In the matter of Statewide Office Furniture Pty Ltd [2018] NSWSC 1393

The probate proceedings

1. The issues that require consideration in respect of the Probate proceedings are: 1. the plaintiffs' claim for repayment to Statewide of company funds allegedly dealt with contrary to the Asset Preservation Order, and interest; 2. the plaintiffs' claim for repayment to the Estate of estate funds applied to payment of Simon's legal costs; 3. the costs of those applications; 4. enforcement; and 5. the Deed Administrator's application for costs in respect of a notice to produce served on the company on behalf of Simon.

Claim for repayment of funds dealt with contrary to Asset Preservation Order

1. Claim 1 in the amended motion is for an order that Simon pay Statewide the sum of $292,580 (said to be the amount of funds disposed of by the company in breach of orders 1 and 2 made on 1 May 2015 and extended on 19 June 2015), together with interest thereon pursuant to (NSW) Civil Procedure Act 2005, s 100. Authority to pursue that claim was conferred on the Special Administrators by the orders of Ward CJ in Eq made on 9 August 2018. [11] Moreover, the Special Administrators were parties to the proceedings - though not yet administrators - when the orders of 1 May 2015 were made, and have a sufficient interest in their performance.
2. When the asset preservation order ("APO") was made, Simon was already indebted to the company on a loan account, in respect of moneys drawn for his personal purposes, in the amount of $76,481.89. This was recorded in ledger account 1-1252 ("the antecedent debt").
3. Following the making of the APO, Simon continued to draw from the company's funds (in addition to his usual wage of approximately $100,000 per annum, until 12 April 2017) for his personal expenses -- including for payment of his legal fees in connection with the probate proceedings and matrimonial proceedings between him and his estranged wife, for rates in respect of property in his name, and for his children's school fees. These drawings were debited to another loan account his name, recorded in ledger account 1-1251. Account 1-1251 had an opening balance as at 1 July 2015 of nil, and a closing balance as at 2 May 2018 of $227,135.24; in the interim there were debits of $292,280.50 and credits of $65,145.26.
4. By the time of the hearing, Simon admitted that a (net) amount of $227,435.24 had been applied from Statewide's resources for his benefit during the period 18 August 2015 to 27 March 2018, apparently in breach of the orders of 1 May 2015 as subsequently extended. Simon also admitted that a total of $73,807.57 had been applied from Statewide's resources for his benefit during the period 3 October 2013 to 16 May 2014, but denied that he was obliged to repay that sum or any of it.
5. The plaintiffs' claim was put on the basis of what was said to be the Court's inherent jurisdiction summarily to enforce its own orders. It was submitted that this jurisdiction has been exercised to make orders for the payment of money in enforcement of undertakings to pay, of which examples were said to be Spindler v Balog [12] and XR Property Developments Pty Ltd v Sekers. [13] However, Spindler v Balog involved the availability of a writ of attachment for contempt by way of enforcement of an undertaking to pay money; it did not involve any summary order or judgment for payment of the sum the subject of the undertaking. It is true that in XR Property Development it was stated: [14] First, by its Amended Summons dated 21 May 2018 (see paragraph [60] below), XR sought declarations and orders for the enforcement of the Undertaking. Correctly, no point was taken by Ms Lee as to the form of the proceedings. In circumstances where Mr Sekers had failed to perform the Undertaking after demand for such performance had been made by XR, Mr Sekers was prima facie in contempt of court. That outcome reflects the classical distinction between an undertaking inter partes and an undertaking to the Court. The former is the product of an agreement between the parties enforceable in accordance with the usual principles of contract. In most cases, even where it is given as part of an agreement between the parties, the latter is enforced by the beneficiary of the undertaking or the Court itself charging the party which has given the undertaking with contempt of court. However, at least in the case of a breach of an undertaking to pay money, there is no doubt that the beneficiary of that undertaking is entitled to sue for orders that the undertaking be performed rather than bring a prosecution for contempt: Spindler v Balog (1959) 76 WN (NSW) 391.
6. However, Spindler v Balog, which as I have said concerned the issue of a writ of attachment, does not seem to me to be authority for that proposition at all.
7. But that is not the end of the matter. The orders made by Robb J and subsequently extended by Kunc J were what were once commonly called "Mareva injunctions", but are nowadays sometimes referred to as "asset preservation orders" [15] or "freezing orders". [16] Although provision in respect of such orders is now made by rules of court, they are sourced in the Court's inherent power to ensure the effective exercise of its jurisdiction, by restraining a defendant from making an adverse dealing with an asset which would involve a real risk that a judgment in the proceedings may not be satisfied. [17]
8. Although it is at the heart of the jurisprudence concerning Mareva injunctions that they operate in personam, not in rem, and that such an order does not give a plaintiff security for a judgment or an interest in the "frozen" assets, but merely prohibits a defendant, under penalty of contempt, from dissipating its assets so as to frustrate a judgment, [18] there is nonetheless a well-established practice of making orders ancillary to a freezing order, and this practice is now expressly authorised by rules of court. [19] For present purposes, it is noteworthy that such ancillary orders may include orders requiring the delivery up of specified assets, [20] orders for the transfer of assets from one foreign jurisdiction to another, [21] and orders for the payment of money into court or another controlled moneys account. [22] In Yukon Line v Rendsburg, a mandatory order requiring the defendant to restore money that had been taken from its bank account, by paying it into court, was upheld. [23] Accordingly, an order to the effect sought by the plaintiffs may be made as one "ancillary" to the APO.
9. However, there is another, and in my view more appropriate, basis for them, namely that a transfer of property to a third party, in defiance of a freezing order of which both parties to the transfer are on notice, is voidable for illegality, and enlivens equity to intervene to restore the property to the transferor's ownership. Although relief on this basis was declined in Bank of Western Australia v Ocean Trawlers Pty Ltd [24] - because the transferees had no knowledge or notice of the Mareva order and acted in good faith and for value - Owen J accepted that the principle stated by Megarry VC in Clarke v Chadburn [25] was apt in the context of a transaction knowingly entered into in breach of an order of the court, namely: [26] It seems to me on principle that those who defy a prohibition ought not be able to claim that the fruits of their defiance are good, and not tainted by the illegality that produced them.
10. Accordingly, the court may order restitution on the basis that the dispositions were illegal, as being in contravention of the APO of which both transferor (Statewide) and transferee (Simon) had notice. [27]
11. The Special Administrators submitted that relief should extend to the whole sum of $292,580.50 which was applied for Simon's benefit after the APO was made, notwithstanding that during the same period he had repaid $65,145.26. They contend that Simon should be required to restore the whole amount of which he received the benefit in contravention of the APO, without any credit for amounts repaid during the same period. The effect of this would be to treat the repayments of $65,145.26 as appropriated to repayment of the antecedent loan, rather than the advances made since the APO was made. The plaintiffs submitted that it should not be open to a defendant in contempt to limit the Court's jurisdiction arising from the contempt by attributing an 'appropriation' most favourable to himself, and that in such a case, having once breached the order, he is in the Court's hands.
12. For several reasons, I do not accept this. First, the repayments were in fact appropriated not to the antecedent debt, but to the post-APO debt. As has been observed, the antecedent debt was recorded in a separate loan account ledger 1-1252, while the transactions subsequent to 13 August 2015 are recorded in loan account ledger 1-1251. Account 1-1252 had an opening balance as at 1 July 2015 of $76,481.89, and a closing balance on 2 May 2018 of $76,781.89; there were no credits to it. When the intermediate repayments were made, they were in fact credited to loan account ledger 1-1251, rather than to the antecedent debt.
13. Secondly, the antecedent debt is not yet repayable. A loan facility agreement between the company and Simon provides that if Simon borrows money from the company under the agreement, each unsecured loan must be repaid within seven years after it is received. While provision is made for the loan to become immediately due and payable in the event that the borrower becomes insolvent, or commits an act of bankruptcy, or a resolution is passed to wind up the borrower or appoint a voluntary administrator, those are plainly references to insolvency events affecting the borrower, not the lender. Accordingly, if (as appears likely - though the agreement is undated, the plaintiff's solicitor deposes that it was prepared in connection with the 2014 accounts) the advances which comprise the antecedent debt were loans to which that agreement applies, then the earliest was made in 2013 and does not become repayable until 2020.
14. Thirdly, the purpose of the APO was to preserve the assets of the company, not to enhance them. The object of any restitutionary relief is to restore the position which would have obtained but for the contravention of the orders - not to improve the position of the company or penalise Simon. If Simon were required to restore the whole $292,280.50, without credit for the $65,145.26 he has repaid, the effect would be to improve the company's position, by extinguishing the antecedent debt as well as the post-APO debt.
15. Accordingly, in circumstances where the repayments have in fact been credited against the post-APO debt, and repayment of the antecedent loan account is not yet due, it would not be just to deny him credit for the amounts he has in fact repaid. Otherwise, the plaintiffs would have the benefit both of the repayments that he has voluntarily made, applied against funds which were not taken in contravention of the orders, as well as recovery in full, with interest, of the moneys disbursed in contravention of the freezing orders.
16. In circumstances where Simon has had the use of the money in question, and Statewide has been deprived of its use, restitution includes payment of interest. [28] This is even more the case where Simon's having use of the money, and Statewide's being deprived of its use, was contrary to the court's orders.
17. It follows that, by way of restoration of funds dealt with contrary to the orders of 1 May 2015 as subsequently extended, Simon should pay Statewide the sum of $227,435.24, together with interest.

Claim for repayment of funds applied for Simon's costs

1. Claim 4 in the amended motion is for an order that Simon reimburse the estate the amount of $88,656.76 (said to be the total amount debited from the estate's funds after 3 March 2017 for his legal costs as defendant in connection with the probate suit), together with interest pursuant to Civil Procedure Act 2005, s 100.
2. On 3 March 2017, Lindsay J made orders to the effect that: 1. probate of the 4 November will be granted to the defendant Simon, the executor named in it; 2. the defendants' cost on the indemnity basis be paid out of the estate; and 3. the plaintiffs' costs on the ordinary basis be paid out of the estate.
3. On 25 May 2017, Simon caused or permitted to be made, from funds held in his solicitors' trust account, three transfers to his solicitors in respect of costs, totalling $79,470.86: $28,959.13, $42,437.50 and $8,074.23. It is uncontroversial that the payments of $28,959.13 and $42,437.50 were in respect of Simon's costs as defendant in the probate proceedings for the period up to 3 March 2017. The $8,074.23 appears to have been in respect of costs of completing the grant and estate administration incurred after 3 March 2017, when the order granting probate to Simon was made. The funds from which those payments were made were estate funds, save for $19,800 which was from funds of the Stojic Family Superannuation Fund. Thus the Estate's funds so used amounted to $59,670.86.
4. On 23 June 2017, on a stay application pending the plaintiffs' appeal, Lindsay J in lieu of a stay made orders pending determination of the appeal or further order, relevantly that Simon be restrained by himself, his servants or agents from selling, transferring, disposing of or encumbering any asset of the estate, except so far as the orders expressly permitted, or with the prior leave of the court, or with the written consent of all parties by their solicitors.
5. On 7 September 2017, the sum of $19,800 which had been taken from the Stojic Family Superannuation Fund was refunded by the solicitors. However, following receipt of additional estate funds into Simon's solicitors' trust account, on 17 November 2017 a further transfer of $19,800 was made from estate funds in the trust account to replace it. Then, on 14 December 2017, a further $9,185.90 of estate funds was transferred in respect of Simon's costs in relation to administration of the estate and the defence of the family provision proceedings.
6. On 28 February 2018, the Court of Appeal set aside the orders of 3 March 2017, ordered that Simon pay the plaintiffs' costs of the appeal, and ordered that the costs of the proceedings before Lindsay J await the outcome of the new trial and be in the discretion of the judge conducting that trial.
7. The $88,656.76 sought in the application comprises the amounts of $59,670.86 of estate funds used on 25 May, $19,800 transferred on 17 November, and $9,185.90 transferred on 14 December 2017.
8. The payments of $19,800 on 17 November 2017 and $9,185.90 on 14 December 2017 were transfers or dispositions of estate assets. As dealings in respect of which the transferor (Simon in his capacity as then executor) and the transferee (Simon in his personal capacity) were both on notice of the orders of 23 June 2017, by which Simon was restrained from transferring or disposing of any asset of the estate, except so far as the orders expressly permitted, or with the prior leave of the court, or with the written consent of all parties by their solicitors, they are voidable for illegality on the basis explained above, and Simon is liable to make restitution in respect of them, with interest. This conclusion would be unaffected by the circumstance that, as submitted on behalf of Simon, the $9,185.90 paid on 14 December 2017 was for defendant's costs in respect of administration of the estate, and family provision claims against the estate; they were nonetheless transfers of estate assets within the scope of the 23 June orders.
9. As to the payments made on 25 May 2017, however, they were legitimately made, by Simon as the (then) duly appointed executor, when they were made. Although the plaintiffs point out that they were made without any assessment having been undertaken, and without prior notice to or consent from them, and that they were not favoured with any even-handed payment of their own costs under the orders of 3 March 2017, those matters do not affect the legitimacy of a payment made by the executor of his own properly incurred costs and expenses. As executor of the Estate, Simon was prima facie entitled to pay his costs of obtaining the grant, and that entitlement was confirmed by an order of the court which was then on foot. The plaintiffs' claim in respect of the $59,670.86 is advanced as one for restitution consequent upon their successful appeal, on the basis that it was money taken from the estate on the footing of orders that were later set aside. [29]
10. It is well-established, and counsel for Simon accepted, that upon reversal of a judgment on appeal, an appellant who has paid money in satisfaction of the reversed judgment is entitled to restitution of money paid under orders that are later set aside on appeal, and interest. [30] This is a personal right at common law, based on the concept of unjust enrichment, [31] and the duty of a court to take care that its acts occasion no injury to any of the litigants. [32]
11. However, it is not axiomatic that this doctrine applies in the present circumstances. Although it is correct that the order that the defendant's costs be paid out of the estate has been set aside, it is at least arguable that, once appointed executor, Simon was entitled to be indemnified by the estate and did not require a costs order; [33] though such orders are commonly made, an executor's right to indemnity does not depend on them. Thus this is not a case where Simon made the payment under compulsion of an order which was later overturned on appeal.
12. Moreover, the payment of $8,074.23 appears to have been in respect of costs incurred after 3 March 2018, in connection with obtaining the grant from the Registry, and other (unparticularised) estate matters. While the plaintiff submits that these are indistinguishable from costs of Simon in respect of the probate suit, they were costs incurred by Simon, in his capacity as executor of the estate, while he held office as such. No order has, at least at this stage, been made which denies him indemnity in that respect.
13. The final position in respect of Simon's costs of the probate proceedings remains to be established, following the new trial. If Simon succeeds once again, then he will likely obtain a costs order to the same or similar effect. If he fails, he may have to bear all the costs personally; [34] but it is still not inconceivable that a costs order may provide for at least some of his costs, on some basis, to be paid from the estate (as Lindsay J ordered, in respect of the (then) unsuccessful plaintiff's costs).
14. It is true that any right of indemnity depended on the appointment of Simon as executor, which itself depended on the order made by Lindsay J which was later set aside by the Court of Appeal. As a result of the revocation of the grant in his favour, and at least if he is not ultimately appointed executor consequent upon the re-trial, Simon would, it seems to me, be liable to account for his administration to the ultimate executor. That would involve examining his receipts and expenditure while he was executor, and scrutinising their propriety. If it turns out that he has used estate funds to pay his costs, and that is inconsistent with the costs orders ultimately made, he would presumably have to repay, or give credit for, the amount so used. But that liability arises from his obligation to account for his administration, and not by way of an obligation to give restitution of moneys paid under a judgment which is reversed. Whether he is liable to account in respect of the amount applied to his costs of the probate proceedings will depend on the ultimate order made in those proceedings. It cannot yet be said that he has been unjustly enriched, so as to attract restitutionary relief.
15. It follows that, by way of restoration of funds dealt with contrary to the orders of 23 June 2017, Simon should pay the estate the sum of the sum of $19,800 together with interest from 17 November 2017, and the sum of $9,185.90 together with interest from 14 December 2017; but he is not, at least yet, liable to give restitution of the sum of $59,670.86 transferred on 25 May 2017.

Costs

1. The plaintiffs have achieved a substantial measure of success in their applications for relief on claims 1 and 4 of their amended motion, but they have not obtained all the relief they sought: they have succeeded only to the extent of $227,435.24 (not $292,580) under claim 1, and $28,985.90 (not $88,656.76) under claim 4.
2. The plaintiffs' application has been necessitated by Simon's contravention of orders of the court, and his failure to return the funds when demanded. The plaintiffs were effectively left no option but to approach the Court, and were put to the costs of a contested hearing. The plaintiffs are indisputably entitled to their costs of the application, and the circumstances are such as would undoubtedly often attract an indemnity costs order.
3. However, the contest has resulted in Simon having to repay a very materially lesser sum than then plaintiffs sought. He did not at the hearing seriously oppose repayment of the $227,435. He made admissions which considerably simplified the hearing. On those matters which were really in issue at the hearing, he had a significant measure of success. As a review of this judgment would demonstrate, those issues account for a significant proportion of the costs of the hearing. In those circumstances, I consider that an indemnity costs order would be inappropriate, because it would fail to acknowledge that the plaintiffs must be regarded as responsible for some of the costs of the hearing, being those associated with the issues on which they failed. Accordingly, Simon must pay the plaintiffs' costs (as special administrators) of the application for relief in pars 1 and 4 of their amended motion, but not on the indemnity basis.
4. The plaintiffs sought an order that those costs be payable forthwith. However, for reasons which will emerge, those costs will be set-off against another costs order in favour of Simon on 15 August 2018 by Ward CJ in Eq. Simon also has an entitlement under an interlocutory costs order made in his favour against the Estate on 8 May 2018 by McDougall J. The purposes of the rule that, unless the court otherwise orders, interlocutory costs orders are not payable until the conclusion of the proceedings, include avoidance of multiple costs assessment proceedings. If the costs of the present application to which the plaintiffs are entitled were to be made payable forthwith, it would be appropriate to make the costs to which Simon is entitled under previous interlocutory costs orders also payable forthwith. The preferable course is that they all await the conclusion of the proceedings, so that there can be a single assessment.

Enforcement

1. The plaintiffs sought orders for the issue of garnishee orders against Westpac to attach amounts standing to the credit of accounts in Simon's name to satisfy orders for repayment of the amounts for which he is liable to restore. Usually, questions of enforcement would be dealt with after judgment by the Registrar; but there is no reason why the Court cannot entertain them, and in the present circumstances, where the Court's jurisdiction is invoked to restore the position which should have obtained under its earlier orders, it is appropriate that it do so.
2. (NSW) Civil Procedure Act 2005, s 106(1)(b), provides that a judgment debt may be enforced by means of, inter alia, a garnishee order. For that purpose, "judgment debt" includes any amount payable under a judgment (and any interest after judgment that is payable on that amount under s 101), and "judgment" includes any order for the payment of money (including any order for the payment of costs). [35] Accordingly, if orders be made that Simon pay Statewide and/or the Estate the sums which he is liable to restore, those orders can be enforced by garnishee orders.
3. As has been mentioned, there are funds standing to the credit of Simon with Westpac, in accounts which are the subject of freezing orders made by the Family Court of Australia. It may be that those freezing orders, being made against Simon personally, do not strictly prevent Westpac, even if on notice of them, from complying with a garnishee order of this court. However, if on notice of the Family Court orders, Westpac would be placed in an invidious position. That consideration, and considerations of comity, dictate that the question of a garnishee order in respect of the funds held by Westpac be approached with considerable caution. However, the requirement for such caution is relieved by the circumstance that on 27 August 2018, in the Family Court proceedings (in which the present plaintiffs have intervened), orders were made by consent of all parties, which included a notation in the following terms: 2. The Applicant Wife consents to the release of funds invested in the name of the Husband (Westpac Banking Corporation account numbers 393151 and 393143) the amount found to be due to the Estate and/or company Statewide Office Furniture Pty Ltd by the Husband, following the hearing of the second and fourth respondent's motion before Justice Brereton of the Supreme Court of New South Wales on 23 August 2018.
4. In the light of that order, the freezing order made by the Family Court is no objection to this court issuing the proposed garnishee orders, although it would be prudent if, when served on Westpac, they were accompanied by the Family Court's order of 27 August 2018.
5. In respect of the amount repayable to the Estate (pursuant to claim 4 in the amended motion), it was contended that Simon had equitable set-offs arising from costs orders in his favour, namely: 1. an interlocutory costs order made by Kunc J on 12 September 2017. 2. a costs order made by McDougall J on 8 May 2018; 3. an order made by Ward CJ in Eq on 15 August 2018, which specifically provides for a set off.
6. The 12 September 2017 Kunc J order was made against the plaintiffs' personally, not against the estate, and it is therefore not between the same parties and Simon cannot set if off against his liability to repay the estate. Moreover, the costs under that order are not yet payable: (NSW) Uniform Civil Procedure Rules 2005 ("UCPR") r 42.7 provides the costs of any application or other step in proceedings are not, unless the court otherwise orders, payable until the conclusion of the proceedings. Further, such order is itself apparently amenable to being set-off against a countervailing costs order in the Court of Appeal, which ordered that Simon pay the plaintiffs' costs of the appeal.
7. The 8 May 2018 McDougall J order was an order for payment of the defendant's costs out of the estate. However, it too was in respect of an interlocutory application, so that by operation of UCPR r 42.7, the costs under it are not yet payable, and it need not be set-off.
8. However, the 15 August 2018 Ward CJ in Eq order is in a different position. It is in the following terms: 1. Order that the defendant's costs of the hearing of the application for orders sought under paragraphs 2 and 3 of the amended notice of motion filed 7 August 2018 be paid out of the estate of the deceased on the ordinary basis but be set-off against any moneys the defendant is found liable to repay to the estate of the deceased pursuant to the application by the plaintiffs for the relief sought under paragraph 4 of the said amended notice of motion.
9. The amount of Simon's liability to restore to the estate amounts applied to his costs is the subject of the relief sought in par 4 of the amended motion, referred to in that order, and as things stand Simon is entitled to set-off his entitlement under the order of the Chief Judge against that liability. However, the costs to which he is entitled under the Chief Judge's order have not yet been quantified. Because of the juridical basis for the relief to which I consider the plaintiffs to be entitled (namely the illegality of the payments), and that it relates only to part of the $88,000 referred to in their claim, justice may be done be varying the order of Ward CJ in Eq so as to provide for the costs to which Simon is entitled thereunder, to be set off instead against any costs of the present application to which the plaintiffs may be entitled.
10. With that variation to the orders of 15 May 2018, the amounts payable by Simon to Statewide and to the Estate by way of restitution are payable forthwith and without deduction, and garnishee orders to enforce payment may issue.

Deed administrator's costs application

1. In the Probate proceedings, the Deed Administrator applies, pursuant to UCPR r 21.13, for an order that his costs and expenses of complying with a notice to produce for inspection under UCPR r 21.10 dated 16 August 2018 served on him by Simon, quantified in the sum of $4,827 inclusive of GST, be paid by Simon. The costs were explained and quantified in an affidavit of the Deed Administrator's solicitor, and are not the subject of dispute. It was submitted only that they should be left to be treated as costs of the proceedings.
2. UCPR r 21.13 provides that the court may order the party giving a notice to produce to pay the amount of any reasonable loss or expense incurred by the recipient in complying with the notice, and if it does so must fix the amount or direct that it be fixed in accordance with the court's usual procedure in relation to costs.
3. It may be that it will often be appropriate to defer questions of recompense for compliance with inter-partes notices to produce, to be dealt with as part of the costs of the proceedings - as would ordinarily be the case in respect of costs of giving discovery. However, the company's role in the probate proceedings is a very limited one, essentially having been joined so that it is bound by orders made - including the freezing orders to which reference has been made. The purpose of the notice to produce in question was not to gain evidence for use in proceedings between Simon and the company, but to gain evidence which Simon hoped might assist in his resistance of the plaintiffs' application. There is no reason why the company, or its Deed Administrator, should be out of pocket in respect of the costs and expenses incurred as a recipient of such a notice, and every reason why the party for whose benefit and purposes the notice was issued should have to bear them. If Simon ultimately becomes entitled to a costs order in the proceedings, he may then recover, as part of his costs of the proceedings, what he has to pay the company. But in the meantime, he must pay the Deed Administrator's costs of complying with his notice.

The Corporations Proceedings

1. In the Corporations proceedings, the Special Administrators of the Estate, and the Deed Administrator, claim an order that the Deed Administrator have leave (pursuant to (CTH) Corporations Act 2001, s 444GA) to transfer all Simon's shares in Statewide to the Special Administrators. Section 444GA relevantly provides that the administrator of a Deed of Company Arrangement ("DOCA") may transfer shares in a company if the administrator has obtained the written consent of the owner of the shares, or the leave of the Court, which the Court may grant only if it is satisfied that the transfer would not "unfairly prejudice" the interests of members of the company.

The DOCA

1. The DOCA provides for payment of the administrator's remuneration and expenses, and employee superannuation entitlements (cl 12(a), (b)), and the payment of the remainder of the company's debts (other than the Estate's claim) totalling $239,000, in instalments at 6 months and 12 months (cl 5(b)) . This is to be funded by a Deed Fund, to be contributed by the Estate (cll 4 and 5). The DOCA further provides that the Deed Administrator and the Estate shall jointly apply to the Court for leave pursuant to s 444GA for the Deed Administrator to transfer Simon's shares to the Estate, at a consideration of $1 per share for the 6,320 shares he holds, to be paid to Simon by way of reduction of his loan account to the extent that it is in debit (clause 3A). The Deed Administrator retains control of the company until the shares have been transferred to the Estate. The Deed Administrator is to do all things necessary to transfer the shares once he has received leave to do so. In the event that leave is not granted, the provisions of clause 20 apply, and any moneys paid by the Estate towards the Deed Fund shall be repaid to the Estate. Under clause 20, if the requisite leave is not granted, the Deed terminates, and the company is immediately placed into liquidation.
2. The Administrator's report to creditors of 29 May 2018 compared the scenarios under the DOCA and in the event of liquidation. Under the DOCA, unsecured creditors (other than the Estate, which releases its claim except to the extent that there are any surplus deed funds, but receives the potential benefit of the company's business) will receive 100 cents in the dollar. In the event of liquidation, creditors will not be paid in full, and may possibly receive no dividend at all, and the Estate will not gain the benefit of any ongoing business. Accordingly, the interests of the creditors are manifestly better served by the DOCA than by liquidation.
3. An important corollary for present purposes is that, as liquidation will not produce a full return to creditors, there would be no return to Simon as shareholder. Simon has not consented to the transfer of his shares, although he has expressed to a willingness to consent conditional upon being released from his loan account. He considers his shares to be worth more than the $1 each provided by the DOCA, and aspires to regain control of the company and trade it out of its difficulties - pointing to his success in turning around its fortunes during the period when he was in control of its affairs. He also points out, not without force, that what is proposed will in effect give control of the company to those who endeavoured to procure it through the disputed share issue of 23 May 2014, which the Court on his application set aside as improper.
4. However, notwithstanding Simon's aspiration to regain control and trade the company on, the course of the administration to date, including the company's execution of the DOCA pursuant to the creditors' resolution that it do so, means that there are in reality two alternatives only: that the DOCA proceed, or that the condition that leave be obtained fail in which event the company will go into liquidation.

Section 444GA

1. As was observed by Black J in Re Kupang Resources Ltd, [36] s 444GA was introduced by (CTH) Corporations Amendment (Insolvency) Act 2007 and reflected a recommendation of the Legal Committee of the Companies and Securities Advisory Committee Report on Corporate Voluntary Administration (June 1998) to the effect that the law should grant deed administrators the ability to compulsorily transfer company shares where necessary for the purposes of implementing a DOCA under which payment of creditors' debts was dependent upon such a transfer occurring. This is such a case. The question is whether I can be satisfied that there is no unfair prejudice to Simon.
2. In the context of a company which is subject to a deed of company arrangement, the question of residual value in the company is significant in determining whether a transfer would prejudice the interests of shareholders. Something more than a mere absence of compensation must be established before it could be said that there is unfair prejudice to the members, because if the shares are worthless there is no unfairness in there being no compensation. [37] While the transfer of shares may involve unfair prejudice to members if there is some residual equity in the company, [38] there would not ordinarily be unfair prejudice if the shares to be transferred have no value, so that there would be no distribution in the event of a liquidation which is the only realistic alternative to the proposed transfer. [39]
3. The alternative to permitting the proposed transfer is that Simon would retain his shares, but they would be in a company in liquidation, without any prospect of receiving a distribution in the liquidation. Thus they would be worthless to him if he were to retain them. As there will be no residual value in the company if the DOCA is not carried into effect, there is no unfair prejudice to Simon in leave being granted to the Deed Administrator to transfer his shares to the estate. And having regard to the interests of the creditors in having the DOCA carried into effect, such leave should be granted.

Costs

1. The application for leave under s 444GA had to be made regardless of Simon's position. While his opposition may have incrementally increased the costs, the effect has been marginal. Each party should bear its own costs of the application in the Corporations proceedings; the Deed Administrator's costs will be costs in the Deed Administration.

Conclusion

1. My conclusions may be summarised as follows:
2. By way of restoration of funds dealt with contrary to the orders of 1 May 2015 as subsequently extended, Simon should pay Statewide the sum of $227,435.24, together with interest.
3. By way of restoration of funds dealt with contrary to the orders of 23 June 2017, Simon should pay the estate the sum of $19,800 together with interest from 17 November 2017, and the sum of $9,185.90 together with interest from 14 December 2017; but he is not, at least yet, liable to give restitution of the sum of $59,670.86 transferred on 25 May 2017.
4. Simon must pay the plaintiffs' costs (as special administrators) of the application for relief in pars 1 and 4 of their amended motion, but not on the indemnity basis, and those interlocutory costs should not be made payable forthwith.
5. The costs order of Ward CJ in Eq made on 15 August 2018 should be varied so as to provide for the costs to which Simon is entitled thereunder to be set off against any costs of the present application to which the plaintiffs are entitled, rather than against any moneys Simon is found liable to repay the Estate pursuant to par 4 of the plaintiffs' amended notice of motion of 7 August 2018.
6. With that variation to the orders of 15 May 2018, the amounts payable by Simon to Statewide and to the Estate by way of restitution are payable forthwith and without deduction, and garnishee orders to enforce payment may issue.
7. Simon must pay the Deed Administrator's costs and expenses of complying with the notice to produce for inspection under UCPR r 21.10 dated 16 August 2018 served on the Deed Administrator by Simon, quantified in the sum of $4,827.
8. The Deed Administrator should be granted leave pursuant to (CTH) Corporations Act, s 444GA, to transfer all Simon's shares in Statewide to the Special Administrators.
9. Each party should bear its own costs of the application in the Corporations proceedings, and the Deed Administrator's costs will be costs in the Deed Administration.

Orders

1. In proceedings 2014/315956, there should be orders to the effect that: 1. the defendant Simon Stojic pay the respondent Statewide Office Furniture Pty Limited, by way of restoration of funds dealt with contrary to the orders of 1 May 2015 as subsequently extended, the sum of $227,435.24, together with interest; 2. a garnishee order issue directing Westpac Banking Corporation to pay to Statewide Office Furniture Pty Limited, all money held by it for or on behalf of Simon Stojic, or owed by it to him, to the extent of the amount outstanding under the order in par (1); 3. the defendant Simon Stojic pay the plaintiffs as Special Administrators of the Estate of the late Ivan Stojic, by way of restoration of funds dealt with contrary to the orders of 23 June 2017, the sum of $19,800 together with interest from 17 November 2017, and the sum of $9185.90 together with interest from 14 December 2017; 4. the defendant Simon Stojic pay the costs of the plaintiffs as Special Administrators of the Estate of the late Ivan Stojic of the hearing of the application for the orders sought under paragraphs 1 and 4 of the amended notice of motion filed 7 August 2018; 5. order (1) made by Ward CJ in Eq on 15 August 2018 be varied, to the intent that the defendants costs of the hearing referred to therein be set off against the costs payable by the defendant to the estate pursuant to order (4) above, instead of against any moneys the defendant is found liable to repay the estate pursuant to the application by the plaintiffs for the relief sought under paragraph 4 of the amended notice of motion of 7 August 2018; 6. a garnishee order issue directing Westpac Banking Corporation to pay to the plaintiffs as Special Administrators of the Estate of the late Ivan Stojic, all money held by it for or on behalf of Simon Stojic, or owed by it to him, to the extent of the amount outstanding under the order in par (3); 7. pursuant to UCPR r 21.13, the defendant pay the Deed Administrator his costs and expenses of complying with the notice to produce for inspection under UCPR r 21.10 dated 16 August 2018, fixed in the sum of $4,827.
2. The Court directs that the plaintiffs bring in short minutes, including calculations of interest, on 10 September 2018, to give effect to the foregoing.
3. In proceedings 2018/245988, the court orders that: 1. the second plaintiff Alan Hayes in his capacity as Deed Administrator of the company Statewide Office Furniture Pty Ltd have leave (pursuant to (CTH) Corporations Act, s 444GA) to transfer all the defendant's shares in the company Statewide to the Special Administrators. 2. The Deed Administrator's costs be costs in the Deed Administration, and there is otherwise no order as to costs, to the intent that each party bear its own costs.

Endnotes

1. The motion also sought orders conferring additional powers on the Special Administrators (claim 2), and judicial advice (claim 3). Those aspects of the motion were dealt with, by Ward CJ in Eq, on 9 August 2018: Stojic v Stojic [2018] NSWSC 1268. I am indebted to her Honour's judgment for its collection of the relevant background facts.
2. Ivanna's mother (Sanja Ferenc) is her guardian for the purpose of these proceedings.
3. However, Anton has renounced his appointment as executor under the May 2014 will.
4. Stojic v Stojic [2017] NSWSC 168.
5. Stojic v Stojic [2017] NSWSC 168 at [89]. Those findings were not challenged on appeal and it is for that reason that this will is no longer in contention.
6. Stojic v Stojic [2017] NSWSC 168 at [101].
7. Stojic v Stojic [2018] NSWCA 28.
8. Stojic v Stojic [2018] NSWSC 723 at [20].
9. Stojic v Stojic [2018] NSWSC 723. The curial proceedings referred to in order 14 include proceedings relating to the position of the estate as creditor in respect of the voluntary administration of Statewide; family provision proceedings commenced by Marijan; proceedings between Simon and his estranged wife in the Family Court; proceedings in Croatia or elsewhere in Europe for recognition of the grant and for representation of the estate and to investigate the affairs of the deceased in Europe for the purpose of evidence in the probate and/or family provision proceedings; proceedings in relation to claims available to the estate for recovery of assets received by Simon; and proceedings to recover repayment from Simon of the estate's funds used to pay his legal fees.
10. Stojic v Stojic [2018] NSWSC 1268.
11. Stojic v Stojic [2018] NSWSC 1268: Schedule of Additional Powers, (f)(ii).
12. (1959) 76 WN(NSW) 391.
13. [2018] NSWSC 1181.
14. XR Property Developments Pty Ltd v Sekers [2018] NSWSC 1181 at [7].
15. Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; 162 ALR 294; [1999] HCA 18 at [26]-[27], [42] and [79].
16. UCPR rr 25.10-25.17.
17. Mareva Compania Naviera SA v International Bulkcarriers SA [1980] 1 All ER 213; [1975] 2 Lloyd's Rep 509; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1; 153 ALR 643; [1998] HCA 30; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; 162 ALR 294; [1999] HCA 18 at [42]; Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435; 162 ALR 336; [1999] HCA 19 at [50]-[52]; Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 623; 71 ALR 457.
18. Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 403; see also National Australia Bank Ltd v Dessau [1988] VR 521 at 529; Cretanor Maritime Co Ltd v Irish Marine Management Ltd [1978] 1 WLR 966 at 974; approved in Attorney-General v Times Newspapers Ltd [1992] 1 AC 191 at 215B.
19. UCPR r 25.12 provides that the court may make an order ancillary to a freezing order "as the court considers appropriate".
20. Jackson v Sterling Industries Ltd (1987) 162 CLR 612; 71 ALR 457, citing CBS United Kingdom Ltd v Lambert [1983] Ch 37; [1982] 3 All ER 237.
21. Derby & Co Ltd v Weldon (No 6) [1990] 3 All ER 263; {1990] 1 WLR 1139 (CA).
22. Themehelp Ltd v West [1996] QB 86 at 103F (Evans LJ); Yukon Line Ltd v Rendsburg Investments Corporation [2001] Lloyds Rep 113 (CA); Millenium Federation Pty Ltd v Bigjig Pty Ltd [2001] 1 Qd R 275 (QCA).
23. Yukon Line Ltd v Rendsburg Investments Corporation [2001] Lloyds Rep 113 (CA).
24. (1994) 13 WAR 407 (Owen J).
25. [1985] 1 All ER 211; 1 WLR 78 (Megarry VC).
26. [1985] 1 All ER 211 at 214; 1 WLR 78 at 81 (Megarry VC).
27. See also Allianz v Vitale [2015] NSWSC 352 at [61]-[70] (Slattery J), which shows that such an order may also be supported by UCPR r 25.14(4).
28. Cf, albeit in a somewhat different context, Heydon v NRMA (No 2) (2001) 53 NSWLR 600.
29. The plaintiffs also relied on this ground in respect of the later payments, but as I have held that they are recoverable on a different basis, the present basis need be considered only in respect of the $59,670.86.
30. Commonwealth of Australia v McCormack (1984) 155 CLR 273.
31. Heydon v NRMA (No 2) (2001) 53 NSWLR 600.
32. Commonwealth of Australia v McCormack (1984) 155 CLR 273 at 276, citing Rodger v The Comptoir D'Escompte de Paris (1871) LR 3 PC 465 at 475.
33. Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709.
34. Cf Graham v Keller; Estate of Delfendahl (NSWSC, Young J, 17 July 2991, unreported).
35. Definitions in (NSW) Civil Procedure Act 2005, s 3.
36. [2016] NSWSC 1895.
37. Weaver & Ors in their capacity as joint and several deed administrators of Midwest Vanadium Pty Ltd v Noble Resources Ltd [2010] WASC 182; (2010) 41 WAR 301; 79 ACSR 237 at [80].
38. Re Kupang Resources Ltd [2016] NSWSC 1895; see also Lewis, in the matter of Diverse Barrel Solutions Pty Ltd [2014] FCA 53 at [19] and Re Nexus Energy Ltd [2014] NSWSC 1910; (2014) ACSR 246 at [21].
39. In the matter of Elite Logistics Holdings Pty Ltd [2017] NSWSC 1830 at [14], citing Re Kupang Resources Ltd [2016] NSWSC 1895 and Re BCD Resources (Operations) NL [2014] VSC 259; (2014) 100 ACSR 450 at [55]-[57]. 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: 10 September 2018