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1. This is an application to set aside or vary a freezing order made by Muller J on 5 May 2026: Gupta v Sharai Projects Pty Ltd [2026] ACTSC 123. The order picked up the usual and extensive form of a freezing order which is set out in Practice Note No 1 of 2008. However, that extensive form of freezing order fits very poorly with a situation such as the present case where the underlying proceedings in the Magistrates Court relate to a claim of $28,000 and the application is made to prevent dissipation of assets only up to an amount of $15,000.

2. Mr Iyengar, who is the director of both defendants and who I granted leave to appear on behalf of the defendants, indicated, and I accept, that as a result of the making of the freezing order, the first defendant’s bank account with the National Australia Bank was frozen. That is a cautious, but not unreasonable, approach by a bank in circumstances where it is very difficult for a bank to determine whether any particular transaction is inside or outside the scope of the exceptions to the freezing order.

3. The application was supported by an affidavit of Mr Iyengar which is less than complete in its disclosure of the assets and income of the first defendant. It does not disclose the contracts which are held by the company or its other liabilities. In his submissions, Mr Iyengar has indicated a concern about the privacy of the company. However, in court proceedings such as this, the privacy of a corporation is, at least so far as it involves disclosure to the court and the other party, not of great concern.

4. A significant feature of this case is that the freezing order is said to be in aid of a not yet made claim for costs in Magistrates Court proceedings by the defendants in those proceedings. The defendants in the Magistrates Court (who are the plaintiffs in these proceedings) hope to be successful in their defence of the Magistrates Court proceedings and to obtain a costs order in the future. It is the satisfaction of that potential costs order which the freezing order is designed to aid. It is significant that no application was made for security for costs in those proceedings. That would be the usual remedy for defendants in responding to a claim against them in circumstances where a corporate plaintiff could not demonstrate sufficient assets to provide some assurance that, if ultimately successful in the defence, the defendants would be able to recover costs.

5. In my view, it is appropriate to narrow the scope of the freezing order in a manner that permits the first defendant to continue trading, and also to remit these proceedings to the Magistrates Court so that any future applications or issues in relation to the proceedings will be dealt with in that court. That is the court where, in my view, these proceedings should have been commenced and prosecuted so as to avoid a multiplicity of proceedings and to allow the merits of the claim to be determined by a judicial officer who has heard all of the evidence in the case.

6. I accept both from the plaintiffs’ submissions, and from reading the reasons given by Muller J, that the basis for the making of the freezing order was the coincidence between the first defendant becoming subject to an order of the New South Wales Civil and Administrative Tribunal (NCAT) and the incorporation the next day of the second defendant. The relevant risk was the possibility of the income streams or contracts presently available to the first defendant being diverted, assigned or otherwise transferred to the second defendant.

7. In my opinion, it is appropriate that orders be made restricting the potential for that kind of diversion, but it is not appropriate to maintain the general freezing order which has been drafted in order to accommodate very much more significant cases. I consider that it is also appropriate to maintain the requirement for disclosure. I note that there has been no disclosure of the extent required by the existing order, although some explanation might be that the present application was on foot seeking to have the order discharged in its entirety.

8. So far as transfer of the proceedings is concerned, there is a power in s 268 of the Magistrates Court Act 1930 (ACT) which permits proceedings to be remitted to the Magistrates Court: 268 Transfer of action from Supreme Court (1) This section applies if a proceeding in the Supreme Court relates to a cause of action that is a prescribed action. (2) The Supreme Court may, on the application of a party to the action or its own initiative, order that the action be transferred to the Magistrates Court if it considers it just to do so. (3) In subsection (1): prescribed action means an action in which the amount claimed (whether initially or as reduced by payment, admitted set-off or otherwise) is not more than the amount for which the Magistrates Court has jurisdiction under this chapter.

9. The reference to “prescribed action” is in limited terms, but in circumstances where the present application is in substance an interlocutory application for the purposes of the Magistrates Court proceedings, I consider it open to transfer these proceedings to the Magistrates Court under that section.

10. Subject to anything further that Mr Hoffmann wants to say, I also propose to make an order limiting the costs that may ultimately be recoverable in relation to the present proceedings to the scale of costs that would have been applicable had this application been made before the Magistrates Court. I will adjourn these proceedings until 4:15pm today so as to permit Mr Hoffmann to provide to the court proposed orders limited to those requiring disclosure and preventing redirection of payments, transfer of contracts or such other activities as he wishes to propose which are directly related to the phoenixing concerns that he has identified. For those reasons, I will adjourn the matter until 4:15pm today. [The matter resumed and submissions were made on the proposed orders.]

11. Mr Hoffmann, who appears for the plaintiffs, has now provided a minute of proposed orders, which, having regard to my earlier reasons, narrows the scope of the orders against the first and second defendants and addresses the other issues that I earlier indicated that I would address. In my view, even those orders go beyond the orders which are appropriate. It is significant, in my view, to retain some proportionality between the orders that are made and the circumstances that give rise to the making of those orders.

12. In assessing the appropriate scope of the orders, I consider that it is appropriate to take into account the following: (a) there was no application for security for costs made in the Magistrates Court proceedings; (b) the only evidence available to indicate a potential for dissipation of assets was the incorporation of a new company, the second defendant, shortly after an order was made against the first defendant in the NCAT; (c) the modest amount which is at stake, namely the potential for a future costs order which may be assessed at an amount of approximately $15,000; and (d) the fact that no costs order has been made and the only basis upon which the freezing order was originally made was a statement of the confidence of the solicitor for the plaintiffs as to the prospects of ultimately obtaining a costs order in the Magistrates Court.

13. In those circumstances, although there would be a case for making even narrower orders, I propose to make orders based upon the short minute, but with the following modifications.

14. I do not propose to include the restraint in paragraph 3(f) as I consider that it is too complex and a broader restraint than is justified in the circumstances.

15. So far as proposed order 4 is concerned, having regard to Mr Iyengar’s statement that the second defendant has no trading activities, does not have a bank account and has not entered into any contracts, I think a more straightforward injunction restraining its activities is appropriate.

16. I consider that it is appropriate to require disclosure only within 21 days of the date of this order, rather than within five days as proposed. Consistent with my deletion of paragraph 3(f), I will also remove the equivalent paragraph from the disclosure requirements. I will not include the provision relating to objection on the basis of self-incrimination. If there is some question of self-incrimination that would cause a defendant or other relevant person to resist disclosing information, then that is a matter which can be dealt with by the liberty to apply provision.

17. So far as costs are concerned, I consider that it is appropriate that the costs be reserved but that they be dealt with in the Magistrates Court and on the basis that the plaintiffs in any event not recover any greater amount of costs than would be recoverable in the event that they had made their application in the Magistrates Court in the first instance.

18. Finally, in order to address the practical difficulties that have arisen as to the operation of the orders and the attitude taken by the bank used by the first defendant, I consider it appropriate to make clear that nothing in the orders requires any bank to enquire into the application or proposed application of any money withdrawn by the first defendant. The intention of that order is to free the banks from any obligation and instead place the burden of these orders upon the first and second defendants.

Orders

19. For those reasons, the orders of the Court are as follows:

Definitions (1) In these orders: (a) ‘Applicants’ means Kapil Gupta (First Plaintiff) and Shad Lakshmi (Second Plaintiff); (b) ‘Existing Order’ means the freezing order made by Justice Muller on 5 May 2026 in Annexure A to the Order of 5 May 2026 in these proceedings; (c) ‘First Respondent’ means Sharai Projects Pty Ltd (ACN 134 111 274) (First Defendant); (d) ‘Second Respondent’ means Sharai Engineers & Builders Pty Ltd (ACN 696 648 352) (Second Defendant); and (e) ‘Iyengar’ means Hari NS Iyengar, sole director of the First Respondent.

Discharge of existing order (2) The Existing Order is discharged, save that the undertakings given by the Applicants in Schedule A to the Order of 5 May 2026 continue in force to the extent that the orders made below have effect.

Prohibition on transfer of contracts, receivables, and licences (3) Until further order, the First Respondent, whether by itself, its directors, officers, employees, or agents, must not: (a) transfer, assign, novate, subcontract, or otherwise deal with any building contract, subcontract, or agreement for the provision of building or construction services to which the First Respondent is a party; (b) transfer, redirect, assign, or otherwise deal with any receivable, progress claim, retention money, or entitlement to payment arising under any building contract or agreement to which the First Respondent is a party; (c) transfer, surrender, allow to lapse, withdraw from or otherwise deal with ACT Builder’s Licence No. 2009507 (Class A, expiring 7 July 2028) or any nominee status associated with that licence; (d) transfer, surrender, withdraw from, or otherwise deal with NSW Contractor Licence No. 386345C; or (e) transfer any assets, contracts, work in progress, goodwill, client relationships, or entitlements to payment to the Second Respondent. (4) Until further order, the Second Respondent is restrained from entering into any contract, acquiring any asset or opening any bank account. (5) For the avoidance of doubt, orders 3 and 4 do not prevent the First Respondent from dealing with its assets in the ordinary and proper course of its building business, including paying wages, superannuation, subcontractors, suppliers, and taxes bona fide and properly incurred. Disclosure (6) Within 21 days of the date of this order, the First Respondent must file and serve on the Applicants an affidavit sworn by Iyengar, in his capacity as sole director of the First Respondent and (to the extent he is able) as director of the Second Respondent, setting out: (a) particulars of all building contracts, subcontracts, and agreements for building or construction services to which the First Respondent is, or has been since 1 January 2026, a party, including the identity of the principal or other contracting party, the contract value, the amount invoiced, and the amount outstanding; (b) particulars of all building contracts, subcontracts, and agreements for building or construction services to which the Second Respondent is, or has been since 1 January 2026, a party, including the identity of the principal or other contracting party, the contract value, the amount invoiced, and the amount outstanding; (c) particulars of all transfers, assignments, payments, or other dealings in assets, contracts, receivables, or entitlements between the First Respondent and the Second Respondent, since 1 January 2026; and (d) particulars of any customer, principal, or employee of the First Respondent with whom the Second Respondent has, since 1 January 2026, entered into, or been engaged to enter into, any contractual arrangement for building or construction services.

Remittal (7) These proceedings (SC 171 of 2026) are remitted to the Magistrates Court of the Australian Capital Territory to be heard with proceedings CS 197 of 2024.

Costs (8) The costs of the proceedings prior to remittal are reserved and shall be determined by the Magistrates Court but in no circumstances are the Applicants to recover costs on a more favourable basis than if the proceeding had been made by application in proceeding in the Magistrates Court. Further orders (9) Nothing in these orders requires any bank to inquire into the application or proposed application of any money withdrawn by the First Respondent. (10) The parties have liberty to apply to the Magistrates Court on 48 hours’ written notice.

I certify that the preceding nineteen [19] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: