Plaintiffs v Defendants

2 The first plaintiff is Gracon Properties. It has three directors: the second plaintiff (Atanas), the third plaintiff (Ile also known as Elliot) and the first defendant (Kosta).[1]

3 The defendants fall into two separately represented groups.

4 The first group comprises Kosta, the second defendant (Divine Complex), fourth defendant (Fusion 2) and fifth defendant (Inspire). I shall refer to them as the Kosta Parties.

5 The second group comprises the third defendant, Northern Link.

6 Following the making of ex-parte freezing orders in the sum of $1.5m against each of the named defendants[2] on 22 August 2025, I heard the contested inter-partes application on 5 September 2025. At the conclusion of argument on 5 September 2025, I made interim freezing orders until midnight on 17 September 2025 or until further order of the Court, so as to provide the defendants an opportunity to file and serve any responsive evidence and submissions on the alleged quantum of the plaintiffs' claims.

7 For the reasons that follow, I have determined that it is appropriate to make freezing orders against each of the defendants in the sum of $3.2 million, until the hearing and determination of the proceeding or further order.

8 The Court has power to make freezing orders pursuant to its inherent power and the express power provided under order 37A of the Rules.[3]

9 The applicable principles concerning the making of freezing orders were articulated by Forrest J in Zhen v Mo[4] and by the Court of Appeal in the context of a pending appeal, in Rozenblit v Vainer.[5] Synthesising those authorities, the relevant and applicable principles are as follows.

(a) First, a freezing order is a drastic and extraordinary remedy. A court must exercise a high degree of caution before an order is made.[6]

(b) Second, the purpose of granting a freezing order is to prevent the frustration of the Court's process by seeking to meet a danger that a prospective judgment of the Court will be wholly or partly unsatisfied.[7]

(c) Third, an applicant must establish, by admissible evidence, the existence of:[8]

(i) a good arguable case against the defendant; and

(ii) that there is a danger that the prospective judgment will be partly or wholly unsatisfied as a result of the defendant's actions in either removing assets or disposing or dealing with them so as to diminish their value. It must be shown that there is a 'reasonable possibility' that assets may be disposed of, dealt with, or diminished in value if an order is not made.[9]

(d) Fourth, the applicant must establish with some precision the value of the prospective judgment so that the value of the assets covered by a freezing order does not exceed the likely maximum amount of the applicant's claim, including interest and costs.[10]

(e) Fifth, as the making of a freezing order is discretionary, other considerations may weigh in favour or against the making of such an order, including: the balance of convenience; any delay in bringing the application before the court; or a lack of candour in the materials before the court.[11]

10 It is not a mandatory requirement that the balance of convenience favours the grant of a freezing order.[12] This is made clear by the carefully considered obiter of the Court of Appeal in Rozenblit:[13]

There are some references in the cases to the balance of convenience as a necessary element to be satisfied as a precondition for the making of a freezing order.

...

However, these cases concern injunctions or stays pending appeal. The joint judgment in Cardile makes it clear that a freezing order is not an injunction and that principles governing injunctions do not necessarily apply in the context of freezing orders. The judgment makes no reference in its extensive discussion of the governing principles to the balance of inconvenience. In those circumstances, although the point does not now need to be decided, our present view is that the preferable approach is to treat the balance of convenience as only one among multiple discretionary considerations rather than as a mandatory requirement.

11 Gracon Properties was incorporated on 3 April 2020. Gracon Properties is a company within the broader Gracon Group. Since its incorporation, Gracon Properties has had as its directors each of Kosta, Atanas and Ile. Each of Kosta, Atanas and Ile are equal shareholders in Gracon Properties. Gracon Properties is the trustee of the Gracon Properties Trust and each of Kosta, Atanas and Ile also hold one third of the units in the Gracon Properties Trust.

12 There is a dispute between the parties as to the scope of the activities of the Gracon Group and, more specifically, the activities of Gracon Properties within that group. The Kosta Parties contend that in or about May 2020, Atanas, Ile and Kosta agreed to commence a business with the intention of building and managing the construction of commercial and industrial units with each of them holding equal shares in that business. They further contend that the sole business purpose of Gracon Properties was to own the title to a warehouse in Broadmeadows, which at all material times was the office space intended to be used by the Gracon Group. The contention of the Kosta Parties as to the scope of the activities of the Gracon Group and Gracon Properties is to be contrasted with the position taken by the plaintiffs. The plaintiffs allege that since about May 2019, Kosta, Atanas and Ile have been parties to a joint venture agreement concerning their investment in, and the development of, commercial business properties in Melbourne via several related entities within the Gracon Group of companies including, upon its incorporation, Gracon Properties.

13 The resolution of the scope of the activities of Gracon Group and the proper role of Gracon Properties within that group will need to await determination at trial. On an application of this type, it is not necessary or appropriate for me to determine that dispute.

14 For present purposes, it is sufficient to observe that the Kosta Parties admit that since April 2020, Kosta owed Gracon Properties the following duties:

(a) to act honestly and in good faith in the best interests of Gracon Properties and for a proper purpose;

(b) not to use his position as a director of Gracon Properties to gain an advantage for himself or another person or to cause detriment to Gracon Properties;

(c) not to use information gained in his position as a director of Gracon Properties to gain an advantage for himself or another person or to cause detriment to Gracon Properties; and,

(d) not to allow his own interests to conflict with the interest of Gracon Properties.

15 It is within the context of the foregoing admitted duties that Kosta's conduct, as admitted on the pleadings or otherwise established uncontroversially on the evidence, falls to be evaluated on the present application.

16 The admitted or uncontroversial facts are as follows.

17 On or about 14 April 2022, Kosta was asked by Ile to send an offer to purchase the property at 30 Willandra Drive, Epping (the Property). The offer was made on the letterhead of Gracon Group and the nominated purchaser was Gracon Properties. Kosta completed the form in accordance with instructions he received from Ile.

18 On or about 8 June 2022, Kosta and Ile signed an expression of interest (EOI) for the Property with a purchase price of $7,730,450 excluding GST. The purchasing entity was identified on the EOI as Gracon Properties and/or nominee. Kosta's evidence as to the signing of the EOI on 8 June 2022 was as follows:

(a) I received a call from each of Atanas and Ile on that day asking me to urgently sign the expression of interest;

(b) each of them said words to the effect that there was an urgent deadline for submission of an offer, two directors needed to sign the offer and each of them were not in a position to complete the document;

(c) I was flustered by the request to sign;

(d) as best as I can recall, I had never been asked to sign any previous EOI or offer to purchase land on any other project and I had minimal involvement in the dealings with real estate agents on all other joint projects with Atanas and Ile; and

(e) I did not pay close attention to the details on the form.

19 By his evidence Kosta therefore admits to an understanding that he was being asked to sign the EOI as a director. Tellingly for the purposes of this application, Kosta gave the following direct evidence as to his rationale for signing the EOI (emphasis added):

My reasons for signing and submitting the EOI was that I was scared of what Atanas and Ile might do if I refused to sign the EOI, told them I was not interested in pursuing any further developments with them or worse still, they discovered that I was arranging to purchase the land.

20 The emphasised part of Kosta's evidence is significant for two reasons. First, it provides direct prima facie evidence that on or about 8 June 2022, Kosta was himself arranging to purchase the Property whilst Gracon Properties was also pursuing the Property. Second, it provides direct prima facie evidence that Kosta was conscious of the perceived need to conceal from Atanas and Ile his self-interested activities with respect to the Property.

21 Shortly after deposing to the above matters, Kosta gave the following evidence:

What I also did and which I have never denied is that I arranged for another purchaser to make an offer on the [P]roperty on or about 10 June 2022.

22 Those arrangements were as follows. On or about 10 June 2022, Mr Steve Previti entered into the sale contract for the Property on behalf of a company known as Elite Environmental Pty Ltd. Mr Previti is a member of Kosta's extended family, being the brother-in-law of Kosta's son Aleks. The purchaser on the sale contract was named as Elite Environmental and/or its nominee. Kosta and Divine Complex admit that Kosta procured the execution of the sale contract by Mr Previti. Kosta and Divine Complex also positively plead that in executing the sale contract Mr Previti was acting on behalf of Kosta and on Kosta's instructions.

23 The purchase price under the sale contract was $8,367,575 with settlement to occur by 30 March 2023. Kosta and Divine Complex positively plead that Kosta paid the $840,000 deposit under the sale contract on or about 14 June 2022 and incurred costs in the amount of approximately $220,000 for the costs of consultant reports and other holding costs.

24 Kosta and Divine Complex admit that at no time did, or has, Kosta disclosed the existence of the sale contract to Ile or Atanas.

25 Following the execution of the contract of sale by Mr Previti, the presently relevant facts as to what occurred in the period leading up to settlement are as follows.

26 In or about January 2023, Kosta approached Mr Gabriel Lotesto to enquire if he would be interested in purchasing and developing the Property. The proposal put to Mr Lotesto was to develop the Property into a complex of some 50 factory units which would then be sold (Development Project).

27 Mr Lotesto determined to introduce his friend, John Beninato, to the possibility of investing in the proposed Development Project.

28 In or about February 2023, the ownership structure of the Development Project was agreed between Mr Lotesto, Mr Beninato and Kosta. Each man caused a special purpose vehicle to be incorporated, with the intention that each special purpose vehicle would be partners in the Development Project. To this end:

(a) Mr Lotesto incorporated Lotcon Holdings Pty Ltd (Lotcon);

(b) Mr Beninato incorporated Bencon Property Holdings Pty Ltd (Bencon); and,

(c) Kosta incorporated Divine Complex.

29 The agreed structure was that the partnership would be managed by a newly incorporated company, Northern Link. Northern Link was incorporated for the purpose of being nominated as the purchaser of the Property and to hold the property on trust for Bencon, Lotcon and Divine Complex (being partners of the partnership) and to act as agent for Bencon, Lotcon and Divine Complex.

30 It is necessary to observe, and it is of some significance in evaluating the 'good arguable case' against Northern Link, that the plaintiffs do not make any allegations concerning the knowledge of Mr Beninato and Mr Lotesto (or their respective controlled entities) as to Kosta's alleged wrongdoing.

31 On or about 22 March 2023, Kosta caused the incorporation of Divine Complex. Since that time, Kosta has also been the sole director, secretary and shareholder of Divine Complex. The purpose of the incorporation of Divine Complex was to participate in the purchase and development of the Property.

32 Northern Link was incorporated on 23 March 2023.

33 On 23 March 2023, the date of Northern Link's incorporation, Divine Complex, Bencon and Lotcon appointed Northern Link as their agent to develop the Property. Kosta, on behalf of Divine Complex, signed the appointment of Northern Link as agent.

34 On or about 28 March 2023, Mr Previti, on behalf of Elite Environmental, nominated Northern Link as purchaser under the contract of sale. The Kosta Parties admit that Kosta procured the nomination of Northern Link as the purchaser under the sale contract.

35 On or about 30 March 2023, Northern Link became the registered proprietor of the Property.

36 The Partnership Agreement is dated 16 November 2023. It relevantly provides that:

(a) the 'Partnership' is the legal partnership established for the joint enterprise between the three partners - Divine Complex, Bencon and Lotcon;[14]

(b) the proportionate interest of Bencon, Lotcon and Divine Complex in the partnership, partnership property and Northern Link is: 40%; 40% and 20% respectively;

(c) 'Partnership Property' means any property and interest of the Partnership or Northern Link and includes the Property;

(d) each partner is entitled (but not obliged) to appoint one director to Northern Link for such term as the partner determines that the directors shall, subject to the Partnership Agreement, manage and control the activities of Northern Link;

(e) Northern Link carries out its role and responsibilities as agent on behalf of the partners;

(f) as soon as reasonably practicable, Northern Link must enter into a contract with Fusion 2 for the construction of buildings on the Property;

(g) in return for completion of, inter alia, the construction works for the Development, Fusion 2 would be entitled to be paid a total construction fee[15] incorporating a 12% builder's margin;

(h) Northern Link shall appoint Inspire to manage various management aspects of the Development and otherwise carry out the day to day management of the Development and financial affairs of the Partnership;

(i) a significant number of matters concerning the operation of the partnership, require the unanimous approval of partners, including but not limited to: variations; acquisitions above $50,000; the sale of any part of the Partnership Property; and, entering into the construction loan or incurring any other debt.

37 Divine Complex has not, hitherto, exercised its right to appoint a director of Northern Link. Northern Link's two appointed directors are Mr Lotesto and Mr Beninato. The failure of Divine Complex to appoint a director was not explained in the evidence. A presently available inference is that no appointment was made so as to conceal Kosta's involvement in the company which owned the Property.

(a) Consistently with the terms of the Partnership Agreement:Fusion 2 was appointed by Northern Link as the builder for the construction of the Property by a building contract dated 5 June 2024; and,

(b) Inspire was appointed by Northern Link as the development manager responsible for the development of the Property by an executed development agreement dated 15 June 2023.

38 Fusion 2 was incorporated on 31 May 2023. Kosta was a director of Fusion 2 from its incorporation until 17 February 2025 and has been a shareholder at all material times. Kosta's son Aleks has, since 17 February 2025, been the sole director of Fusion 2.

39 Kosta has been the sole director of Inspire at all material times. The sole shareholder of Inspire is Vision Choice Group Pty Ltd (ACN 652 809 967) (Vision Choice). Kosta was the sole director and shareholder of Vision Choice from its incorporation until 7 February 2025.

40 The Partnership Agreement records that the partners have consented to the appointment of Fusion 2 and Inspire 'with express knowledge that there would otherwise exist a conflict of interest'. That is, of course, not surprising given Kosta's interest in Divine Complex, Fusion 2 and Inspire. As Mr Lotesto deposed, both 'Fusion [2] and Inspire were Kosta's companies, and his services as the builder and project manager for the Development Projects were one of his primary contributions to the venture'. The corollary of Mr Lotesto's evidence is that the appointment of Fusion 2 and Inspire were also a further means (in addition to Divine Complex's 20% interest) by which Kosta could obtain a benefit from the development of the Property.

41 The evidence filed to date supports a conclusion that Kosta directly or indirectly controls Divine Complex, Fusion 2 and Inspire.

42 Pursuant to the Partnership Agreement, Fusion 2 is entitled to a builder's margin of 12% on top of all of its costs of delivering the works under the building contract. That is, the Partnership Agreement reflects an intention that the contract price will be arrived at by incorporating a builder's margin of 12%. The building contract is signed by Kosta and Aleks Gracievski for the contract sum of $9,679.599. The plaintiffs contend that this is likely to mean that Fusion 2 could have expected profit totalling $1,161,551.90 excluding GST from the performance of the works under the building contract. Neither Fusion 2 nor any of the other defendants gave evidence contesting the estimated profit that may have been derived by Fusion 2 from the performance of the building works.

43 The value of the management agreement is $242,500. There is no evidence presently as to what the particular margin is under the management agreement. The plaintiffs have given hearsay evidence that a typical margin charged under such an agreement is approximately 12%, meaning that Inspire could have an expected profit under the management agreement of $29,100. Neither Inspire nor any other defendant adduced evidence on the application contesting the validity or appropriateness of that estimate.

44 Mr Lotesto gave evidence that in or around April to May 2025, the construction phase of the Development Project came to an end and on 7 May 2025 a plan of sub-division was registered. During the course of the Development Project, a marketing campaign was conducted to secure off-plan sales for the new units. Out of the 50 units constructed, 19 off-plan contracts of sale were executed and after the sub-division was registered, 18 of those units settled. One of the off-the plan sales, being unit 17, is presently the subject of a dispute before the County Court of Victoria and has not settled. Northern Link remains the registered proprietor of unit 17.

45 Mr Lotesto gave evidence that the total value of the units sold was $8,227,250.07. From the period between the acquisition of the Property by Northern Link to the settlement of the off-plan sales, Northern Link was required to make repayments in the sum of $8,838,247.69. As a consequence, after the sale of the 18 units there has been a shortfall of $825,151.31.

46 Mr Lotesto gave evidence that due to the lack of any further sales, and the shortfall which resulted from the off-plan sales, the amount of $10,072,886.17 was still outstanding on the loan which had been made to Northern Link for the purpose of purchasing the Property and funding its construction.

47 With interest accruing at a rate of 11.39%, together with other charges, Mr Lotesto deposed that Northern Link was not able to service the interest payments on the loan as it had insufficient funds to do so and that Kosta, Mr Beninato and Mr Lotesto decided to repay the loan through their respective partner entities and by the partitioning of a majority of the unsold units to the shareholders and partners of Northern Link.

48 The partitioning process was provided for by the terms of the Partnership Agreement and as at the date of Mr Lotesto's evidence on 29 August 2025:

(a) 18 out of 50 units have been sold pursuant to off-the plan contracts of sale;

(b) 11 out of 50 units had been partitioned to Bencon;

(c) 11 out of 50 units had been partitioned to Lotcon;

(d) seven out of 50 units had been partitioned to Divine Complex;

(e) two out of 50 units (Lots 60 and 66) had been transferred to Bencon, Lotcon and Divine as tenants in common in one equal third shares; and,

(f) one of the 50 units (unit 17) was partitioned to Northern Link and is the subject of a proceeding in the County Court concerning the validity of the purchaser's rescission of the applicable contract of sale.

49 As at 29 August 2025, Northern Link's assets were as follows:

(a) unit 17, which is the subject of the proceeding in the County Court of Victoria;

(b) $95,900 being a 10% deposit for the sale of Unit 17 held in the trust account of Northern Link's conveyancer;

(c) cash in the bank in the amount of $9,120.49; and,

(d) the chose in action in respect of the proceeding in the County Court of Victoria.

50 Turning to the first criterion for the making of a freezing order, the threshold set by the good arguable case requirement is a 'very low one'.[16] Importantly, the good arguable case threshold is less stringent than the 'prima facie cause of action' criterion applicable in the different juridical environment of interlocutory injunctions.[17] On an application such as this, the court cannot and should not attempt to resolve disputed factual issues.[18]

51 On the face of the admitted and uncontroversial facts, Gracon Properties was pursuing an opportunity to purchase the Property. Kosta, acting as its fiduciary, was aware of the pursuit of that opportunity. Kosta issued both the letter of offer on behalf of Gracon Properties on 14 April 2022 and the EOI on 8 June 2022. At the same time as he was signing the EOI, and based on his own evidence, he was arranging - with deliberate secrecy - to purchase the Property. That purchase was being undertaken for the advancement of his own interests.

52 These matters give rise to a good arguable case that Kosta has breached the fiduciary duties that he owed to Gracon Properties.

53 An orthodox statement of the law is that:[19]

[A] director of a company is under a fiduciary obligation not to promote his or her personal interest by making or pursuing a gain or benefit in circumstances in which there was a conflict or a real or substantial possibility of a conflict between his or her personal interest and the interests of the company without the fully informed consent of the company.

54 The diversion of a business or commercial opportunity by a director of a company for personal benefit may be in breach of one or both of two overlapping fiduciary principles, commonly referred to as the 'conflict rule' and the 'profit rule'. In Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan,[20] Gageler J explained:[21]

"The first", often referred to as the "conflict rule", "is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest". The unconscionability which attracts equitable remedies in circumstances where the conflict rule alone is invoked lies not so much in receipt by the fiduciary of the benefit or gain (over which the fiduciary need not have control) as in retention by the fiduciary of the benefit or gain which in conscience ought to be disgorged to the principal.

"The second", often referred to as the "profit rule", "is that which requires the fiduciary to account for any benefit or gain obtained by reason of or by use of [the] fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing [the fiduciary's] position for [the fiduciary's] personal advantage." The unconscionability which attracts equitable remedies in such circumstances lies in pursuit by the fiduciary of self-interest, or, more precisely, in pursuit of an interest other than the exclusive interest of the principal.

55 In referring to the general statements of principle above, I do not lose sight of the fact that the ultimate scope of Kosta's fiduciary duties to Gracon Properties is context specific and will require determination at trial. As Hayne and Crennan JJ stated in Howard v Commissioner of Taxation:[22]

[I]t is necessary to recognise, and give due weight to the fact, that different minds may reach different conclusions as to the presence or absence of a real possibility of conflict between duty and interest or duty and duty. That is, the doctrine cannot "be inexorably applied and without regard to the particular circumstances of the situation".

It follows that the working out of the application of the rule to company directors is not achieved by the bare repetition of its terms. Much closer attention must be given to the duties, interests and alleged manner of conflict than is given by simply observing that directors owe fiduciary duties. It is necessary to identify the duties or interests which are said to conflict or present a real possibility of conflict.

56 Counsel for the Kosta Parties sought to develop a submission that the Court was not, at this juncture, in a position to determine whether or not any potential breach of fiduciary duty by Kosta was innocent or dishonest. Counsel for the Kosta Parties developed this submission by pointing to the evidence of Ile to the effect that proposed developments would only proceed if each of Atanas, Ile and Kosta agreed. Counsel for the Kosta Parties referred to the fact that the plaintiffs positively plead that Kosta disagreed with the proposal to make a further offer for the Property on behalf of Gracon Properties on 10 June 2022. These matters, it was submitted, gave rise to the possibility that any pursuit of the opportunity by Kosta thereafter was in circumstances authorised by the agreement between Atanas, Ile and Kosta that opportunities would only be pursued on behalf of Gracon Group entities in the event that all three of them were in agreement. An alternative characterisation arising from the same submission, and also relevant to any inferences to be drawn as to the risk of dissipation, is that any breach of Kosta's in those circumstances can be characterised as 'innocent'.

57 The difficulty with this submission is that it presently sits in tension with the direct evidence of Kosta. The evidence of Kosta is that as at 8 June 2022 he was arranging to purchase the Property. Absent further evidence, this gives rise to the presently available inference that if there was such a disagreement as to whether to buy the Property on 10 June 2022, it was a disagreement infected by, or orchestrated as a consequence of, Kosta's then existing desire to purchase the Property in the advancement of his own interests.

58 Kosta admits that he was arranging to purchase the Property. He also admits that he did so without telling Atanas and Ile and by procuring a relative to execute the contract of sale. Kosta did not give evidence as to why he procured Mr Previti to sign the contract of sale. It is available on the presently adduced evidence to infer, and I do with the acknowledgement that the issue is likely to be tested at trial with further evidence, that Kosta did so because he did not want Atanas and Ile to learn of his involvement in the acquisition of the Property.[23]

59 The totality of the evidence adduced on the application therefore reveals a good arguable case that, whilst acting as a fiduciary, Kosta pursued the opportunity to purchase the Property for his own interests, did not reveal the existence of his personal interest to Atanas or Ile and consciously sought to keep his personal involvement of the acquisition of the property secret from them.

60 As a consequence, there is a 'good arguable case' as against each of Divine Complex, Fusion 2 and Inspire pursuant to the principles enunciated by Lord Selborne LC in Barnes v Addy [1874] UKLawRpCh 20; (1874) 9 Ch App 244. The knowledge of Kosta is at least, prima facie, attributable to each of those entities and there is accordingly a 'good arguable case' that they had knowledge of and assisted Kosta in carrying out his alleged 'dishonest and fraudulent design'[24].

61 The foregoing conclusion makes it unnecessary to determine whether there is a 'good arguable case' to the effect that Divine Complex knowingly received 'property' for the purposes of the first limb of Barnes v Addy. In that context, I am conscious that the following matters may arise for determination at trial:

(a) the proper characterisation of what the 'property' received was;[25]

(b) whether it is capable of constituting 'property' for the purposes of the first limb of Barnes v Addy; and

(c) whether an action for knowing receipt is doctrinally available against a third party to whom a fiduciary, in breach of the business opportunity doctrine, has diverted the opportunity.[26]

62 The case against Northern Link is a more borderline one.

63 The plaintiffs do not allege that either of the directors of Northern Link had knowledge of the facts giving rise to Kosta's alleged breaches of directors duties or Kosta's alleged dishonest and fraudulent design. The plaintiffs must therefore attribute the knowledge of Kosta to Northen Link.

Northern Link's knowledge arises by reason that Kosta's knowledge is to be imputed to Northern Link, given:

(A) the terms of the New Venture, the Agency Agreement and the Partnership Agreement;

(B) the fact that Northern Link was the nominated purchasing entity of the Property in performance of the New Venture by the parties to it.

65 As counsel for the plaintiffs expressly confirmed, no allegation is made that Kosta was in 'de facto' control of Northern Link.

66 Counsel for the plaintiffs submitted that Northern Link is impressed with Kosta's knowledge: (a) through Kosta's agency in delivering the Property to Northern Link; and, (b) because Divine Complex (as one of the three partners) had knowledge (as Kosta's alter ego) and the partnership and its agent are thereby impressed with the knowledge of Divine Complex.

67 No authority was identified by the plaintiffs in support of either contention.

68 Turning to the first contention, I do not accept that even if Kosta was acting as agent for Northern Link in 'delivering the Property', that Northern Link was impressed with knowledge of the facts giving rise to Kosta's alleged breaches of duty or knowledge of Kosta's alleged dishonest and fraudulent design. That is because even if Kosta was an agent, there is no suggestion that his principal (Northern Link) assigned 'to him any task of making appropriate disclosures'.[28] Furthermore, the existence of the facts giving rise to the alleged breaches and the alleged dishonest and fraudulent design, constituted information already held by Kosta before he allegedly became Northern Link's agent. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd, the High Court referred approvingly to the statement of Lord Hoffman in El Ajou that he knew of 'no authority for the proposition that in the absence of any duty on the part of the principal to investigate, information which was received by an agent otherwise than as agent can be imputed to the principal simply on the ground that the agent owed to the principal a duty to disclose it'.[29]

69 Turning to the second contention, and recognising the presently applicable low threshold, I consider that there is a good arguable case that the knowledge of Divine Complex (as a partner) can be attributed to Northern Link (as Divine Complex's agent) and that there is therefore a good arguable case that Northern Link has knowingly assisted Kosta's allegedly dishonest and fraudulent design. The attribution of knowledge is arguable because of the general rule that notice to a principal is notice to its agents.[30]

70 In determining whether there is the requisite danger of disposal or diminution, it is important to note that the reference to a 'reasonable possibility' does not imply that an applicant must establish the existence of a greater than 50% chance of disposal or diminution.[31]

71 In evaluating whether the relevant danger exists, the nature of the claims being advanced by an applicant and established on the evidence or by admission, can also provide a basis for inferring that the requisite risk of disposal or diminution arises. In Distinctive FX v Wright,[32] Elliott J stated: [33]

The evidence relied upon 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 partly unsatisfied as a result of the removal, disposal or diminishing of assets. Where the allegations made against a defendant concerns serious dishonesty, that evidence of itself may satisfy the court that the requisite danger exists.

72 The proposition identified above is drawn from the decision of the New South Wales Court of Appeal in Patterson v BTR Engineering (Aust) Ltd[34] where Gleeson CJ stated (emphasis added):[35]

In particular, I consider that Giles J was correct in taking the view that the evidence as to the nature of the scheme in which the appellant was allegedly involved, which established a prima facie case against him, was such as to justify the conclusion that there was a danger that the appellant would dispose of assets in order to defeat any judgment that might be obtained against him and that such danger was sufficiently substantial to warrant the injunction. There is no reason in principle why the evidence which is relevant to the first of the issues earlier referred to might not also have a bearing on the second, and this will especially be so where the prima facie case that is made out against a defendant is one of serious dishonesty involving diversion of money from its proper channels. The present is not a case in which a plaintiff who claims simply to be an unsecured creditor seeks to prevent a dissipation of assets which have no particular connection with the claim in question. This is a case in which the plaintiff claims that the defendant, making use of a corporation controlled by him, fraudulently misappropriated a large sum of money which, if it is still under the control of the appellant, would be quite likely to constitute, directly or indirectly, the bulk of his assets. As Giles J held, the nature of the scheme in which, on the evidence to date, the appellant appears to have engaged, is such that it is reasonable to infer that he is not the sort of person who would, unless restrained, preserve his assets intact so that they might be available to his judgment creditor.

73 The judgment of Meagher JA in Patterson is to similar effect (emphasis added):[36]

To obtain such an injunction a plaintiff must prove two ingredients: first, that he has a prima facie case against the defendant, and secondly, that there is some risk of a dispersal by the defendant of his assets so as to defeat the value of the plaintiff's victory if he ultimately wins. Normally proof of the first ingredient alone will not suffice; normally one cannot infer a risk of dissipation of assets from the mere fact that the plaintiff has a prima facie cause of action. In normal circumstances this is particularly so in cases like the present, where there is no evidence at all what the defendant's assets are. However, in exceptional cases (of which the present is unfortunately one) one can infer the existence of the latter ingredient partly or wholly from proof of the former. This may well be the situation in all cases where the plaintiff's prima facie case against the defendant involves proof of gross dishonesty.

74 The decision in Patterson stands for the proposition that the type of conduct identified as supporting the prima facie case may be available for the purposes of drawing an inference as to the risk of dissipation. Reliance on the conduct to draw the inference is not dependent upon the ability to establish or characterise that conduct as involving serious dishonesty. Rather, the relevant question is whether the conduct identified and relied upon as giving rise to a good arguable case also supports an inference as to the risk of dissipation. As Nichols J stated in Rohan v Pavloff Family Investments Pty Ltd after referring to Patterson and Distinctive FX:[37]

I do not read that reasoning as purporting to lay down a prescriptive test or a stand-alone principle to be applied only in cases in which a particular standard of fraudulent misappropriation or gross dishonesty is reached. Rather, the reasoning draws attention to the factual inferences that might be drawn from facts that go to establish the defendant's conduct. The inferences available in any given case will depend upon the facts and strength of the evidence.

75 The nature of the good arguable case with respect to Kosta's conduct and his apparently conscious attempts to keep his involvement secret from Atanas and Ile provides a firm foundation from which I infer that there is a sufficient possibility that Kosta and the entities which he controls, Divine Complex, Fusion 2 and Inspire, may dispose of or dissipate assets. As Redlich J identified in VUT v Wilson[38] the existence of secretive conduct can be used as part of the chain of reasoning to establish a conclusion that a substantial danger exists that the defendants will dissipate the assets the subject of dispute.

76 In addition to concluding that there is a sufficient risk of dissipation as a result of Kosta's conduct, I have also had regard to the fact that the vast majority of the assets of the Development Project (ie, the units themselves) have recently been dissipated through sale or by the partitioning of those units to each of Divine Complex, Lotcon and Bencon. This appears to have occurred without notice to the plaintiffs and in circumstances where Northern Link has been on notice since the commencement of this proceeding that the plaintiffs sought a declaration that Northern Link holds the Property on trust for Gracon Properties. Now, Northern Link only retains one unit (unit 17) and that is because the purchaser has purported to rescind the contract of sale. The dispersion to date and the fact that each of the partnership entities and their appointed agent are special purpose vehicles incorporated for the purpose of the Development Project, gives rise to the risk that the assets which remain held by Northern Link and Divine Complex will be further dissipated to third parties.

77 The defendants submit that the plaintiffs' delay in seeking freezing orders demonstrates that they do not consider there to be a risk of dissipation. Whilst a lack of diligence and expedition on the part of a moving party is a discretionary factor which can militate against the grant of a freezing order,[39] I do not consider that the plaintiffs have acted with a lack of diligence and expedition which ought to disentitle them from the relief they seek. Whilst the Partnership Agreement was produced by September 2024, I consider that the admissions made by Kosta and Divine Complex by their defence dated 4 June 2025 have been significant in informing the good arguable case and the strength of inference to be drawn from the admitted conduct as to the risk of dissipation. I also note that following the filing of the defence, production of the building contract between Northern Link and Fusion 2 was sought together with the management agreement with Inspire. Ultimately, I do not accept that such delay as there was between June 2025 and August 2025 is demonstrative of the fact that 'the plaintiffs do not consider there to be a risk of dissipation'. That contention is disproved by the existence of this application. It is also an inapt test - the relevant enquiry is whether there is a 'reasonable possibility' of dissipation. Such an enquiry is to be made objectively on the evidence before the Court. The evidence on this application, specifically Kosta's own evidence and the dissipation of the proceeds of the sale of the units and the units themselves, has strengthened the objective assessment as to the possibility of further dissipation.

78 I have concluded that the plaintiffs have a good arguable case against the defendants and that there is a reasonable possibility that assets may be disposed of or diminished in value if a freezing order is not made.

79 On that basis, a freezing order ought to be made.

80 Discretionary considerations do not warrant a different conclusion.

81 First, the evidence filed by the Kosta Parties was directed to identifying prejudice which would be occasioned if the freezing order precluded the Kosta Parties from meeting living, legal and business expenses from their assets and otherwise prevented them from accessing bank accounts. The interim freezing order made on 5 September 2025 does not prohibit payment of inter alia: up to $1,000 a week on ordinary living expenses; reasonable legal expenses; and, business expenses bona fide and properly incurred. No prejudice was submitted to arise from the imposition of conditions of this nature.[40]

82 The freezing order will be accompanied by the order sought by the Kosta Parties to the effect that the plaintiffs are not to serve a copy of the freezing order on any bank or financial institution without leave of the Court. Such an order is necessary because it appears that the plaintiffs served copies of the ex-parte freezing order on relevant banks and financial institutions, with the concomitant effect that all of Kosta's accounts were frozen. In making this order, I endorse the following observations of Jackman J in Nova Supply Chain Finance Pty Ltd v Active Capital Reinsurance Ltd:[41]

The practice of serving banks with freezing orders has thus often had the unfortunate consequence of making it practically very difficult for those who are subject to freezing orders to engage in transactions within the exceptions to those orders, those exceptions being vitally important safeguards in the striking of a fair balance between the parties. As Laddie J observed in The Bank v A Ltd [2000] EWHC J0517-13; (2000) LLR 271 at [31]:

Mareva orders have rightly been described as the nuclear weapons in the court's armoury and as being at the very extremity of the court's powers. To reduce the risk of abuse, stringent safeguards have been put in place to protect, as far as possible, the interests of the absent respondent.

The difficulties are starkly illustrated by the circumstances in Rambaldi v Meletsis. On one day, it took Mr Meletsis over two hours in his local branch to process 34 payments, and in the following weeks he spent about 25 hours ensuring that the payments had been received by the intended recipients: see [30]. Mr Meletsis was unable to use his credit cards and other forms of payment for living expenses (including ordering food online when members of his family were in isolation after contracting COVID-19, paying for nearby parking at an emergency department when his child fell ill, and booking school holiday activities for his children online: see [93]). I do not suggest in any way that parties who serve freezing orders on banks might intend to undermine the practical operation of the exceptions to the freezing order. However, experience teaches that the law of unintended consequences is not subject to desuetude or repeal.

What then is the solution? At present, the answer usually given is to wait for the problem to arise in the few days after making the freezing order, and then to deal with the problem on an ad hoc basis. That is time-consuming, expensive and frustrating, as the circumstances in Rambaldi v Meletsis amply demonstrate. In that case, the parties initially appeared before O'Callaghan J on three occasions in the space of two and a half weeks. The parties and Westpac then appeared four weeks later on just one day's notice, and over the course of the following month filed written submissions addressed to the question whether Westpac should pay the plaintiffs' and the first and second defendants' costs of the first and second defendants' applications to vary the freezing orders. That would have to be the only available solution for it to be consistent with the overarching purpose of the civil practice and procedure provisions of facilitating the just resolution of disputes according to law, and as quickly, inexpensively and efficiently as possible: s 37M of the Federal Court of Australia Act 1976 (Cth).

In my view, bearing in mind that the making and serving of the freezing order against a specified person (or company) should itself provide sufficient protection to a prospective judgment creditor, and that the service of the order on that person's (or company's) bank is typically supererogatory, the onus should be on the party seeking a freezing order to justify any proposal to give notice of the order to a bank or financial institution which is not itself a party to the order. Accordingly, in my view, consideration should be given in future cases to making an order to the effect that the freezing order is not to be served on, or notified to, any bank or financial institution which is not a party to the order without the leave of the Court. The applicant for leave would then have to justify the proposed course of action in the particular circumstances of the case, and demonstrate how the full scope of the order (particularly the exceptions pertaining to ordinary living and business expenses and reasonable legal expenses) would be likely to operate in practical terms. On reflection, that is the course which I should have taken when this matter first came before me on an urgent ex parte hearing.

83 Second, the freezing order made will not preclude Northern Link from meeting its existing GST liability of $756,647. Mr Lotesto deposes that the entirety of the proceeds of sale of Unit 26 (which was sold for $510,000) were intended to be used to part pay Northern Link's GST Liability. The terms of the freezing order sought by the plaintiffs permit this to occur. Insofar as the balance of the GST Liability is concerned, the evidence is that this will initially need to be met by a loan from the partners of Northern Link. Whilst the loan cannot be secured, it will be repayable from the proceeds of unit 17 as a business expense. The freezing order will also include a carve out which enables Northern Link to enter another contract of sale for unit 17 (if necessary) and deploy the net proceeds of that sale to meet the GST Liability as a business expense. Any resultant prejudice to the partners of Northern Link is therefore minimal or non-existent.

84 Finally, as I have already stated, there has not been a disentitling lack of diligence or expedition on the part of the plaintiffs.

85 The applicant bears the onus of satisfying the Court as to the amount which must be the subject of the order,[42] and that the freezing order should not unnecessarily tie up a party's assets and property.[43]

86 The application for a freezing order in the sum of $7 million is based on Ile's affidavit evidence. That evidence was served as 'reply' evidence after the defendants had filed their material and submissions. Accordingly, at the hearing of the inter-partes application, I granted the defendants leave to file any evidence or submissions as to quantum by 4:00pm on 12 September 2025. Both the Kosta Parties and Northern Link availed themselves of that opportunity.

87 The plaintiffs seek, inter alia, equitable compensation comprising 'the profit expected to be made by Gracon Properties as a result of its purchase of the Property.'[44] The estimate provided by the plaintiffs of their loss in the proceeding is $6,904,000 plus GST.

88 The basis of this estimate is explained by Ile as follows.

89 Over the last eight years, Atanas and Ile have developed six industrial warehouse projects which are alleged to be similar to the development at the Property.

90 Based on Ile's experience developing the industrial warehouse project, he calculates the estimated profit that would have been earned had 'Gracon Group' conducted the development of the property. This is done by consideration of:

(a) the size and number of each lot;

(b) the estimated building costs;

(c) the cost of the land;

(d) holding and other costs including:

(i) stamp duty; and

(ii) selling agents commission; and,

(e) the expected sale price of each lot to calculate an estimated profit.

91 Using the sale price list of the units at the property, Ile calculates total sale revenues of $25,904,000. The price list used by Ile appears to be the off-plan price list as 46 of the 50 units are for sale and the remaining 4 units have been 'reserved'. In response to Ile's evidence, Mr Lotesto estimates the total sale revenue from the sale of the units as being $25,511,250. This estimate is arrived at by adding the value of the off-plan sales of the 18 units that have been sold, the sale price of unit 17 and a 3 April 2025 valuation of the remaining units by Savills (adduced through evidence from Kosta). I consider Mr Lotesto's estimate to be the best available evidence of the likely sale revenues. That is because it combines actual sales data for the sold units, the actual sale price of unit 17 and a more up to date valuation of the unsold units.

92 Turning then to estimated costs, Ile estimates that the deductions from the sale revenues ought to be $19 million plus GST comprising: $6.7 million in building costs; $8.8 million in purchase costs; $3 million in holding costs; and $500,000 in agent's commission.

93 The defendants challenge these estimates by reference to the costs that have been incurred in the delivery of the Development Project by Northern Link. Whilst this has some utility, it must be remembered that plaintiffs are seeking compensation for the loss they have allegedly incurred in being deprived of the ability to develop the Property. The plaintiffs' cost base may well have been different. For example, a significant proportion of the holding costs actually incurred, and relied upon by Kosta, is constituted by interest expenses on loans by Northern Link to acquire the Property and fund construction. It does not necessarily follow that the plaintiffs will have incurred the same holding costs. For that reason, for present purposes and noting that my task is to ensure that the freezing order does not exceed the likely maximum amount of the plaintiffs' claim, I accept Ile's evidence as to the estimated holding costs and agent commissions.

94 However, I am unable to accept Ile's estimate as to the cost of construction. Ile's evidence does not disclose any detailed basis as to how the $6.7 million cost of construction is arrived at. It appears to be speculative guesswork. It will be recalled that the building contract between Fusion 2 and Northern Link has a contract sum of $9,679.599. In circumstances where the plaintiffs rely on the fact that the units have been built 'as is' to estimate their revenues and do not challenge the commerciality of the building contract with Fusion 2, the best estimate of the costs of construction and project management are the costs actually incurred of $10,000,809.11.

95 Based on the foregoing matters, on the available evidence, the likely maximum amount of the plaintiffs' claim is $3.2 million. In fixing this figure, I note that the plaintiffs, through their counsel, undertook to retain an expert promptly and provide expert evidence in support of their claim for equitable compensation. The plaintiffs submitted that such evidence could be filed within 6 weeks. I will therefore order that the plaintiffs file and serve any expert evidence in support of their claim for equitable compensation by 4:00pm on 29 October 2025.

96 For the reasons I have set out above, I have concluded that there is a good arguable case against each of the defendants and that there is a reasonable possibility that unless a freezing order is made, the assets of the defendants will be dissipated or diminished in value. There are no discretionary considerations which otherwise militate against the granting of a freezing order.

97 In those circumstances, I have determined that a freezing order ought to be made in the sum of $3.2 million and with carve outs for, inter alia, living expenses, reasonable legal expenses and bona fide and properly incurred business expenses.

98 During oral argument the parties agreed that the costs of the application ought to be reserved in the event that I acceded to the plaintiffs' application for a freezing order. I will so order.

(in its capacity as Trustee for the Gracon Properties Unit Trust)

NORTHERN LINK BUSINESS HUB PTY LTD (ACN 666 722 087)

INSPIRE ACCOMMODATION PTY LTD (ACN 652 810 529)

[1] Without intending any disrespect, in these Reasons I have used the first names of members of the Gracievski family.

[2] The freezing orders were made against all of the current defendants, but for completeness I note that Fusion 2 and Inspire were only added as defendants to the proceeding on 5 September 2025.

[3] Refuse to Lose Pty Ltd v Kostakis [2025] VSC 438 (Refuse to Lose) at [150] (Connock J).

[4] [2008] VSC 300 at [22]- [30] (Forrest J).

[5] [2019] VSCA 164 (Rozenblit) at [19] (McLeish and Niall JJA).

[6] Rozenblit at [19(2)]; Zhen at [22].

[7] Rozenblit at [19(1)]; Zhen at [23].

[10] Zhen at [29]; Rozenblit at [19(6)].

[11] Zhen at [30]; Rozenblit at [19(8)].

[12] Rozenblit at [19(8)] cf Zhen at [27]. See also Davis v Turning Properties Pty Ltd [2005] NSWSC 742; (2005) 222 ALR 676 at [37] (Campbell J).

[13] Rozenblit at [16]-[17] (citations omitted).

[14] Each of the partners entered into the Partnership Agreement as a trustee of a specific property trust.

[15] The construction fee is described as the fee in Schedule 2 and constitutes 100% of all costs, fees and expenses incurred in or associated with the construction and delivery of the works plus a builder's margin of 12%.

[16] Refuse to Lose at [155] (Connock J), citing Curtis v NID Pty Ltd [2010] FCA 1072, [6] (Edmonds J).

[17] See Refuse to Lose at [158]-[159] and the cases cited therein.

[18] Refuse to Lose at [157] (Connock J, citing the Court of Appeal in Woodruff v Manda Capital Holdings Pty Ltd [2025] VSCA 164 (McLeish, Walker and Lyons JJA)).

[19] Hylepin Pty Ltd v Doshay Pty Ltd [2021] FCAFC 201; (2021) 288 FCR 104, 110 [25] citing Boardmann v Phipps [1966] UKHL 2; [1967] 2 AC 46, 124 (Lord Upjohn); Chan v Zacharia [1984] HCA 36; (1984) 154 CLR 178, 199 (Deane J); Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41, 103 (Mason J).

[20] [2018] HCA 43; (2018) 265 CLR 1.

[21] Ibid 30 [68]-[69] (citations omitted).

[22] [2014] HCA 21; (2014) 253 CLR 83, [60]-[61] (citations omitted).

[23] The inference arises from Kosta's own evidence that he was fearful of Atanas and Ile learning of his involvement in the acquisition of the Property and his failure to otherwise explain why Mr Previti was involved: see Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 (Handley JA).

[24] The alleged 'dishonest and fraudulent design' is pleaded at paragraph 41 of the Third Amended Statement of Claim.

[25] That is, whether it is the Property itself, the opportunity to acquire the Property or something else.

[26] See Bowstead & Reynolds on Agency (23rd edition) at p 727 and the cases cited therein.

[27] Paragraph 49 of the Third Amended Statement of Claim. The New Venture is defined in para 27 to mean an agreement between Kosta, Mr Beninato and Mr Lotesto and/or their related entities to together purchase the Property and exploit the opportunity to develop the Property as a business property as joint venturers or partners.

[28] Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [126] (Farah), citing El Ajou v Dollar Land Holdings plc [1993] EWCA Civ 4; [1994] 2 All ER 685 (El Ajou) at 702-703.

[29] Farah at [127]. See El Ajou at 703-704.

[30] Northumberland Insurance Ltd (in liq) v Alexander (1984) 8 ACLR 882, 904, citing Lindley on Partnership, 14th edition at p 259. For example, in Mayhew v Eames [1825] EngR 357; 1 Car & P 550, notice that carriers would not be accountable for lost parcels was communicated to the principals, but the agent had no knowledge of the notice. The court held that as the knowledge of the principal was the knowledge of the agent, the principals had no action against the carriers

[32] [2015] VSC 299 (Distinctive FX).

[34] (1989) 18 NSWLR 319 (Patterson).

[35] Ibid at 325F-326A (Gleeson CJ, with whom Meagher JA and Rogers AJA agreed).

[37] [2023] VSC 175 at [60] (emphasis added).

[38] [2003] VSC 299 at [34].

[39] Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [53] (Gaudron, McHugh, Gummow and Callinan JJ).

[40] For the avoidance of doubt, I note the agreement of the parties that: payment of Divine Complex's contribution to the GST Liability of Northern Link is a bona fide and properly incurred business expense; and the payments referred in paras 2.7 and 2.8 of Kosta's 3 September 2025 affidavit are to be treated as ordinary living or bona fide business expenses.

[41] [2024] FCA 1398 at [10]- [13].

[42] Refuse to Lose at [161]; Zhen at [24].

[43] Refuse to Lose at [161]; Zhen at [29].

[44] See the particulars to paragraphs 42 and 46 of the Third Amended Statement of Claim.