians Pty Ltd [2012] NSWCA 197, Allsop P (as his Honour then was, Macfarlan JA agreeing) at [9] saying: The law in relation to standing concerning applications of this kind was fully and completely set out by Campbell JA with the agreement of Beazley JA and Hodgson JA in Samootin v Shea [2010] NSWCA 371 at [62] and following. There is no doubt that the only person with standing to complain about the secured creditor's actions with the existence of a sequestration order is the trustee. There is property exempt from the reach of a trustee but land owned by the debtor or later bankrupt is not such property. I would have nothing to add to the principles identified by Campbell JA, which lead to the inexorable conclusion that Mr Garrett does not have standing to complain about the position taken by the secured creditor.
4. In short, the argument of Glowberth is that the tenancy agreement is dated 22 May 2014 and upon the bankruptcy of Mr Gordon on 2 July 2015, all property of Mr Gordon vested with the Official Trustee (by operation of ss 5 and 58 of the Bankruptcy Act), including all causes of action arising from the tenancy agreement, and the discharge of Mr Gordon's bankruptcy on 24 July 2018 did not cause that property to revert to Mr Gordon.
5. Glowberth says that on this application I am seized with sufficient information to decide whether Mr Gordon has standing because before me I have the essential facts, being the chose in action sued upon, the date of the bankruptcy, and the date of discharge from bankruptcy.
6. Glowberth also submits that because there is a serious issue as to whether Mr Gordon had standing to obtain the Freezing Orders, it provides a further basis on which the Freezing Orders should be discharged. Given that I have already determined that the Freezing Orders should be discharged and am now focused on whether further freezing orders should be made, the question for me is whether the continued issue in relation to standing is a basis on which I should decline to make further freezing orders.
7. Glowberth argued that Mr Gordon admits that he had a chose in action before he was made bankrupt by reference to the special conditions to the tenancy agreement, which state: 1. The period of tenancy cannot be extended past 12 months. 2. Prior to or at the expiration of 12 months the lessor [Glowberth] will sell the subject property. 3. The lessor [Glowberth] must provide the right of first option to the lessee [Mr Gordon] to purchase the subject property. 4. The lessor [Glowberth] agrees that any net sale proceeds received for the subject property in excess of $750,000 will be divided equally between the lessor [Glowberth] and the lessee [Mr Gordon]. 5. The lessee [Mr Gordon] will be liable for all outgoings for the subject property, including but not limited to, council rates, water rates and land tax.
8. Glowberth says that these provisions must be read together, with cl 2 especially indicating that the chose in action for breach of cll 2 and 3 must have arisen 12 months after 22 May 2014, before the bankruptcy of Mr Gordon on 2 July 2015, because Mr Gordon had the right to approach the court for specific performance of those obligations. Glowberth submits that cl 5 of the special conditions provides at least part of the consideration given for the promises in cll 2 and 3, and there was nothing inchoate, but there was an accrued right to seek performance of the option in the tenancy agreement at least a year after it was entered, if not upon the date it was entered.
9. In support of these submissions, Glowberth referred to Beneficial Finance Corp Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510, Young J at 523-524 stating: In Imperial Chemical Industries Ltd v Sussman (English Chancery Divisions, Oliver J, 28 May 1976, unreported), Oliver J then sitting in the English Chancery Division said (this passage is set out in the judgment of Goff LJ in Pritchard's case (at 391): The critical distinction between a purchaser's option and a mere right of first refusal lies … in the fact that an option vests in the offeree the right to call for a conveyance of the land without any further intervention of the offeror. It is not inappropriate to describe this right as 'an interest in land' that the offeror has parted with his dominion over the land and can no longer control its disposition. … The grantor of a right of pre-emption is not in that position - and the disposition of the land remains a decision which is his and his alone. No doubt if he evinces a desire to sell, and thus creates the conditions in which he has undertaken to make an offer, that undertaking can be enforced inter parties, but the decision whether to create such conditions remains his and cannot be demanded or influenced by the offeree. This passage seems to be the clue as to the real distinction. If, on the true construction of the documents, or, in the case of an oral contract, what the parties have said, one can see that contingently or unconditionally the proprietor of property has put it out of his or her control to prevent the grantee from acquiring the property, then a proprietary right is conferred on the grantee. If, however, the right of the grantee only extends to impose a personal obligation on the grantor to make an offer, then there is no proprietary right conferred. …
10. Mr Gordon submits that the issue of standing is not one on which I can make a final determination on an interlocutory basis, particularly in light of the way in which the ASOC now pleads the case as one which is brought by Mr Gordon or, in the alternative, as one in which he seeks a declaration on a matter in which he has an interest, being whether the amount is owing to the Official Trustee. Mr Gordon submits that he simply needs to show whether he has a good arguable case to meet the first enquiry for determining whether freezing orders are appropriate as a matter of discretion.
11. Mr Gordon says that where the right that is the subject of a proceeding by a former bankrupt is inchoate or depends upon an event that may never happen, it is neither property nor after-acquired property for the purposes of the Bankruptcy Act and therefore does not vest in the Official Trustee at the date of bankruptcy. He submits that the tenancy agreement was entered into on 22 May 2014, when Mr Gordon was not bankrupt, and there had been no breach of the tenancy agreement at the time that he was made bankrupt on 2 July 2015 and, therefore, the cause of action on which he now sues did not exist at the date of bankruptcy and nor did it exist before he was discharged from bankruptcy on 24 July 2018 because the breach only happened in June 2023, when Glowberth entered into the contract of sale with a third party.
12. Mr Gordon says that whatever rights had accrued to him under the tenancy agreement by the date of his bankruptcy were definitely rights that vested in the Official Trustee, but it is not the correct analysis to say that the whole of the tenancy agreement vests because the authorities speak about the property being a "chose in action". He draws a distinction between, for example, a chose in action that entitled Mr Gordon as a tenant to be given peaceful and quiet enjoyment and possession of the Sackville Property (which, if infringed, would sound in damages and have vested in the Official Trustee), and the inchoate rights that existed for him under the tenancy agreement, which did not become a chose in action until it was breached in June 2023.
13. Mr Gordon says that the argument he wishes to make at the final hearing, for which he says he has a good arguable case before me, is that there is a set of events that need to come to pass, which may never come to pass, for those inchoate rights to come into existence, and then those rights, once they accrue, are not property that devolved upon Mr Gordon as a bankrupt before he was made bankrupt or in the period before his bankruptcy was discharged.
14. The authorities to which Mr Gordon primarily referred are as follows: 1. Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306; [1990] HCA 45: A married woman (Mrs Pereira) died, having left by her will the matrimonial home and its contents to Mrs Shultz, who was then a bankrupt. The woman's husband (Mr Pereira) successfully applied for a family provision order out of the estate. Shortly after Mrs Shultz was discharged from bankruptcy, an appeal overturned the order for provision and the Official Receiver instituted proceedings to determine whether that interest of Mrs Schultz formed part of the bankrupt estate. Mason CJ, Brennan, Deane, Dawson and Gaudron JJ said at 314: Nevertheless, Mrs. Schultz acquired upon the death of Mrs. Pereira a right to have the deceased estate administered in accordance with the duties of the executors. Though not the legal or equitable owner of the assets which were the subject of the devise and bequest in her favour, she had, by virtue of the chose in action created by that devise and bequest, an expectation that the assets would pass to her upon completion of the administration, subject to their being realized to meet any outstanding liabilities and to defray the costs of administration, and an interest in respect of those assets. That interest was derived from and dependent upon the chose in action. The interest is of such a kind that, when a beneficiary transmits a chose in action (or part thereof), or that chose in action passes by operation of law, such as under the Bankruptcy Act, that transmission naturally encompasses not only the chose in action but also the expected fruits of that chose in action: Horton v Jones; In re Leigh's Will Trusts [1970] Ch. 277, at p. 282. Mrs. Schultz's right to due administration arose from cl. 3(a) and (g) of the will. That right vested in the Official Receiver as soon as it vested in Mrs. Schultz, since it was clearly "property" as defined in s. 5(1) of the Bankruptcy Act: Re Pevsner; Ex parte Trustee in Bankruptcy (1983) 68 FLR 254, at p. 256; Silvia v Thomson (1989) 87 ALR 695, at p. 696. It follows, from what has been said above, that the interest derived from that right also passed to the Official Receiver at that time. Moreover, at all times Mrs. Schultz possessed but one right by virtue of cl. 3(a), whatever the effect of the subsequent court orders in relation to cl. 3(g). 1. Mr Gordon says that the principle to be taken from this case is that the existence of a present entitlement to have the will administered was essential to the reasoning and that in the absence of that entitlement, there would have been a different result. He says that if Mrs Pereira had not died before Mrs Schultz's discharge from bankruptcy, then Mrs Pereira would have been in a position to change her will at any time and the hope that one might have of being favourably considered in a person's will is a mere expectation or an inchoate sense of entitlement which would not have devolved upon the bankrupt Mrs Shultz prior to Mrs Pereira's death. 2. Panagopoulos v Panagopoulos [2022] NSWSC 1151: This case concerned whether an entitlement to bring a family provision claim was affected by bankruptcy. Mr Gordon relied on the following passages in the judgment of Robb J: 28 Where a debtor becomes a bankrupt, s 58 of the Bankruptcy Act 1966 (Cth) provides for the vesting of the bankrupt's property in the Official Trustee or a registered trustee. Property that is acquired by, or devolves upon, the bankrupt before the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt, vests in the Official Trustee or registered trustee forthwith: Bankruptcy Act, s 58(1)(a), (6). Conversely, property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt, vests in the Official Trustee or registered trustee as soon as that property is acquired by, or devolves on, the bankrupt: Bankruptcy Act, s 58(1)(b), (6). 29 Under family provision legislation, the nature of an order for further provision has been to take effect as if it were a codicil to the testator's will: Testator's Family Maintenance and Guardianship of Infants Act 1916 (NSW), s 4(1); Family Provision Act, s 14(1)(a); Succession Act, s 72(1)(a). However, the provision made by a family provision order takes effect only as if it were a testamentary disposition, and the result of such an order is imposed only as from the date of the order: McLeod v Johns [1981] 1 NSWLR 347 at 349 (Kearney J). In other words, as Mason CJ, Brennan, Deane, Dawson and Gaudron JJ stated in Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 316; [1990] HCA 45: … the person to whom a benefit flows following the making of such an order receives that benefit as the result of the creation of rights pursuant to the making of the order and not by way of variation to any pre-existing rights which that person may have possessed pursuant to the will. 30 Citing the decisions of this Court in Union-Fidelity Trustee Co of Australia Ltd v Montgomery [1976] 1 NSWLR 134 at 141 (Helsham J) and McLeod v Johns at 349 (Kearney J), the majority of the High Court noted at 316-7 (citations omitted): "It should be observed that the same result has been reached in relation to legislation providing that the order should take effect as if it had been made by codicil." 31 Given that Jim is a discharged bankrupt, the foregoing propositions reveal that any order for further provision made by this Court will not vest in the Official Trustee and the impact of any such vesting is not a concern for the Court in determining whether adequate provision has been made or whether to make an order for further provision. 1. Mr Gordon argues that these passages indicate that the rights only arose on the date the order was made and not any time before then when there was only a mere expectancy. 2. Norman v Commissioner of Taxation (Cth) (1963) 109 CLR 9; [1963] HCA 21: This case concerned a taxpayer who entered into a deed purporting to assign to his wife by way of a gift all of the interest derived during the year from a sum of £3000, being part of the sum deposited by him on loan with a firm with no fixed term, where the firm was at liberty to repay it at any time without notice. In the same deed, the taxpayer also purported to assign to his wife by way of gift all the interest, dividends and other income arising during the same year of income from two estates in which the taxpayer had a beneficial interest in residue. The question was whether the amount paid by way of interest and the dividends were income derived by the taxpayer in the year of income. Windeyer J at 26 stated: The distinction between a chose in action, which is an existing legal right, and a mere expectancy or possibility of a future right is of cardinal importance in this case, as will appear. It does not, in my view, depend on whether or not there is a debt presently recoverable by action because presently due and payable. A legal right to be paid money at a future date is, I consider, a present chose in action, at all events when it depends upon an existing contract on the repudiation of which an action could be brought for anticipatory breach. 1. Mr Gordon says that he only had a possible future right under the tenancy agreement, not an existing legal right in the form of a chose in action, at the date of his bankruptcy.
15. Mr Gordon said that while he had not been able to find any decision which squarely deals with the proposition advanced by him, and there appeared to be a dearth of authority on the question of an inchoate right, on the basis of the above authorities, it appears to be eminently an arguable case on the law that the uncrystallised right of Mr Gordon might never accrue to him and, therefore, was not property that devolved upon him within the period of his bankruptcy.
16. Mr Gordon says that the construction point which is raised against him - involving the reading together of cll 2, 3 and 4 of the special conditions - is misconceived because the case that Mr Gordon advances does not rely on any breach of cl 2, and that in a rising market it is hard to see how that breach could ever cause loss. Mr Gordon said there may have been a completely hopeless cause of action in 2014 to sue for non-existent damages for the failure to sell on time, but Mr Gordon does not advance that case, the Official Trustee did not advance that case, and it is not the cause of action with which Mr Gordon ultimately invites this court to engage.
17. Mr Gordon says that the fact a cause of action may have accrued does not infect the proposition that stands at the root of the way that he seeks to characterise the inchoate right that subsequently turned into a cause of action. Mr Gordon says that he does not advance a case that this was an option and the evidence, which Mr Gordon accepts, reveals that there was no interest in land in the present case. Mr Gordon says that the special conditions to the tenancy agreement, properly construed, do not contain an option to purchase because, if they did, such an offer would fail for want of certainty, because there is no price at which the option is to be exercised and it is simply a right of first refusal with no interest in land.
18. I note that the Official Trustee also made submissions in support of the view that if Glowberth is liable in respect of the causes of action pleaded in the ASOC, that liability is either to Mr Gordon or the Official Trustee and that those matters can only be dealt with at a final hearing. The Official Trustee submitted that these issues are particularly difficult to resolve at an interlocutory hearing and there were differences in the authorities about the proper approach.
19. The Official Trustee referred to the decision in Barwick v Goodridge [2011] NSWSC 1233; 255 FLR 245, where Black J at [16]-[19] determined that a view would be formed as to the bankruptcy trustee's title to relevant property in advance of the final hearing, even though the issue before the court was an interlocutory one.
20. The Official Trustee also submitted that there is an active debate over the extent to which s 27 of the Bankruptcy Act provided exclusive "jurisdiction in bankruptcy" to the Federal Court to the exclusion of this court, referring to Re Galtari Pty Ltd (in liq) [2018] NSWSC 917 where Gleeson JA at [24]-[34] outlined the various authorities on the point. In light of the view I have formed, I do not consider that it is necessary for me to add to that debate.
21. In my view, the question of the proper characterisation of the rights or expectancies of Mr Gordon as at the date of his bankruptcy and during the period of it is not one on which I can make a final determination when I am dealing with the matter on an interlocutory basis. My task is to determine whether there is a good arguable case and to my mind there is in the present case, which ultimately goes to the standing of Mr Gordon. Despite the invitation of Glowberth, I am not satisfied that this is a question that I can determine on a final basis when I do not have the benefit of all of the facts before me that might emerge at a final trial on which many of the arguments rehearsed before me will be based. For that reason, I am not satisfied that I am in a position to make a ruling that Mr Gordon has no standing and, therefore, I cannot determine that the proceedings are incompetent in the sense described in Samootin.
22. I am fortified in my view by the fact that the claims made in the ASOC are expressed in the alternative, seeking a declaration that Glowberth either has to pay Mr Gordon or has to pay the Official Trustee. Mr Wood referred to the decision in QBE Insurance (Aust) Ltd v Lois Nominees Pty Ltd [2012] WASCA 186 in which clients sued a bankrupt solicitor for negligence and the insurers refused to indemnify the solicitor, resulting in proceedings being commenced by the clients against the insurer seeking a declaration that the insurer was liable to indemnify the solicitor. The question for the court was whether the declaration sought had any utility. Newnes JA (with whom Murphy JA agreed) at [208] said: The following propositions are, in my view, at least arguable for present purposes. The plaintiffs have a sufficient interest to claim declaratory relief. Although the chose in action vests in the trustees in bankruptcy, the plaintiffs have a singular interest in recovering under the policy by virtue of s 117 of the Bankruptcy Act. The legislative scheme confers on them a special entitlement to the proceeds of a successful claim for indemnity. The operation of s 117, whilst contingent upon the success of the plaintiffs' money claims, is not speculative or remote in this case in that the solicitor is in bankruptcy, and, for present purposes, it must be taken that the assertion of the entitlement to indemnity under the policy is an arguable claim. The insurer is a proper contradictor. The dispute is real in the sense that the insurer has declined indemnity under the policy and specified the grounds upon which it has done so. These matters point to the plaintiffs having an arguable claim to the declaration they seek.
23. Mr Gordon says that, similarly, he has an arguable claim to the declaration that he seeks because he has a sufficient interest in its outcome and that suffices for "present purposes", being the interlocutory context in which I am making this determination.
24. I am satisfied that on an interlocutory basis there is a good arguable case as to whether Mr Gordon is entitled to such a declaration on the basis that Mr Gordon has a sufficient interest, because it is not hypothetical and it is not something in which he has no interest.

Quantum and undertaking as to damages

1. Glowberth says that in the ASOC, Mr Gordon pleads both a liquidated claim in the amount of $360,000 and an unliquidated claim, both of which cannot be reconciled with each other. Glowberth submits that the liquidated claim is based on the Sackville Property being sold to a third party and the unliquidated claim is based on Mr Gordon exercising an option to purchase, both of which cannot succeed. It is said that the unliquidated claim is not properly pleaded and not supported by evidence because there is no material to prove that Mr Gordon was actually in a position to purchase the Sackville Property. Glowberth asserts that there is certainly no evidence substantiating the quantum of the Freezing Orders in the sum of $1,363,000 and no application has been made for freezing orders to support the liquidated claim.
2. Glowberth summarises its position in this way: if the Sackville Property is worth $1.47 million and Mr Gordon has the money to purchase it but does not, he still has his $1.47 million and, therefore, does not suffer any loss unless the Sackville Property is actually worth more than $1.47 million. The pleading is that the Sackville Property was worth more than $1.47 million, but there is no evidence to support that proposition.
3. Glowberth underlines this point by the lack of material in response to a notice to produce dated 21 September 2023 that was served on Mr Gordon seeking copies of: 1. statements of all bank accounts held in his name during 2023; 2. tax returns and notices of assessment for Mr Gordon lodged with the Australian Taxation Office for the financial years 2021, 2022, and 2023; 3. all applications for finance lodged by Mr Gordon or on his behalf in relation to the purchase of the Sackville Property between August 2021 and the present date; and 4. all correspondence regarding any approval for finance applied for by Mr Gordon or on his behalf in relation to the purchase of the Sackville Property between August 2021 and the present date.
4. The two documents produced by Mr Gordon in response to the notice to produce were from the Commonwealth Bank in relation to an account held in Mr Gordon's name, which indicate that he had an account balance of $1,978.95 as at 1 October 2023. From this production, I am safely able to infer that Mr Gordon has no other assets held in any bank accounts, has not lodged any tax returns or received any notices of assessment for the financial years 2021, 2022, and 2023, and did not apply for any finance for the purchase of the Sackville Property in the relevant period. It does not tell me anything else about the financial position of Mr Gordon.
5. Glowberth uses the same absence of material regarding the financial position of Mr Gordon to argue that the inference is available that he would not be able to financially stand behind the undertaking as to damages he is required to give as a price for obtaining freezing orders.
6. Mr Gordon says that his unchallenged evidence is that from 23 June 2023, he has been ready, willing and able to buy the Sackville Property for $1.5 million and had earlier been prepared to buy it for $2.5 million. He accepts that his evidence will have to be augmented at the final hearing, including by valuation evidence to support the value he says the Sackville Property had.
7. I note that Mr Gordon also pleads in ASOC at [14] that if Glowberth had offered to sell or provided Mr Gordon with the opportunity to purchase the Sackville Property on similar terms to those contained in the contract of sale on 23 June 2023, he would have purchased the Sackville Property and was ready, willing and able to do so.
8. In those circumstances, I consider that on an interlocutory hearing of this sort, I am able to conclude that Mr Gordon has a good arguable case concerning his allegation that he would have purchased the Sackville Property and was ready, willing and able to do so, but will need to support that case through proper evidence at the final hearing. This will be evidence as to the value of the Sackville Property and his ability to purchase it, all of which are matters for the final hearing, not an interlocutory one. His failure to produce that evidence at an interlocutory hearing before me does not provide a proper basis for refusing him freezing orders.
9. On the evidence before me, I am also not in a position to determine that Mr Gordon would not be able to support the undertaking as to damages that he has given. In any event, there is no inflexible rule that a person unable to support an undertaking as to damages should be refused interlocutory relief.
10. As a matter of discretion, I am not prepared to deny freezing orders to him based on the argument that he could not purchase the Sackville Property when he asserts in unchallenged evidence by affidavit that he was ready, willing and able to purchase the Sackville Property for $1.47 million in June 2023.

Mr Gordon's alleged failure to provide vacant possession of the Sackville Property

1. Glowberth submits that: 1. On 14 March 2023, NCAT made an order that Mr Gordon deliver vacant possession of the Sackville Property to Glowberth. 2. On 5 September 2023, NCAT dismissed Mr Gordon's appeal, leaving the order of 14 March 2023 undisturbed. 3. On 13 October 2023, a warrant for possession of the Sackville Property was issued to the Office of the Sheriff of New South Wales. 4. On 30 October 2023, the Sheriff executed the warrant and physically removed Mr Gordon from the Sackville Property, leaving his chattels on site. 5. On 20 November 2023, Lindsay J made a further order requiring Mr Gordon to deliver vacant possession. 6. On 21-23 November 2023, Glowberth organised security measures on the Sackville Property, providing an opportunity for Mr Gordon to remove his belongings, which he has failed to do.
2. Glowberth says that this provides a discretionary reason not to grant freezing orders in favour of Mr Gordon because he is disobeying an order of the court.
3. Mr Gordon argues that the evidence before me at the interlocutory hearing is that he does not physically remain in possession of the Sackville Property but, to the contrary, he has been forcibly removed and some of his chattels remain on the Sackville Property, which he is doing his best to remove (although he has a lot of his belongings there).
4. I am not prepared to refuse Mr Gordon any freezing orders on the argued basis that he remains in possession of the Sackville Property and is disobeying an order of the court. I do not consider that the evidence establishes that fact, but rather demonstrates that there is a difference of opinion between the two parties over whether Mr Gordon has or has not removed all of his belongings.

No real danger of dissipation of assets

1. Glowberth argued that there is no demonstrable danger of dissipation of assets by Glowberth, and that all it was doing was selling the Sackville Property, about which there was no secret because an element involved in the sale was having Mr Gordon evicted from the Sackville Property. Glowberth submitted that the orders of NCAT on 14 March 2023 meant that the tenancy agreement was terminated immediately, giving rise to an arguable issue estoppel in favour of Glowberth. In support of this proposition, Glowberth referred to Lambidis v Commissioner of Police (1995) 37 NSWLR 320, Priestley JA at 332 (with whom Kirby P at 323-324 and Powell JA at 337 agreed) saying: Accordingly, where tribunals, even though called administrative tribunals, are legislatively empowered to decide the competing claims of parties in a way which has legal effect, and where, in making such decisions it is necessary for them to decide identifiable disputed issues, there seems to me to be a strong reason why such issues once decided should be treated as having been set to rest between the disputants.
2. Glowberth conceded that such an estoppel would be something that had to be determined at a final hearing and it would certainly be something that would go to the balance of convenience because it is a strong argument available to Glowberth.
3. Mr Gordon countered this argument by referring to the decision of the Appeal Panel of NCAT, Gordon v Glowberth Pty Ltd [2023] NSWCATAP 253 at [47], which states: The appellant is not precluded by the Tribunal's orders from taking such action as he may be advised to resolve the other alleged rights and obligations between the parties. Mr Gutierrez, who appeared for the respondent at the hearing of the appeal, acknowledged (as the Tribunal also noted during the hearing on 14 March) that an order terminating a residential tenancy agreement and an order for possession, as mandated by section 83 of the RTA, do not create any issue estoppel or res judicata preventing the appellant from making any claim, in proceedings in an appropriate forum, to an entitlement in respect of the property.
4. I think this is an answer to the issue raised by Glowberth before me.
5. The essential issue about the dissipation of assets is one which Glowberth did not squarely confront. Mr Gordon relied on precisely the same argument about the danger of dissipation of assets which had previously been put at the hearing before me on 20 September 2023. The point made by Mr Gordon is a short one.
6. Glowberth is the trustee of the De Prima Family Trust. The balance sheet for the De Prima Family Trust demonstrates that as at 30 June 2020, it had amounts owing to its beneficiaries of $2,471,942.50, as part of total non-current liabilities of $3,054,749.60. If there is a distribution that has been declared by the De Prima Family Trust in favour of the beneficiaries but not paid, it becomes payable as a debt, in which case there is a reasonable basis for believing that if the proceeds of sale of the Sackville Property are paid to Glowberth, the beneficiaries of the De Prima Family Trust might pay it to themselves.
7. Mr Gordon says that this risk is reinforced by Glowberth's failure to provide documents in response to the notice to produce dated 20 September 2023 served on Glowberth by Mr Gordon which sought the production of the following documents: 1. The balance sheet and income statement for the De Prima Family Trust for the year ended 30 June 2020, including the report titled Beneficiary Accounts referred to in note 8 in the balance sheet of the De Prima Family Trust as at 30 June 2020. 2. The most recent balance sheet and income statement for De Prima Family Trust.
8. On 15 November 2023, Glowberth appeared at the Return of Subpoena list at this court and stated that there was nothing to produce in answer to the notice to produce. In those circumstances, Glowberth says that the available inference is that the position regarding amounts owing to the beneficiaries of the De Prima Family Trust is the same as that which was stated in the 30 June 2020 balance sheet.
9. I agree that Mr Gordon has demonstrated that there is a danger that Glowberth's assets might be disposed of, dealt with or diminished in value such that any judgment or prospective judgment of the court in favour of Mr Gordon would be wholly or partly unsatisfied in the sense described in Tyche.
10. As for the monetary limit of the proposed freezing orders, Mr Gordon says that he is owed a debt of $360,000 and damages of at least $1.03 million because he was prepared to buy the Sackville Property for $2.5 million, and he was not given that opportunity to exercise his right of first refusal in relation to the current sale of the Sackville Property at $1.47 million. Glowberth says he cannot recover both.
11. In my determination, I consider that there is an arguable basis on which Mr Gordon can seek both the amount of the debt and damages. For those reasons, any freezing order should maintain a monetary limit of $1,363,000.

Amendment to the freezing orders

1. Glowberth says that if the freezing orders are to be made, then they should allow Glowberth to pay their reasonable legal costs and not be limited to $2,000 per week as restricted in the Freezing Orders. I agree that such an amendment should be made.

CONCLUSION

1. For the reasons expressed above, I am of the view that the Freezing Orders should be discharged and in their place a new form of freezing orders made, subject to the amendment to the exception for the payment of reasonable legal expenses.
2. The parties are to provide my Associate with agreed short minutes (which also deal with costs) within 7 days reflecting the reasons above, failing which I will make orders in chambers.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 February 2024