Jaken Properties Australia Pty Limited v Naaman

Facts

1. On 21 June 2005, Jaken Property Group Pty Limited was appointed as trustee of the Sly Fox Family Trust. More than one version of the trust deed is in evidence and the authenticity of the various deeds is in dispute. Two of the three versions nominate Peter Sleiman as the beneficiary of the Sly Fox Family Trust, whilst the other nominates Tony Sleiman as beneficiary. In October 2005, Jaken Property Group became the registered proprietor of the O'Malley's Hotel in Kings Cross, which it held as trustee for the Sly Fox Family Trust. Jaken Property Group paid $8.9 million for the hotel.
2. In 2005, Powerhouse was incorporated. Powerhouse was trustee for the Petejake Family Trust, Pete Jake 1 Unit Trust and the Pete Jake 2 Unit Trust. In September 2006, Peter Sleiman became the sole shareholder of Powerhouse. Ms Michael is the sole director of the company. In October 2006, Powerhouse purchased the Kings Head Tavern at Hurstville for $13 million.

2006 proceedings

1. In November 2006, Mr Naaman commenced proceedings against Jaken Property Group, claiming some $2 million. As mentioned, Jaken Property Group was then the trustee for the Sly Fox Family Trust and registered proprietor of the O'Malley's Hotel.
2. In January 2007, Jaken Properties Australia was incorporated. Tony Sleiman is the sole director and shareholder of that company. On 13 February 2007, Jaken Property Group, Jaken Properties Australia and Peter Sleiman executed a Deed of Appointment and Retirement of Trustee of Discretionary Trust, replacing Jaken Property Group as the trustee of Sly Fox Family Trust with Jaken Properties Australia. (Jaken Properties Australia is also the trustee of Sly Fox 1 Unit Trust and Sly Fox 2 Unit Trust.) Title to the O'Malley's Hotel was transferred to Jaken Properties Australia.
3. On 27 February 2007, Jaken Property Group was placed into voluntary liquidation on the basis of a sole debt of $2,500. The 2006 proceedings were stayed as a consequence. It is contended in these proceedings that these transactions were a sham intended to defeat creditors, including Mr Naaman.

2009 proceedings

1. In July 2009, Mr Naaman commenced proceedings against Jaken Properties Australia and Peter Sleiman. Jaken Property Group Pty Limited (in liquidation) was later joined to the proceedings with leave.
2. Jaken Properties Australia then owned: 1. the O'Malley's Hotel in Kings Cross; 2. a property in Granville; and 3. two apartments in Southbank, Victoria.
3. In October 2012, the Granville property was transferred to Superior Family Investments, being a company of which Peter Sleiman's wife, Samantha Panetta, is the sole director and shareholder. In March 2013, the two Southbank apartments were transferred to PSJK Holdings Pty Limited, being a company of which Ms Panetta is the sole director and shareholder. It is contended in these proceedings that these transactions were a sham intended to defeat creditors, including Mr Naaman.

Freezing order and Powerhouse

1. On 18 June 2014, Rein J made orders by consent in the 2009 proceedings including: An order that [Jaken Properties Australia] be restrained from disposing of, dealing with other than in the usual course of business, or further encumbering or diminishing the value of the property [known] as 'the O'Malley's Hotel' … until further order of this court.
2. Relying on documents passing between Peter Sleiman and National Australia Bank, Mr Naaman contends that Peter Sleiman requested that the bank increase Jaken Properties Australia's loan facility by $3.6 million (from $8.4 million to $12 million) and reduce Powerhouse's loan facility correspondingly. On 21 August 2014, the bank confirmed the increased facility to Jaken Properties Australia. In this manner, Mr Naaman contends that Jaken Properties Australia breached the freezing order made by Rein J by "further encumbering or diminishing the value of the property [known] as 'the O'Malley's Hotel'". In these proceedings, Powerhouse is said to have received the $3.6 million for its benefit, knowing that its transfer was for no consideration, was in breach of trust or in breach of fiduciary duties, and holds those monies on trust for Jaken Properties Australia. I understand this issue to be hotly contested.
3. On 20 January 2015, according to a Deed of Change of Trustee, Jaken Properties Australia was replaced as trustee of the Sly Fox Family Trust by AVS Group Australia Pty Limited. This deed was only produced to Mr Naaman in January 2019 and, as I understand it, the authenticity of the document is disputed.
4. In March 2015, the freezing order made by Rein J was lifted following, as I understand it, the initial lack of success in Mr Naaman's claim in the 2009 proceedings: Naaman v Sleiman [2014] NSWSC 1869. However, Mr Naaman had greater success on appeal and his claim was remitted for determination of damages: Naaman v Sleiman [2015] NSWCA 259. The day after the Court of Appeal handed down its judgment, Mr Naaman contends that the name of O'Malley's Hotel Pty Ltd was changed to ACN 150 830 07 Pty Ltd and a new company incorporated with the same name in an attempt to transfer the business of the hotel to a new corporate entity and thereby defeat Mr Naaman's claim.

Judgment debt

1. On 25 February 2016, Young J made final orders in the 2009 proceedings including: 4. That judgment be entered for [Mr Naaman] against [Jaken Property Group (in liquidation)] in the amount of $3,446.755.55. 5. Declare that [Jaken Property Group (in liquidation)] is entitled, as against [Jaken Properties Australia as trustee for the Sly Fox Family Trust] and generally, to be indemnified out of the assets of the Sly Fox Family Trust for liabilities incurred by it in its capacity as trustee of the Sly Fox Family Trust, including in respect of the judgment entered against [Jaken Property Group (in liquidation)] in these proceedings. 6. Further declare that [Mr Naaman] is subrogated to the rights of [Jaken Property Group (in liquidation)] for its entitlement to be indemnified from the assets of the Sly Fox Family Trust for its liability to [Mr Naaman] in respect of the judgment to be entered in these proceedings, subject only to the costs and expenses of the liquidator of the creditors' voluntary winding up of [Jaken Property Group (in liquidation] and the claim of $2,500 which has been referred to in the evidence.
2. Mr Naaman's solicitor says that no monies have been paid to Mr Naaman in satisfaction of Young J's orders. Further, by the time judgment was entered, Jaken Properties Australia had transferred all but the O'Malley's Hotel to related companies. Further, the assets of the Sly Fox Family Trust had been dissipated or transferred to parties related to Jaken Properties Australia, Peter Sleiman and Tony Sleiman so that the trustee claimed to no longer have any assets to satisfy the judgment. Mr Naaman's solicitor tendered an affidavit sworn by Tony Sleiman on 3 March 2016 in the 2009 proceedings, deposing that Jaken Properties Australia was no longer the trustee of the Sly Fox Family Trust and the trust had no assets. As to Sly Fox 1 Unit Trust and Sly Fox 2 Unit Trust, Tony Sleiman explained that the unit trusts were the beneficial owners in equal shares of O'Malley's Hotel. That property was security for $12 million owed to the National Australia Bank. Tony Sleiman estimated that the current market value of the property was less than $5 million due to the negative effect of "lock out laws". Tony Sleiman's niece, Alissia Michael, was running the hotel with the support of the Sleiman family and their related entities, who contributed the difference between rental income and interest payable to the bank.
3. In January 2019, Connells Point Hotel Pty Ltd was incorporated. Rolda Yacoub is the director and shareholder of Connells Point Hotel. On 1 February 2019, the lease of the Kings Head Tavern was assigned to Connells Point Hotel.

2019 proceedings

1. In January 2019, Jaken Properties Australia commenced these proceedings, seeking an order that Mr Naaman withdraw his caveat over the O'Malley's Hotel. In March 2019, Mr Naaman filed a cross-claim.
2. In May 2019, Connells Point Holdings was incorporated. Peter Sleiman and Jake Sleiman are directors and shareholders of the company.
3. In August 2019, Darke J made orders granting leave to Mr Naaman to apply to join Powerhouse Corporation and PSJK Holdings as cross-defendants. On 4 October 2019, Powerhouse Corporation and PSJK Holdings were joined. By his cross-claim, Mr Naaman claims that the Granville property, the two Southbank apartments, the proceeds of the $3.6 million National Australia Bank drawdown and the O'Malley's Hotel are held on constructive trust for Jaken Properties Group and, by virtue of Mr Naaman's right of subrogation, for his benefit up to the value of the judgment debt. Peter Sleiman, Tony Sleiman, Superior Family Investments, Powerhouse, PSJK Holdings and O'Malley's Hotel are said to have knowingly assisted and been knowingly involved in the breach of trust and fiduciary duties by Jaken Properties Australia and are said to be liable for equitable compensation and damages. Darke J also provisionally listed the matter for hearing before Kunc J on 17 February 2020 for four days.

Sale of Kings Head Tavern and purchase of Royal Hotel Granville

1. On 8 November 2019, Mr Nasr received instructions from Powerhouse and Connells Point Hotel to act on their behalf to sell the land and hotel business known as the Kings Head Tavern. Powerhouse owned the land. Connells Point Hotel leased the hotel and, according to Mr Nasr, owned the business and licence entitlements.
2. On 11 November 2019, Darke J confirmed the hearing commencing on 17 February 2020.
3. On 20 November 2020, RHG Properties Pty Limited was incorporated. Peter Sleiman is the sole director and shareholder of that company. RHG Nominees Pty Limited was also incorporated. Chantelle Chapman is the sole director and shareholder of that company. Both companies retained Mr Nasr to purchase the Royal Hotel Granville.
4. On 13 December 2019, four contracts were exchanged: 1. Powerhouse entered into a contract to sell the Kings Head Tavern with hotelier's licence to MAHF Custodian Pty Limited for $20,630,550. By special condition 45, the purchase price was apportioned as $7,910,550 to the land and $12,720,000 to the liquor licence, including 25 gaming machine entitlements and two gaming machine permits. 2. Connells Point Hotel entered into a business sale agreement with Redcape Hotel Group Pty Limited, agreeing to sell its business for $6,369,450, to be apportioned as $1 for the lease, $1.5 million to plant and equipment and the balance in goodwill. 3. MAHF Custodian Pty Limited entered into a contract for sale of the Royal Hotel Granville with hotelier's licence to RHG Nominees for $27 million. Special condition 45 of the contract apportioned the price between the land ($11 million) and liquor licence ($16 million). 4. Redcape Hotel Group entered into a business sale agreement with RHG Trading Pty Limited, agreeing to sell the Royal Hotel Granville business for $24 million, apportioned between the lease ($1), plant and equipment ($1,180,983) and goodwill ($22,819,016).
5. On 16 December 2019, Redcape Hotel Group made an announcement to the Australian Securities Exchange, advising that it had sold the Royal Hotel Granville for $51 million and acquired the Kings Head Tavern for $27 million: "The vendor of the Kings Head Tavern was also the purchaser of the Royal Hotel Granville". On 19 December 2019, a newspaper article was published to similar effect.
6. On 19 December 2019, KP Group Pty Limited, a company owned by Ms Panetta, entered into a contract to sell a property in Carlingford for $1.22 million.
7. In January and February 2020, problems emerged in these proceedings. Mr Naaman's solicitor swore two affidavits setting out the complicated procedural history of the matter and difficulties obtaining the production of documents by the cross-defendants. On 3 February 2020, Kunc J vacated the hearing dates of 17 to 21 February 2020 such that the final hearing would now commence on 7 April 2020.
8. On 5 February 2020, Deeds of Change of Trustee were executed in respect of the Pete Jake 1 Unit Trust and Pete Jake 2 Unit Trust, changing the trustee from Powerhouse to Connells Point Holdings. The deeds were signed by Ms Michael as director of Powerhouse and by Peter and Jake Sleiman as directors of Connells Point Holdings.
9. On 12 February 2020, sale of the Carlingford property was completed. Mr Nasr says that the proceeds were to be paid to Corpserve Australia Pty Limited to be held on deposit pending payment to a builder doing renovations on the Royal Hotel Granville. However, on 2 March 2020, $1,150,000 was deposited to the National Australia Bank account of the Sly Fox 1 Unit Trust with the notation "Loan Frm Sleiman Fiv E Clover" and then transferred to "Skyhigh Projects" for renovations on the Royal Hotel Granville.
10. On 28 February 2020, the Australia and New Zealand Banking Group Limited (ANZ Bank) made an offer of finance of $31.3 million to corporate entities apparently associated with the Royal Hotel Granville including Peter Sleiman, RHG Properties and RHG Nominees.
11. On 11 March 2020, the contracts exchanged in December 2019 were completed. According to the settlement sheets, after adjustments: 1. Powerhouse received $20,629,716.56 on settlement for the Kings Head Tavern; from this, $6,684,147.94 was paid out, including some $6 million to the National Australia Bank. 2. Connells Point Hotel received $6,246,650.98 from Redcape Hotel Group for the Kings Head Tavern business. 3. RHG Nominees was to pay $26,969,691.54 for the Royal Hotel Granville land. 4. RHG Trading was to pay $23,469,515.15 to Redcape Hotel Group for the Royal Hotel Granville business. Also on 11 March 2020, Tony Sleiman appointed Jaken Properties Australia as trustee of the Sly Fox Family Trust again.
12. As I understand a worksheet annexed to the affidavit of Mr Nasr, the net proceeds of sale of the King's Head Tavern payable to Powerhouse was some $14 million, which was effectively offset against the purchase price of the Royal Hotel Granville. ANZ Bank also provided finance. Mr Nasr says Powerhouse lent the balance of the monies received from the sale of the land to RHG Trading, which purchased the business of the Royal Hotel Granville. So did Connells Point Hotel. Certainly, no monies were deposited to the bank account of Sly Fox Family Trust.
13. On an unknown date, a "Declaration of Trust Apparent Purchaser" was executed between RHG Nominees and RHG Properties, recording that RHG Nominees was the "Apparent Purchaser" for the Royal Hotel Granville whilst RHG Properties was the "Real Purchaser" as trustee of the RHG Properties Unit Trust. The Apparent Purchaser declared that it held the property for the Real Purchaser and agreed to transfer the property to it should it be requested to do so.
14. In late March 2020, the Royal Hotel Granville closed due to the COVID-19 pandemic and Kunc J vacated the hearing and fixed the matter for hearing on 16 November 2020.
15. Ms Burnett notes that, since the joinder of Powerhouse to these proceedings, it has apparently been replaced as trustee for the Pete Jake 1 Unit Trust and Pete Jake 2 Unit Trust with Connells Point Holdings, as referred to in ANZ's letter of offer. Powerhouse has sold the Kings Head Tavern property with an apparently low price of $7.9 million, being less than it paid for the property in 2006 and less than that reported in the ASX notification. Mr Naaman is now very concerned that the cross-defendants, or some of them, are dissipating or transferring further assets including the Kings Head Tavern property and sale proceeds, which appear to have been applied to assist with the acquisition of the Royal Hotel Granville by related companies. Mr Naaman is concerned that any judgment and costs orders made in these proceedings in his favour against Powerhouse will be frustrated if orders are not made restraining Powerhouse, Connells Point Holdings and RHG Nominees from dealing with or disposing of the proceeds of sale of the Kings Head Tavern property up to $4.7 million or otherwise restraining them in respect of the Royal Hotel Granville property from further encumbering or dealing with that property. Further, given the late appearance of several trust documents, and apparently frequent changes in trustees, Mr Naaman's solicitor is concerned that, unless restrained, Jaken Properties Australia, Peter Sleiman and Tony Sleiman will arrange for additional documents to be prepared and executed to change the terms of the trust deed in order to affect Mr Naaman's claims and the enforcement of any judgment.
16. On 29 October 2020, Jaken Properties Australia and Powerhouse offered an undertaking, until further order or final hearing of these proceedings, not to take any step to amend the terms of any trust of which they are trustee or make any payment to any person with a value in excess of $50,000 other than to pay costs incurred in the conduct of the proceedings or in the ordinary course of business including any tax liability without giving Mr Naaman seven days prior notice in writing.

Interlocutory injunctions and third party Marevas

1. On an application for an interlocutory injunction, the question is whether the plaintiff has made out a prima facie case and whether the balance of convenience favours the grant of the injunction. As to whether there is a prima facie case, a plaintiff does not need to show that it is more probable than not that at trial the plaintiff will succeed. It is sufficient to show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending trial. How strong the probability needs to be depends upon the nature of the rights the plaintiff asserts and the practical consequences likely to flow from the orders the plaintiff seeks: Mineralogy Pty Ltd v Sino Iron Pty Ltd [2016] WASCA 105 at [87].
2. The second question is whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs, or is outweighed by, the injury which the defendant would suffer if an injunction was granted: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1; Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46. Whether an applicant for an interlocutory injunction has made out a sufficient prima facie case and whether the balance of convenience favours the grant of such relief are related, not independent, questions: Warner-Lambert Co LCC v Apotex Pty Ltd (2014) 311 ALR 632; [2014] FCAFC 59 at [70]; Mineralogy v Sino Iron at [87].
3. In relation to freezing orders, an applicant is required to demonstrate that the defendant, by attempting to put their assets out of reach, is seeking to frustrate the court's power to grant an effective remedy: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 331 per Rogers AJA. As the Court of Appeal explained in Frigo v Culhaci [1998] NSWCA 88 at [16]: A plaintiff must establish, by evidence and not assertion, that there is a real danger that, by reason of the defendant absconding or removing assets out of the jurisdiction or disposing of assets within the jurisdiction, the plaintiff will not be able to have the judgment satisfied if successful in the proceedings. There has been much debate as to the precise degree of risk which must be shown … What is clear is that mere assertions that the defendant is likely to put assets beyond the plaintiffs reach will not be enough: Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG [1984] 1 All ER 398; Patterson.
4. The risk of dissipation of assets does not need to be demonstrated on the balance of probabilities; nor is it necessary that there be evidence of such intention: Deputy Cmr of Taxation v Hua Wang Bank Berhad (No 3) [2012] FCA 594 at [8]-[10]; Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) (2012) 90 ATR 711; [2012] FCA 1064 at [23] to [24]. It is necessary for the applicant for such an order to "show a reasonably arguable case on legal as well as factual matters": Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [67].
5. The Court must also weigh discretionary considerations, as outlined in Cardile v LED Builders at [53]: Discretionary considerations generally also should carefully be weighed before an order is made. Has the applicant proceeded diligently and expeditiously? Has a money judgment been recovered in the proceedings? Are proceedings (for example civil conspiracy proceedings) available against the third party? Why, if some proceedings are available, have they not been taken? Why, if proceedings are available against the third party and have not been taken and the court is still minded to make a Mareva order, should not the grant of the relief be conditioned upon an undertaking by the applicant to commence, and ensure so far as is possible the expedition of, such proceedings? It is difficult to conceive of cases where such an undertaking would not be required. Questions of this kind may be just as relevant to the decision to grant Mareva relief as they are to a decision to dissolve it. These are matters to which courts should be alive. As will appear, they are matters which should have been considered by the Full Court in this case.
6. Having considered these matters, it may be appropriate to make an order requiring a party or third party to hold and to keep unencumbered assets up to a value which is at least reasonable in all of the circumstances, noting that the Court should generally grant the minimum relief necessary to do justice between the parties and also specify the circumstances in which the order will cease to operate: Cardile v LED Builders at [70]. The draconian nature of freezing orders was made plain in Cardile v LED Builders Pty Ltd at [50]: …Nevertheless, those statements should not obscure the reality that the granting of a Mareva order is bound to have a significant impact on the property of the person against whom it is made: in a practical sense it operates as a very tight "negative pledge" species of security over property, to which the contempt sanction is attached. It requires a high degree of caution on the part of a court invited to make an order of that kind.
7. In the context of freezing orders, the expression "third parties" is used in the sense of persons against whom no final substantive relief is claimed. A freezing order may be made against or served on a third party who holds or controls assets beneficially owned by a substantive defendant, or may be made against a third party who might be liable to disgorge property or otherwise contribute to the assets of a substantive defendant: Peter Biscoe QC (as his Honour then was), Mareva and Anton Piller Orders (2005, LexisNexis Butterworths Australia) at [4.1] citing Cardile v LED Builders at 405-6 [57]. The cited portion of the majority judgment in Cardile v LED Builders as to when a Mareva order may be made against third parties bears repetition, at [57]: … such an order may, and we emphasise the word "may", be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which: (i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including "claims and expectancies" (The phrase used by Deane J in Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 625), of the judgment debtor or potential judgment debtor; or (ii) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.
8. A third party may be innocent or not innocent. Not innocent third parties include those who have become mixed up in a defendant's arrangements, such as a spouse or a company controlled or owned by the defendant or the spouse or the controller of a corporate defendant: Biscoe, Mareva and Anton Piller Orders at [4.1]. Here, the third parties may be described as 'not innocent' as the corporate third parties are related entities to the cross-defendants, and the individual third parties are close relatives of Peter and Tony Sleiman.
9. The third parties' principal submission was that no Mareva order could be made against them without joining them to the proceedings, relying on Cardile v LED Builders. However, the import of that decision is to the contrary, Cardile v LED Builders being the leading third party case in Australia. There, freezing orders were made against 'not innocent' third parties where they were not made defendants to the substantive proceedings but were made respondents to an interlocutory application and orders were made against them on that application: Biscoe, Mareva and Anton Piller Orders at [4.7]. Although the majority in Cardile v LED Builders noted the speech of Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 at 362 where Lord Mustill said, "The right to an interlocutory injunction cannot exist in isolation, but is always incidental to and dependent on the enforcement of a substantive right, which usually although not invariably, takes the shape of a cause of action", the majority in Cardile v LED Builders noted at [48]: …However, we do not think that his Lordship was suggesting that an order might be made against a non-party not amenable in some way ultimately to some coercive process requiring it to disgorge, or in some other way to participate in the satisfaction of, a judgment against a party.
10. Relying on Cardile v LED Builders, Mr Biscoe QC noted, "In Australia it now seems to be established that a freezing order may be made against a third party without joining it as a defendant. … Cardile v LED Builders … implicitly approved the procedure of not joining the third party as a substantive defendant but, instead, of making it a respondent to an interlocutory application… Procedurally, Cardile is significant in implicitly approving the course of not joining a third party as a party to the proceedings": at [4.7], [4.14], [4.22].

Submissions

1. Mr Naaman submitted that the sale of the Kings Head Tavern and the acquisition of the Royal Hotel Granville, in its form and execution, is a more convoluted version of the transactions of which Mr Naaman complains in these proceedings. But their ultimate aim, and effect, are said to be the same, being to impede Powerhouse's ability to enforce its right of indemnity should Mr Naaman succeed before Kunc J. Mr Naaman said he had a good cause of action against Powerhouse and, indeed, the third parties as, by order of the Court, he was subrogated to the rights of Jaken Properties Group to an indemnity, which is an estate with the character of a charge or lien over the assets of the Sly Fox Family Trust: Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth (2019) 368 ALR 390; [2019] HCA 20 at [82] to [84] per Bell, Gageler and Nettle JJ. Having been subrogated to the rights of Jaken Properties Group, Mr Naaman has standing and the rights to seek to trace the property impressed with the equitable charge or lien into the hands of all recipients of the property, and seek assistance from a Court of equity to recover it. The cross-claim already seeks to recover $3.6 million from Powerhouse on this basis and thus Mr Naaman has a good arguable case.
2. Unless restrained and preserved, it was submitted that there was a real risk that Mr Naaman would be left (yet again) unable to enforce his judgment debt. The evidence indicated that, before the sale and purchase of hotels in March 2020, Powerhouse held over $14 million in unencumbered assets and now does not hold that money. Further, RHG Nominees used the net proceeds of the sale of the Kings Head Tavern, which were due to Powerhouse, to purchase the Royal Hotel Granville. There was no explanation as to why Powerhouse did not receive the consideration for the sale of the Kings Head Tavern or why the new hotel is not registered in the name of Powerhouse. The orders sought aim to maintain the status quo and to halt any further dissipation of assets until Kunc J determines the substantive proceedings.
3. Mr Naaman submitted that since the commencement of this proceeding, the cross-defendants have provided five purported deeds made in relation to the Sly Fox Family Trust, including one provided after the filing of the motion of interlocutory injunctions. These deeds purport to change, vary or amend the terms of the trust and parties associated with the trust, including the trustee. Relief has been claimed in the application to restrain any further changes being made to the terms of the trust including any further changes of the trustee. Such relief was said to be appropriate in view of the cross-claim, which seeks relief in respect of trust transactions entered into with the intention to defraud creditors, the conduct of the cross-defendants in relation to trust documents and the judgment and orders of February 2016 entitling Mr Naaman to be indemnified from the assets of the trust.
4. Mr Naaman submitted that, given the trial is imminent, the length of time, during which the respondents would be the subject of such injunctions and freezing orders was reasonably constrained. There was no evidence of prejudice in the making of the proposed orders. There was no disentitling delay. The ASX announcement and newspaper article both stated that the vendor of Kings Head Tavern (Powerhouse) was also the purchaser of the Royal Hotel Granville. Given the value of the transaction as disclosed in those publications, Mr Naaman would have had no concern that Powerhouse would be left without assets to satisfy a judgment against it. The respondents never disclosed the transactions to Mr Naaman or the Court. The implication in the respondents' submissions - that a party and his representatives must be constantly on the lookout for unlawful dissipation of assets - was unsupported by authority and impractical.
5. Finally, Mr Naaman submitted that the undertaking proffered by the cross- defendants was inadequate. It did not encompass Peter and Tony Sleiman. As Powerhouse appeared to no longer to be a trustee, the undertaking should be given by the new trustee. The reference to a monetary sum was inadequate given the way that the transactions were undertaken, that is, for nominal sums.
6. The cross-defendants opposed the relief sought on the basis that orders in the terms sought would directly affect the Royal Hotel Granville and its business and operations and, that being so, those entities, along with the other three non-party respondents to the application, would need to be joined as parties to the proceedings and get themselves ready for a hearing in an impossibly short time period. I note that the affidavit of Mr Nasr did not refer to the potential impact of a Mareva order on the operations of the Royal Hotel Granville.
7. Further, the cross-defendants submitted that the sale and purchase of the hotels occurred some seven months ago and was no secret at the time. The allegations made in Mr Naaman's submissions were said to warrant the joinder of the third parties to the proceedings and for further detailed particulars to be provided of the serious allegations made against those third parties. Further amendments to the claims against the cross-defendants were also said to be necessary but not circulated. It was also submitted that the injunction would prevent the third parties from continuing the renovations of the Royal Hotel Granville and make trading conditions more difficult but, again, Mr Nasr's affidavit did not go so far. The cross-defendants submitted that the application was a transparent attempt to lay the foundation for a last minute adjournment of the final hearing, which did not identify nor provide any evidence in support for the proposed joinder of five more parties and an assortment of claims nor justify the need for interim relief at this late stage of the proceedings.
8. Further, the cross-defendants opposed the relief sought on the basis that the proceeds of sale of the Kings Head Tavern no longer remain in the hands of Powerhouse and an injunction would serve no purpose and should not be ordered. The same was said of the relief sought against the third parties. There was said to be no risk that Jaken Properties Australia would enter into further trust instruments as, as recently as 20 October 2020, Jaken Properties Australia ratified and acknowledged the existing terms of the trust. There was said to be no evidence of any threat that Powerhouse would remove any of its assets from the jurisdiction and no utility in making such an order. Powerhouse had always been a trustee and did not have any assets of its own. The Kings Head Tavern was sold seven months ago and there is no evidence that Powerhouse retained $4.78 million or paid away any sum other than to discharge mortgage debt on settlement of the sale of that land. (I understood Mr Nasr's evidence to suggest that Powerhouse lent the net proceeds of sale to some of the third parties). A triable issue was said not to have been identified or proved to the requisite standard; there was said to be only bare assertion unsupported by evidence. The terms of the proposed restraint was said to be so onerous that an order in those terms could not be fairly made; there was no provision for Powerhouse to meet its own operating expenses or contribute to the cost of defending itself in the proceedings listed for hearing.
9. The cross-defendants submitted that there was no need for an order for an affidavit setting out the whereabouts of the proceeds of sale of Kings Head Tavern, as the solicitor who acted on the transactions, Mr Nasr, had already provided that information in his affidavit. However, I think it has to be acknowledged that Mr Nasr's affidavit is lacking in detail in respect of the suggested loan of the net proceeds of sale to the third parties and unsupported by any documentation of such a loan. An affidavit from a director of Powerhouse, Ms Michael, may be appropriate in these circumstances.
10. In support of his submission, Mr Naaman circulated a 'points of claim' which specified the evidence said to support the application for Mareva orders against third parties. The cross-defendants submitted that, as the 'points of claim' relied upon much of the evidence and issues in the substantive proceedings, there was no separate serious issue to be tried against the third parties. I suspect I may not have understood this submission. I do not consider that there needs to be a new and different serious issue to be tried; it suffices if the evidence in the substantive proceedings and evidence relied upon in support of an application for Mareva relief together point to a serious issue to be tried in the substantive proceedings. The cross-defendants submitted that the 'points of claim' and Mr Naaman's disinclination to join the third parties to these proceedings would be productive of further litigation, said to go to the balance of convenience.
11. The third parties submitted that Mr Naaman had failed to identify evidence and grounds for relief against any of the non-party respondents. Other than broad unsubstantiated assertions, it was submitted that Mr Naaman had not articulated the barest elements of any cause of action against the third parties. But nor do I understand Cardile v LED Builders to require Mr Naaman to establish anything beyond the matters described in this judgment at [45]. The third parties submitted that nothing in the applicants' submissions identified any evidence showing that the third parties had frustrated, actually or prospectively, the administration of justice. Further, Mr Naaman was said to have been dilatory in bringing the application, warranting its refusal on discretionary grounds: Cardile v LED Builders at [53]. Further, the third parties would need to be joined as their rights were said to be affected: John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19.
12. As to delay, Mr Naaman submitted in reply that, between 26 and 27 October 2020, the applicant had received over 1,400 pages of documents from the cross defendants and hundreds of pages of additional materials from two subpoenaed parties. It took until 30 October 2020 for the third parties to confirm that they had no documents to produce apart from the documents produced by the cross defendants. On 30 October 2020, Mr Nasr served an affidavit and a 405-page exhibit. No director of any relevant entity had sought to give evidence on the application. Most if not all the documents produced had at all relevant times been in the possession of the respondents. The documents were said to reveal an uncanny resemblance between the timing and effect of the transactions involving the Kings Head Tavern and the transactions involving O'Malley's Hotel, of which Mr Naaman complained in the proceedings. Both transactions took place in the face of imminent trials.
13. As to the need to join the third parties, this was disclaimed by Mr Naaman, who intended to proceed against the third parties separately and wished to keep the trial dates before Kunc J given the risk of further transactions to dissipate the cross defendants assets, with the intention to defraud Mr Naaman. Mr Naaman submitted that the question before Kunc J was whether Powerhouse held $3.6 million on trust for Jaken Property Group. The relief which Mr Naaman may seek against the third parties in separate proceedings would concern whether they held property that belonged to Powerhouse, knowing that there was a claim against Powerhouse and thus holding that property on trust for Powerforce. Thus, if Mr Naaman proceeded to sue the third parties in separate proceedings, their rights were not affected in the way described in John Alexander's Clubs v White City Tennis Club.
14. As to the suggested futility of the orders sought, Mr Naaman submitted that Powerhouse had chosen not to reveal the extent of its assets. Powerhouse does have an equitable right of indemnity which Mr Naaman would be anxious to preserve lest it were assigned elsewhere. Presumably, Powerhouse has other causes of action such as the loan of the net proceeds of sale. It was said that submissions of futility lay ill in the mouth of the party accused of dissipating its assets in contravention of section 37A of the Conveyancing Act 1919 (NSW) and ought be rejected. A respondent to a freezing order may not argue that the Court would not freeze its assets, because its unlawful plan has in fact succeeded and it now has no assets.

Conclusion

1. I have endeavoured to address the parties' submissions in the course of this judgment. Essentially for the reasons advanced by Mr Naaman, I consider that the bases for the interlocutory injunctions and Mareva orders have been established. There is a serious question to be tried in these proceedings as to whether Powerhouse holds $3.6 million plus interest on trust for Jaken Property Group, to which Mr Naaman is entitled by right of subrogation. The sale by Powerhouse of the Kings Head Tavern and the purchase of the Royal Hotel Granville by RHG Nominees or, perhaps, RHG Properties, in March 2020 is consistent with an attempt by Powerhouse to put its assets out of reach by providing the net proceeds of sale, in an apparently undocumented loan, to related entities. When viewed with similar transactions described in this judgment, Mr Naaman has established that there is a real danger that the cross-defendants may seek to frustrate the Court's power to grant an effective remedy in these proceedings. The evidence suggests that the corporate third parties hold or control assets beneficially owned by Powerhouse or may be liable to disgorge property or otherwise contribute to the assets of Powerhouse. The individual third parties have it within their power, as directors of Powerhouse and Connells Point Holdings, to ensure that the assets of those companies are not further dissipated.
2. As to the balance of convenience, Mr Nasr's affidavit did not indicate any prejudice which the cross-defendants may suffer if the orders sought are made. The third parties did not put on any evidence. The final hearing is imminent. The interlocutory injunctions and Mareva order will likely be of short duration. It was not obvious why the third parties had to be joined, nor why the cross-claim had to be amended, nor why the final hearing would be vacated. For these reasons I have made the orders sought by Mr Naaman, save for the costs order sought. Whether Mr Naaman should have his costs of the motion should await the final determination of these proceedings.

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: 04 November 2020