Jingalong Pty Ltd v Todd

Judgment 1HIS HONOUR: This is an application for urgent relief on an ex parte basis for orders in the nature of freezing orders against Jingalong Pty Ltd (Jingalong). Jingalong is the appellant in the proceedings in this Court against Mr Todd and Mr Pernice. The applicant for relief is Gregory George Todd, the first respondent in the appeal. 2The appeal is in respect of a dispute concerning a property described as "Lot 1" Gannet's Road, Nowra. On 10 April 2014 Kunc J made orders giving effect to his finding that Jingalong held Lot 1 on constructive trust for Mr Todd: Todd v Jingalong Pty Ltd [No 2] [2014] NSWSC 440. An order was also made that Jingalong pay Mr Todd's costs of the proceedings (other than in respect of the first cross-claim by Jingalong). 3Subsequently on 19 September 2014, McColl JA made orders staying the orders made by Kunc J pending the hearing and determination of the appeal: Jingalong Pty Ltd v Todd [2014] NSWCA 330. 4The present application relates to a different property owned by Jingalong, described as "Lot 5" in deposited plan 1181699. Mr Todd lodged a caveat against Lot 5 supported by a statutory declaration sworn on 31 July 2014 claiming an estate or interest in that land based on the costs order made in his favour against Jingalong in the Court below. Those costs have not been assessed, but have been quantified by Mr Todd's solicitors at approximately $130,000. The caveat is obviously bad in form because the costs order in favour of Mr Todd does not give rise to any equitable interest in Lot 5 owned by Jingalong. 5Following lodgement of the caveat, the solicitors for Jingalong informed the solicitors for Mr Todd that Lot 5 was the subject of a contract for sale exchanged on 2 July 2014 with completion due on 11 August 2014. The solicitors for Mr Todd requested that an amount of $130,000 be retained from the proceeds of sale of Lot 5 before Mr Todd would agree to withdraw the caveat. No response was received to that request until 17 September 2014, when the solicitors for Mr Todd were served with a notice to caveator of proposed lapsing of caveat relating to Lot 5. 6Mr Brezniak of Counsel who appeared for Mr Todd informed the Court that the caveat will lapse today, being 9 October 2014. His explanation from the bar table for the delay in applying for relief was that the solicitors for Mr Todd were under the (obviously) mistaken impression that they would be able to obtain an extension of the caveat. This is not the case. As already mentioned, the caveat is bad as Mr Todd has no equitable interest in Lot 5. Mr Brezniak also informed the Court that on his instructions Mr Todd's solicitor had been informed that the mortgagee of Lot 5 required two days notice after the lapsing of the caveat to attend settlement of the sale of Lot 5. Nonetheless it was submitted that there was a real basis for a concern that the settlement of the sale of Lot 5 would occur within a shorter timeframe. 7In these circumstances Mr Todd has sought relief on an urgent basis for orders in the nature of freezing orders to preserve a minimum amount of $130,000 from the proceeds of sale of Lot 5 pending the determination of the appeal. 8Counsel for Mr Todd accepted that his client is not entitled to security in respect of the costs order obtained below. This is undoubtedly correct. 9Mr Tobin, a solicitor for the applicant, swore an affidavit in support of the application dated 8 October 2014 deposing on information and belief that he had been informed by Mr Todd that the sole remaining asset of Jingalong is Lot 5 and that upon the sale of that property any proceeds of sale will be disbursed through related entities of Mr Cameron (the director of Jingalong) and Jingalong, following which Jingalong may promptly attempt to go into liquidation. 10Mr Tobin also deposed to what he said were adverse credit findings made against Mr Cameron by Kunc J in the proceedings below, which he said resulted in the conclusion by his Honour that "Jingalong's acquisition of the land in Lot 1 was either tainted by fraud within the meaning of that term in s 42 of the Act (the Real Property Act 1900 (NSW)) or gave rise to a personal equity in Mr Todd against Jingalong in relation to Lot 1". 11Mr Brezniak submitted that although the costs order had been stayed pending the outcome of the appeal, there was a prima facie claim for a money amount subject to the outcome of the cost assessment process against Jingalong. He further submitted that there was a danger that, by reason of assets of Jingalong in particular the net proceeds of sale of Lot 5 being disposed of or otherwise dealt with in some fashion, that Mr Todd, if he succeeds in defending the appeal, will not be able to have his costs judgment satisfied. 12It was submitted that the Court should draw an inference to this effect from the adverse credit findings made against Mr Cameron in the proceedings below and the evidence of the financial position of Jingalong contained in affidavits sworn by Mr Cameron in the proceedings below. Those affidavits referred to the difficult financial position of Jingalong and the fact that it had borrowed substantial funds for the development of various properties, including Lot 5. Mr Brezniak properly drew to the Court's attention that the financial information concerning Jingalong was to some extent out of date, the latest affidavit being one sworn by Mr Cameron on 16 September 2013. He submitted nonetheless that an inference should be drawn that Jingalong's financial position had not substantially changed for the better since that date. 13I am prepared to draw the inference that Jingalong will most likely complete the sale of Lot 5 immediately or shortly after the lapsing of the caveat on 9 October 2014, and unless restrained, any net proceeds of sale will be disbursed by it. Mr Brezniak informed the Court that there was a mortgagee which held security over the Lot 5, but the quantum of the secured debt was presently unknown. Whether there will in fact be any net proceeds of sale remains to be seen. This however is not a sufficient reason to refuse an order in the nature of freezing orders for a short period of time, as the proposed orders will not prevent Jingalong discharging any mortgage or paying any reasonable costs and expenses incidental to the sale of Lot 5. 14I am satisfied that it is appropriate to make a form of freezing order for a limited period of time. The appropriate form of order is not that sought in paragraph 4 of the notice of motion filed in Court. Mr Brezniak acknowledged that the form of order should follow the example form of order in practice note SC Gen 14. 15As the order sought is on an ex parte basis, it should be made only for a short period of time, sufficient to enable service of the order and relevant documents on Jingalong, and for the matter to be returnable before the Court next Monday 13 October 2014. At that time if the parties are unable to agree on an appropriate interim regime pending the hearing and determination of the appeal, Mr Todd will need to renew his application for continuation of the freezing orders.