Solicitors:
William James Law Pty Ltd (Plaintiff)
R E Barros & Company (First, Third, Fourth and Sixth Defendants)
JAS Legal (Second and Fifth Defendants)
File Number(s): 2018/71774
[2]
Judgment (ex tempore - revised 13 july 2018)
HIS HONOUR: The plaintiffs have obtained freezing orders against the defendants. The orders relate to what are alleged to be very substantial defalcations committed by the first defendant, over a period of perhaps 11 years, in the course of his employment as chief financial officer of the Pace group of companies of which the plaintiffs form part. The factual background is set out in the reasons of Ball J (who granted the freezing orders) given on 13 March 2018. [1] There is some additional background in reasons that I gave, in considering the first defendant's application for a stay, on 20 April 2018. [2] I shall not repeat that background.
I am concerned today with the plaintiffs' notice of motion seeking orders pursuant to UCPR rule 25.12 that the first, third, fourth, fifth and sixth defendants make affidavits disclosing, in substance, amounts paid by them for legal expenses (and to be paid in the future) and the sources of those payments. Rule 25.12 reads as follows:
Ancillary order
25.12 ANCILLARY ORDER
(cf Federal Court Rules Order 25A, rule 3)
(1) The court may make an order (an "ancillary order") ancillary to a freezing order or prospective freezing order as the court considers appropriate.
(2) Without limiting the generality of subrule (1), an ancillary order may be made for either or both of the following purposes:
(a) eliciting information relating to assets relevant to the freezing order or prospective freezing order,
(b) determining whether the freezing order should be made.
For the orders sought to be made, the Court must be satisfied of a number of things. The first is that the orders are (in this case) ancillary to the freezing orders already made. The second (again in the circumstances of this case) is that the orders may be directed to eliciting information that relates to assets that are relevant to the freezing orders already made. The third, and more general, requirement is that the orders may be justified as necessary for the just, quick and cheap disposition of the real issues in dispute (see section 56 and following of the Civil Procedure Act 2005 (NSW)).
The plaintiffs' case is that although the first defendant has, they say on his own admission, stolen up to $9 million of the plaintiffs' money, and has (although I am not sure his admissions extend so far) effectively disbursed that out through the other defendants, they have been thwarted in their attempts to find assets into which the money has been transmitted. It is the plaintiffs' case that if any of the defendants hold money that represents the proceeds of defalcations, then that money is theirs. The plaintiffs say that the money should not be used for the payment of the defendants' legal expenses, although whether or not it should be so used is a matter for debate further down the track.
In those circumstances, I am comfortably satisfied that the very wide relational test set out in r 25.12(2)(a) has been satisfied. On the plaintiffs' case, the information relates to assets that are relevant to the freezing order because it will help, or may help, the plaintiffs to track down the assets that they say have been stolen from them, or assets into which those stolen moneys have been transmuted.
Turning to s 56: it is necessary to bear in mind that the ultimate aim of the plaintiffs, in these civil proceedings, is to recover as much as they can of what they say has been stolen from them. That is the ultimate end, to which the Court must find the just, quick and cheap path. It seems to me that identifying assets that could be the subject of the claim, and that could be described as worthy of protection, is entirely consistent with s 56. Accordingly, although I accept that compliance with the orders sought will involve the defendants in expense, I think the expense is justifiable in terms of the end that I have described. At present, I see no s 60 "proportionality" issue.
Mr Condon of Senior Counsel, who appeared for the first, third, fourth and sixth defendants, raised a concern, which I have to say may or may not be justified, that the orders sought might expose at least some of the defendants to a liability for contempt of Court. If that were so, Mr Condon submitted, his clients would be entitled to invoke the privilege in respect of self-incrimination. For present purposes, that directs attention to s 128A of the Evidence Act 1995 (NSW). I am satisfied that if orders are to be made, they should provide for the defendants to invoke that privilege and to take the steps necessary to claim it.
It is apparent that if a s 128A course of action is required, that will involve further expense.
One needs to balance all those matters (and it seems to me that the evidentiary consequences should form part of the balancing exercise) in light of the caution that has often been expressed as to the drastic nature of (as it is now called) a freezing order, and that a freezing order is not one that should be granted lightly. Mr Condon referred, properly, to the plurality in Cardile v LED Builders Pty Limited [3] at [51]. Their Honours referred with approval to the decision of the Court of Appeal of this State in Frigo v Culhaci [4] . It is not necessary to set out either [51] of Cardile or the relevant passage from Frigo. It is adequately encapsulated in what I have just said.
This is a case in which the freezing orders have been made. There is no application to set them aside. The orders are sought in relation to - ancillary to - those freezing orders. Thus, to an extent, the need for caution has been considered and dealt with already, both by Ball J in making the orders and, by a sidewind, by me in dealing with the stay application. Nonetheless, the Court must be certain, so far as it can, that the making of the orders sought will not unduly inconvenience the defendants in terms of cost, and will not expose them to the risk of self-incrimination.
I am of the opinion, for the reasons given, that the balancing exercise, taking into account the residual need for caution, justifies the making of the orders sought. However, so it seems to me, those orders should be made together with what is in effect the s 128A rider. Rather than attempt to draft that on the run, I propose to direct the parties to bring in short minutes of order to give effect to the conclusions that I have just expressed. I expect those short minutes of order to follow order 1 of the draft orders provided by Mr Hynes of Counsel, for the plaintiffs, extending the time for compliance to 30 July 2018 and deleting, in draft orders 1B(ii) and 1D(ii) the words "or intend to be made".
That leaves the question of costs. The parties have not put submissions on that. My present view is that the general position, in respect of interlocutory applications, that is found in r 42.7 ought apply. That is to say, my present view is that costs ought be reserved. I say that, in part, because the making of the orders may prove to add very little to the store of human knowledge, in which case, retrospectively, the application might seem to have been unjustified.
[3]
Endnotes
MWP Transport v Kent [2018] NSWSC 300.
MWP Transport v Kent [2018] NSWSC 524.
(1999) 198 CLR 380.
[1998] NSWCA 88.
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Decision last updated: 19 July 2018