Roupell v Zhang

Supreme Court of NSW|2020-10-06|Before: Schmidt AJ

Judgment

Mr and Mrs Roupell commenced proceedings in July 2020 claiming that in October 2019 they engaged Mr Zhang to install an air conditioner at their home. During the work undertaken on 19 October a fire broke out, destroying the house. They now seek orders restraining Mr Zhang's assets to the value of $1.2 million and requiring him to provide an affidavit disclosing his assets and liabilities: Uniform Civil Procedure Rules 25.11 and 25.12.
The orders are opposed.
The plaintiffs contend that they contracted Mr Zhang to undertake the work which neither he nor the workers were licensed to undertake. At the time Mr Zhang held an electrician's license but only applied to the Australian Refrigeration Council for a refrigeration license on 21 October 2019, which was not issued until 12 November 2019.
It is Mr Zhang's case that from 24 December 2010 he was the holder of the business name Sam Z Electrical & Air and carried on the business of providing electrical and air conditioning services, but from 26 July 2017 that business was conducted by Sam Z Electrical & Air Pty Ltd, of which he was sole director. It was the company, not he, which contracted with Mr and Mrs Roupell and employed the workers who burnt down the property and had business insurance.
Mr Zhang also says that his company was placed under external administration on 14 July 2020 and he had then worked only sporadically until late September when he took up employment in which he earns about $800 per week.

Issues

There is no issue that Mr Zhang and two workers attended the home and that the work undertaken caused it to burn down. That Mr and Mrs Roupell have a prima facie case that their contract was with Mr Zhang rather than the company of which he says was sole director, from July 2017 was conceded for the purpose of the motion and the terms of a restraint were also agreed, apart from the amount.
Left in issue was whether there was a risk of dissipation and costs.

Civil Procedure Act 2005

In determining whether the restraint sought should be granted, what the dictates of justice require must be born in mind, consistently with the obligations imposed on the Court by ss 56 and 58 of the Civil Procedure Act 2005 (NSW). The Court must also exercise its discretions bearing in mind the overriding purpose specified in s56, namely, the just quick and cheap resolution of the real issues in the proceedings.

Prima facie case

Whether there is a prima facie case does not depend upon a preliminary trial, with the ultimate result of the case being forecast or disputed factual or legal issues being resolved: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622; [1968] HCA 1.
It is enough that the plaintiffs show a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending the trial: Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [65]. That depends on the nature of the rights asserted and the practical consequences likely to flow from the order sought.
The plaintiffs' motion was supported by:

An affidavit sworn by Mrs Roupell annexed to which was a copy of the google search which led her to contact Mr Zhang and their text exchanges; and
Affidavits sworn by the plaintiffs' solicitor Mr Emanuel, annexed to which were copies of correspondence with Mr Zhang's solicitor and various documents.

Mr Zhang relied on affidavits sworn by himself and his wife.
On that material it appears that the contract was entirely oral.
Mrs Roupell's evidence was that by undertaking a Google search she had found a listing for Sam Z Electrical & Air and spoke to a man who identified himself as Sam, on the published mobile number. She provided him with the specifications of the air conditioning unit to be installed and he quoted a price of $500. By an exchange of text messages a time for inspection was arranged.
On 17 October 2019 Mr Zhang attended and advised where the unit should be installed. After a further exchange of messages, he attended on 19 October 2019 with two workers and they began installing the unit.
In his September 2020 affidavit Mr Zhang did not deal with these matters. He there dealt with his assets and liabilities. It follows that at present, there has been no evidentiary challenge to Ms Roupell's evidence.
Mr Zhang thus conceded, for the purpose of the motion, that there was an arguable case on liability, albeit it was submitted, one that was barely arguable, the claims having been advanced only after the insurer denied liability. There is a cross claim pursued against the insurer.
I disagree. On the evidence as it stands the plaintiffs do have a prima facie case, in the sense that if the evidence remains as it is, there is a probability that at trial they will be entitled to the relief claimed.

Was the risk of dissipation established?

I am not, however, satisfied that the necessary risk of dissipation has been established.
As discussed in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321-322 and Frigo v Culhaci [1998] NSWCA 88:

Restraining orders may not be made simply to provide a plaintiff with security in advance for a judgment that is hoped for, which it is feared might not be satisfied.
Nor are they available to improve the plaintiff's position, in the event of the defendant's insolvency.
They are rather concerned with minimising the possibility of an unscrupulous defendant seeking to render himself or herself "judgment proof", by taking steps to ensure that no assets within the jurisdiction can be found to satisfy the judgment.
Such orders are intended to enable the court to protect its process from abuse in relation to the enforcement of its orders.
It is not necessary for a plaintiff to show that the defendant has a positive intention of evading a judgment.
It is sufficient if the defendant's conduct or proposed conduct is, objectively speaking, calculated to have the effect of frustrating the enforcement of any judgment that the plaintiff may obtain.

But the prospect of impending insolvency is not alone a reason to grant such orders: Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 at 558.
Evidence that a defendant has previously acted in a way which shows that his probity is not to be relied on, can be relevant: Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 at [72]-[74]. As can evidence that, unless restrained, the defendant would take steps to make himself proof against an order to pay any judgment obtained: Ross v Internet Wines Pty Ltd (2004) 60 NSWLR 436; [2004] NSWCA 195 at [75].
Mr Zhang's case was that there was no such evidence.
Mr Zhang's evidence was that his company was placed into administration in July 2020, after which he took a break and worked only sporadically until September, when he commenced work in which he earned a wage of about $800 per week. He is the joint owner of properties at Revesby and Sylvania, he had been making mortgage repayments; he had accepted offers of deferral of his loans; and he had no intention of disposing of his interest in the properties.
The evidence of Mr Zhang's wife was that she was also working, earning a weekly income; that they also received weekly boarding fees; and that she also had no intention of disposing of her interests in their properties.
The plaintiff's case was that Mr Zhang's evidence had to be considered in light of the fact that he had only given partial disclosure about the information sought in the motion; neither the value of the properties, nor the amount of the loans had been disclosed; and that other evidence established that his earnings would not enable him to service his repayments.
It was submitted that Mr Zhang's financial records showed that his mortgage repayments as at March 2020 were $4242 per month and at 31 August, $3,991, but payments made in July and August were only $1,800. The property to which these repayments related was unclear, but his evidence that he was earning only $800 per week established that he would not have enough to repay borrowings totalling $2,237,440.
Another mortgage appeared to require payments of $3,421 per month and a letter of 3 September 2020 sent by an unidentified author and lending body to Mr Zhang and his wife said that from 28 July 2020 a 3 month deferral period on their loan had been agreed, with the current minimum repayment of $6,434 falling due on 10 November 2020. Earnings of $800 per week could also not support those borrowings.
Relevant prior lack of probity was also submitted to be established by the pleadings. Paragraph 15 of the statement of claim pleaded: 15 (i) The Defendant was not licensed to carry out the installation of the air conditioner.
That was denied in paragraph 10 of the defence.
The evidence certainly establishes that Mr Zhang may not be able to service all of his borrowings, given his current income. He may also be at risk of insolvency, which would depend both on the value of his properties and other assets, the amount of his borrowings and his capacity to repay them, which depends not just on his earnings, but what arrangements he makes with the lenders.
But I am not satisfied that the evidence relied on establishes that there is a risk of dissipation of Mr Zhang's assets. The possibility of insolvency alone simply does not establish the existence of the risk that Mr Zhang will unscrupulously seek to ensure that he has insufficient assets in the jurisdiction, to satisfy any judgment. Nothing other than his alleged lack of probity was relied on to establish the existence of that risk.
What the pleadings deny, however, is that Mr Zhang not having a particular license put him in "total breach" of the contract. He did not, by that pleading, assert that he had such a license.
In the result I am satisfied that the orders sought cannot be made.
Had I come to a different conclusion there was also an issue as to whether an evidentiary basis had been established for the amount which the plaintiffs sought to restrain. There was no evidence, for example, as to the value of the house or the cost of its rebuilding, which would have had to be resolved.
There is no basis for the making of any order and so it is unnecessary to resolve this difficulty, which the plaintiffs did not address in their submissions.

Costs

The usual order under the Uniform Civil Procedure Rules is that costs follow the event. In this case that is an order that the plaintiffs pay the costs of the motion, as agreed or assessed.
The plaintiffs contended that Mr Zhang's approach to the questions raised about his assets provided a basis for a departure from the usual order. Given the onus which fell upon them to prove their case and that the order which they sought was one which would not be lightly made, that submission cannot be accepted.

Order

For these reasons the plaintiffs' motion is dismissed and they must bear Mr Zhang's costs, as agreed or assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 October 2020

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