defendant. Plaintiffs' freezing order application dismissed; subpoena to Westpac set aside; subpoena to NAB discharged and documents returned; plaintiffs ordered to pay defendant's costs of both motions and...
Key principles
A freezing order will only be made where the applicant shows both an arguable case to judgment and a real risk that the respondent will take steps to frustrate execution of that...
A subpoena requiring broad banking records in the absence of a legitimate forensic purpose to discover particular transactions concerning the proceeds of sale constitutes an...
The court's primary objective in granting a freezing order is to protect the Court's process and potential execution on judgment, not to balance competing litigation interests...
Statements by a defendant's solicitor about present intentions not to dissipate assets are properly read as statements of present intention and do not, without more, operate as a...
Issues before the court
Whether the subpoenas to Westpac and NAB for broad banking records were an abuse of process (a 'fishing expedition') and should be set aside or...
Plain English Summary
Parker J dismissed the plaintiffs' second application for a freezing order against Ms Nelson because, although the plaintiffs had an arguable case, they failed to show a sufficient risk that Nelson would dissipate assets to frustrate execution. Broad subpoenas to banks seeking records of all banking services were set aside as overbroad fishing expeditions; narrower, targeted subpoenas might have been appropriate but the issued ones were not. The defendant was awarded costs and the plaintiffs were ordered to pay $20,000 on account of those costs.
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Deep Dive
1,927 words · generated 14/07/2026
What happened
This interlocutory ruling concerns two linked but distinct applications brought by the plaintiffs in long-running proceedings about the redevelopment and sale of a Lindfield property. The plaintiffs (Mr Moustapha and Overlook Tiles) allege they contributed labour, management and materials to the redevelopment and claim restitutionary remedies and proprietary relief (an equitable charge or constructive trust over proceeds) against the defendant, Ms Katie Nelson.
Whether a freezing order under UCPR r 25.11 should be granted to prevent the respondent from reducing her net assets in Australia below a specified...
Whether the successful defendant should be awarded costs assessable and payable forthwith, and whether a payment on account should be ordered.
Cited legislation
4 cited instruments linked from this judgment.
Key chronological events:
Mid-2015: Nelson purchased the Lindfield property; she and Moustapha were involved in a personal relationship and he assisted with works.
Early 2017: Nelson sold Lindfield for $4.575 million.
March 2017 onwards: plaintiffs commenced proceedings; various amendments followed.
November 2018: the plaintiffs’ first freezing order application (same relief) was dismissed by the Court (see the earlier judgment).
May and July 2020: Nelson sold two further properties (Telegraph Road on 12 May 2020 for stated consideration $5m; Bandalong Avenue on 6 July 2020 for $1.77m).
23 July 2020: plaintiffs issued broad subpoenas to Westpac and NAB for bank records, primarily to trace the proceeds of the recent property sales.
14 August 2020: plaintiffs filed a fresh freezing order application (to prevent dissipation of assets) and sought narrower evidence orders to support it; hearing occurred 18–19 August 2020 before Parker J.
18–19 September 2020 (orders dated 18 September 2020): Parker J set aside/discharged the bank subpoenas, dismissed the freezing order application and ordered plaintiffs to pay the defendant's costs of the motions and to pay $20,000 on account of those costs.
The immediate interlocutory dispute heard by Parker J comprised:
An application by the plaintiffs for a freezing order (UCPR r 25.11) limiting Nelson’s capacity to reduce net assets below a specified amount.
Applications to obtain bank records and to compel the defendant to provide an affidavit setting out how the sale proceeds had been applied (the "evidence applications").
A cross-application by the defendant to set aside the subpoenas to the banks as an abuse of process.
Parker J refused to make the evidence orders (because the issued subpoenas were overbroad and amounted to a fishing expedition) and refused to grant the freezing order because the plaintiffs failed to establish a sufficient risk of dissipation. Costs were awarded to the defendant and $20,000 was ordered on account.
Why the court decided this way
Two distinct legal thresholds governed the outcome:
Subpoenas and the evidence applications:
The court asked whether the subpoenas served on the banks had a proper forensic purpose. The plaintiffs' objective was to find out what happened to the proceeds of sale, in order to show dissipation that could justify a freezing order.
Parker J accepted the general proposition that subpoenas may issue for interlocutory purposes and that an interlocutory application might require evidence not relevant to the main hearing (Evidence applications [8], [12], [13]).
However, the subpoenas issued were extremely broad (requiring all records from 1 January 2020 onward), while the focused forensic question was the disposition of sale proceeds. When the forensic purpose is narrow, broad fishing for all banking records is an abuse of process. The court characterised the issued subpoenas as a "classic case of a fishing expedition" (Evidence applications [19]). As a result, the NAB subpoena was discharged and the Westpac subpoena (not yet complied with) was set aside (Orders).
Freezing order application:
The court applied the settled two-step test for freezing orders: (i) an arguable case to judgment, and (ii) a real risk that the defendant will dissipate assets to frustrate execution (Freezing order application [3]-[4], citing Cardile [9]).
The plaintiffs conceded there was an arguable case. The central contest was the second limb: whether the sale of properties, together with other factors, demonstrated a sufficient risk of dissipation.
Parker J carefully analysed the plaintiffs' four cited factors (sale of the properties; refusal to provide information; failure to adduce expert evidence; earlier correspondence indicating no intention to dissipate). He rejected each as establishing the requisite risk:
Sale of properties: converting land to cash alone is not dissipation; it merely changes the form of asset. The court emphasised the difference between converting to cash and actual dissipation. For an individual who remains in the jurisdiction, dissipating assets generally requires giving away or consuming funds so as to make recovery impossible; mere sale does not show that will occur (Freezing order application [5]-[11]).
Refusal to disclose: the defendant's reluctance to provide detailed financial information can be understandable and, in the absence of other evidence of dissipation, is neutral (Freezing order application [14]-[16]).
Failure to file expert evidence: the court would not infer from Nelson's lack of responding expert reports that she had no answer and would therefore dissipate assets; strategic litigation choices could explain the absence (Freezing order application [2]-[4]).
Earlier correspondence: statements by Nelson's solicitor in 2018 that Nelson had no intention to dissipate assets were statements of present intention, not a binding undertaking and could not be read as promising never to sell property two years later (Freezing order application [5]-[6], [12]-[14]).
The court stressed the purpose of a freezing order is to protect the Court's processes, not to balance litigants' relative litigation risks, and that the plaintiffs' submissions reflected a misconception on that point (Freezing order application [18]-[19]).
On the overall balance, there was insufficient evidence of the necessary risk of dissipation; the freezing order was refused (Freezing order application [20]; Orders).
Costs and payment on account:
Given the discrete nature of the freezing application (and its similarity to a prior unsuccessful application), Parker J regarded immediate costs assessable and payable forthwith as appropriate. To avoid inefficiency and duplication in fixed separate assessments, the court ordered a lump sum payment on account of costs in the sum of $20,000 (Costs [4]-[11]; Orders).
Before and after state of the law
Before this decision:
The established principles governing freezing orders were well known: an applicant must establish an arguable case and a real risk of dissipation; the court's objects are to protect its processes and eventual execution on judgment (see Cardile and the Mareva line).
Courts have cautioned against granting wide fishing subpoenas and have required forensic purpose and proportionality.
What this decision reinforces:
The judgment applies existing principles to factual settings where a defendant has sold real property but remains resident and intends to stay in the jurisdiction; such sales do not, without more, create the requisite risk to justify freezing relief.
It emphasises judicial vigilance against overbroad subpoenaing and characterises subpoenas used to "discover" whether dissipation occurred as an abuse of process.
It reaffirms that interlocutory costs can be made immediately payable and that a practical lump-sum payment on account is appropriate in some cases.
There is no change in legal principle, but the decision is a practical restatement of how these principles operate when the defendant is a local natural person who has converted real property to cash.
Key passages with plain-English translation
"In my view, it was a classic case of a fishing expedition." (Evidence applications [19])
Translation: The bank subpoenas were an attempt to search widely for any evidence of dissipation without a focused, justified reason. The court will not permit that.
"What this underlines is that the sale by Ms Nelson of her properties was not, of itself, a dissipation of assets in the relevant sense." (Freezing order application [6])
Translation: Selling land and receiving cash does not automatically mean someone is trying to evade creditors; it changes the form of assets but does not necessarily mean they will be destroyed or irretrievably removed.
"The court is not concerned to balance the interests between the litigants. The purpose of a freezing order is to protect the Court's processes from being frustrated by the defendant." (Freezing order application [18])
Translation: Freezing orders are about protecting how judgments can be enforced, not about fair allocation of risk between parties while the case is pending.
"I have decided to make it $20,000." (Costs [11])
Translation: The court fixes a pragmatic lump-sum payment now towards the defendant's costs of these interlocutory applications, to provide some immediate recompense while costs are later assessed in detail if necessary.
What fact patterns trigger this precedent
This judgment will be particularly relevant where:
An applicant seeks a freezing order against an individual defendant who is resident in Australia and has converted real property into cash by sale, but there is no contemporaneous evidence of onward dissipation of proceeds.
An applicant issues wide-ranging subpoenas to banks to obtain a defendant's entire banking records across a period, where the substantive forensic issue concerns the destination of specific proceeds (for example, post-sale transfers).
A party brings repeated, closely similar interlocutory freezing applications that resemble earlier unsuccessful applications and where the delay in prosecuting the claim is material.
A defendant refuses to disclose financial particulars but there is no independent evidence that the defendant has dissipated assets or intends to frustrate execution.
In such fact patterns, courts should scrutinise whether the form of relief sought is proportionate and whether there is any other evidence (transfers abroad, gifts, payments to related third parties, plans to leave the jurisdiction) that would elevate the risk of dissipation.
How later courts have treated it
Given this is a 2020 NSW Supreme Court interlocutory ruling, it will serve as persuasive authority in New South Wales courts for the following practical points:
Reinforcement of the distinction between conversion of asset form and dissipation, especially for individual defendants resident in Australia.
A precedent for refusing subpoenas that are overbroad relative to the forensic purpose of tracing specified proceeds.
Support for immediate costs or payments on account when interlocutory applications are discrete and unnecessary or repetitive.
Subsequent courts (and practitioners) can rely on the manner in which Parker J applied existing authorities (Cardile, Patterson, Jackson) and cross-jurisdictional decisions (Suzhou Haishun) to similar fact patterns. The judgment sits within established lines; it provides fact-specific guidance rather than new legal doctrine.
Still-open questions
Several issues remain fact-specific and will continue to be litigated in future cases:
Threshold of evidence showing risk of dissipation once an individual converts property to cash. What combination of factors (timing, transfers to related parties, large outgoings such as luxury purchases) will be sufficient? Parker J indicates sale alone is insufficient, but the precise combination that elevates suspicion requires further fact patterns.
The proper scope of subpoenas to banks in interlocutory contexts. While this decision rejects overbroad subpoenas, it acknowledges that targeted subpoenas may be justified. Lines as to necessary particularity for subpoenas to withstand abuse of process challenges remain a practical question.
The interplay between discovery obligations and the use of subpoenas for interlocutory relief. When can a plaintiff properly use subpoenas (rather than ordinary discovery) to address an interlocutory issue? This judgment suggests caution but does not provide a closed test.
The quantum and use of payments on account in respect of interlocutory costs. What principles should govern setting the figure? This decision exercised judicial discretion and adopted a pragmatic approach; appellate guidance on standardising such awards would be helpful.
Practitioners should carefully advise clients that (a) conversion of assets to cash by a resident individual will not alone justify freezing relief; (b) subpoenas must be narrowly tailored to the forensic question; and (c) repeated or misdirected interlocutory applications may attract immediate adverse costs and account payments.
Judgment (7 paragraphs)
[1]
Judgment
This judgment concerns two interlocutory motions which I heard on 18 and 19 August. The main application was one by the plaintiffs for a freezing order against the defendant. The other applications concerned evidence for the purpose of the freezing order application. I will refer to these other applications as the "evidence applications".
Following the hearing on 19 August I dismissed the freezing order application. At earlier points I had disposed of the evidence applications. I decided that the plaintiffs should pay the costs of the motions. I also decided to order that the plaintiffs pay a sum of money to the defendant on account of their liability for costs. In accordance with directions I made, I later received supplementary affidavit evidence and written submissions from the parties on the quantum of the payment.
This judgment sets out my reasons for the orders I made disposing of the freezing order application and the evidence applications. It also sets out my reasons for the orders I will now make fixing the quantum of the payment to be made by the plaintiffs on account of costs.
[2]
Claims, procedural history and evidence on motions
The freezing order application was the second such application made by the plaintiffs in these proceedings. An earlier application was made in October 2018. It came before the Court in November 2018 (coincidently, before me) and was dismissed: Moustapha v Nelson [2018] NSWSC 1816.
In my judgment I described at [1]-[19] the claims in the proceedings as they were then formulated, and the procedural history to that point. An abbreviated version appears below.
The case concerns a property development venture involving a property at Lindfield in Sydney. The property was purchased by the defendant, Katie Nelson, in mid-2015. She sold it, after renovations had been carried out, in early 2017.
The first plaintiff, Fouad Ahmad (known as "Fred") Moustapha, is a property developer. The second plaintiff, Overlook Tiles Pty Limited ("Overlook") is a company controlled by him which sells tiles and bathroom products.
The proceedings were commenced by statement of claim in March 2017. The statement of claim was amended in November 2017 and again in August 2018.
When the freezing order application was before me in November 2018, the plaintiffs had formulated another version of the statement of claim involving further amendments. I granted the plaintiffs leave to make these amendments and the application proceeded on that basis. The new version of the statement of claim was formally filed in March the following year.
The plaintiffs' case is that Mr Moustapha agreed to help Ms Nelson with the development of the Lindfield property, effectively as a project manager, in return for a share of the profit from the venture. The plaintiffs also claim that Ms Nelson owes them money for unpaid costs of the project. Overlook is allegedly owed $160,000 for tiles and bathroom products supplied in the course of the renovation. Other work was allegedly done by contractors retained by the plaintiffs. Where the plaintiffs have paid the contractors they seek reimbursement. Otherwise they seek indemnity.
It appears not to be in dispute that when the development project began, Ms Nelson and Mr Moustapha were in a personal relationship. They are said to have begun an affair in January 2015. During the affair, Mr Moustapha continued to live with his wife and seven children at the matrimonial home. Ms Nelson was living in an apartment which she owned at Bandalong Avenue at West Pymble.
There also appears to be no dispute that Mr Moustapha helped Ms Nelson with undertaking the development. It is common ground that initially he did so gratuitously. But according to the plaintiffs' case, in October 2015 the arrangement took on a business dimension. The parties allegedly agreed that Mr Moustapha would manage the construction work for Ms Nelson, in return for a half share of any profit over $500,000 which she made on the development.
The affair between Mr Moustapha and Ms Nelson ended in about June 2016. The work on the Lindfield property was completed in about October. Shortly afterwards, the affair was revealed to Mr Moustapha's wife and contact between him and Ms Nelson ceased.
Ms Nelson puts forward several lines of defence to the plaintiffs' claims. First, she says that the help she received from Mr Moustapha was always based on their personal relationship, and there was no contractual arrangement for her to reimburse him or pay him a share of the profits from the development. She alleges that this was confirmed when their relationship came to an end, and was formally acknowledged by Mr Moustapha at that time, including in an email which he sent her on 9 June 2016.
Ms Nelson also alleges that her relationship with Mr Moustapha began, and continued, as a result of representations made by him that his marriage was over, and of promises to leave his wife. Ms Nelson's defence pleads that these representations and promises were fraudulent and that this in some way vitiates the plaintiffs' claims against her. Ms Nelson has also filed a cross-claim seeking damages, including exemplary damages, for fraud.
Finally, Ms Nelson advances defences based on failure to comply with provisions of the Home Building Act 1989 (NSW). She says that the alleged agreement with Mr Moustapha was an oral one, and is unenforceable by reason of s 10. Furthermore the plaintiffs are disentitled to recover money because they did not hold contracts of insurance as required by s 92.
Ms Nelson had bought the Lindfield property for $2.1 million in June 2015. In order to finance the purchase, she made use of a line of credit with Westpac Banking Corporation ("WBC"). She also borrowed money from the National Australia Bank ("NAB").
Ms Nelson sold the property in January 2017 for $4.575 million. According to Ms Nelson, after paying out NAB, the costs of the redevelopment and interest, she was left with approximately $1.58 million. Of this, she used $670,000 to buy another property at Telegraph Road at Pymble, which she was planning to redevelop. The purchase was assisted by a further loan from NAB. Some of the remaining monies were used to reduce her drawings on the WBC line of credit and to pay other personal debts. Ms Nelson also bought herself a BMW motor car which cost about $120,000.
The plaintiffs make claims both of a monetary and a proprietary nature. I will deal first with the monetary claims.
No doubt because of the statutory defences advanced by Ms Nelson, the plaintiffs do not make any claim in contract. Instead, they seek judgment by way of restitution. The restitutionary claims include both reimbursement of contractor expenses paid or incurred, and a quantum meruit for the value of materials supplied and project management work done by Mr Moustapha. The plaintiffs also seek an account of the profits made by Ms Nelson from the development, or equitable compensation for the value of the work done, materials supplied, and liabilities undertaken to contractors.
The plaintiffs' proprietary claim is based on the contention that the proceeds of sale of the Lindfield property were held by Ms Nelson on constructive trust. The plaintiffs claim to be able to trace those proceeds both into the Bandalong Avenue property and the Telegraph Road property, and accordingly seek the imposition of equitable charges on those properties. The plaintiffs make these proprietary claims on the basis that the development of the Lindfield property was a joint endeavour between the parties giving rise to a common intention constructive trust of the type recognised in Baumgartner v Baumgartner (1987) 164 CLR 137.
The plaintiffs' argument in support of their October 2018 application reflected the two types of relief which they claimed. In aid of the proprietary claim, the plaintiffs sought an order under Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), r 25.3 (or alternatively, by way of interlocutory injunction to preserve the subject matter of their claim) against the Bandalong Avenue and Telegraph Road properties. In aid of the monetary claims in restitution or in equity, the plaintiffs sought a freezing order under UCPR, r 25.11 limiting the amount which Ms Nelson could draw down on her line of credit.
I did not consider that there was sufficient basis for the proprietary claims to justify relief under r 25.3 (or by way of interlocutory injunction). And, although I accepted that the plaintiffs had had an arguable unsecured claim, I was not satisfied that there was sufficient risk of Ms Nelson dissipating her assets to justify a freezing order under r 25.11. I therefore dismissed the application with costs.
Following my decision, the interlocutory wrangling between the parties continued. The principal focus for dispute was that the plaintiffs wished to deploy expert evidence concerning the quantum of their claims. This issue had in fact arisen before the October 2018 application was made, and it was not resolved until late 2019. The relevant history is set out in a judgment delivered by Ward CJ in Eq on 4 November 2019: Moustapha v Nelson [2019] NSWSC 1573 at [10]-[38].
In summary, the story began in April 2018 when, after repeated delays by the plaintiffs in filing their evidence, the Registrar made a guillotine order requiring all evidence to be filed by a date in May. The plaintiffs retained a building expert but the expert did not complete his report by the date specified in the guillotine order. It was not until July that the expert produced a draft; but the plaintiffs' legal representatives were dissatisfied with it and decided to change experts.
Eventually a new expert was retained and that expert produced a report in February 2019. The report was not served until July 2019, and defendant then opposed the grant of leave to rely on it. That application was allocated a half day hearing in November 2019.
In the meantime, Ms Nelson's legal representatives sought production of drafts and other documents associated with the report. That resulted in a dispute about privilege. It was this dispute which was determined by Ward CJ in Eq on 4 November 2019.
The application for leave came before Rein J on 20 November. It appears to have been vigorously contested; altogether there were three days of full or partial hearing. Eventually, his Honour granted leave to rely on the report on terms which required, among other things, that the plaintiffs pay Ms Nelson's costs of the application in the fixed sum of $52,500.
It is not clear what else happened in the first half of this year, but the proceedings are still not ready to be allocated a hearing date. This is because there is a dispute between the parties about discovery.
The immediate context for the present applications was the recent sales by Ms Nelson of the Telegraph Road property, and, shortly afterwards, of her home at Bandalong Avenue. Land Titles Office records show that the Telegraph Road property was transferred to a purchaser on 12 May this year for a stated consideration of $5 million. The Bandalong Avenue property was transferred to a purchaser on 6 July for a stated consideration of $1.77 million.
On 23 July, the plaintiffs' solicitors issued subpoenas to WBC and NAB, who remain Ms Nelson's bankers. The main purpose of the subpoenas appears to have been to obtain copies of bank statements which would show the movement of the funds received for the sale of the two properties. But the subpoenas were cast in much wider terms, requiring each bank to produce all of its records concerning any banking services provided to Ms Nelson from 1 January 2020 onwards.
When these subpoenas came to the attention of Ms Nelson's solicitors, they applied to have the subpoenas set aside as an abuse of process. It was contended that the subpoenas amounted to a "fishing expedition" for the purposes of a possible application for freezing orders (at that stage, of course, no such application had been made). Ms Nelson's notice of motion was filed on 7 August.
The plaintiffs then made their application for a freezing order. The plaintiffs filed their notice of motion on 14 August pursuant to leave from Robb J as Duty Judge.
[3]
Evidence applications
Initially I was not concerned with Ms Nelson's application to set aside the subpoenas. The plaintiffs' notice of motion for freezing orders was referred to me as Duty Judge and that was all that was fixed for hearing before me. But at the beginning of the hearing I granted the plaintiffs leave to amend their notice of motion so as to seek the following prayers for relief:
1. This amended notice of motion be returnable instanter;
2. Defendant to file and serve an Affidavit by 25 August 2020 setting out in detail each of the transactions, payments and/or disbursements made by the defendant with the proceeds of sale of the [Telegraph Road and Bandalong Avenue properties].
3. Defendant to produce an unredacted copy of the bank statement being annexure A to the Affidavit of Fred David sworn 17 August 2020.
4. Grant access to the bank records produced by Westpac Banking Corporation and National Australia Bank or in the alternative leave to file the amended subpoenae annexed to the Affidavit of Mouna Youssef dated 13 August 2020 at page 11 ("Amended Subpoena") and Order that the Defendant produce the documents sought in the Amended Subpoenae by such date as is determined by this Honourable Court.
The "amended" subpoenas (strictly speaking, these were to be fresh ones) referred to in proposed order 4 were to be in narrower form than those which the plaintiffs had previously had issued to WBC and NAB. The application to issue those subpoenas was pressed only to the extent of requiring production of records showing what had happened with the proceeds of sale of the two properties. This was also covered by the affidavit in proposed order 2, but that affidavit would of course require Ms Nelson to provide further details if the funds from the sale of the properties had been transferred on from the bank accounts into which they were initially paid.
Proposed order 3 requires some further explanation. Mr David is Ms Nelson's solicitor. The affidavit referred to in proposed order 3 was sworn by him in opposition to the plaintiffs' freezing order application. In the affidavit, Mr David stated, on instructions, that with the monies received for the sale of the properties Ms Nelson "paid out debts and discharged mortgages that were secured by the two properties", depositing the remaining amount in a bank account. The annexure to the affidavit was a copy of the bank statement showing the receipt of that amount, but with other entries redacted. Hence the request for an unredacted copy.
[4]
Freezing order application
Although the plaintiffs continue to maintain their proprietary claims, despite my conclusions about the weakness of those claims in my November 2018 judgment, the plaintiffs did not in this application make any further attempt to obtain orders in aid of those proprietary claims. The application was only for a freezing order under UCPR r 25.11.
The plaintiffs sought an order in the usual form which would prevent Ms Nelson from reducing the total value of her assets in Australia below a fixed sum. The sum specified in the plaintiffs' application was $2,274,794. This was calculated as the amount of the quantum meruit claim, as set out in the plaintiffs' expert report, plus interest. It was a significant increase above the sum sought in November 2018.
The parties agreed that the Court could not make a freezing order unless two conditions were satisfied. The first was that the plaintiffs had demonstrated a sufficient likelihood of obtaining an enforceable judgment. The second was that there was sufficient risk that, unless the order was made, Ms Nelson would take steps designed to frustrate execution of such a judgment.
Counsel for Ms Nelson did not seek to argue about the first of these requirements. As I understood it, counsel accepted that the plaintiffs' claim against Ms Nelson (relevantly for a quantum meruit or damages) was reasonably arguable.
The debate before me concerned the second element. Counsel for Ms Nelson contended that the evidence did not establish that there was any, or at least any sufficient, risk of Ms Nelson removing, or attempting to remove, assets from the reach of the Court's execution processes so as to frustrate execution of the judgment which the plaintiffs hoped to obtain. The term "risk of dissipation of assets" was used as shorthand, as it has been used in many cases. I will return to the precise meaning of the term below.
Counsel for the plaintiffs pointed to four factors which, so she contended, established a sufficient risk of dissipation in this sense. These were:
1. the sale of the two properties, and especially the sale of the Bandalong Avenue property in which Ms Nelson was previously living;
2. Ms Nelson's failure to provide information about the sales, and the application of the proceeds, when asked to do so;
3. Ms Nelson's failure to respond to the plaintiffs' expert evidence on quantum with expert evidence of her own; and
4. statements made on behalf of Ms Nelson in earlier correspondence, which, it was suggested, had been falsified by the recent sales.
[5]
Costs
Counsel for Ms Nelson sought an order for the costs of the freezing order application, and a further order that those costs be assessable and payable forthwith. Counsel for the plaintiffs accepted that she could not resist a costs order, but contended that there should be no order for assessment and payment forthwith.
In support of this contention, counsel for the plaintiffs argued that the freezing order application was intertwined with the final outcome of the case. Counsel submitted that the plaintiffs' purpose in bringing the application had been to "protect its interest in satisfying any judgment and to not litigate proceedings whereby the defendant rendered any judgment nugatory".
In my view, this submission underlined the fundamental misconception in the plaintiffs' approach. Protecting the plaintiffs' interest in satisfying the judgment they hoped to obtain could not of itself have justified the making of a freezing order. The court acts to protect its own processes.
It followed that the plaintiffs' freezing order application was a discrete one. As I have already said, it was decided by reference to factual and legal considerations which will play no part in the main hearing. I considered that that was a recognised reason for making an interlocutory costs order assessable and payable forthwith, especially where, as here, there was some time to go until the main proceedings would reach hearing: Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1 at [18].
I thought there was another relevant factor. The application followed an earlier unsuccessful application for a freezing order. It failed for substantially the same reasons as the first one. All it achieved was to distract the parties from moving the case towards hearing. With the benefit of hindsight the application should not have been brought.
For these reasons, I thought that it would be proper to order that the costs of the freezing order application be assessable and enforceable forthwith. There was no dispute that the same considerations applied to the costs of the evidence applications.
But the separate assessment of costs could have been inefficient. It might have led to two assessments where, if the defendant proves successful in the proceedings, only one will be necessary. I also thought it would likely be a further distraction from the preparation of the case for hearing.
[6]
Orders
The orders already made (on 18 August 2020) by the Court on Ms Nelson's notice of motion filed 7 August 2020 (concerning the subpoenas) were:
Order that the subpoena to Westpac Banking Corporation on 23 July 2020 be set aside.
Order that the subpoena issued to National Australia Bank Limited on 23 July 2020 be discharged and all documents produced pursuant to that subpoena returned.
The order already made (on 19 August 2020) on the plaintiffs' notice of motion filed 14 August 2020 (for freezing orders) was:
Order that the motion be dismissed.
I now make the following orders:
Order that the respondents (plaintiffs) pay the costs of the applicant (defendant) of her notice of motion filed 7 August 2020.
Order that the applicants (plaintiffs) pay the costs of the respondent (defendant) of their notice of motion filed 14 August 2020 (as amended).
Order that the plaintiffs pay Ms Nelson the sum of $20,000 on account of their liability for costs under orders 1 and 2.
[7]
Amendments
20 November 2020 - minor typographical amendments at various paragraphs
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Decision last updated: 20 November 2020
Plaintiffs' freezing order application dismissed; subpoena to Westpac set aside; subpoena to NAB discharged and documents returned; plaintiffs ordered to pay defendant's costs of both motions and to pay $20,000 on account of those costs (Orders).
Having obtained the amendment to the notice of motion, counsel for the plaintiffs asked me to make the orders requiring the production of the evidence sought (to which I will refer as the "evidence orders"), and adjourn the hearing of the balance of the motion, which sought the freezing order itself, until those orders had been complied with. Then the evidence could be used on the adjourned hearing.
Counsel for Ms Nelson opposed the making of the evidence orders, contending that they would constitute an abuse of process. In the circumstances, I decided to deal with the application for the evidence orders before considering the freezing order application any further. Once I had made this decision, counsel agreed that I should, when hearing the application for the evidence orders, also hear Ms Nelson's motion concerning the subpoenas already issued to WBC and NAB, as that motion raised similar issues.
The subpoena motion was readily dealt with. Counsel for the plaintiffs accepted that even if more targeted subpoenas would have been justified, the terms of the issued subpoenas were too broad. Rather than trying to make orders which would have the effect of cutting down the scope of the subpoenas after they had been issued, it was better to discharge them and start again.
For these reasons, I ordered that the subpoena to NAB be discharged, and the documents produced pursuant to that subpoena returned. I ordered that the subpoena to WBC, which had not yet been complied with, be set aside.
Thus I came to the evidentiary application in the plaintiffs' amended motion, and Ms Nelson's contention of abuse of process.
Counsel for Ms Nelson first submitted that the evidence in question would not be relevant to the issues to be determined on the trial of the proceedings. But that did not of itself make their production an abuse of process. It is well recognised that a subpoena may be issued for the purposes of proceedings on an interlocutory motion. Of its nature, such a motion may give rise to evidentiary issues which are not relevant in the principal proceedings.
An application for a freezing order is a classic instance of this. A court may, and often does, make a freezing order on an interim basis, or until further order. But the rationale for a freezing order is to protect the eventual process of execution on any judgment the plaintiff may obtain: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [41]. In principle, the order should usually be framed so as to remain in force (if the plaintiff obtains judgment) until execution has taken place.
Such an order is temporary, in the sense that once execution has taken place its operation will be spent. The court also retains power in the meantime to vary the order if the circumstances call for that. But subject to those qualifications a freezing order is final in the sense that the parties join issue on the plaintiff's entitlement to the order sought and the court determines that issue on the facts established by the evidence.
This becomes particularly clear when one considers a case where this Court is asked to make a freezing order in aid of proceedings in another court or tribunal. In such proceedings the Court is not asked to grant any relief to which the freezing order could be seen as ancillary. Such an application is closely analogous to an application for a permanent injunction.
More broadly, a freezing order application is self-contained. In this regard it is like any other application for relief which is not relief of a substantive nature on a conventional cause of action. An application for an order setting aside a statutory demand is an example, but there no doubt are many others.
For these reasons, there was no objection to the orders sought by the plaintiffs that the evidence in question would not necessarily be relevant at the main hearing.
As already noted, the plaintiffs' application sought the production of bank records (proposed orders 3 and 4), and, as well, an order requiring Ms Nelson to file and serve an affidavit (proposed order 2). The application was conducted before me as one which, in the first instance, sought leave to issue a subpoena for the bank records. If I were satisfied that there was a proper forensic purpose in taking that step, I would then go on to consider whether to require an affidavit as well.
An initial question arose concerning the affidavit from Mr David referred to in proposed order 3. It seemed to me that if the affidavit were to be relied upon in opposition to the freezing order application, the plaintiffs might be entitled to require the production of documents so as to test its accuracy. This would clearly be a legitimate forensic purpose. But when I raised this with counsel for Ms Nelson, he decided that he would not rely on the affidavit on the hearing of the freezing order application.
This meant that the issue between the parties reduced to whether, in the circumstances (including the circumstance that no evidence would be offered by Ms Nelson about what had happened to the proceeds of the properties), there was a legitimate forensic purpose for issuing a subpoena for Ms Nelson's bank records to find out what had happened to those proceeds
Counsel for the plaintiffs contended that such records would be relevant to establish a risk of dissipation of the proceeds of sale. That was said to be something which was "on the cards": see Portal Software International Ltd v Bodsworth [2005] NSWSC 1115 at [24]-[25].
If the plaintiffs could obtain evidence that some of the proceeds of the properties had been dissipated, that would indeed assist in showing that there was a risk of further dissipation, and thereby support the freezing order application. But as I will explain in more detail below, the mere sale of the properties was not dissipation in the relevant sense. The fact was that the plaintiffs' legal representatives did not know whether the proceeds had been dissipated or not.
In these circumstances, the evident purpose of the subpoenas was to find out what had happened, in the hope that evidence of dissipation would emerge. In my view, it was a classic case of a fishing expedition. In similar circumstances, Ierodiaconou AsJ of the Victorian Supreme Court reached the same conclusion: Suzhou Haishun Investment Management Co Ltd v Yue'e Zhao (Ruling No 2) [2018] VSC 144 at [175].
For these reasons, I declined to make the orders for production of the bank records sought by the plaintiffs. I declined to order the provision of an affidavit for the same reason. Having made this ruling, there was no reason to adjourn the hearing of the freezing order application.
It is convenient to deal with points (3) and (4) before returning to deal with points (1) and (2).
Failure to respond to plaintiffs' expert evidence: The amount of time and money which the parties have invested in arguing about the plaintiffs' expert evidence is surprising. This is especially so on the plaintiffs' side. To the extent that the claim depends upon payments, or liabilities, to contractors, it can be established simply by proving those payments were made and those liabilities were incurred. Expert evidence would only be necessary for the quantum meruit part of the claim, namely the value of the goods supplied by Overlook (if that is in issue) and of the management services provided by Mr Moustapha. It is not easy to see why this should have taken so long to obtain and serve.
Nor is it easy to see why the expert report apparently set out to value the whole of the building work done on the Lindfield property, or why the plaintiffs have given so much prominence in this application to that figure. On the face of it, there will have to be deductions, at least, for the costs in fact paid by Ms Nelson and for the management services provided before the alleged agreement in October, at a time when both parties agree the services were being provided gratuitously. It is not clear from the report what the quantum of these deductions would be. There are no relevant particulars in the statement of claim.
In the circumstances I was certainly not prepared to infer that no expert evidence has been filed on behalf of Ms Nelson because she has no answer to the claim. Perhaps her advisors were content to defend the claim on the liability grounds they have identified. Perhaps they thought the plaintiffs' report addresses the wrong question or had deficiencies which could be exposed by cross-examination. In my view this point did not substantially advance the plaintiffs' case on the present application.
Earlier correspondence concerning disposal of assets: The correspondence in question took place between February and April 2018. This was about a year after the proceedings had been commenced and was about six months before the plaintiffs' first application for freezing orders.
The correspondence began with a letter from the plaintiffs' solicitors on 16 February. The letter stated that it was written "to ascertain that any judgment … will not be rendered nugatory by any action of your client". It asked a series of questions about Ms Nelson's financial position. One question asked Ms Nelson to identify what she still retained from the proceeds of the Lindfield property. The letter stated that failure to answer the questions could trigger an application to the Court.
After a follow-up on 3 March, Mr David replied on 22 March:
Our client has no intention whatsoever to dissipate her assets or otherwise diminish or frustrate the prospects of your client obtaining judgment. Her asset position has not materially changed since the commencement of these proceedings.
Beyond that, your clients have no entitlement to the information sought in your letter and we will not be providing such information. There is no threat or danger of dissipation/frustration, your clients' pleaded claim to be entitled to a constructive trust are fundamentally flawed and have insufficient prospects of success, and your clients have delayed in bringing the foreshadowed application.
The plaintiffs' solicitors responded by issuing a subpoena to WBC. When Mr David objected, they wrote on 13 April repeating their request for information about what Ms Nelson still retained from the proceeds of the Lindfield property. The letter suggested as an alternative that Ms Nelson undertake "not to dispose or reduce those proceeds" [sic] without the plaintiffs' consent.
On 17 April Mr David replied:
Our client is under no obligation to provide you with any financial information or undertaking as to her assets, and she will not be doing so. The reason for this is that there is no basis for a freezing order in this case. Your clients have no evidence, and our client has given no indication, suggesting that there is any danger that our client would be unable to satisfy a judgment as a result of removing, disposing or otherwise adversely dealing with assets.
We do however have instructions to confirm that our client has not, and has no intention to, remove, dispose or otherwise adversely deal with her assets so as to frustrate any judgment to be obtained by your client.
Counsel for the plaintiffs characterised the statements I have quoted as indicating that Ms Nelson did not intend to dispose of her assets. Counsel argued that Ms Nelson's subsequent conduct in disposing of the Telegraph Road and Bandalong Avenue properties contradicted those statements.
In my view the letters clearly spoke of Ms Nelson's then current intentions. The plaintiffs did not in April 2018 press their request for an undertaking, and I did not think that the statements in the letters amounted to giving such an undertaking. In fact Mr David made it unmistakeably clear that he was not doing so.
It was true that Mr David said that Ms Nelson did not intend to "dispose" of her assets. But it was quite clear from the context that Mr David was saying that Ms Nelson had no intention of trying to frustrate the future execution of any judgment the Court might give, whether by the disposal of assets or otherwise.
On a fair reading the letters could not be interpreted as saying that Ms Nelson would never sell the properties. They were written two years before Ms Nelson sold them. In my view, they were of little or no weight in establishing a present risk of dissipation of assets.
Recent sale of Telegraph Road and Bandalong Avenue properties: The first point to make is that the usual form of freezing order requires the defendant to maintain net assets in the jurisdiction of at least a specified figure. It does not prevent the defendant from selling assets so long as the specified level of net assets is maintained. Had the plaintiffs obtained a freezing order against Ms Nelson in November 2018, the recent sales would not of themselves have breached that order. Indeed the plaintiffs would not in the usual course even have been entitled to notice of the sales.
What this underlines is that the sale by Ms Nelson of her properties was not, of itself, a dissipation of assets in the relevant sense. On its own, all the sale did was convert the asset into a different form, namely cash. Converting real estate into money may have made later dissipation of the equity easier, but that is all it did. The real question was how likely that it was that the conversion of Ms Nelson's real estate into cash was a forerunner to some further step to dissipate assets.
Historically, the English practice of the 1970s from which freezing orders developed was initially directed at defendants outside England and prevented the transfer of assets out of the jurisdiction. Over time, freezing orders were extended to defendants in England and to the dissipation of assets within the jurisdiction: Biscoe, Freezing and Search Orders: Mareva and Anton Piller Orders (LexisNexis Butterworths, 2nd ed, 2008) at [2.12]-[2.16].
This development was logical, in that all that is required to defeat a prospective judgment is to take action to ensure that assets which might have been available to meet it are not available any more. In theory there is no difference between a foreign defendant removing assets from the jurisdiction and a local defendant dissipating them within the jurisdiction. But there are important practical differences, especially for individuals.
Those behind a corporate defendant may often with relative ease transfer its assets to another entity, within or outside the jurisdiction, but yet retain control of those assets. But it is not nearly so easy for an individual defendant who lives, and intends to continue to live, in the jurisdiction. For such a defendant, dissipating assets would usually require either giving them away or converting them into money and consuming the proceeds. The process will generally make it impossible to reclaim them later.
For these reasons, it was easy to overstate the risk of dissipation in this case. In Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 the defendant was a former employee of the plaintiff who had allegedly defrauded it. The plaintiff's evidence of fraud was strong. The trial judge granted a freezing order on the ground that the alleged fraud itself established a sufficient risk of dissipation. The order was upheld by the Court of Appeal.
In that case, there would be a clear temptation for a defendant who had little or nothing to lose to dissipate his assets. But the present case was different. While the claim against Ms Nelson was arguable, it was far from overwhelming, and even if it succeeded it would not necessarily wipe her out financially. Why would she put her assets beyond the Court's reach just to avoid the possibility of losing them to a judgment when, by doing so, she would deprive herself of those assets if she succeeds in her defence?
In these circumstances, the sale of the development property at Telegraph Road was hardly surprising. The property was bought by Ms Nelson on the basis that she was going to renovate it, and the subsequent sale is exactly what one would expect. The sale of the Bandalong Avenue property was not so predictable. But plenty of people sell their homes and rent for short or long term before buying another one.
There was no suggestion that Ms Nelson had any intention, or indeed any realistic ability, to re-locate overseas. In my opinion, the fact that, in the fifth year of the litigation, Ms Nelson sold her two properties said much more about the plaintiffs' delay in prosecuting their claim than it did about Ms Nelson's intentions in the event she ultimately has to meet a judgment in their favour.
Refusal to disclose information about proceeds of sales: Counsel for the plaintiffs submitted that Ms Nelson's refusal to provide information about what the net proceeds of the sales had been, and what she had done with those proceeds, betrayed a concern that disclosure of the information would not assist her in defending the application. But I thought that this was too simplistic.
In circumstances such as the present, Ms Nelson's reluctance to answer the plaintiffs' questions may be understandable for other reasons. Information about Ms Nelson's asset and liability position is not something which the plaintiffs would normally have. The information may reveal financial pressures or opportunities which could affect Ms Nelson's ability or willingness to continue the litigation. I did not think the Court should regard Ms Nelson's refusal to give the plaintiffs that advantage as necessarily being suspicious.
If there had been other evidence suggesting dissipation of assets by Ms Nelson, her refusal to answer the plaintiffs' questions about the proceeds might have supported the inference that dissipation had not taken place. But in my view, there was no such evidence, and the refusal was neutral.
Balancing factors and conclusion: Counsel for the plaintiffs submitted that the balance of convenience favoured the application. Counsel submitted that the plaintiffs' interest in enforcing any judgment they might obtain should be protected. On the other hand, so counsel contended, there was no prejudice to Ms Nelson in making the order. Counsel submitted that the order in effect reflected the status quo and observed that Ms Nelson could always apply for a variation if she wished.
In my view, these submissions rest on a misconception about the nature of the power exercised by a court in a freezing application of this type. The court is not concerned to balance the interests between the litigants. The purpose of a freezing order is to protect the Court's processes from being frustrated by the defendant. The order may incidentally benefit the plaintiff but that is not its purpose.
At one point in her submissions counsel stated that Mr Moustapha was only "seeking to ensure that in progressing the litigation [that he was] not progressing something that will be fruitless". But this submission only illustrated the misconception behind the application. The proposition that a freezing order is not a species of anticipatory execution has been established at High Court level since Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 619 and the profession has been reminded of it time and again since that case was decided: see for example Sturesteps v Khoury [2019] NSWSC 943 at [24] per Pembroke J.
Taking all of the relevant factors together, I was not satisfied that on the evidence there was sufficient risk of dissipation of Ms Nelson's assets to justify a freezing order. I therefore refused the application and dismissed the plaintiffs' motion.
For these reasons, I indicated to the parties that I would make an order that the plaintiffs pay a lump sum to Ms Nelson on account of the costs awarded on these applications. This is not a fixed sum order under Civil Procedure Act 2005 (NSW), s 98(4); the costs remain to be determined by assessment. If they ultimately exceed the sum fixed then the plaintiffs will have to pay the difference; if they are less than the sum fixed, the plaintiffs will get a refund or a credit. But ordering a payment on account will have the merit of giving Ms Nelson some form of reimbursement now for the costs of applications which I have decided should not have been brought.
The parties have now filed evidence and submissions on the quantum of the payment which should be ordered. In his affidavit, Mr David recorded the total amount billed to Ms Nelson for work on the two motions as having been $24,700. This is made up of $12,800 in solicitor's fees, $11,500 in counsel's fees and $400 in filing fees.
Counsel for Ms Nelson submitted that I should fix the amount of the payment at 100% of counsel's fees and filing fees, plus 80% of solicitor's fees. This would amount to $22,200. Counsel for the plaintiffs submitted that the better figure would be 50% of the total, being $12,400.
In determining the amount payable under a fixed sum costs order, the court uses a broad brush. Because I am only fixing an amount to be paid on account of costs, the brush can be even broader. Furthermore, there is no need to discount the figure below the costs likely to be recoverable under the usual assessment process: cf Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640 at [57]. Counsel accepted that the fixing of the figure was very much a matter for judgment. I have decided to make it $20,000.