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[2024] VSC 495
General information, not legal advice.
Supreme Court of Victoria
2024-08-21
Connock J
Original judgment source is linked above.
PRACTICE AND PROCEDURE - Freezing order - Good arguable case test - Third party freezing order - Applicable principles - Different to interlocutory injunction - Supreme Court (General Civil Procedure) Rules 2015 (Vic) ord 37A - Property Law Act 1958 (Vic) s 172 - Property Law Act 1958 (Qld) s 228 - Alienation of property with intent to defraud creditors - Inherent jurisdiction - Ancillary orders general principles - Personal Property Securities Act 2009 (Cth) ss 19, 20, 50, 296, 297, 298, 299 - Constructive knowledge - Taking free from a security interest - Onus of proof in proceedings under the (Cth).
For the First and Second Defendants / Plaintiffs by counterclaim
Freezing Orders - Principles and Observations 42
1 By its summons filed 8 July 2024, the plaintiff sought relief including: joining Josephine Woodruff as the third defendant; joining Point Bay Developments Pty Ltd (ACN 627 498 944) (PB Developments) as the fourth defendant; granting leave to file and serve an amended statement of claim; freezing and ancillary orders against Ms Woodruff; freezing and ancillary orders against PB Developments; and ancillary orders against the first defendant (Mr Pappas Senior) and the second defendant (Statemark).
2 The applications were originally proposed to be made ex parte but, following communication with the Court, the applications were made on notice to each of the defendants, Ms Woodruff and PB Developments. At an urgent hearing held before me on 16 July 2024 for the purpose of addressing an application for interim orders:
The defendants, Ms Woodruff, and PB Developments were each separately represented by counsel and senior counsel respectively.
Ms Woodruff was joined to the proceeding as the third defendant.
The third defendant, by her counsel, undertook that she would not in any way deal with, encumber, transfer or diminish the value of the 100 shares registered in her name in the capital of Point Bay Developments Pty Ltd (PB Shares) until the final hearing and determination of the plaintiff's summons filed 8 July 2024 (Summons) or until further order of the Court.
In respect of the undertaking referred to in the preceding sub-paragraph, the plaintiff by its counsel gave the usual undertaking as to damages.
Following some exchanges with the Bench and a short adjournment to allow the plaintiff to further consider its position, the plaintiff informed the Court that it did not press its application for joinder of PB Developments or an interim freezing order against PB Developments at that time. This was without prejudice to the plaintiff's right to press the application on an interlocutory basis.
Timetabling directions were made to facilitate the hearing of the applications the subject of the Summons on 21 August 2024.
Leave will be granted to the plaintiff to file and serve a further amended statement of claim substantially in the form of the proposed further amended statement of claim provided to the Court on 8 August 2024 (Proposed FASOC).
Subject to the plaintiff giving the usual undertaking as to damages, an order should be made restraining Ms Woodruff until further order from disposing of, encumbering, transferring, or diminishing the value of 70 of the PB Shares.
No ancillary orders should be made against Ms Woodruff, Mr Pappas Senior or Statemark.
It is not necessary to address the applications against PB Developments because they were not pressed and were disposed of by consent pursuant to orders made by the Court on 13 August 2024.
Directions and timetabling orders will be made to facilitate the further progress of the proceeding and liberty to apply will be reserved.
4 The plaintiff relied upon: an affidavit of its director, Michael Czarny, affirmed 3 July 2024 (Czarny Affidavit)[1] and an affidavit of Howard Chait, the plaintiff's solicitor, sworn 15 July 2024 (Chait Affidavit). The plaintiff also relied upon revised written submissions dated 6 August 2024.
5 The first and second defendants informed the Court that they did not propose to take any active role in the applications the subject of the Summons, although they were represented by counsel and solicitors at the hearing.[2]
6 Ms Woodruff relied upon her affidavit sworn 30 July 2024, an affidavit of an accountant, Graeme Gillard, who, over many years, has carried out work for Ms Woodruff's domestic partner, Mr Pappas Senior,[3] an affidavit of Mr Pappas Senior sworn 1 August 2024, and an affidavit of her solicitor, Mr Pharmacis, sworn 13 August 2024. Ms Woodruff also relied upon written submissions dated 13 August 2024.
7 The proposed fourth defendant, PB Developments, did not file any affidavit material or appear at the hearing, and the plaintiff's application made by the Summons against PB Developments was dismissed by consent by orders made on 13 August 2024.
8 The background is evident from the affidavit material relied on, and the pleadings[4] and submissions, which I have read and considered. On this application, the relevant background was said to include the following.
9 On about 12 November 2018 the plaintiff entered into a loan agreement with Austpro Management Services Group Pty Ltd (ACN 126 790 323) (Austpro) as borrower (Loan Agreement), and Mr Pappas Senior and Statemark as guarantors (Guarantors). The Loan Agreement provided for financial accommodation to be made available to Austpro up to the principal amount of $18 million (Loan), the purpose of which was to provide funding to Austpro to construct and develop an apartment building located at 21 Holman Street, Bunbury, Western Australia 6230 known as the Aspire Apartments (Holman Property or Aspire Apartments). The term of the Loan Agreement is said to have expired on 12 January 2020.
10 As security for all moneys owed under the Loan Agreement the plaintiff was provided with a first registered mortgage over the Holman Property (Mortgage) and a written guarantee and indemnity from each of Mr Pappas Senior and Statemark (Guarantee). The Guarantee was recorded in a deed of guarantee dated 12 November 2018 and executed by each of Mr Pappas Senior and Statemark (Deed of Guarantee).
11 I have read and considered the terms of the Loan Agreement and the Deed of Guarantee, to which I refer but will not set out in detail in these reasons. That said, given the submissions made and the matters addressed later in these reasons, it is convenient to note the following matters regarding the Deed of Guarantee:
The parties are the plaintiff as trustee for the Holman Street Bunbury Unit Trust as Lender, and Mr Pappas Senior and Statemark (in its own capacity and as trustee of the Pappas Family Trust) as Guarantors.
The Guarantor's obligations are addressed in clause 2 and include the due and punctual payment by Austpro of all monies owing to the plaintiff and due and punctual performance of the Borrower's Obligations (as defined).
Clause 3.1 records that the Guarantor's Obligations (as defined) are principal obligations.
Clause 3.6 provides that the Lender is under no obligation to give notice of any default by Austpro.
Clause 3.11 provides that if the Guarantor provides any security in support of this Guarantee, the Lender may retain that security until seven months after the Borrower's Obligations and the Guarantor's Obligations have both been fully satisfied.
Clause 9 set out extensive undertakings by the Guarantors, including undertakings:
(a) not to create or permit to exist any security over any of their property other than a security specifically permitted by the Lender;
(b) not to dispose of, declare a trust over, or otherwise create an interest in all or a substantial part of their property (either in one or several transactions, whether or not related) over any period of 12 consecutive months except:
iii. at arm's length and for full value in a transaction that is entered into in the ordinary course of its ordinary business;_
- The charge over the property of the Guarantor is in clause 13, which provides as follows:
In support of the Guarantor's Obligations under this Guarantee in an Event of Default each Guarantor:
(a) charges in favour of the Lender all of its right, title and interest in any personal property and any freehold or leasehold property (or part thereof) in the States and Territories of Australia which it has at the time of entering into this Guarantee or acquires after entering into this Guarantee; and
(b) agrees to do all things reasonably required and to execute all documents which are necessary to convert the charge into a registered mortgage or registered security interest.
- Clause 14 contains specific provisions relating to trusts and reads in part as follows:
Clause 14 applies where the Guarantor has entered into this Guarantee as trustee of a trust (whether or not disclosed to the Lender) (called the "Trust"); ...
14.3 Specific prohibitions relating to the Trust
The Guarantor must not without the Lender's prior written consent:
(a) cease to be the trustee of the Trust nor will it do anything which could cause or enable its removal, nor will it retire, as trustee of the Trust;
(b) cause or permit the Trust to be determined or a vesting date to be appointed;
(c) do or permit anything which adversely affects the Guarantor's right of indemnity against the Trust assets;
(d) in any way vary the Trust Deed or permit it to be varied;
(e) resettle, set aside, distribute or dispose of any Trust assets;
(f) delegate any powers of the Guarantor as trustee of the Trust or exercise any power of appointment; or
(g) if the Trust is a unit trust, issue, redeem or transfer any units in the Trust.
The Guarantor must at the request of the Lender provide full financial details of the Trust, including its ABN.
The Guarantor irrevocably and unconditionally grants to the Lender direct access to the Trust assets to recover any money not paid on time under this Guarantee or any other Transaction Document. The Guarantor acknowledges and agrees that its personal property includes the Guarantor's right of indemnity from the Trust.
- Clause 16.5 addresses the Personal Property Securities Act 2009 (Cth) (PPSA) and is in the following terms:
Contracting out of the PPSA
To the extent that Chapter 4 of the PPSA would otherwise apply to an enforcement by the Lender of any security interest under this Guarantee, each party agrees that the following provisions of the PPSA do not apply:
(a) to the extent that section 115(1) of the PPSA allows them to be excluded: sections 95, 118, 121(4), 125, 130, 132(3)(d), 132(4), 135, 138B(4), 142 and 143; and
(b) in addition, to the extent that section 115(7) of the PPSA allows them to be excluded: sections 127, 129(2) and (3), 132, 133(1)(b) (insofar as it relates to a security interest of the Lender), (134(2), 135, 136(3), 136(4), 136(5) and 137.
12 Following communications between the plaintiff, Austpro and Mr Pappas Senior in late December 2019 regarding the prospect of some partial repayments and further advances, which did not come to fruition, the plaintiff issued a notice of default on 21 January 2020 demanding from Austpro as borrower, and Mr Pappas Senior and Statemark as Guarantors, the payment of all moneys then due and owing under the Loan Agreement and Guarantee (First Default Notice). Austpro, Mr Pappas Senior and Statemark did not pay any of the moneys claimed under the First Default Notice.
13 On 7 February 2020 the plaintiff issued a further written notice of default to each of Austpro, Mr Pappas Senior and Statemark (Second Default Notice) notifying them of the default under the terms of the Mortgage and the Loan Agreement, and demanding that they remedy the default by paying to the plaintiff the sum then secured by the Mortgage, being $18,290,878.99 within seven days of the Second Default Notice. No payment was made in respect of the Second Default Notice.
14 In early 2020 communications took place between Austpro and the builder (Perkins) undertaking the Aspire Apartments development regarding funding, payment of progress claims, and related matters. A dispute between Austpro and Perkins occurred in relation to payment of progress claims, and on 19 May 2020 Perkins issued to Austpro a notice notifying Austpro that it had suspended the works on the Aspire Apartments.
15 On 21 May 2020 the plaintiff took possession of the Holman Property as mortgagee and served a notice of entry into possession pursuant to s 111 of the Transfer of Land Act 1893 (WA) on Austpro. The plaintiff then proceeded to realise the Holman Property.
16 On 23 December 2022 the plaintiff commenced this proceeding against the Guarantors seeking to recover the alleged shortfall from the sale of the Holman Property. Mr Czarny deposed that as at 14 June 2024 the amount owing under the Loan Agreement and the Guarantee was $16,007,183.79, noting also that this amount continues to accrue interest and fees.
17 The plaintiff alleges that Statemark entered into the Deed of Guarantee in its own capacity and as trustee of the Pappas Family Trust, which is the subject of the Pappas Family Trust Deed (Family Trust Deed). The primary beneficiaries under the Family Trust Deed are named as Christopher Pappas, Isabella Pappas and Natasha Pappas. The secondary beneficiaries of the Pappas Family Trust include the parents, spouses and children of the primary beneficiaries. Mr Czarny said that he understood from his dealings in relation to the Loan Agreement that Isabella Pappas and Natasha Pappas are the children of Mr Pappas Senior and Ms Woodruff. He also understands that Ms Woodruff and Mr Pappas Senior have a son who is also named Christopher Pappas (Mr Pappas Junior). He said he did not know whether the Christopher Pappas listed as a primary beneficiary of the Family Trust Deed was Mr Pappas Senior or Mr Pappas Junior.
18 The Deed of Guarantee was executed on behalf of Statemark by John Anthony Woodruff (John Woodruff). An Australian Securities and Investment Commission (ASIC) search as at 12 November 2018, being the date that the Deed of Guarantee was executed, recorded that John Woodruff was the sole director of Statemark. It also recorded that he was a shareholder of Statemark, holding one of the two issued shares in Statemark. Mr Czarny said that he understood that John Woodruff was Ms Woodruff's brother, and that he passed away on about 12 March 2021. Mr Czarny further deposed that: John Woodruff was removed or ceased to be a director of Statemark from 25 March 2021; Natasha Pappas was appointed as the sole director of Statemark on 25 March 2021; and that John Woodruff remains registered as one of the two shareholders of Statemark.
19 PB Developments was previously named Austpro Australia Pty Ltd but changed its named to Point Bay Developments Pty Ltd on 18 June 2020. With respect to PB Developments, Mr Czarny's evidence included the following:
In the weeks prior to 3 July 2024 Mr Czarny had obtained and reviewed all of the documents lodged with ASIC in respect of PB Developments as recorded on the PB Developments ASIC search, which he referred to and exhibited (PB Developments ASIC Documents).
Upon reviewing the PB Developments ASIC Documents Mr Czarny discovered that Statemark had held shares in PB Developments and that, over various transactions, had transferred its shares in PB Developments to Ms Woodruff without the plaintiff's consent, knowledge or approval. The relevant steps and transactions were summarised by Mr Czarny as follows:[5]
PB Developments was registered with ASIC under the name Austpro Australia Pty Ltd. Upon its registration with ASIC PB Developments had:
i) Statemark was the registered holder of 51 shares; and
ii) Xiaoye Du is the registered holder of 49 shares.
(b) PB Developments had two directors, Pappas and Xiaoye Du.
Manda entered into the Loan Agreement and the Deed of Guarantee with Austpro, Statemark and Pappas.
The sole director of Statemark as at 12 November 2018 was John.
The 49 shares in PB Developments held by Xiaoye Du were transferred to Statemark such that Statemark become the sole shareholder of PB Developments holding all 100 shares. Xiaoye Du resigned as a director of Point Bay, leaving Pappas as the sole director.
Austpro wrote to Manda requesting funding for variations on the Aspire Developments worth $300,000 on the basis that Austpro would pay $150,000 into a retention account set up pursuant to the Loan Agreement.
Statemark transferred 70 shares in PB Developments to Josephine (in her then name Josie Pappas) such that the then shareholding in PB Developments was:
Austpro/Pappas wrote to Manda requesting a four-month extension to the term of the Loan Agreement and offering to pay $1,500,000 into the retention account.
I emailed Pappas requesting that Austpro/he deposit the $1,500,000 into the retention account and pay one month's interest so that Manda could consider the request for an extension and the provision of further funding.
Manda served the First Default Notice on each of the Borrower, Pappas and Statemark.
Manda served the Second Default Notice to each of Austpro, Pappas and Statemark.
Josephine transferred 70 shares in PB Developments to Pappas such that the shareholding become:
On the same day, Pappas transferred his 70 shares in PB Developments back to Josephine such that the shareholding become:
I forwarded an email to Pappas attaching progress claims 16 and 17 from Perkins.
I emailed Pappas noting, amongst other things, that Austpro and Pappas had not paid the $1,500,000 into the retention account and that Manda reserved its right to enter into possession of the Holman Property as mortgage [sic] in possession.
Statemark transferred its 30 shares in PB Developments to Josephine such that Josephine held all 100 shares in Point Bay.
Manda took possession of the Holman Property and issued the Notice of Re-entry.
PB Developments changed its name from Austpro Australia Pty Ltd to Point Bay Developments Pty Ltd.
Josie Pappas changed her name from Jossie [sic] Pappas to Josephine Woodruff.
Natasha Pappas was appointed as a director of Statemark.
John Anthony Woodruff ceased to [be] a director of Statemark.
20 Mr Czarny stated that the plaintiff had not taken any steps in relation to Statemark's shares in PB Developments to date because he was not alive to the matters referred to in the table above. He said that the focus in 2020 and 2021 had been to complete and realise the Holman Property as the principal security for the Loan. He said that he only became aware of the dealings in the PB Developments shares in the last few weeks, at which point he instructed the plaintiff's lawyers to make the application for freezing orders. Mr Czarny said that had he known about the existence of Statemark's shares in PB Developments at an earlier time then he would have caused the plaintiff to apply for freezing orders earlier than he did.
21 In paragraphs 46 to 57 of the Czarny Affidavit Mr Czarny set out details of what he understood to be the position regarding the assets of PB Developments, to which I refer but will not set out. Among other things, Mr Czarny refers to: PB Developments becoming the registered owner of land in Mackay, Queensland (Mackay Land); the Mackay Land being a largely vacant development site; an email from Mr Pappas Senior sent on 23 August 2018 to the plaintiff regarding Mr Pappas Senior's involvement in the Mackay Land project; the Mackay Land project being estimated to be valued at $80 million; the project manager for the Mackay Land development being noted as being the borrower under the Loan Agreement, Austpro; two mortgages being registered on the title to the Mackay Land in favour of Global Capital Property Fund Limited (GCP); Mr Pappas Senior being one of three directors of GCP, having been appointed on 15 August 2019; Natasha Pappas being the company secretary of GCP; requests for funding having previously been made to the plaintiff in November 2023 by a broker in relation to the Mackay Land project, and in respect of a proposed loan of $12,500,000; a development valuation report in relation to the Mackay Land; and related matters.
22 Mr Czarny deposed that his understanding is that the Mackay Land was subdivided into three lots on or about 11 August 2023, as follows:
Lot 1001 on Survey Plan 338618, with a title reference of 51327469 and with the registered proprietor being PB Developments.
Lot 1002 on Survey Plan 338618, with a title reference of 51327470 and with the registered proprietor being PB Developments.
Lot 1003 on Survey Plan 338618, with a title reference of 51327471 and with the registered proprietor being PB Developments.
23 GCP's website, which was reviewed by Mr Czarny, was said to have included the following statements regarding what is understood by Mr Czarny to be the Mackay Land project:[6]
On 8 March 2024, Point Bay Developments Pty Ltd settled a sale of the majority of the project land and repaid the Loan and Interest owing to GCPF.
In the same transaction PBD also paid off the amount owing on the JV investment with GCPF, leaving a balance owing of approximately $8,000,000 which as [sic] accruing interest under the JV agreement at 17%.
The developer has kept ownership of Stage 1 & 2A. The marketing team is concentrating on social media advertising to expand the reach through targeted campaigns on platforms like Facebook and Google. There is also an emphasis on strengthening relationships with local real estate partners through frequent communication to ensure consistent and effective results.
The sale of the majority of the land has resulted in a positive impact on all GCPF investors. This success not only reflects the strength of the project but also demonstrates the professionalism and expertise of the development team involved.
The positive impact of the Mackay Project has opens [sic] doors to new opportunities for growth and expansion for GCPF.
24 Title searches obtained by Mr Czarny on 26 June 2024 record Lot 1002 and Lot 1003 of the Mackay Land having been transferred to Pappy View Pty Ltd, with Lot 1001 remaining registered in the name of PB Developments.
25 Mr Czarny said that, except for the matters referred to in his affidavit, he did not have exact information as to what the current status of the Mackay Land was, or what other or further dealings there may have been with the land.
26 With respect to the assets of Mr Pappas Senior, an assets statement was said to have been provided to the plaintiff on 10 November 2023. This was in the form of an unsigned assets and liabilities statement for Mr Pappas Senior (Mr Pappas Senior Assets Statement) sent by email to the plaintiff on 10 November 2023 in connection with the broker's exploration of funding in relation to the Mackay Land development. Mr Czarny noted that in this statement Mr Pappas Senior had identified a number of assets which he is said to own, including a home worth $4.8 million, an investment property worth $65 million, and shares worth $2 million. Mr Czarny deposed that he did not know what the assets in the Mr Pappas Senior Assets Statement are, but noted that, in accordance with the terms of the Guarantee, Mr Pappas Senior had charged his assets to the plaintiff.
He was not aware of Mr Pappas Senior having any real assets available to meet any judgment that may be awarded in the proceeding.
The Mr Pappas Senior Assets Statement gives him reason to be concerned that Mr Pappas Senior has assets which would be subject to the charge under the Guarantee (Guarantee Charge) but which the plaintiff is not aware of, and which Mr Pappas Senior has not disclosed to the plaintiff.
When the plaintiff first commenced this proceeding it brought a claim pursuant to the charge under the Guarantee in respect of a property in Mermaid Waters, Queensland (Mermaid Waters Property), the registered proprietor of which was Christopher John Pappas.
The Mermaid Waters Property is the registered office for Statemark.
On 30 January 2023 the solicitors for Mr Pappas Senior in this proceeding informed the plaintiff's solicitors that the Mermaid Waters Property was owned by Mr Pappas Junior, and that Mr Pappas Senior had no interest in the Mermaid Waters Property. This resulted in the plaintiff amending its claim in this proceeding to delete any claims to the Mermaid Waters Property.
The shares in PB Developments that were owned by Statemark are subject to the Guarantee Charge and at no time has the plaintiff consented to or released the charge over the PB Developments shares.
He was not aware of Statemark having any other assets other than the transferred shares in PB Developments.
The value of the shares in PB Developments is referrable to the value of PB Developments itself and, more specifically, the Mackay Land and the Mackay Land project.
Mr Czarny was concerned that PB Developments would deal with its assets so as to dissipate the value of the PB Developments shares, and in that way prevent the plaintiff from realising the value of its charge over the PB Developments shares previously held by Statemark.
The plaintiff now seeks to enforce its security over the shares Statemark held in PB Developments and for this purpose seeks leave to join Ms Woodruff and PB Developments on the basis that:
(a) Ms Woodruff holds the shares subject to the Guarantee Charge;
(b) the PB Developments share transfers were undertaken for the purpose of ensuring that the plaintiff could not enforce the Guarantee Charge over the shares; and/or
(c) PB Developments is bound by and complies with any orders made by the Court in relation to the shares in PB Developments currently held by Ms Woodruff.
28 In the Chait Affidavit, Mr Chait addresses giving notice of the application on 8 July 2024 in correspondence with the defendants' solicitors, and deposes to the communications that followed, which were exhibited and I have read and considered.
29 The Woodruff Affidavit is brief. The matters to which Ms Woodruff refers include the following: Ms Woodruff being the domestic partner of Mr Pappas Senior, having met him in about 1979; Ms Woodruff's legal name being Josephine Elizabeth Woodruff; Christopher, Isabella and Natasha Pappas being the children of Ms Woodruff and Mr Pappas Senior; Mr Pappas Senior principally being involved in property developments; Ms Woodruff having variously been an officeholder and shareholder of various companies through which Mr Pappas Senior has developed many commercial and residential developments, mostly on the Gold Coast; Ms Woodruff having only a general understanding of the day-to-day operations of Mr Pappas Senior's business and its structures; Ms Woodruff having signed various documents in connection with the various companies over the years; Mr Pappas Senior using an accountant named Graeme Gillard, whom she has met a handful of times; Ms Woodruff's absence of recollection regarding various trust deeds; the identification of Ms Woodruff's signature on various trust deeds; the state of Ms Woodruff's health; and some related matters.
30 In his affidavit Mr Gillard addressed his business background, qualifications and his involvement with Mr Pappas Senior and Ms Woodruff over the years. He deposed to the establishment of the 'Josie Pappas Trust' on 1 February 2014, a further and different deed of trust dated 13 July 2018 (Statemark Bare Trust), the transfer of shares in PB Developments to Ms Woodruff in December 2019 and February 2020, and a variation of the Josie Pappas Trust Deed to record her legal name. In substance, Mr Gillard elaborated on these matters as follows.
31 Mr Gillard said he assisted with the establishment of the Josie Pappas Trust in late 2013 or early 2014 on the instructions of Mr Pappas Senior. Mr Gillard is recorded as the settlor of the trust and Ms Woodruff is recorded as the trustee. A copy of the trust deed was exhibited to Mr Gillard's affidavit (Josie Pappas Trust Deed).
32 As best as Mr Gillard could recall, for the first six years or so, the Josie Pappas Trust did not operate a bank account. In about 2020 steps were taken to open a bank account in Ms Woodruff's name at a time when she already had a bank account at Bendigo Bank in the name of Josephine Woodruff. Mr Gillard recalled that the bank identified the discrepancy between the names 'Josie Pappas' and 'Josephine Woodruff'. This was said to be the first time that Mr Gillard became aware that Ms Woodruff's legal name was Josephine Woodruff, not Josephine Pappas. Consequently Mr Gillard prepared a variation document for the Josie Pappas Trust Deed to effect the change of Josephine's name in the Josie Pappas Trust Deed from Josie Pappas to Josephine Woodruff, with that variation being executed on 7 July 2020. A copy of the deed of variation was exhibited.
33 Mr Gillard further deposed to the fact that on 9 July 2020 an ASIC Form 484 was lodged noting the name change from Josie Pappas to Josephine Woodruff. He said that he was not directly involved in the lodgement, but the form was lodged by his office after they became aware that Ms Woodruff's name on the ASIC register was incorrect.
34 Mr Gillard exhibited the deed relating to the Statemark Bare Trust, which recorded that the 51 shares then held by Statemark in PB Developments (then named Austpro Australia Pty Ltd) (Austpro Australia) were held as bare trustee for the benefit of Ms Woodruff and that any further shares held by Statemark would be held by it as bare trustee for Ms Woodruff. The Statemark Bare Trust trust deed (Statemark Bare Trust Deed) relevantly provided as follows:[7]
THIS DEED is made this 13th day of July 2018.
BETWEEN: STATEMARK PTY LTD ACN 104 121 600 IN ITS OWN CAPACITY AND AS TRUSTEE OF THE PAPPAS FAMILY TRUST of c/- Legacy Consulting Group 4, 42 Nerang Street South Queensland 4215 ('The Trustee")
AND: JOSEPHINE WOODRUFF of c/- Suite 228, 10 Albert Avenue, Broadbeach Queensland ("Josie")
EXPLANATION:
The Company AUSTPRO AUSTRALIA PTY LTD ACN 627 498 944 ("the Company") is a new company incorporated on the date of this deed with 100 issued shares ("Shares on Issue").
The Trustee is the registered holder of 51 of the 100 Shares on Issue as at the date of this Deed.
Pursuant to this Deed, the parties agree on the true beneficial ownership of the shares in the Company held by the Trustee.
IT IS AGREED AS FOLLOWS:-
ACKNOWLEDGEMENT AND DECLARATION OF TRUST
a) The Trustee acknowledges that it is registered as the owner from incorporation of 51 of the Shares on Issue in the Company ("the Company Josie Shares).
b) The Trustee hereby acknowledges and agrees that as and from the time it owned the Company Josie Shares, and at all times since and into the future, it owns the Company Josie Shares as bare trustee for and on behalf and at the direction of Josie.
c) If the Trustee is issued or transferred any additional shares in the Company, these additional shares are also called Company Josie Shares for the purposes of this Deed, and are likewise acquired and held as bare trustee for and on behalf and at the direction of Josie.
MANAGEMENT OF THE COMPANY AND THE COMPANY JOSIE SHARES
The Trustee agrees that:-
a) The Trustee must only mortgage, transfer, or deal with the Company Josie Shares at the direction of Josie and must not do so without consent and the Trustee must transfer the Company Josie Shares to any entity that Josie nominates at any time.
b) The Trustee shall vote at all shareholder's meetings of the Company so far as it relates to the Company Josie Shares as Josie directs and not otherwise.
c) The Trustee shall if requested by Josie appoint any directors to the Company it directs or nominates or resign any directors of the Company as it directs or nominates.
POWER OF ATTORNEY
The Trustee hereby appoints Josie as its lawful power of attorney to carry out any of the terms agreed in this Deed, including but not limited to:
a) Register a Power of Attorney according to the terms herein set out and to sign all documents necessary to do this;
b) Vote at all meetings of shareholders of the Company in the place of and instead of the Trustee in respect of the Company Josie Shares;
c) Do all things and sign all documents to deal with the Company Josie Shares as it deems appropriate; and
d) To resign or appoint any directors to the Company as she deems fit.
APPLICABLE LAW
The law applicable to this Deed shall be the law of the State of Queensland and the parties hereto, where necessary, shall submit to the exclusive jurisdiction of any competent Court having jurisdiction in relation to any matter or thing arising out of this Deed.
ENTIRE DEED
This Deed constitutes the entire Deed of the parties and supersedes all prior Deeds, understandings and negotiations entered into in respect of the matters set out herein.
COUNTERPARTS
This Deed may be executed in counterparts and the separate parts taken together shall constitute a binding Deed.
35 The execution clauses noted that the deed was executed on 13 July 2018. The handwritten signatures are recorded as being John Anthony Woodruff as sole director and sole secretary of Statemark, and Josephine Woodruff. John Woodruff passed away in March 2021.
36 With respect to the three ASIC Form 484s dated 17 December 2019, 25 February 2020 (18:18:34pm) and 25 February 2020 (18:33:32pm) referred to in Mr Czarny's affidavit,[8] Mr Gillard noted that he was the ASIC registered agent on each of the three forms, but that he did not have any specific recollection of having any direct involvement with the lodgement of these forms. He also said that he does not have any recollection as to why it appears that 70 shares were transferred from Ms Woodruff to Mr Pappas Senior and then from Mr Pappas Senior back to Ms Woodruff a short time later on 25 February 2020. Mr Gillard said that in his office at the time the administrative tasks of lodging a Form 484 would have been attended to by one of his staff, but that he has no recollection of who that person was in relation to these forms. He said that based on his review of the transfers, they were consistent with the transfer to Mr Pappas Senior having been effected in error, and that he can think of no reason why he would have advised that a transfer be made to Mr Pappas Senior and then reversed on the same day.
37 With respect to the share transfer form dated 11 December 2019, by which 100 ordinary shares in Austpro Australia were transferred from Statemark to Ms Woodruff on 11 December 2019, Mr Gillard said he was not involved in preparing that transfer. The transfer was exhibited to the affidavit of Ms Woodruff. She said that she had no independent recollection of the form, but confirmed that her signature appeared at the bottom of the form.
38 Mr Pappas Senior, who is the sole director of PB Developments (formerly named Austpro Australia), swore an affidavit on 1 August 2024 in support of Ms Woodruff's opposition to the orders sought by the plaintiff. Mr Pappas Senior explained that he was born on 7 March 1943, and is 81 years old. He said that he met Ms Woodruff in about 1979 and that they have three children, being Christopher, Isabella and Natasha Pappas. Mr Pappas Senior said that he and Ms Woodruff were not married, but over the years Ms Woodruff has referred to herself as Josephine or Josie Pappas.
39 With respect to Mr Pappas Senior's business, he said that he had been involved in property development for over 50 years and had completed a variety of projects, including several high-rise developments. Mr Pappas Senior said it has been his practice throughout his property development career to seek and follow legal and accounting advice, including in relation to taxation matters, and to ensure that his family's assets were protected as best as was legally possible given the inherent risks involved in property development. Mr Pappas Senior explained that he conducted his property development business through a number of different companies and trusts, and that Ms Woodruff had at various times been a director, shareholder, trustee or beneficiary of different companies and trusts. Mr Pappas Senior said that, generally, this occurred because it was based on legal or accounting advice, which was rarely written advice. Ms Woodruff was said to have had 'little direct involvement in the property development operations'.
40 Mr Pappas Senior also explained that he had used Mr Gillard as an accountant for about 20 years, but noted that he had engaged other accountants from time to time, but mostly used Mr Gillard. So far as legal advice was concerned, Mr Pappas Senior deposed that he met John Wheeler in about 1974 and from that time Mr Wheeler performed most of the legal work associated with his property development business. He recalled that the name of one of Mr Wheeler's businesses was Parkwood Securities, and that Mr Wheeler also worked through a group called Legacy, which he believed had previously been called Legend Legal Group.
41 Mr Pappas Senior deposed to having difficulty in locating business records and other documents relating to PB Developments and Statemark. Among other things, he explained that there was a recent break-in at the office and several items of furniture, electrical goods and documents, including business records, were stolen. This was said to be currently the subject of a Supreme Court of Queensland proceeding against Jack and James Doumani and Angela Docen, with the (exhibited) originating application being filed on 9 July 2024 (Queensland Chattels Proceeding).
42 Mr Pappas Senior explained the steps he had taken to locate documents relevant to PB Developments and Statemark, and he exhibited a number of copy documents he had been able to obtain. These relevantly included: the PB Developments constitution; an ASIC extract for Austpro Australia dated 21 May 2019; an application for registration of Austpro Australia; an ASIC certificate of registration for Austpro Australia dated 13 July 2018; some 'template' documents for Austpro Australia, including minutes for the first meeting of directors and shareholders, relevant consents, a register of members, and related documents; correspondence from Mr Wheeler in relation to the incorporation of Austpro Australia and the establishment of a unit trust;[9] a current ASIC company extract for Statemark dated 13 July 2018; the Josie Pappas Trust Deed; the Statemark Bare Trust Deed; and a directors' resolution for Statemark dated 13 July 2018 in which it was recorded that:
It was proposed that the company in its own capacity and as trustee of the Pappas Family Trust agrees to hold 51 shares in Austpro Australia Pty Ltd and any further shares it may hold in this company as Bare Trustee for Josephine Woodruff and to this effect agrees to sign a declaration of trust to this effect and to hold these shares at all times beneficially for Josephine Woodruff and at her direction at all times.
43 Mr Pappas Senior also exhibited a share transfer form dated 11 December 2019 that noted the transfer of 100 ordinary shares in PB Developments (then Austpro Australia) from Statemark to Ms Woodruff as trustee for the Josie Pappas Trust.
44 Mr Pappas Senior said that he could not say with certainty that it was Mr Wheeler who prepared the trust documents, resolution and share transfer form, but that he did not recall engaging any other lawyer at that time. Mr Pappas Senior said that he did not prepare these documents himself. He also deposed that Mr Wheeler is 82 years old and that he had a stroke in late May 2024. Mr Pappas Senior said that he attended Mr Wheeler's home on 30 July 2024 to speak with him about the documents and Mr Wheeler informed him that he could not recall anything about them due to his stroke badly affecting his memory. Mr Wheeler also informed Mr Pappas Senior that after Mr Pappas Senior left him that day he was going to the hospital to see his doctor in relation to further treatment following his stroke.
45 Mr Pharmacis confirmed that Ms Woodruff is the domestic partner of Mr Pappas Senior and that Mr Pappas Junior is known as Christopher. He also referred to the business records of PB Developments being stored at premises where there had been a break-in and a number of items stolen, including business records. He said that he does not act for any party in the Queensland Chattels Proceeding.
46 Mr Pharmacis deposed that Mr Pappas Senior informed him that Mr Pappas Junior has been assisting him in locating the business records of PB Developments and making enquiries on his behalf of Legacy Legal. He said he was informed by Mr Pappas Senior that Mr Pappas Junior gave him a folder that was located at a private residence. Mr Pharmacis said that on 12 August 2024 Mr Pappas Junior provided him with a copy of the share register of PB Developments (previously Austpro Australia Pty Ltd) and exhibited a copy of that share register. The share register recorded the following:
Share certificate No 1 was in respect of 49 shares originally held by Xiaoye Du.
Statemark, as trustee for the Pappas Family Trust, held 51 shares, evidenced by share certificate No 2.
On 21 November 2018 the 49 shares held by Xiaoye Du were registered in the name of Statemark, as trustee for the Pappas Family Trust, giving a holding of 100 shares.
On 11 December 2019 the 100 shares in PB Developments were transferred to Ms Woodruff.
47 Mr Pharmacis said that he was informed by Mr Pappas Senior and believed that there were no transfers of shares in PB Developments since 11 December 2019, and that, from the date of its incorporation until about 23 December 2019, PB Developments was dormant and held no assets and had no liabilities. He said further that he was informed and believed that Ms Woodruff paid $100 in cash for the shares that she holds in PB Developments, but he cannot locate the record. In addition Mr Pharmacis deposed to Mr Pappas Junior having been stabbed and bashed by unknown assailants during a burglary at his house around 2:30am on 13 August 2024 and that he had observed several stab wounds and severe injuries to Mr Pappas Junior's head when he visited the hospital at around 12:30pm on 13 August 2024.
48 The plaintiff relied upon its revised written submissions dated 6 August 2024, which were supplemented orally by submissions from Mr Hay of senior counsel and Mr Hristovski of counsel at the hearing of the application.
49 It became apparent through the plaintiff's revised submissions that it no longer pursued its application for the joinder of, and freezing orders against, PB Developments.
50 The plaintiff's applications against Ms Woodruff were pressed and it was said that the application for freezing orders was made in order to preserve the value of the 100 shares in the capital of PB Developments that were originally registered in Statemark's name. During the hearing, senior counsel for the plaintiff informed the Court that the nature of the freezing order now sought against Ms Woodruff was to be confined to an order restraining dealings with the PB Shares only, and that the applications for broader freezing orders and ancillary orders would no longer be pressed. A proposed amended summons was provided to the parties and the Court, and leave to amend the Summons was granted without opposition. Senior counsel also confirmed at the outset of the hearing during an exchange with the Bench that it remained the case that the plaintiff was making an application for a freezing order and not an application of any other kind, but emphasised that the nature of the freezing order now sought was more confined than had previously been the case. This was also reflected in the proposed amendments to the Summons.
51 The background to the application was referred to in paragraphs 6 to 12 of the plaintiff's revised submissions, which it is not necessary to repeat given the matters addressed in the Background and Evidence section above.
52 The plaintiff rightly observed that the principles applicable to an application for freezing orders were well established, and reference was made to the decision in Zhen v Mo (Zhen)[10] and the recent summary of Harris J in Pickett v Amin.[11] The plaintiff stated that it seeks the freezing orders in order to preserve the PB Shares by preventing Ms Woodruff from transferring or dealing with them.
53 The plaintiff submitted that it had a prima facie case against Statemark, Mr Pappas Senior and Ms Woodruff, and that this was reflected in the Proposed FASOC. In so doing and in substance, its submissions included the following:
The Loan Agreement and Guarantee were duly executed and the PB Shares were charged to the plaintiff pursuant to the terms of the Guarantee.
The terms of the Guarantee make it clear that it applies to all trusts of which Statemark is trustee irrespective of whether the existence of the trusts was notified to the plaintiff, and that by clause 14.2 of the Guarantee, Statemark represented and warranted that it was empowered to grant such a charge.
The Guarantee Charge extended to all assets existing at the time of the Guarantee and any after acquired assets.
The Guarantee Charge attached to the PB Shares upon the execution of the Guarantee, or alternatively on the date they were acquired, being a date after the execution of the Guarantee.
Insofar as Statemark held the PB Shares on trust for Ms Woodruff pursuant to the Statemark Bare Trust, clause 14 of the Guarantee is of wide compass and would capture the shares even if they were held pursuant to that trust for Ms Woodruff.
In any event, 70 of the PB Shares were transferred by Ms Woodruff to Mr Pappas Senior on 25 February 2020 and then back to Ms Woodruff on the same day. Consequently, so it was said, to the extent that Mr Pappas Senior held 70 of the PB Shares in his name, those shares would also have been captured by the Guarantee Charge, which equally applies to the assets of Mr Pappas Senior.
The evidence in the Gillard affidavit regarding the transfer to Mr Pappas Senior of the 70 PB Shares likely having been an error was vague, of little weight, and insufficient to rebut the assumptions in ss 129 and 1274B of the Corporations Act 2001 (Cth) (Act) as to the accuracy of the ASIC register.
It would have been known to Statemark and Mr Pappas Senior that the Loan Agreement was due to expire on 12 January 2020 and the first transfer to PB Developments of shares to Ms Woodruff occurred on 17 December 2019, with the expiry of the Loan term only a few weeks away.
The transfer of 70 of the PB Shares to Mr Pappas Senior occurred on 25 February 2020, which was after the First Default Notice and the Second Default Notice, and they were then transferred back to Ms Woodruff on the same day.
On 5 May 2020 Mr Czarny, on behalf of the plaintiff, informed Mr Pappas Senior that the plaintiff reserved the right to take possession of the Holman Property, which it did on 21 May 2020. In the period between those dates, on 15 May 2020 Statemark transferred the remaining 30 PB Shares to Ms Woodruff, and on 9 July 2020 Ms Woodruff changed her name from Josie Pappas to Josephine Woodruff.
Clause 14.3(e) of the Guarantee expressly prohibits Statemark from dealing with charged assets other than by the written approval from the plaintiff, and at no time did the plaintiff approve the transfer of the PB Shares to Ms Woodruff. All transfers of shares were said to have been made without the plaintiff's consent or knowledge, and it was submitted that all transfers of PB Shares after 20 January 2020 were made after Mr Pappas Senior and Statemark were in default under the Guarantee.
Ms Woodruff and Mr Pappas Senior were not bona fide third party purchasers and no consideration was ever provided by either of them for the transfers. In this context it was noted that Ms Woodruff had deposed that she has no independent recollection of the various transactions, and that she has been acting as a shareholder and officeholder for Mr Pappas Senior's business interests over time.
54 In the circumstances, it was submitted that no valuable consideration passed between Statemark, Mr Pappas Senior and Ms Woodruff; Ms Woodruff was not a third party bona fide purchaser; and the plaintiff did not consent to any transfer of the PB Shares. Accordingly, the plaintiff contended that Ms Woodruff takes the PB Shares subject to the Guarantee Charge.
55 The plaintiff made reference to the lack of detail in the evidence of Ms Woodruff and Mr Pappas Senior, contending that regard should be had to what is not addressed as well as what is addressed in the evidence. It was also contended that it could be inferred that Ms Woodruff was not acting independently but in accordance with the wishes or instructions of Mr Pappas Senior, who it was said had stated that it was his practice to seek to protect the family's assets from the risks of the property development business. Emphasis was also placed upon what was said to be an absence of explanation about the various documents and transactions referred to in them.
56 As to the Statemark Bare Trust, it was submitted that, although it was not contended to be a sham, the weight given to it should be limited given, among other things, the share register at the time recording 51 PB Shares as being held for the Pappas Family Trust; the various documents recording later transfers; the evidence regarding Ms Woodruff paying for the PB Shares said to be transferred to her on 11 December 2019; and the share register exhibited by Mr Pharmacis recording that the shares were transferred to Ms Woodruff in her capacity as trustee of the Josie Pappas Trust. Again, emphasis was placed on an absence of explanation about these and other matters.
57 With respect to the PPSA, the plaintiff submitted that it does not prevent the application of equitable principles regarding the unauthorised disposition of charged assets. In so doing reference was made to s 254 of the PPSA and Goldus Pty Ltd v Cummins (No 4).[12] The plaintiff submitted that, for the purposes of the PPSA, the Guarantee Charge was a security interest that attached to the PB Shares upon the granting of the charge pursuant to s 19 of the PPSA; that it was effective according to its terms in accordance with s 18(1) of the PPSA; that it was enforceable against third parties as it was evidenced in writing and contained in an agreement signed by the grantor in accordance with s 20 of the PPSA; that it had attached, and that by reason of the operation of s 18(3) of the PPSA, the security interest in after acquired property attached without specific appropriation by the grantor. It was also said that the definition of 'personal property' in the Deed of Guarantee was the same as that in the PPSA.
58 Although it was said that s 43 of the PPSA provides that a buyer of personal property for value takes the property free of an unperfected security interest, it was submitted that the section has no application because neither Ms Woodruff nor Mr Pappas Senior were 'buyers', and nor did they provide any value when they took the PB Shares. It was further submitted that s 50(1) of the PPSA does not assist Ms Woodruff or Mr Pappas Senior as it relevantly requires the purchaser (as defined) to give value for the instrument, which neither Ms Woodruff nor Mr Pappas Senior did.
59 It was submitted that s 50 of the PPSA would not apply in any event because the exception referred to in s 50(2) of the PPSA was engaged. This was said to be because each of Mr Pappas Senior and Ms Woodruff would have taken the instruments with actual or constructive knowledge that the taking constituted a breach of the security agreement that provided for the security interest (ie the Guarantee Charge). In this context reference was made to the definition of 'constructive knowledge' in s 297 of the PPSA. Reliance was also placed on the presumptions in s 299 of the PPSA and the contention that Ms Woodruff and Mr Pappas Senior were members of the same household. It was further submitted that the transferor and transferee were associated entities; that is, Statemark, Mr Pappas Senior and Ms Woodruff were each associated entities. However, during oral submissions senior counsel for the plaintiff confirmed that this contention regarding associated entities was no longer pressed.
60 Alternatively, it was submitted by the plaintiff that transactions were intended to defeat creditors and were voidable pursuant to s 172 of the Property Law Act 1958 (Vic) (PLA Vic), or alternatively s 228 of the Property Law Act 1958 (Queensland) (PLA Queensland). The plaintiff submitted that the transfers occurring at about the time the Loan Agreement was to go into default, and after it went into default, had the effect of reducing the assets available to the plaintiff and Statemark's creditors more generally, This, so it was submitted, prima facie established that the transfers were undertaken with the primary intent to defraud creditors for the purposes of the provisions and shield PB Developments from the Guarantee Charge. In this context reference was made to Noakes v Harvey Holmes & Son.[13]
61 It was also confirmed during oral submissions that the plaintiff contended that Ms Woodruff held the shares on a constructive trust for the plaintiff (or Statemark or Mr Pappas Senior) because she acquired them with at least constructive knowledge of the plaintiff's prior equitable interest through the Guarantee Charge, and without giving value.
62 When addressing the contention that there was a danger that a prospective judgment would be wholly or partly unsatisfied, reference was made to Bell J's observations in Gashi.[14] In this context it was submitted that, when determining whether there was a sufficiently substantial danger, the Court was permitted to consider the evidence adduced by the plaintiff to establish its claim for the substantive relief, referring also to Patterson v BTR Engineering (Aust) Ltd.[15] During oral submissions the plaintiff addressed the risk of dissipation and emphasised: the timing and nature of the transaction; the absence of explanation by Ms Woodruff and Mr Pappas Senior; what was said to be the modest and confined nature of the freezing order in the context of maintaining the status quo; and the tensions and inconsistencies with the various transactions referred to in the documents in evidence. In a related PPSA context junior counsel for the plaintiff submitted that it should not be inferred that Ms Woodruff did not consent to the PB Shares being the subject of the Guarantee Charge, although it was not contended by the plaintiff that there was an evidentiary basis that she did so consent.
63 The plaintiff submitted that its prima face case against Mr Pappas Senior, Statemark and Ms Woodruff was that they transferred the PB Shares to Ms Woodruff for no value or consideration in order to remove those shares from the operation of the Guarantee Charge and deprive the plaintiff of its security. The actions were said to be designed to defraud the plaintiff and the creditors of Statemark from the benefit of the PB Shares. It was submitted that given that the PB Shares were transferred to defeat or delay the plaintiff's charge, and given that Ms Woodruff has refused to provide an ongoing undertaking to preserve the PB Shares pending the outcome of the proceeding, there is a sufficient and substantial danger that the PB Shares will be disposed of or dissipated so as to defeat the Guarantee Charge and the creditors of Statemark. In this context it was emphasised that, save for the PB Shares, and the particularised matters referred to in the Mr Pappas Senior Assets Statement, the plaintiff was not aware of any assets which Statemark or Mr Pappas Senior have that could be used to pay down the substantial debt owing to the plaintiff, which was said to exceed $16 million. Consequently, it was submitted that diminishing the value of the PB Shares would pose a real danger that any judgment the plaintiff obtained would be unsatisfied.
64 The balance of convenience was said to favour the granting of the orders because the orders would preserve the status quo until the trial of the proceeding. If the orders were not made it was submitted that the PB Shares could be dissipated or devalued so that they could be deemed effectively valueless, thereby depriving the plaintiff of its Guarantee Charge security in the event that it was successful at trial. Counsel for the plaintiff also emphasised that the defendants had not put forward any evidence of any prejudice to them if they are not able to dispose of or deal with the PB Shares.
65 Although acknowledging that delay by the plaintiff was a discretionary matter for the Court to have regard to in considering an application for a freezing order, attention was drawn to the observations of Hargrave J in Choice Planning Pty Ltd v Mider @ Franklin Street Pty Ltd.[16] It was submitted that there had been no material delay by the plaintiff in bringing the application because it was brought within weeks of the plaintiff becoming aware or cognisant of the transfers of the PB Developments shares from Statemark to Ms Woodruff, and between Mr Pappas Senior and Ms Woodruff. Having identified the transfers, it was submitted that the plaintiff had acted promptly in making the application, observing that the only way that the transfers could be identified was via historical ASIC searches of PB Developments. It was submitted that there was no reason for the plaintiff to undertake such searches earlier as it was not previously aware in 2020 that Statemark had held shares in PB Developments.
66 It was further submitted that, in any event, there had been no prejudice to the defendants by reason of any delay, and that the evidence filed by the defendants does not point to anything that they could have, or would have, done differently had the applications been made earlier.
67 In conclusion the plaintiff submitted that the PB Shares were prima facie subject to the Guarantee Charge and that the dealings with the PB Shares without the plaintiff's knowledge or consent deprived the plaintiff of the value and benefit of its security. It was emphasised that the Guarantee Charge had not been released and the PB Shares remained subject to it. The orders were said to be necessary in order to preserve the value of the PB Shares pending trial.
68 The plaintiff observed that, in summary, Manda contended that the beneficial interest in the 100 shares in PB Developments registered to Ms Woodruff were subject to the Guarantee Charge. Ms Woodruff submitted that the central issues on the application are:
- Whether the plaintiff has established that it has a good arguable case that -
(a) the beneficial interest in the PB Shares was charged to the plaintiff;
(b) the PB Shares were transferred to Ms Woodruff in breach of the Guarantee Charge;
(c) Ms Woodruff will in future become obliged to disgorge the PB Shares; and
- Whether the discretionary considerations favour the granting of a freezing order.
Ms Woodruff contended that the Court should refuse to make the 'drastic and wide-ranging orders' and that the plaintiff's application should be dismissed. She also resisted the narrower form of freezing order sought by the plaintiff and addressed by senior counsel for the plaintiff at the commencement of the hearing.
69 Ms Woodruff made submissions by reference to what was submitted to be a chronology of key events with references to the evidence in contention. That chronology was in the following form:[17]
The discretionary Josie Pappas Trust was created with:
PB Developments (then called Austpro Australia Pty Ltd) was registered, with 100 shares issued as follows:
The ASIC incorporation document (page 199 of Exhibit MC-1) shows that:
The Register of Members recorded that, inter alia, Statemark held the 51 shares in its capacity as trustee of the Pappas Family Trust (but, for the reasons identified below, the Pappas Family Trust, through Statemark, held the shares as bare trustee for Mrs Woodruff (i.e. a sub-trust))
Contemporaneously with the incorporation of BP Developments, a declaration of trust was made by which Statemark, in its own capacity and as trustee of the Pappas Family Trust, declared that "the true beneficial ownership of" its 51 shares in BP [sic] Developments (and any future shares in PB Developments) was "as bare trustee for and on behalf and at the direction of" Mrs Woodruff (PB Shares Deed)
Contemporaneously with the incorporation of PB Developments and the creation of the PB Shares Deed, the (then) sole director of Statemark signed a sole director resolution of Statemark confirming that Statemark held its 51 shares in BP [sic] Developments (and any future shares in PB Developments) as "Bare Trustee" for Mrs Woodruff (Memorandum of Resolution)
*Mrs Woodruff contends that these documents clearly establish that Statemark (whether in its own capacity or as trustee of the Pappas Family Trust) at all times held any shares it had in PB Developments as bare trustee for Mrs Woodruff
A Loan Agreement and Guarantee (which included the Charge) was entered into between:
The 49 shares in BP [sic] Developments held by Xiaye [sic] Du were transferred to Statemark, such that Statemark became the sole shareholder of PB Developments holding all 100 shares
*Mrs Woodruff contends that, by reason of the PB Shares Deed and the Memorandum of Resolution, Statemark commenced to hold these further 49 shares as bare trustee for Mrs Woodruff
Standard share transfer form was executed by Statemark "in its own capacity and as trustee of the Pappas Family Trust, as Bare Trustee for Josephine Woodruff" (as transferor) and Mrs Woodruff "as trustee for the Josie Pappas Trust" (as transferee) in respect of the 100 shares in BP [sic] Developments then held by Statemark (PB Shares Transfer Form).
*Mrs Woodruff submits that the PB Share Transfer Form unequivocally confirms that Statemark held the PB Shares as bare trustee for Mrs Woodruff (in a sub-trust) and that, from 11 December 2019, the PB Shares have been held by Mrs Woodruff for the Josie Pappas Trust.
The Register of Members of PB Developments is amended to record the transfer of the PB Shares to Mrs Woodruff as trustee for the Jose Pappas Trust.
*Pursuant to s 231 of the Corporations Act 2001, Mrs Woodruff became a member of PD [sic] Developments from this date. The Register of Members records no transactions after this date.
ASIC form lodged which records that on 11 December 2019 Statemark transferred 70 (but not 100) of its 100 shares to Jossie [sic] Pappas.
*The ASIC form is inconsistent with the PB Share Transfer Form and the Register of Members as to the number of shares transferred. The ASIC form also erroneously records the paid up capital as $100 (rather than $10). The date of the purported transfer of only 70 (rather than 100) shares is consistent with the PB Share Transfer Form and the Register of Members. Mrs Woodruff submits that the natural inference that arises is that the ASIC form was lodged in error. Relevantly, the ASIC form is a secondary record which should (but here does not) reflect the transfer of 100 shares on 11 December 2019 and the shareholding entered into the Register of Members
Manda issued a notice of default and demand to AMSG as borrower and each of Chris Pappas and Statemark as guarantors
Manda issued a further default notice to each of Austpro, Chris Pappas, and Statemark
*Mrs Woodruff submits that the first ASIC form (recording the transfer of shares to Chris Pappas) was lodged in error and that the second transfer form lodged 15 minutes later was lodged to correct the error. Relevantly, there are no transactions recorded in the Register of Members after 11 December 2019.
ASIC form lodged which records that Statemark transferred 30 shares in BP [sic] Developments to Mrs Woodruff on 25 February 2020
*From 11 December 2019, Mrs Woodruff should have been recorded in the ASIC records as holding 100% of the issued shares in PB Developments (i.e. the PB Shares), consistently with the PB Share Transfer Form. It was not until 15 May 2020 that the ASIC record of the true shareholding in PB Developments was brought into line with the PB Share Transfer Form and the Register of Members.
A variation of trust deed of the Josie Pappas Trust was executed: Name change from Josie Pappas to Josephine Woodruff
*Mrs Woodruff submits that the name change was effected to open a bank account for the Josie Pappas Trust which necessitated her using her legal name
A Form 484 was lodged with ASIC, notifying a name change from Josie Pappas to Josephine Woodruff
*Mrs Woodruff submits that this was effected to correct the ASIC record consistently with her legal name
70 In summary, Ms Woodruff submitted that the Summons should be dismissed because: first, the plaintiff had not established a good arguable case that would support the freezing order in relation to the PB Shares. Second, if it is still pursued, there is no basis for seeking a freezing order over Ms Woodruff's assets in excess of $16 million as referred to in the Summons where Ms Woodruff is not a 'prospective judgment debtor' and the relief against her consists only of declarations, a mandatory injunction, judicial sale of the shares, or alternatively, the appointment of a receiver. Third, if it is still pursued, it followed that there was no basis for the ancillary order. Fourth, the balance of convenience does not favour the granting of the freezing order sought in relation to the PB Shares.
71 These contentions were developed and expanded upon in Ms Woodruff's written submissions and the oral submissions by senior counsel at the hearing, to which I have had regard. In substance, Ms Woodruff's submissions on these topics included the following.
72 Ms Woodruff submitted that the plaintiff must show it has a good arguable case against Mr Pappas Senior and Statemark that would result in Ms Woodruff having to disgorge the PB Shares, and that this has not occurred.
73 The Statemark Bare Trust was heavily relied upon in written and oral submissions. It was submitted that from the date of incorporation of PB Developments any shares held by Statemark in PB Developments were held by Statemark (either in its own capacity or as trustee for the Pappas Family Trust) as bare trustee for Ms Woodruff, which was said to be significant. In its capacity as bare trustee it was submitted that Statemark could not grant rights in the PB Shares to the plaintiff, much less so charge the beneficial interest in the PB Shares. Principles relating to the obligations of bare trustees were referred to and it was submitted that Statemark's sole obligation was to protect and not encumber the PB Shares.[18]
74 Ms Woodruff submitted that the office of bare trustee stood in stark contrast with the office of a trustee of, for example, a discretionary family trust, which generally comes with a broad range of powers concerning the dealing in trust property.
75 Ms Woodruff submitted that the proper construction of the Guarantee Charge was central to the claims against her because they depend on the plaintiff establishing that the PB Shares were transferred by Statemark and Mr Pappas Senior in breach of the Guarantee Charge. Three questions were said to arise:
Did Statemark and Mr Pappas Senior charge the PB Shares (including their beneficial interest) to the plaintiff?
Were the PB Shares transferred to Ms Woodruff by Statemark in breach of the Guarantee Charge?
Will Ms Woodruff in future become obliged to disgorge the PB Shares?
76 Ms Woodruff submitted that the plaintiff must establish that there is a good arguable case that the answer to each question is yes in order to meet one of the minimum requirements for a freezing order. Further it was submitted that even if a good arguable case was made out it is only a gateway because, for example, affirmative answers to the questions say nothing about the risk of dissipation. In any event it was submitted that the plaintiff could not establish a good arguable case in relation to the three questions referred to.
77 Ms Woodruff submitted that although it may be accepted that the PB Shares come within the ambit of the expression 'personal property', Statemark did not charge its right, title and interest to the PB Shares. It was submitted that Statemark held the PB Shares as bare trustee only.
78 It was further submitted that clause 14 of the Deed of Guarantee did not assist because the gateway provision in clause 14 was not satisfied. Ms Woodruff submitted that, upon the proper construction of the Deed of Guarantee, it was plain that Statemark was not entering into the Deed of Guarantee in its capacity as bare trustee for Ms Woodruff. In this context attention was drawn to features of the Deed of Guarantee, including the express statement of the capacity in which Statemark entered into the Deed of Guarantee, and the fact that the charging of the beneficial interests in the PB Shares by Statemark as bare trustee would have been an act in breach of trust.
79 Ms Woodruff submitted that once it is accepted that the beneficial interest in the PB Shares was not charged to the plaintiff that is the end of the matter and that the plaintiff's application and its claims generally against Ms Woodruff must fail. The balance of the submissions made by Ms Woodruff were further and alternatively to this contention.
80 Ms Woodruff contended that central to the plaintiff's allegations against her is the contention that she received the shares in PB Developments in breach of the Guarantee Charge. Two questions were said to arise. First, under general law (and ignoring for the moment the operation of the PPSA), did the Guarantee Charge prevent Statemark from transferring the PB Shares to Ms Woodruff? Second, is the answer to this question different by operation of the PPSA?
81 With respect to the position under the general law it was submitted that the Guarantee Charge operated as a floating charge and did not preclude dealings with the PB Shares until an event of default occurred. Thus, so it was said, the event of default occurred only after the PB Shares were transferred and registered to Ms Woodruff (in her capacity as the trustee of the Josie Pappas Trust). In this context reference was made to the observations of Ward CJ in Boulos Holdings Pty Ltd v Edwin Davey Pty Ltd[19] regarding principles governing the construction of a charge and whether the charge operated as a fixed or floating charge. In this context it was further submitted in substance as follows:
The Guarantee Charge was granted by a natural person (Mr Pappas Senior) and a corporate guarantor (Statemark) and must be taken to operate consistently between them.
The Guarantee Charge was expressed to extend to all 'personal property' of a Guarantor. Consequently, by its terms the Guarantee Charge extended to all personal property of Mr Pappas Senior and Statemark. Emphasis was placed upon the broad spectrum of personal property including Mr Pappas Senior's toothbrush at one end of the spectrum and any funds standing to his credit with any bank at the other. It was submitted that, given the breadth of the Guarantee Charge, it would be nonsensical to contend that the charge operated as a fixed charge over personal property from the time of its inception. If it were to have that operation it was said that it would be impossible for Mr Pappas Senior to live day to day without breaching the Guarantee Charge. Ms Woodruff submitted that it could not be sensibly contended that Mr Pappas Senior was required to seek the plaintiff's permission to carry on day to day and that this would not be the objective intention of the parties.
A floating charge does not attach to specific property until it crystallises, which occurs when there is a default in performance of the obligations and, in accordance with the terms of the charge, notice is served that the charge has become fixed on the assets.
The Guarantee Charge did not crystallise until after Ms Woodruff was registered as the holder of the PB Shares and it follows that Statemark did not breach the Guarantee Charge by transferring the PB Shares to Ms Woodruff. Consequently, the plaintiff has not made out a good arguable case in this regard.
82 Ms Woodruff made a number of submissions in relation to the Guarantee Charge and the terms and operation of the PPSA, which in substance included the following.
83 It was submitted that it was uncontroversial that the Deed of Guarantee was a 'security agreement'; that the Guarantee Charge falls within the definition of 'security interest'; that the PB Shares are 'an investment instrument'; and that the security interest (ie the Guarantee Charge) had not been registered.
84 By reason of the operation of s 296 of the PPSA it was submitted that the plaintiff bears the onus of proving that the security interest attached to the beneficial interest in the PB Shares. It was also submitted that if the plaintiff established that the security interest attached to the beneficial interest in the PB Shares, Ms Woodruff would bear the onus of proving that she took the PB Shares (including the beneficial interest) free of the security interest.[20] Ms Woodruff submitted that as a security interest the Guarantee Charge would only be enforceable against her under the PPSA if it attached to the collateral, absent which, the PPSA has no application.
85 It was submitted that the security interest (the Guarantee Charge) did not attach to the PB Shares because Statemark held the PB Shares as bare trustee for Ms Woodruff and, in that capacity, Statemark's rights in the PB Shares were limited and it was not able to grant a security interest over the PB Shares, much less any beneficial interest in the PB Shares. It was submitted that once it is accepted that no security interest attached to the PB Shares, alternatively the beneficial interest in the PB Shares, that was the end of the issues arising under the PPSA because the security interest did not and could not attach to the PB Shares, and therefore was not enforceable against Ms Woodruff as a third party.
86 In the alternative, Ms Woodruff submitted that even if the security interest had attached to the PB Shares, Ms Woodruff had taken them free from such security by operation of s 50(1) of the PPSA. This was said to be so because it was contended that the PB Shares transfer form notes that the consideration for the 100 ordinary shares to be transferred to Ms Woodruff was $100, and therefore there was consideration. Further and in any event, it was contended that given that the PB Shares were at all relevant times held by Statemark as bare trustee for Ms Woodruff they had no commercial value in the hands of Statemark. The transfer of the PB Shares by Statemark to Ms Woodruff discharged Statemark from its obligations as bare trustee and thereafter she became the holder of them and controlled them.
87 For the reasons referred to in Ms Woodruff's written submissions, as elaborated upon orally, it was contended that the exception in s 50(2) of the PPSA did not engage or operate so as to preclude the operation of s 50(1) of the PPSA. In this context reference was made to the evidence regarding Ms Woodruff's limited understanding of Mr Pappas Senior's business instructors, her limited engagement with Mr Gillard, and Mr Pappas Senior's evidence that Ms Woodruff had little direct involvement in the operations of his property development business. Consequently, it was contended that on the evidence it could not be said that s 297 of the PPSA operates to impose constructive knowledge of the Guarantee Charge upon Ms Woodruff in connection with the alleged Statemark transfers.
88 With respect to the plaintiff's reliance on s 299 of the PPSA in connection with the alleged Statemark transfers, which presumes actual or constructive knowledge unless the contrary is shown beyond reasonable doubt, Ms Woodruff submitted that these provisions did not apply given the evidence. In this context it was said that Statemark was the transferor and it is not a member of Ms Woodruff's household or an 'associated entity' and that this issue had been glossed over by the plaintiff.
89 Consequently it was said that the plaintiff had not established a good arguable case that the transfer of the PB Shares occurred in breach of the provisions of the PPSA, even if the security interest had attached to the PB Shares.
90 Ms Woodruff's submissions did not materially engage in any depth regarding the recorded transfers in the Form 484s dated 25 February 2020. During the hearing these were the subject of engagement by senior counsel for Ms Woodruff in order to clarify the position. In this context it was submitted by Ms Woodruff that there was no good arguable case in connection with the Form 484s dated 25 February 2020 because it was apparent that the forms were lodged by mistake. The matters to which attention was drawn included: the Statemark Bare Trust; the 11 December 2019 transfer; the terms of the share register; the close timing of the Form 484s being lodged on 25 February 2020 and the fact that they were only 15 minutes apart; the evidence of Mr Pharmacis on information and belief from Mr Pappas Senior; and Mr Pappas Senior's evidence regarding seeking to legitimately protect assets from the risks of property development.
91 During discussions senior counsel for Ms Woodruff responsibly acknowledged that, if it was found that a good arguable case had been shown that the shares the subject of the alleged 25 February 2020 Mr Pappas Senior to Ms Woodruff transfer were caught by the Guarantee Charge, then Ms Woodruff was not contending on this application that there was not a good arguable case that the Guarantee Charge attached to the PB Shares under the PPSA. In such a scenario it was also accepted that the PPSA operated so that the onus was on Ms Woodruff to prove that she would take free of the security interest; that s 299 of the PPSA applied; that the presumption in s 299 of the PPSA had not been displaced; and that it could not be said that it had been established on the evidence on this application that value had been provided for the purpose of s 50 of the PPSA. In my view the position taken by senior counsel in relation to these matters was appropriate in the circumstances. In any event, as is later discussed, the plaintiff established that there is a good arguable case that the PPSA applied and was relevantly engaged in relation to 70 of the PB Shares the subject of the transfer referred to in the Form 484 recording the transfer from Mr Pappas Senior to Ms Woodruff on 25 February 2020.
92 Ms Woodruff further submitted that unless the plaintiff demonstrates that the value in the PB Shares has been dealt with in breach of the Guarantee Charge it cannot obtain orders that Ms Woodruff disgorge the PB Shares. With respect to the reliance upon the PLA Vic and PLA Queensland, it was contended that no order would be made unless the dealing sought to be set aside is subtracted from the value of the assets otherwise available to the creditors. Given that it was said that Statemark at all times held the beneficial interest in the PB Shares as bare trustee for Ms Woodruff, it was submitted that there was no relevant subtraction to the assets of Statemark, with reference also being made to the decision in Jew v Holloway.[21] Thus it was said the plaintiff had not established a good arguable case that Ms Woodruff will or may become obliged to disgorge the PB Shares.
93 With respect to the risk of dissipation, Ms Woodruff submitted that the Czarny Affidavit did not depose to any fact, matter or circumstance capable of establishing the necessary real risk that Ms Woodruff would deal with her assets (including the PB Shares) so as to put them beyond the reach of the plaintiff. It was emphasised that Ms Woodruff has held all 100 shares in PB Developments since 11 December 2019, which was more than four and a half years.
94 It was further contended that there was no evidence to the effect that the PB Shares have any value or that the restraint in dealing with the PB Shares will preserve value. In this context attention was drawn to the plaintiff's abandoned attempt to constrain PB Developments acting in relation to the Mackay Land. It was contended that in circumstances where PB Developments remains free to deal with the Mackay Land without restraint, the contention that Ms Woodruff would deal with the PB Shares (which she holds on trust for the Josie Pappas Trust) with the effect that it will render a judgment of the Court unsatisfied is entirely unconvincing. During oral submissions it became clear that Ms Woodruff was seeking to make a more refined submission, namely that the PB Shares remain subject to what was described as 'commercial risk' because no restraint was pursued in respect of PB Developments itself. In clarifying the position senior counsel for Ms Woodruff explained that it was not being contended that Mr Pappas Senior, as sole director of PB Developments, would be able to act inappropriately so as to reduce the value of the PB Shares.
95 Ms Woodruff further contended that no adverse inference could be drawn from the fact that the application was opposed and that Ms Woodruff was intending to deal with the PB Shares. It was said that opposition to an application cannot be used to overcome an absence of evidence regarding the risk of dissipation, with emphasis being placed upon the nature of the orders sought and the authorities that recognise freezing orders to be an extraordinary interim remedy.
96 Finally, with respect to the balance of convenience Ms Woodruff submitted that the plaintiff's case was attended with significant difficulty and that even if the Court were to determine that there was a good arguable case, any such case was weak. In the circumstances it was submitted that the interests of justice do not lie in granting a drastic and intrusive remedy.
97 The relevant principles regarding the making of freezing orders have been well- rehearsed in numerous cases and there was no issue between the parties about them.[22]
98 It is well accepted that the Court has the power to make freezing orders pursuant to its inherent power and the express power provided under ord 37A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules).
[22] First ... a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party's capacity to deal with his or her assets.[25]
[23] Second, the order is not designed to provide security for the applicant's claim.[26] It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.[27]
[24] Third, the applicant bears the onus both in satisfying the Court that the order should be continued and in satisfying the Court as to the amount which is to be the subject of the order.
[25] Fourth ... an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts.[28]
[26] Fifth, that before such an order can be made it is necessary that the applicant establish -
(a) an arguable case against the defendant;[29] and
(b) that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant's actions in either removing the assets or disposing or dealing with them so as to diminish their value.[30]
[27] Sixth, the balance of convenience must favour the granting of the freezing order.[31]
[28] Seventh ... there is no set process determining the exact nature of an order. The order will be framed according to the circumstances of the case.[32]
[29] Eighth, the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party's assets and property.[33]
[30] Finally, there may be discretionary considerations which militate against the granting of a freezing order, such as delay in bringing the application on before the court or a lack of candour in the materials placed before the court.[34]
100 In Distinctive FX Pty Ltd v Wright,[35] Justice Elliott added that the evidence relied on by a plaintiff in seeking to establish an arguable case against a defendant may also be relied upon to demonstrate that there is a danger a prospective judgment will be wholly or partially unsatisfied as a result of the removal, disposal or diminishing of assets. His Honour also observed that where the allegations made against a defendant contain allegations of serious dishonesty, 'that evidence of itself may satisfy the Court that the requisite danger exists.'[36]
101 Whilst noting the difference in language between 'real risk' under the general law and 'danger' in ord 37A, in the present case the substance of these considerations applies equally, and the result does not change, whether the order is sought pursuant to the inherent powers of the court or pursuant to ord 37A. The plaintiff did not contend otherwise. In this context I note also the observations of the Court of Appeal in Rozenblit v Vainer (Rozenblit)[37] regarding the origins of ord 37A, including the observation that[38] '[t]he governing principles set out in O 37A, which was introduced in 2006 as part of a harmonisation exercise involving all Australian States and Territories, closely reflect the principles enunciated by the High Court of Australia in Cardile v LED Builders Pty Ltd.[39]' In so observing the Court of Appeal again emphasised that the rationale is the prevention of the frustration of the court's processes, not the provision of security, and that caution is required so as not to lightly grant such a drastic remedy.[40]
102 Although the Court of Appeal in Rozenblit was addressing circumstances involving a freezing order pending appeal, its considered observations in that context apply more broadly. The summary of principles there set out was in the following terms:[41]
[19] In summary then, the principles governing an application for a freezing order pending appeal are as follows:
(1) The purpose of granting a freezing order is to prevent the frustration or inhibition of the Court's process by seeking to meet a danger that a prospective judgment of the Court will be wholly or partly unsatisfied. Its purpose is not to provide security in respect of a prospective judgment or order.
(2) A freezing order is to be viewed as an extraordinary interim remedy. The order is a drastic remedy which calls for a high degree of caution on the part of the Court before an order is made.
(3) An applicant for a freezing order pending appeal will be required to establish that there is a good arguable case that the appeal will succeed. This means that it can be seen from the available material that the appeal has a real prospect of success.
(4) It must be shown that there is a reasonable possibility, not necessarily more than a 50 per cent chance, that assets may be disposed of or dealt with or diminished in value if an order is not made.
(5) In the case of an order against a third party, it must be shown that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the third party's ability to exercise power in respect of the relevant assets, or that a court process may be available to the applicant as a result of a prospective judgment, under which the third party may be obliged to disgorge assets or contribute to satisfying the prospective judgment.
(6) The value of the assets covered by a freezing order should not exceed the likely maximum amount of the applicant's claim, including interest and costs.
(7) As a condition of making a freezing order it will normally be appropriate to require the applicant to give undertakings to the Court, including the usual undertaking as to damages, supported if necessary by the provision of security.
(8) The order being discretionary,[42] other considerations including the balance of convenience may bear upon the Court's ultimate decision, but it is not a distinct requirement that the balance of convenience favours the making of the order.
(9) The inherent jurisdiction of the Court is preserved and r 37A.05 simply addresses the minimum requirements that ordinarily need to be satisfied in an application.
104 In Robmatjus,[45] Hargrave J made the following observations regarding the available process against third parties:
[57] The plaintiffs rely upon the second limb of Rule 37A.05(5). Rule 37A.05(5) is based upon the decision of the High Court in Cardile v LED Builders Pty Ltd.[46] The facts in that case bear a number of similarities to the facts in this case. The joint judgment of Gaudron, McHugh, Gummow and Callinan JJ contains the following statement of principle as to the circumstances in which freezing orders may be made against persons who are not parties to the proceeding:
What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion 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", 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.[47]
[58] The principles stated by the High Court are now contained in Rule 37A.05(5). In this case, reliance was placed by the plaintiffs upon sub-rule (b) of that Rule. It was submitted that there may be a process available to the plaintiffs under which the non-parties may be required to disgorge property or otherwise contribute to the funds of the defendant to help satisfy any judgment against it.
[59] A threshold issue was raised in argument. It was submitted on behalf of the defendant and the non-parties that, in order to establish that a relevant process "may" ultimately be available, the plaintiffs must establish "a compelling cause of action" for relief as a result of such process being instigated. It was submitted that a mere possibility that some process may ultimately lead to relief of the relevant kind is not sufficient for the purposes of the rule. I do not accept this submission. Although I accept that a merely theoretical possibility will not fall within the rule, I do not think that a plaintiff need establish a "compelling cause of action". It will be enough if a plaintiff can satisfy the Court that, in all the circumstances of the case, there is a real case to be investigated under the process or processes relied upon as potentially yielding a means of satisfaction of the judgment from the assets of the non-parties.
105 In Gashi,[48] Bell J made the following observations regarding freezing orders against a third party:
[45] Under r 37A.05(5)(a) and (b), the court may make a freezing order against a third party if it is satisfied that an actual or prospective judgment may go unsatisfied (in whole or in part) because the third party "holds" a power of disposition or control over assets "of" the actual or prospective judgment debtor or that, under a process which is or "may" ultimately be available to the applicant, the third party may be ordered to disgorge their assets or contribute towards satisfying the judgment.
[46] In Robmatjus Pty Ltd v Violet Home Loans Australia Pty Ltd,[49] Hargrave J said that r 37A.05(5) was based on the decision of the High Court in Cardile v LED Builders Pty Ltd.[50] In that case, the High Court set out the following principles with respect to making freezing orders against third parties:[51]
What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion 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", 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.
[47] Further, in Robmatjus, Hargrave J went on to say when a relevant process "may" be available:[52]
It was submitted on behalf of the defendant and the non-parties that, in order to establish that a relevant process "may" ultimately be available, the plaintiffs must establish "a compelling cause of action" for relief as a result of such process being instigated. It was submitted that a mere possibility that some process may ultimately lead to relief of the relevant kind is not sufficient for the purposes of the rule. I do not accept this submission. Although I accept that a merely theoretical possibility will not fall within the rule, I do not think that a plaintiff need establish a "compelling cause of action". It will be enough if a plaintiff can satisfy the Court that, in all the circumstances of the case, there is a real case to be investigated under the process or processes relied upon as potentially yielding a means of satisfaction of the judgment from the assets of the non-parties.
[48] The evidence of the deputy commissioner in the present case establishes that the children and the company own certain property which they acquired during the relevant period (2001-2006). The children earned no significant income in that period. The trustee company did not lodge tax returns during that period.
[49] The children did not have the income or independent borrowing capacity to acquire the properties on their own behalf. Mr and Mrs Gashi do not contend that they did. Mr Gashi admits that he bought the relevant properties in the names of his wife and Victoria (Altona), Samira (Niddrie) and Arif (Essendon). On the evidence, Mr Gashi then treated the properties as his own, developing them as he saw fit.
[50] Likewise, the family company had no income or independent borrowing capacity with which to buy property. It appears the company is the vehicle through which Mr Gashi conducts property development activity.
[51] Rule 37A.05(5)(a)(i) refers to a third party who "holds" a power of disposition over assets "of" an actual or prospective judgment debtor. These concepts are capable of applying in different circumstances. As relevant to the present case, an asset is "of" a debtor if they have the beneficial but not the legal ownership. Further, a third party "holds" a power of disposition over such assets if they have the legal but not the beneficial ownership and can dispose of the assets in law. The rule is thus engaged whenever a third party has legal ownership of property on behalf of beneficiaries who are actual or prospective judgment debtors and possesses the power in law to dispose of the property, whether they intend to use that power or not. The fact that they possess the power is sufficient. Of course, these are not the only circumstances in which the rule is engaged, and discretionary considerations will influence whether an order should be made.
[52] In terms of r 37A.05(5)(a), I think there is a danger that a prospective judgment of the deputy commissioner against Mr and Mrs Gashi will go unsatisfied because the Gashi children and the family company hold a power of disposition of the property which they own on Mr and Mrs Gashi's beneficial behalf. There is a danger that the power of disposition will be used to put the property beyond the reach of the deputy commissioner when he comes to enforce the likely judgment.
[53] Rule 37A.05(5)(b) refers to a process which may ultimately be available under which the third party may be required to disgorge assets or make a contribution to the judgment. This also covers (while not being confined to) a case where (as here) the assets are held in law by a third party on behalf of beneficial owners who are actual or prospective judgment debtors. The rule is engaged where the actual or prospective judgment creditors have, in the words of Hargrave J in Robmatjus Pty Ltd v Violet Home Loans Australia Pty Ltd,[53] a "real case to be investigated" pursuant to which the property may be made available for satisfying a judgment debt. That, in my view, is the case here as regards the relevant property of the three Gashi children and the family company.
In my opinion nothing in Rule 37A, introduced by Statutory Rule 102/2006, qualifies the entrenched common law requirement in Victoria that in order for Mareva relief to flow, a good arguable case against the respondent must be demonstrated.
If the threshold was reduced to reflect a real case to be investigated, to determine whether the third party may be obliged to disgorge assets or contribute toward satisfying a judgment or prospective judgment, this, in my opinion would not advance the requirement for a high degree of caution to be exercised on the part of a court invited to make an order of this kind, rather, it would diminish the capacity of a court to give effect to the requirement and would be inconsistent with it.
Finally, in my opinion, no distinction is warranted or should be made as to the test to be applied in the evaluation of the evidence in cases where the Mareva order is sought, whether against a party to the principal proceeding or a non-party.
With the greatest respect to the observations and approach of Hargrave J in Robmatjus, to the extent that his Honour applied the real case to be investigated test for the purposes of granting a freezing order against third parties, I decline to follow and apply such a test.
Accordingly, and in addition to discretionary considerations to be taken into account, as a minimum in my view, a good arguable case against a respondent must be demonstrated before relief may be granted for a freezing order under Rule 37A, whether that relief is sought against a party to the principal proceeding or a third party.
... an applicant for relief against third parties is required to establish a 'good arguable case', and more particularly, a good arguable case that a third party 'may be obliged to disgorge assets or contribute towards satisfying a judgment or prospective judgment'.
108 With respect to the power to make ancillary orders, I refer to, without setting them out, the terms of r 37A.03 of the Rules. With respect to the making of ancillary orders, J Forrest J observed as follows in Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd (No 2):[58]
[16] It is now well settled that a Court has the power to make ancillary disclosure orders in conjunction with the imposition of freezing orders.[59]
[17] The Court has the power to make orders that will achieve the objective of the freezing order. In Hospital Products Ltd v Ballabil Holdings Pty Ltd, Rogers J said:
...Mareva injunctions are granted to preclude the disposal of assets designed to render a defendant judgment proof. An affidavit of discovery of assets may be ordered in every case where the information in such affidavit will further the court's purpose in defeating such a stratagem... The object must remain throughout to prevent disposal of assets in furtherance of the illegitimate aim of making oneself judgment proof and of stultifying the order of the court. Whatever needs to be done to achieve that objective, the court has power to order as part of its inherent jurisdiction.[60] (Emphasis added.)
[18] In Bax Global(Australia) Pty Ltd v Evans,[61] Austin J said:
Since the source of the jurisdiction to make Mareva orders is the Court's inherent power to prevent abuse of its processes and stultification of the administration of justice by the removal of assets from the plaintiff's reach, the Court must also have the power to order disclosure of the nature and location of particular assets or assets of a class so that the Mareva relief is effective and not oppressive. As Robert Goff J pointed out in A v C (at 351), if the plaintiff does not know the number and location of (say) the defendant's bank accounts, a Mareva order in respect of bank accounts generally could be oppressive both to the defendant and to the bankers who are required to act in accordance with it, especially where there is more than one account or several defendants. Without information about the nature and location of the defendant's assets, the plaintiff may be unable to make the risk assessment which is necessary in order to give the undertaking as to damages, or if the undertaking is given, it may lead to an unexpected exposure. Robert Goff J concluded, as do I, that considerations such as these point to the conclusion that in the special cases where the court decides to make Mareva orders, it may make such disclosure orders as are necessary to ensure that the Mareva jurisdiction is properly and effectively exercised.
[19] It follows that any disclosure order should be made for the purpose of rendering the freezing order effective. In Turner v Universal Home Loans,[62] for example, Austin J found that it was inappropriate for the plaintiffs to seek an affidavit of assets and income, when it was plain that the purpose of requiring the affidavit would be related to the allegation of breach of the asset preservation orders, rather than to make the asset preservation orders effective.[63] His Honour concluded that such disclosure would go "outside the jurisdictional basis for ancillary disclosure orders".[64]
[20] In Universal Music Australia Pty Ltd v Sharman License Holdings Ltd,[65] Moore J said:
Ancillary orders can be made to make the Mareva order more efficacious. One such order involves directing the party bound by the Mareva order to file an affidavit disclosing assets on which the Mareva order operates: see generally the judgment of Conti J in Kuan Han Pty Ltd v Oceanview Group Holdings Pty Ltd [2003] FCA 1063 at [45] and following. The reasons why such an affidavit can render the Mareva order more efficacious are helpfully described by Peter Biscoe QC in Mareva and Anton Pillar Orders: Freezing and Search Orders, LexisNexis Butterworths, Sydney, 2005, at [3.3]:
There are several reasons why an assets disclosure order is important to the efficacy the other freezing order. First, disclosure of the assets upon which the freezing order operates makes it more difficult for a respondent surreptitiously to disobey the freezing order. Secondly, disclosure identifies third parties such as banks who have custody of the assets and enables notice of the order to be given to them so as to bind them to the order, for third parties will be guilty of contempt of court if they knowingly assist a respondent to breach the order. Thirdly, disclosure may enable the freezing order to be framed by reference to specific assets rather than as a maximum some [sic] order, thereby minimising oppression to the respondent, and unnecessary exposure of the applicant to risk under its undertaking as to damages. Fourthly, disclosure assists an applicant to make a rational decision whether to continue its undertaking as to damages.[66]
[21] Courts have been careful to ensure that disclosure does not exceed what is necessary to make the freezing order effective. In Iraqi Ministry of Defence v Arcepey Shipping Co SA,[67] for example, Goff J said that the Mareva jurisdiction should not "improve the position of claimants". Rather, it should prevent the injustice of a defendant removing his assets from the jurisdiction which may have otherwise been available to satisfy a judgment. In Australia and New Zealand Banking Group Ltd v Bank of Melbourne Ltd,[68] Ashley J said:
It is no doubt very important that the intention of a Mareva injunction be not frustrated by a concealment or an inadequate disclosure of assets. As against that, a defendant is not to be treated as a "debtor in advance"; and the court should not sanction what appears to be a fishing expedition.
[22] In keeping with these principles, in Macquarie Bank v Riley Street Nominees,[69] Campbell J ordered that the contents of an asset disclosure affidavit should not be disclosed except to the applicant's legal advisers His Honour's intent being to ensure that information went no further than was needed for the purpose of the freezing order.[70]
[23] There are cases in which an ancillary order may be utilised, for example where there is a prima facie case of deprivation of property, to trace funds "with a view to recovering them".[71] Indeed, in this case, when making my initial orders, I concluded:[72]
Here, there is a strong prima facie case that ATO has been deprived of many millions of dollars by the conduct of AES and the directors. It is appropriate that orders be made in relation to both the directors and, as subsequently considered, the third parties, so that AES's funds can be traced and, if it becomes necessary, recovered.
109 J Forrest J also made observations in the same case regarding the importance of caution given the nature of such ancillary orders, and stated that he was not intending to convey '... that there could be an open ended inquiry forcing the third parties to provide information as to the ultimate source of the funds. That is not the purpose of the ancillary orders as the authorities I have referred to demonstrate'.[73]
110 Bell J in Gashi[74] went on to make the following observations regarding ancillary orders:
[59] Rule 37A.03(1) enables the court to make orders which are ancillary to freezing orders. Under r 37A.03(2), such orders include orders for the purposes of eliciting information relating to relevant assets.
[60] Ancillary orders may be made against actual or intended parties to proceedings (such as Mr and Mrs Gashi) and also third parties (such as their three children and the family company).[75]
[61] An ancillary order is just that, not a freestanding order. To make an ancillary order, the criteria for making a freezing order in r 37A.05(4) (parties or prospective parties) and (5) (third-parties) must first be satisfied. Then the court must consider whether to exercise its discretion in r 37A.03(1) to make the ancillary order.
[62] The ex parte order in the present case does not contain ancillary orders. That matter was left for the judge hearing the application for the freezing orders on a final basis, which is the application currently before me.
[63] The deputy commissioner seeks ancillary orders only against the three Gashi children and the family company as third parties. The orders would require them to provide information on affidavit about their world-wide asset holdings and also about their interests in the properties which they acquired with funds provided by Mr and Mrs Gashi.
[64] As the criteria in r 37A.05(5) are satisfied as regards the third parties, the issue is whether I should exercise the court's discretion in r 37A.03(1) to make ancillary orders.
[65] In the circumstances of the present case, I think it is appropriate to do so. The financial and property affairs of Mr and Mrs Gashi have become intermingled with the financial and property affairs of their children and the family company. The facts and circumstances which have given rise to the assessments, on the basis of which the recovery proceeding has been issued, include facts and circumstances relating to the acquisition of the relevant property by the children and the company. Moreover, the nature of the relationship between the three children and the company on the one hand and Mr and Mrs Gashi on the other make it reasonable to require them to disclose information relating to their world-wide asset holdings. The need for this disclosure is directly connected to the need to ensure that the deputy commissioner can enforce the likely judgment.
[66] I will therefore make the ancillary orders sought against the third parties.
111 Prior to its amendment, the primary issues for consideration under the Summons were:
Whether leave should be granted to the plaintiff to file and serve a further amended statement of claim substantially in the form of the Proposed FASOC;
Whether a freezing order should be made against the third defendant, Ms Woodruff;
Whether an ancillary order should be made against Ms Woodruff, Statemark, and Mr Pappas Senior.
Leave to file and serve a further amended statement of claim
112 The plaintiff will be granted leave to file and serve a further amended statement of claim substantially in the form of the Proposed FASOC. The principles relevant to the grant of leave to amend are well known and were not in controversy. They have been rehearsed in many authorities, including Business Service Brokers Pty Ltd v Optus Mobile Pty Ltd (No 3),[76] to which I refer but is not necessary to recite here.
113 The grant of leave will assist in ensuring that the real issues in controversy are determined and assist in avoiding multiplicity of proceedings. Granting leave to amend also suitably serves the overarching purpose in s 7 of the Civil Procedure Act 2010 (Vic). Further, the grant of leave to amend was not opposed by any of the defendants, which presented as an appropriate position for counsel to take.[77]
114 The plaintiff no longer seeks a freezing order over all of Ms Woodruff's assets up to an unencumbered value in excess of $16 million. Rather, the freezing order sought is now confined to only the PB Shares.[78]
115 There was no dispute between the parties regarding the applicable principles the Court is to apply when considering whether to make a freezing order, and I refer in this regard to the principles and observations set out earlier in these reasons.
116 As the evidence, the Proposed FASOC, and the parties' submissions reveal, central to this application is the plaintiff's contention that it has demonstrated a good arguable case that Ms Woodruff will or may be required to disgorge or relinquish the PB Shares because:
The PB Shares are subject to the Guarantee Charge and they were transferred to Ms Woodruff by Statemark in breach of the Deed of Guarantee for no valuable consideration, and in circumstances where Ms Woodruff had actual or constructive knowledge of the PB Shares being subject to the Guarantee Charge.
Further or alternatively, 70 of the PB Shares are subject to the Guarantee Charge and they were transferred to Ms Woodruff by Mr Pappas Senior on 25 February 2020 in breach of the Guarantee Deed for no valuable consideration, and in circumstances where Ms Woodruff had actual or constructive knowledge of the PB Shares being subject to the Guarantee Charge.
Further or alternatively, the transfer of the PB Shares by Statemark to Ms Woodruff, and/or the transfer of 70 of the PB Shares by Mr Pappas Senior to Ms Woodruff, each occurred with the intention to defraud (for the purposes of s 172 of the PLA Vic or s 228 of the PLA Queensland) the plaintiff of the value of the Guarantee Charge over the PB Shares, and the transfers are therefore voidable at the suit of the plaintiff.
Further or alternatively, Ms Woodruff holds the PB Shares on constructive trust in equity for the plaintiff by reason of Ms Woodruff obtaining the PB Shares without providing value and with actual or constructive notice of the plaintiff's prior equitable interest.
By reason of the above the plaintiff is entitled to various relief requiring Ms Woodruff to disgorge or relinquish her interest in the PB Shares so as to allow the shares to be controlled and dealt with by or on behalf of the plaintiff.
Good arguable case? - Statemark alleged transfers to Ms Woodruff in December 2019 and May 2020
117 It is convenient first to consider the alleged transfers of the PB Shares by Statemark to Ms Woodruff. It will be recalled that the plaintiff relied upon documents said to evidence the following transfers by Statemark to Ms Woodruff:
Form 484 recording the transfer of 70 PB Shares to Ms Woodruff (named Josie Pappas) on 11 December 2019;
Form 484 recording the transfer of 30 PB Shares to Ms Woodruff (named Josie Pappas) on 15 May 2020;
Form 484 recording Ms Woodruff's name change from Josie Pappas to Josephine Woodruff.
118 I also refer to the share transfer form dated 11 December 2019 relied upon by Ms Woodruff, which records a transfer of 100 PB Shares by Statemark to Ms Woodruff 'as trustee for the Josie Pappas Trust'. The date of transfer is said to be 11 December 2019.
119 Although it is readily apparent that there is a tension between the content of the Form 484s on the one hand and the December 2019 share transfer form on the other, this tension can be put to one side for the moment. This is because I consider below the question of whether, on the evidence before the Court on this application, the plaintiff has demonstrated a good arguable case that one or more of the PB Shares the subject of each of the three alleged transfers by Statemark to Ms Woodruff was subject to the Guarantee Charge.
120 The short answer to this question is no. I elaborate below as to why.
121 The Statemark Bare Trust is recorded in the Statemark Bare Trust Deed as having been established on 13 July 2018, being the date PB Developments (then named Austpro Australia) was registered, and nearly four months prior to the entry into the Loan Agreement by Austpro and the entry into the Deed of Guarantee by Statemark and Mr Pappas Senior. So much is evident from the Statemark Bare Trust Deed, the resolution of the sole director of Statemark dated 13 July 2018, and the ASIC company extract for PB Developments. The sole director resolution is recorded as having been signed by John Woodruff, as sole director of Statemark, and is in the following terms:
It was proposed that the company in its own capacity and as trustee of the Pappas Family Trust agrees to hold 51 shares in Austpro Australia Pty Ltd and any further shares it may hold in this company as bare trustee for Josephine Woodruff and to this effect agrees to sign a declaration of trust to this effect and to hold the shares at all times beneficially for Josephine Woodruff and at her direction at all times.
122 The terms of the Statemark Bare Trust Deed expressly record that all presently held and after acquired shares in PB Developments (then named Austpro Australia) are held and to be held by Statemark as 'bare trustee for and on behalf and at the direction of' Ms Woodruff.
123 The Guarantee Deed was (relevantly) entered into by Statemark 'in its own capacity and as trustee of the Pappas Family Trust'. The Deed of Guarantee does not record Statemark entering into the Deed of Guarantee in any other capacity, whether as bare trustee of the Statemark Bare Trust, or otherwise.
124 Contrary to the plaintiff's submission, and having regard to the well-known and rehearsed principles applicable to commercial contracts such as the Deed of Guarantee,[79] the plaintiff has not demonstrated a good arguable case that Statemark also entered into the Deed of Guarantee as trustee of the Statemark Bare Trust. It is sufficient in this context to refer to the express capacity in which Statemark is recorded as entering into the Deed of Guarantee and to note that it is not recorded that Statemark entered into the Deed of Guarantee as the trustee of the Statemark Bare Trust or any other trust not referred to.[80] It may also be noted that the evidence before the Court does not suggest otherwise. Such a conclusion also sits comfortably with the well-understood role and obligations of a bare trustee, although my conclusion on this aspect would remain the same even if this consideration was to be put to one side.[81]
125 Although in reaching this conclusion I take into account the terms of the Statemark Bare Trust Deed; the evidence regarding the recording of later transactions; the terms of the share register; the limited evidence of Ms Woodruff and Mr Pappas Senior; and the other matters raised by the plaintiff, on the evidence before the Court, and given the other matters earlier referred to, the plaintiff has not demonstrated a good arguable case that Statemark entered into the Deed of Guarantee as trustee for the Statemark Bare Trust or that the shares the subject of that trust are caught by the Guarantee Charge. For completeness, I add that this would remain the position even if it was accepted that the share register in July 2018 was considered to be in tension with the Statemark Bare Trust Deed because it recorded PB Shares being held for the Pappas Family Trust. That said, I do not accept that the claimed tension exists, or if it does, has the force contended for by the plaintiff. It is to be noted in this context that 18 July 2018 was the date that PB Developments (then Austpro Australia) was first registered, and that both the resolution regarding the Statemark Bare Trust and terms of the Statemark Bare Trust Deed record that it is entered into by Statemark in its own capacity and in its capacity as trustee of the Pappas Family Trust.
126 To the extent that the plaintiff submitted that clause 14 of the Deed of Guarantee supported its contention that on the material before me on this application there was a good arguable case that Statemark entered into the Deed of Guarantee in its capacity as trustee of the Statemark Bare Trust, or that the PB Shares the subject of the Statemark Bare Trust are caught by the Deed of Guarantee, I do not accept that submission.
127 Clause 14.1 of the Deed of Guarantee deals with the application of clause 14 and provides that:
Clause 14 applies where the Guarantor has entered into this Guarantee as trustee of a trust ( whether or not disclosed to the Lender) (called the "Trust")
128 The balance of the provisions in clause 14 of the Deed of Guarantee engage in respect of the trust or trusts that the Guarantor has entered into the Deed of Guarantee in its capacity as trustee of. Because the plaintiff has not shown that there is a good arguable case that Statemark entered into the Deed of Guarantee as trustee of the Statemark Bare Trust, it follows that the plaintiff has not demonstrated a good arguable case that the provisions of clause 14 upon which it relies engage with the Statemark Bare Trust (or its assets) in the circumstances.
129 Having regard to the above, on the evidence before the Court on this application the plaintiff has not shown that it has a good arguable case that the PB Shares the subject of the alleged Statemark transfers to Ms Woodruff in December 2019 and May 2020 were subject to the Guarantee Charge, or the Deed of Guarantee more generally. More particularly with respect to the former, the plaintiff has not demonstrated a good arguable case that the PB Shares the subject of the Statemark transfers constitute personal or other property of the kind referred to in the Guarantee Charge.[82]
130 Given the above, it is not necessary for present purposes to address the question of whether the alleged transfers by Statemark to Ms Woodruff took place without valuable consideration or in circumstances where Ms Woodruff had actual or constructive knowledge that the PB Shares were subject to the Guarantee Charge.[83]
131 It also follows that the plaintiff has not demonstrated a good arguable case that any of the Statemark transfers were voidable under s 172 of the PLA Vic or s 228 of the PLA Queensland, given that the plaintiff has not shown a good arguable case that the shares the subject of the alleged Statemark transfers were subject to the Guarantee Charge. The same result follows in relation to the plaintiff's contention that the shares the subject of the alleged Statemark transfers are held on constructive trust by Ms Woodruff because she acquired them for no value and with constructive knowledge of the plaintiff's prior equitable interest (being the Guarantee Charge).
132 For parallel reasons it follows that the plaintiff has not shown a good arguable case that the PPSA applies to the shares the subject of the alleged Statemark transfers, or that the PPSA is relevantly engaged in the manner discussed below when addressing the 25 February 2020 transfer from Mr Pappas Senior to Ms Woodruff.
Good arguable case? - 25 February 2020 transfer by Mr Pappas Senior to Ms Woodruff
133 As is evident from Ms Woodruff's submissions, she relies upon the December 2019 transfer form in support of her contention that the 100 PB Shares were transferred to her on 11 December 2019 by Statemark as bare trustee.[84] Ms Woodruff also relies upon the share register exhibited to Mr Pharmacis' affidavit, and his evidence that he is informed by Mr Pappas Senior and believes that there have been no transfers of shares in PB Developments since 11 December 2019, which was a point emphasised by Ms Woodruff's senior counsel during the hearing. Thus Ms Woodruff's position is that she has held the PB Shares since 11 December 2019 - although as is apparent from her evidence, she did not depose to such matters or provide any explanation in relation to the same.
134 It will be recalled, however, that the various Form 484s in evidence included two forms recording what are stated to be 'Changes to member's register details' of PB Developments on 25 February 2020 (February Share Transfer Forms). The first form is recorded as having been lodged with ASIC at 6:18pm and records a transfer of 70 of the PB Shares from Ms Woodruff (named 'Jossie Pappas' in the form) to 'Chris Pappas'. The second form is recorded as having been lodged about 15 minutes later at 6:33pm the same day, and records a transfer of 70 of the PB Shares from 'Chris Pappas' to Ms Woodruff (named 'Josie Pappas' in the form).
135 Each of the February Share Transfer Forms records 'Chris Pappas', in his capacity as director of PB Developments (then named Austpro Australia) certifying the information in each of the Form 484s to be 'true and complete'.
136 The plaintiff contended that, even if the Court was not satisfied that a good arguable case had been shown in relation to the Statemark Transfers, it had been shown in relation to the alleged transfer by Mr Pappas Senior to Ms Woodruff. This aspect received little attention in Ms Woodruff's written submissions, although it was asserted in footnote 8 of the submissions that '[t]he contention that Mr Pappas at any time held any share in PB Developments cannot seriously be pursued.' As mentioned earlier, this topic was addressed and engaged with constructively and helpfully by senior counsel for Ms Woodruff during some extended exchanges at the hearing, where the submissions made by Ms Woodruff on the point were exposed and developed.
137 Having regard to the evidence and submissions, I am satisfied that the plaintiff has demonstrated a good arguable case that the 70 shares the subject of the 25 February 2020 transfer from Mr Pappas Senior to Ms Woodruff (70 PB Shares) were subject to the Guarantee Charge at the time of the membership change recorded in the Form 484. I draw attention to the following.
138 First, the February Share Transfer Forms record that the 70 PB Shares were in fact transferred to Chris Pappas on 25 February 2020. The evidence also revealed that it is Mr Pappas Senior who is and was the sole director of PB Developments, and that he was known as 'Chris', with Mr Pappas Junior being known as 'Christopher'. For the purposes of this application I am satisfied that the 'Chris Pappas' referred to in the February Share Transfer Forms is Mr Pappas Senior.
139 Second, s 1274B(2) of the Act gives prima facie evidence status to the matters referred to in the Form 484s, which includes the fact of the 25 February 2020 transfer from Mr Pappas Senior to Ms Woodruff.[85]
140 Third, I am not satisfied on the evidence before me that the prima facie evidentiary status (or other evidentiary value) of the Form 484s has been displaced by Ms Woodruff (or anyone else) proving to the contrary. Neither Ms Woodruff nor Mr Pappas Senior, who are recorded as the parties to the transfers, address the February Share Transfer Forms in their affidavits. The evidence also records that many company records of PB Developments are missing.
141 Further, whilst reliance is placed on the share register and Mr Pharmacis stating that he is informed by Mr Pappas Senior and believes that there were no transfers other than the transfer on 11 December 2019, this sits in at least material tension with the Form 484s recording the transfers between Ms Woodruff and Mr Pappas Senior on 25 February 2020. It is to be remembered in this context that there are four documents lodged with ASIC on different dates that record transfers of varying numbers of the PB Shares to and from Ms Woodruff, all of which are variously inconsistent with the transfer form of 11 December 2019 relied upon by Ms Woodruff. I note also Mr Pappas Senior's evidence that he acts and relies on advice given by lawyers and accountants regarding asset protection.
142 I also observe that the copy share register exhibited by Mr Pharmacis that is said to record the transfer on 11 December 2019 is, in part, in a different (handwritten) form to the earlier transfers in the register,[86] and does not record the relevant share certificate numbers. There are also no supporting minutes recording any resolution to record the 11 December 2019 transfer in the share register, although the result on this application would not change if these matters were put to one side.
143 I also do not accept that the evidence of Mr Gillard regarding the February Forms, or the timing of the lodgement of them, operates, alone or in combination with any other evidence, to displace the evidentiary value of the February Share Transfer Forms. Mr Gillard positively stated that he did not have any recollection as to why it appears that the 70 PB Shares were transferred, and that he does not know who was involved in his office in lodging these forms. He then speculates regarding the prospect of the forms having been lodged in error 'based on his review of the transfers', stating also that, as things stand, he can think of no reason why the transfers occurred. However, on the evidence before me, the documents record, and are evidence for present purposes, of the existence of the transfers to which they refer and record. Whilst the ultimate determination of the facts will necessarily be a matter for trial, for present purposes the documents are evidence appropriately to be taken into account and weighed in the context of the other evidence, as I have done.
144 Fourth, the Guarantee Charge includes a charge in favour of the plaintiff in respect of existing and after acquired personal property, and there is at least a good arguable case that this includes the 70 PB Shares if they were transferred to Mr Pappas Senior on 25 February 2020 as recorded in the Form 484.
145 Fifth, even if it is assumed that, on the proper construction of the Guarantee Charge, the grant of the charge did not occur until 'in an Event of Default',[87] the evidence of Mr Czarny and the Notices of Default demonstrate that there is at least a good arguable case that there was an Event of Default well before the date of the recorded alleged transfer on 25 February 2020.
146 Sixth, given the evidence of Mr Czarny and the absence of consent to the transfer of the 70 PB Shares to Ms Woodruff, the plaintiff has demonstrated a good arguable case that the transfer was in breach of at least clause 9(n) of the Deed of Guarantee, noting also in this context that there was no direct evidence from Mr Pappas Senior or Ms Woodruff about this transfer being in the ordinary course of business or for value.
147 Seventh, the plaintiff has shown at least a good arguable case that the PPSA applies, is relevantly engaged,[88] and in relation to the following:
It was not controversial between the parties that the Deed of Guarantee is a security agreement; that the Guarantee Charge is a security interest; that the PB Shares are an investment instrument; that Ms Woodruff does not contend on this application that the PB Shares were a circulating asset; and that the security interest (ie the Guarantee Charge) has not been registered.
Under s 20 of the PPSA a security interest is enforceable against the third party in respect of particular collateral (relevantly) if the security interest is attached to the collateral and a security agreement that provides for the security interest covers the collateral as referred to in s 20(2) of the PPSA.
The Deed of Guarantee is a security agreement that satisfies s 20(2) of the PPSA because (relevantly) it is evidenced in writing that is signed by Statemark and Mr Pappas Senior and contains a statement that a security interest is taken in all of the guarantors' present and after-acquired property.
Pursuant to s 19(2) of the PPSA and relevantly, a security interest attaches to collateral when:
(a) the Guarantor has rights in the collateral, or the power to transfer rights in the collateral to the secured party; and
(b) either value is given for the security interest or the Guarantor does an act by which the security interest arises.[89]
If the 70 PB Shares were transferred to Mr Pappas Senior by the first of the February Share Transfer Forms, there is at least a good arguable case that he then had rights in that collateral or the power to transfer rights in the collateral to the plaintiff. Further, value was given for the security interest, including the Loan, and/or the Guarantor did an act by which the security interest arose, namely entering into the security agreement and/or defaulting under it.
Although a purchaser (as defined) of an investment instrument takes it free of a security interest under s 50(1) of the PPSA if they give value for it and then take possession or control of it, there is little evidence that value was given by Ms Woodruff, or that she took control or possession - noting the extended definition of control in s 27 of the PPSA and the fact that, even on Ms Woodruff's case, the share register relates to the transfer in December 2019 and not the alleged transfer of the 70 PB Shares on 25 February 2020.
Further, s 296 of the PPSA relevantly provides that in a proceeding in Australia under the PPSA,[90] the onus of proving the fact that a person takes personal property free of a security interest under s 50 of the PPSA lies with the person asserting those facts, which in this case is Ms Woodruff.
In any event, even if s 50(1) of the PPSA was satisfied, the section does not apply if the purchaser takes the instrument with actual or constructive knowledge that the taking constitutes a breach of the security agreement that provides for the security interest. 'Purchaser' has an extended definition which does not have a criterion of value or price, and (relevantly) means a person who takes the instrument by sale, assignment, negotiation, issue, reissue or any other consensual transaction that creates an interest in personal property. Consequently, it may be inferred for present purposes that the alleged 25 February 2020 transfer from Mr Pappas Senior to Ms Woodruff was one or more of such transactions, and it was not contended otherwise.
The meaning of constructive knowledge is addressed in s 297 of the PPSA. Further, and relevantly, under s 299(2) of the PPSA, where a transferee is a member of the same household as the transferor, the following is to be presumed unless the contrary is shown beyond reasonable doubt:
(a) the transferee had actual or constructive knowledge that the acquisition constituted a breach of the security agreement that provides for a security interest in the personal property;
(b) the transferee had actual or constructive knowledge of a security interest in the personal property;
(c) value was not given by the transferee for the interest acquired.
There is a good arguable case that the presumption in s 299 is engaged because there is direct evidence that Ms Woodruff is and has been for many years the domestic partner of Mr Pappas Senior and therefore, it may at least be inferred, is a member of the same household as Mr Pappas Senior (as transferor), and so much was not contested for present purposes.
There is no material evidence from Ms Woodruff or Mr Pappas Senior addressing the matters referred to in sub-paragraph (9) above. In any event, such evidence as there is does not on this application establish beyond reasonable doubt that Ms Woodruff did not have actual or constructive knowledge of the security interest or the presumed breach of the security agreement, or that value was given by Ms Woodruff for the alleged interest acquired. For completeness, I add that the reference to the amount paid in the 25 February 2020 Form 484 is not sufficient to discharge the onus or establish beyond reasonable doubt that value was given for the transfer. I also note for completeness that, although at one point it was faintly submitted on behalf of Ms Woodruff that her affidavit evidence might result in the presumptions in s 299 of the PPSA being rebutted, this submission was not ultimately pressed, which again in my view was an appropriate position for senior counsel to take in the circumstances.
148 The end point is that, having regard to the matters referred to above, the plaintiff has demonstrated for the purposes of this application that it has a good arguable case that Ms Woodruff may be required to disgorge or relinquish the 70 PB Shares the subject of the alleged transfer to Ms Woodruff referred to in the 25 February 2020 Form 484.
149 Having been satisfied that it is established that there is a good arguable case that Ms Woodruff may have to disgorge or relinquish the 70 PB Shares by reason of the matters referred to above, it is not strictly necessary to address the plaintiff's contentions regarding a good arguable case that the alleged transfer by Mr Pappas Senior to Ms Woodruff is voidable pursuant to s 172 of the PLA Vic or s 228 of the PLA Queensland, or that Ms Woodruff holds the said shares on constructive trust by reason of her obtaining them without giving value and with actual or constructive knowledge of the plaintiff's claimed prior equitable interest through the Guarantee Charge. However, I make the following brief observations regarding these matters.
150 As to the constructive trustee in equity contention insofar as it related to the alleged 25 February 2020 transfer from Mr Pappas Senior to Ms Woodruff, for the reasons earlier referred to, a good arguable case has been demonstrated that the 70 PB Shares were subject to the Guarantee Charge at the time of the alleged transfer. On the evidence before the Court I am also satisfied that a good arguable case has been shown that Ms Woodruff had constructive knowledge of the plaintiff's alleged prior equitable interest under the Deed of Guarantee, noting in this regard the character of the knowledge that is required to be established with respect to such a claim. Regarding the character of the constructive knowledge required, it is sufficient for the purposes of this application to refer to the discussion of Professor Ong in the fifth edition of Trusts Law in Australia (at pages 521-524) and the cases there referred to.
151 On the evidence before the Court I am satisfied for the purpose of this application that a good arguable case has been shown that Ms Woodruff has acted with wilful neglect in relation to knowledge of the Deed of Guarantee. It is sufficient to refer to: her evidence regarding the nature of her involvement; the available inference that she acts and has acted in accordance with the wishes, or at the direction, of Mr Pappas Senior in connection with his business activities; the Form 484s; and to the absence of any explanation or other evidence from Ms Woodruff regarding these or other transactions or documents that concern her and are the subject of the evidence.
152 The result is that I am satisfied that the evidence rises high enough to establish a good arguable case that the 70 PB Shares are held by Ms Woodruff as constructive trustee for the plaintiff.
153 For completeness I add that, to the extent that the plaintiff belatedly made reference to the concept of tracing and the observations made in the decision of the Full Federal Court in RnD Funding Pty Ltd v Roncane Pty Ltd,[91] this does not assist the plaintiff. The present case does not involve the tracing of one form of an asset into another. That said, senior counsel for the plaintiff clarified during the hearing that this authority was being referred to not so much for what it says about tracing, but in order to provide further support for the contention that the Guarantee Charge gave rise to an equitable interest in the PB Shares that are alleged to be subject to it.
154 I also accept that the plaintiff has shown that there is a good arguable case that the transfer from Mr Pappas Senior to Ms Woodruff is voidable under s 172 of the PLA Vic or s 228 of the PLA Queensland. The provisions are in identical terms and it is therefore not necessary to address which might apply, although it appears likely that the Queensland legislation will apply, given the evidence regarding the location of the parties and the Form 484s.
155 For the reasons referred to earlier regarding the transfer of the 70 PB Shares, there is at least a good arguable case that this involved an alienation of property by Mr Pappas Senior to defraud creditors and is therefore voidable at the suit of the plaintiff. In so concluding I take into account the well-established principles regarding the operation of these provisions, including those referred to in the decisions of Vickery J in Groeneveld Australia Pty Ltd v Nolten Vastgoed BV[92] and Sloss J in Deputy Commissioner of Taxation v Haritos.[93]
156 With respect to the evidence in connection with the alleged intent to defraud, the matters to be noted include the following:
The alleged transfer was made on 25 February 2020, not long after the service of the Second Default Notice on Statemark and Mr Pappas Senior under the Deed of Guarantee.
Although the precise value of PB Developments is not ascertainable on the evidence before the Court, there is evidence of the company's ownership of substantial land in Mackay and involvement in a property development. It was also stated in the affidavit of Mr Pharmacis that he was informed by Mr Pappas Senior and believed that from the date of its incorporation until about 23 December 2019, PB Developments was dormant and held no assets and had no liabilities. This statement enables it to be inferred for present purposes that the position changed subsequent to 23 December 2019.
The alleged 25 February 2020 transfer from Mr Pappas Senior to Ms Woodruff occurred after the date referred to in the preceding paragraph, and at a time when Mr Pappas Senior was aware that it was alleged that there was a substantial default under the Loan Agreement and Deed of Guarantee. This was in respect of a sum in excess of $16 million, for which it was said Mr Pappas Senior and Statemark were each liable.
Whilst at the date of the alleged 25 February 2020 transfer there was no existing litigation or court order, it may be inferred that it was apparent that there was at least a considerable risk that litigation was to follow if the demands the subject of the First Default Notice and the Second Default Notice were not met or satisfactorily resolved.
The alleged transfer on 25 February 2020 is recorded in the Form 484 as being to Mr Pappas Senior's domestic partner of many years, Ms Woodruff, in circumstances where no evidence is given by either party regarding the circumstances of that alleged transfer or Form 484.
There was no evidence from Ms Woodruff or Mr Pappas Senior regarding value having been provided for the alleged transfer to Ms Woodruff recorded in the 25 February 2020 Form 484 - and noting also that there was some evidence before the Court regarding PB Developments having material assets, including but not limited to the inference able to be drawn from Mr Pharmacis' statement that PB Developments did not have any assets of value prior to 23 December 2019.
In addition, there are at least five documents in evidence, with various inconsistencies and inadequate explanations, recording or referring to transfers of the PB Shares on various different dates shortly before, or not long after, the alleged defaults under the Loan Agreement and the Deed of Guarantee. It will be recalled that these documents comprise: the 11 December 2019 transfer form; the December 2019 Form 484 regarding 70 PB Shares being transferred by Statemark to Ms Woodruff; the 25 February Form 484 recording the transfer of 70 PB Shares by Ms Woodruff to Mr Pappas Senior; the 25 February Form 484 recording the transfer of 70 shares by Mr Pappas Senior to Ms Woodruff; and the 15 May 2020 Form 484 recording the transfer of 30 PB Shares by Statemark to Ms Woodruff.
157 In the circumstances the plaintiff has shown that there is a good arguable case that the alleged transfer on 25 February 2020 by Mr Pappas Senior to Ms Woodruff referred to in the 25 February 2020 Form 484 was an alienation of property made with the intent of Mr Pappas Senior to defraud creditors.
158 I add that it was not contended on the application that the exception in s 172(3) PLA Vic / s 228(3) PLA Queensland provided a defence. In any event, the valuable consideration, good faith, and notice criteria in these sections were not addressed by Ms Woodruff, Mr Pappas Senior or any other deponent in relation to the 25 February 2020 transfer from Mr Pappas Senior to Ms Woodruff. I also note that if reliance is to be placed upon this exculpatory provision, the onus will be on Ms Woodruff. It may also be observed that valuable consideration is defined (in the definition of 'purchaser') in the PLA Vic so that it does not include 'nominal consideration in money', and is similarly defined in s 3 of the PLA Queensland.
159 I turn now to the question of whether there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of Ms Woodruff either removing the 70 PB Shares or disposing or dealing with them so as to diminish their value.
160 Having regard to the evidence before the Court and the applicable principles earlier referred to, I am satisfied that there is such a requisite danger. It is sufficient for present purposes to refer to the five different documents recording variously inconsistent transfers of the PB Shares in and around the time of the alleged defaults under the Loan Agreement and the Deed of Guarantee. Further, having regard to Ms Woodruff's evidence regarding her limited knowledge and role, and the other evidence before the Court, it may at least be inferred for the purposes of this application that Ms Woodruff acted and acts on the instructions or wishes of her domestic partner, Mr Pappas Senior, in connection with his business activities. I also take into account the absence of any explanation of the 25 February 2020 Form 484s by Ms Woodruff and Mr Pappas Senior, and the good arguable case that is demonstrated that Statemark and Mr Pappas Senior are liable under the Deed of Guarantee.
161 Although relevant, I do not find Ms Woodruff's submission regarding the PB Shares registered in her name not having been transferred for in excess of four years to be persuasive when considered with the other evidence in the context of the existence or otherwise of a risk of dissipation of the 70 PB Shares. Shortly stated, this is because it is only very recently that the plaintiff has become aware of the position with the PB Shares and, as is apparent from this application, this is something that Ms Woodruff and Mr Pappas Senior are now aware of.[94]
162 With respect to the other discretionary considerations raised and said to weigh against the making of an order, I make the following further brief observations.
163 First, delay by the plaintiff does not present as a matter of any significance in the present circumstances. As the evidence of Mr Czarny revealed, the plaintiff was not aware of the position with the PB Shares until recently, and then acted sufficiently promptly to bring the application before the Court. In so observing I also take into account the observations in the authorities referred to by the plaintiff in relation to delay, noting also that each case is of course dependent upon its own facts, as is the position here.
164 Second, Ms Woodruff did not put on any evidence regarding any prejudice that might be suffered by her if an order was to be made in relation to the PB Shares. The same may be said of Mr Pappas Senior.
165 Third, as I have referred to earlier, I do not accept that the Court should proceed on the basis that the PB Shares have little or no value. Although the evidence is understandably limited given the asymmetry of information, there is some evidence regarding assets held by PB Developments and its involvement in a major property development. Further, the evidence of Mr Pharmacis regarding PB Development not holding assets prior to 23 December 2019 allows for the inference on this application that the position changed after that date. It is also to be observed that neither Mr Pappas Senior nor Ms Woodruff, being the parties in possession of the relevant information, stated or suggested that the PB Shares were of little or no value.
166 Fourth, I accept the submission of Ms Woodruff that her defence of this application is not a factor that should be taken into account against her, and I do not do so.
167 Fifth, I do not consider there to be force in the contention that the PB Shares can be considered to have little or limited value because PB Developments is able to continue on with its business and activities. Mr Pappas Senior is the sole director of PB Developments and in carrying on its activities he is subject to well-known directors' and fiduciary duties that are owed to the company. There is no basis upon which it can be suggested that the value of PB Developments can be depleted in a manner that would involve a breach of these obligations. Further, if that were to occur then the company would have rights against Mr Pappas Senior that may be able to be pursued in a number of ways depending upon the ultimate outcome of the proceeding. These may include actions by receivers or liquidators, or through derivative proceedings. To the extent that it was suggested that it would be open to PB Developments to sell assets and that this would impact upon the value of the PB Shares, I also do not consider that to be persuasive. If acting in accordance with the duties owed to the company Mr Pappas Senior as director of PB Developments caused company assets to be sold, then that would involve the transfer of one asset in return for an asset of a different kind, for example proceeds of sale.
168 That said, I acknowledge that Ms Woodruff's position on this topic was clarified somewhat during oral submissions. As I have earlier mentioned, senior counsel for Ms Woodruff explained that it was not being contended that Mr Pappas Senior could act inappropriately. Rather, it was being submitted that PB Developments would be subject to commercial risk, to which I raised the question of whether there might also be exposure to commercial opportunity or gain. In any event, these matters involve conjecture and speculation and carry little or no weight.
169 Taking into account the matters referred to above, in my view the balance of convenience also favours the making of an order in respect of the 70 PB Shares. As the authorities reveal, the Court should take the course that appears to carry the lower risk of injustice if it turns out to be wrong, which in my view favours making a confined freezing order similar to that now sought by the plaintiff, but in respect of only the 70 PB Shares, and reserving liberty to apply.
170 As mentioned previously, the Summons was amended and the plaintiff did not press its application for ancillary orders (to the proposed freezing order against Ms Woodruff) against Statemark, Mr Pappas Senior or Ms Woodruff. On the material before me this appeared to be an appropriate course for the plaintiff to take in the circumstances. I also note for completeness that the plaintiff alleges that the Deed of Guarantee contains terms which impose an obligation upon each of Statemark and Mr Pappas Senior to provide to the plaintiff financial and other information when a request is made in accordance with the terms of the Deed of Guarantee. If that is so and a request has not been made, then presumably that is a course open to the plaintiff, although this is a matter between the parties and I say no more about it.
171 For the reasons referred to above I have concluded that:
The plaintiff should have leave to file and serve an amended summons substantially in the form provided to the Court on 20 August 2024, to be filed and served by 4:00pm on 22 August 2024.
The plaintiff should have leave to file and serve a further amended statement of claim substantially in the form of the proposed further amended statement of claim provided to the Court on 8 August 2024, to be filed and served by 4:00pm on 23 August 2024.
Subject to senior counsel for the plaintiff confirming that he is instructed to give, and does give, the usual undertaking as to damages, an order should be made, subject to further order, that the third defendant, Josephine Woodruff, be restrained from disposing of, dealing with, transferring, encumbering or in any way diminishing the value of 70 of the 100 shares registered in her name in the capital of Point Bay Developments Pty Ltd (ACN 627 498 944).
Timetabling directions should be made for the filing and service of responding pleadings to the further amended statement of claim and further to progress the proceeding.
Liberty to apply should be reserved.
172 Following further discussion with counsel for the parties after delivering my reasons orally, the parties agreed on a suitable proposed form of order. The orders were made in open court on 21 August 2024 and authenticated later that day. The authenticated orders are in the following terms:[95]
(a) the third defendant file and serve a defence to the amended statement of claim; and
(b) the first and second defendant file and serve any amended defence to the amended statement of claim and counterclaim.
(a) the plaintiff file and serve any reply to the third defendant's defence; and
(b) the plaintiff file and serve a reply to the first and second defendants' defence, and the defendants by counterclaim file and serve a defence to the first and second defendants' counterclaim.
[1] Some small parts of paragraphs 34 and 65 of the Czarny Affidavit were not read, the detail of which is recorded on the transcript and need not be further addressed.
[3] With no disrespect intended to the first defendant or his son, I have used the defined terms 'Mr Pappas Senior' and 'Mr Pappas Junior' because father and son each have the same name.
[5] Czarny Affidavit, [45], amended to reflect some terms defined in these reasons and correct name spelling where that is known. Also, references to Pappas are references to Mr Pappas Senior.
[7] Affidavit of Graeme Anthony Gillard, sworn 30 July 2024, pages 42-43. This is the trust that the plaintiff defines as the 'Josie Woodruff Trust' in its Revised Written Submissions.
[8] Which Mr Gillard erroneously referred to as being dated 20 February 2020 not 25 February 2020, although nothing turns on this.
[9] Which Mr Pappas Senior said did not proceed because Xiaoye Du did not come up with the capital.
[10] [2008] VSC 300, [22]-[30] (J Forrest J).
[11] [2023] VSC 715, [42]-[45] (Harris J).
[12] [2021] FCA 1095, [310] (Colvin J).
[13] (1979) ALR 297, citing Freeman v Pope (1870) 5 Chancery App 538.
[14] [2010] VSC 120, [13]-[14]. See the extracts earlier set out in these reasons.
[15] (1989) 18 NSWLR 319 (Gleeson CJ, Meagher JA and Rogers AJA agreeing).
[16] [2015] VSC 59, [39] (Hargrave J).
[17] Third defendant's submissions, filed 13 August 2024, pages 5-9. The relevant sections of the submissions have been reproduced in full, including typographical errors apparent in the original, but with '[sic]' annotations.
[18] Reference was made to the observations of Halley J in Morelli (liquidator), in the matter of FW Projects Pty Limited (in liq) v White Hills Pty Limited [2024] FCA 789, [66]-[67].
[19] [2021] NSWSC 689, [268]-[271].
[20] Ms Woodruff's submissions also made plain that it was not contended on this application that the PB Shares were a 'circulating asset' within the meaning of that term as used in the PPSA.
[21] [2013] VSCA 260; (2013) 43 VR 243 [23] (Redlich and Coghlan JJA and T Forrest AJA).
[22] I addressed many of these principles in Arabic Assemblies of God Inc v Land of Refuge Arabic Church in Melbourne Inc [2020] VSC 24, [13]-[18].
[24] Footnotes included as in original.
[25] Cardile v LED Builders Pty Limited (1998) 198 CLR 380, [51] (Cardile); Practice Note 3 of 2006.
[26] Jackson v Sterling Industries [1987] HCA 23; (1987) 162 CLR 612, 621, 625.
[27] Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1, [73].
[28] Hartwell Trent (Aust) Pty Ltd v Tefal Societe Anonyme [1968] VicRp 1; [1968] VR 3, 13.
[29] Glenwood Management Group Pty Ltd v Mayo [1991] VicRp 45; [1991] 2 VR 49, 49. It is apparent from the balance of the reasons of J Forrest J and the decision his Honour cited that this is intended to be a reference to a 'good arguable case'.
[30] Rule 37A.02(1) Under the general law the plaintiff must establish that there is a real risk of assets being disposed of: Cardile [122].
[31] Consolidated Constructions Pty Ltd v Bellenville Pty Ltd [2002] FCA 1513.
[32] Jackson v Sterling Industries [1987] HCA 23; (1987) 162 CLR 612, 621.
[35] [2015] VSC 299, [39].
[36] Referring to Victoria University of Technology v Wilson [2003] VSC 299, [33] (Redlich J); Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, 325F-326A (Gleeson CJ, with whom Meagher JA and Rogers AJA agreed).
[38] Ibid, [14] (McLeish and Niall JJA).
[39] (1999) 198 CLR 380 (citation in original).
[40] [2019] VSCA 164, [14] (McLeish and Niall JJA).
[42] Cardile (1999) 198 CLR 380, 404 [53] (Gaudron, McHugh, Gummow and Callinan JJ) (citations in original).
[49] [2007] VSC 165 at [57].
[51] At 405-6, [57] per Gaudron, McHugh, Gummow and Callinan JJ.
[52] [2007] VSC 165 at [59].
[53] [2007] VSC 165 at [59].
[56] See eg Rafferty v Time 2000 West Pty Ltd (No 7) [2011] FCA 405; Deputy Commissioner of Taxation v Ekelmans [2013] VSC 346; Suzhou Haishun Investment Management Co Ltd v Zhao (No 2) [2018] VSC 176.
[57] [2013] VSC 346, [26].
[58] [2009] VSC 527. Footnotes included. I refer also to the helpful discussion by Justice Peter Biscoe in Mareva and Anton Pillar Orders: Freezing and Search Orders (LexisNexis Butterworths, 2nd ed, Sydney, 2005) and in particular, chapter 3, which deals with ancillary orders. This includes references to numerous authorities addressing the need for exceptional circumstances before an order would be made requiring a respondent to attend court for cross-examination in relation to a disclosure of assets affidavit or statement - see, for example, paragraphs 3.28 to 3.37. I refer also to chapter 9 'Sanctions for Disobedience'.
[59] See, eg, A v C (1980) 2 All ER 347, Hospital Products Limited v Ballabil Holdings Pty Ltd (1984) 2 NSWLR 662, 669.
[60] (1984) 2 NSWLR 662, 669.
[61] (1999) NSWSC 815 [23].
[68] Unreported, Victorian Supreme Court, 26 June 2005.
[71] Royal Australian College of Physicians Ltd v Yadam [2006] NSWSC 1463.
[72] [2009] VSC 418 [47].
[73] At [28]. His Honour also recognised and emphasised that ancillary orders are not intended to constitute interrogation or specific discovery where that would not be truly facilitative of the freezing orders in question - at [29] and in the particular circumstances there described.
[76] [2022] VSC 283, [22]-[31] (Connock J).
[77] I note for completeness that after my ruling had been delivered ex tempore there was further discussion regarding the proposed amendments, and senior counsel for the plaintiff informed the parties of a further revision that was needed in connection with the 70 PB Shares, which was not opposed.
[78] I add for completeness that had the application for the broader form of relief been pressed, against Ms Woodruff, on the material currently before the Court it would not have succeeded. Given how the application was ultimately pursued it is not necessary to say anything further on this topic for present purposes.
[79] Which need not be set out but see, for example, the recent summary in Selak v National Tiles Co Pty Ltd (No 4) [2024] VSC 438, [245]-[250] (Connock J).
[80] Except as trustee for the Pappas Family Trust, as referred to in the previous paragraph.
[81] See, for example, Dennis Ong, Trusts Law in Australia (The Federation Press, 5th ed, 2018) 501-503 and the cases there cited, and also CGU Insurance Ltd v One.Tel Ltd (in liq) [2010] HCA 26; (2010) 242 CLR 174 at [36] (French CJ, Haydon, Crennan, Kiefel and Bell JJ).
[82] See the Guarantee Charge in clause 13 of the Deed of Guarantee set out earlier in these reasons.
[83] That said, I note for completeness that the ASIC Form 484s recorded that one dollar had been paid for each of the 100 shares transferred to Ms Woodruff, totalling $100, and that the December 2019 transfer form recorded that $100 had been paid for the 100 PB Shares, which Mr Pappas Senior informed his solicitor was paid by cash.
[84] Which it will be recalled is stated to be in her capacity of the Josie Pappas Trust, although this unexplained tension or inconsistency need not be further explored for present purposes.
[85] And the documents stand as evidence on the application in any event, even if s 1274B(2) of the Act did not have that operation or is put to one side.
[86] Meaning that the top parts of other entries are typed. I am not referring to the fact that the handwriting is different, noting also that John Woodruff passed away in March 2021.
[87] See clause 13 of the Deed of Guarantee.
[88] During the exchanges with senior counsel for Ms Woodruff and the Bench during the hearing it became apparent that so much was not relevantly resisted for the purposes of this application if a finding is made that there was a good arguable case that the 70 PB Shares the subject of the Form 484 were caught by the Guarantee Charge.
[89] Section 19(3) of the PPSA regarding a specified later time for attachment is not relevant for present purposes.
[90] It was not contended by either party that this is not such a proceeding.
[91] [2023] FCAFC 28, [114]-[115] (Beach, Derrington and Halley JJ agreeing).
[92] [2011] VSC 18, [61]-[75].
[93] [2014] VSC 379, [218]-[232].
[94] Noting also that the PB Shares were subject to the undertaking given on 16 July 2024 until the determination of the Summons.
[95] The plaintiff did not at this stage propose that the orders be endorsed with a Penal Notice and therefore the authenticated orders are not endorsed in that way.
Manda Capital Holdings Pty Ltd
Pappas [2024] VSC 495
(1989) 18 NSWLR 319
(2013) 43 VR 243
(1998) 198 CLR 380
(1987) 162 CLR 612
(1998) 195 CLR 1
(1999) 198 CLR 380
(1984) 2 NSWLR 662
(2010) 242 CLR 174