Samimi v Seyedabadi; Seyedabadi v Samimi

Court of Appeal (NSW)|2013-08-26|Before: McColl JA, Coll JA

Judgment 1McCOLL JA: On 4 March 2013 Coorey DCJ gave judgment in the District Court dismissing a claim by Ali Seyedabadi (the "owner") to recover damages for breach of contract, breach of statutory warranties and for negligence from Kamran Samimi (the "builder"): Seyedabadi v Samimi; Samimi v Seyedabadi (District Court of New South Wales, Coorey DCJ, 4 March 2013, unreported). The dispute arose in respect of the construction by the builder of a duplex at Naremburn on behalf of the owner (the "works") pursuant, originally, to a contract made in August 2002. The primary judge also dismissed the builder's cross-claim to recover from the owner $338,809.60 said to be due under a cost plus contract in respect of the building works. 2There are two applications before the Court. The first in point of time is the owner's notice of motion filed on 13 August 2013 seeking an extension of time in which to file and serve a notice of cross-appeal pursuant to Uniform Civil Procedure Rules ("UCPR") 51.17(2)(b)(ii). The second is the builder's notice of motion filed on 14 August 2013 seeking a freezing order in respect of the owner's assets pursuant to UCPR 25.14.

Background 3The relationship between the parties commenced with the execution of a fixed price contract pursuant to which the works were to be completed for $575,000. By August 2004 relations had deteriorated such that the builder left the site. 4The owner asserted at trial that the fixed price contract remained in force, that the builder's departure from the site constituted repudiation and that he was entitled to damages in respect of defective works, delay and the costs of retaining a second builder to complete the works. However the builder cross-claimed alleging that the fixed price contract was "cancelled" in November 2003 and that the parties agreed that the works would continue on a costs plus basis. He sought to recover sums he alleged were due, but unpaid, under that contract. 5The trial commenced on 25 November 2009 and lasted for 37 hearing days, including 10 days of legal argument and submissions. The liability judgement was given on 4 March 2013 on which occasion verdict and judgment was entered in favour of the builder on the owner's claim and the builder's cross claim was dismissed (the "liability judgment"). On 18 July 2013 the primary judge ordered the owner to pay ninety per cent of the costs of the proceedings (the "costs judgment"). I was not provided with a copy of the costs judgment, and, it appears from the owner's affidavit of 13 August 2013 that reasons for that judgment may not yet have been provided to the parties. 6The judgment is 125 pages long. Large sections of the parties' (particularly the builder's) submissions are reproduced. At times the debate before me proceeded as if the primary judge's recounting of the submissions indicated his Honour had accepted them. The nature of the present applications is such that I should not engage in a detailed analysis of the reasons, however his Honour's dispositive findings are, I may reasonably assume, those matters which appear under the heading to that effect at Red Book 113. On that assumption, his Honour's findings are, relevantly, as follows. 7First, the primary judge accepted the builder's contention that, in November 2003 the fixed price contract was superseded by a "costs plus" basis contract: Red 61, 116, 117, 123, 136-137, 183. His Honour described this issue as "the major dispute between the parties": Red 136. 8In reaching that conclusion, his Honour rejected the submission the owner advanced that the fixed price contract was not "cancelled" because milestone progress payments only consistent with its continuance were made. His Honour rejected that submission because he found (Red 115, 132) that the owner and the builder had conspired to deceive the owner's Bank by the builder issuing false invoices to "enable the [owner] to pretend to the bank that he needed money for a progress or stage payment". The builder gave evidence of that conspiracy under the protection of a certificate issued pursuant to s 128 of the Evidence Act 1995. 9Secondly, the primary judge rejected the owner's submission that the builder was not entitled to leave the site in August 2004. This appears to be because his Honour accepted the builder's submission that by that date, he had completed the work he had contracted to perform and the works remaining were what were called "finishing works" which the builder was not contractually obliged to complete: Red 116. 10Unsurprisingly in light of the conspiracy finding, the primary judge had "serious doubts" about the credibility of both parties: Red 116, 132. This led him to find that it was "impossible to know how many 'fake' invoices" the parties produced to deceive the Bank so that, in turn, it was "impossible to know the true financial position between the parties": Red 116. However, his Honour thought it unlikely the builder would have left the site in August 2004 if the owner had not owed him money and, on the basis that by that stage the parties were operating on a "costs plus" basis, he concluded he could not "say that the [builder] was not entitled to leave the site in August 2004": Red 117. 11Thirdly, the primary judge found that "there is no reason why the ... builder is liable to pay the [owner] any money if the parties were operating on a 'costs plus' basis only": Red 117. The precise basis of that conclusion is not, with respect, readily apparent to one unfamiliar with the interstices of the facts, issues and reasons. 12In another passage of his reasons dealing with the parties' credibility, the primary judge found that the owner "was prepared to resort to almost anything to achieve a result": Red 132. The builder did not fare much better. His Honour took into account in relation to his credibility, the conspiracy finding, the fact that the builder's claim escalated from "about $60,000" to "around $400,000" and, too, his concession in cross-examination "that he was prepared to say whatever he wanted to say 'even knowing that it wasn't true'": Red 134. His Honour also had "real doubt about the reliability of the [builder's] invoices" as there was almost nothing to connect them to work on the site and, too, the fact that some "appear[ed] five years after the commencement of the dispute": Red 134. 13Fourthly, the primary judge rejected the owner's case that he had overpaid the builder and, too, all claims the owner made for defective work as set out in a Scott Schedule: Red 139, 142 - 179, 184. 14Fifthly, the primary judge rejected the builder's cross-claim because of doubts about the reliability of the builder's invoices, a conclusion that it was tolerably apparent was connected to his Honour's lack of confidence in the builder's claim having regard to the fact that its quantum escalated from "about $60,000" to "around $400,000" (a finding the builder seeks to challenge on appeal): Red 180. His Honour accepted the owner's submission that there was "nothing in the items in the invoice itself [sic, as in original] that can be related to specific work on the site" (Red 180) and that when cross-examined "about invoices that he claimed that he had paid, [the builder] could not substantiate any of the items that he was taken to": Red 181. 15In a summary of his conclusions the primary judge reiterated that he could place no reliance on either parties' financial records, that, in any event, there were no written records relating to aspects of the dealings between the owner and the builder and, in relation to the owner's claim in relation to work undertaken by a second builder he engaged to complete the works, that there were no defective works and that the builder was not responsible for the costs of finishing works: Red 183 - 184. He gave judgment for the builder on the owner's claim and dismissed the cross-claim.

Statutory framework 16Part 25, Division 2 of the UCPR deals with freezing orders relevantly as follows: "25.10 Interpretation (cf Federal Court Rules Order 25A, rule 1) In this Division: ... 'another court' includes a court outside New South Wales, whether inside or outside Australia. 25.11 Freezing order (cf Federal Court Rules Order 25A, rule 2) (1) The court may make an order (a 'freezing order), upon or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the court's process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied. (2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets. 25.14 Order against judgment debtor or prospective judgment debtor or third party (cf Federal Court Rules Order 25A, rule 5) (1) This rule applies if: (a) judgment has been given in favour of an applicant by: (i) the court, or (ii) in the case of a judgment to which subrule (2) applies-another court, or (b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in: (i) the court, or (ii) in the case of a cause of action to which subrule (3) applies-another court. (2) This subrule applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the court. (3) This subrule applies to a cause of action if: (a) there is a sufficient prospect that the other court will give judgment in favour of the applicant, and (b) there is a sufficient prospect that the judgment will be registered in or enforced by the court. (4) The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur: (a) the judgment debtor, prospective judgment debtor or another person absconds, (b) the assets of the judgment debtor, prospective judgment debtor or another person are: (i) removed from Australia or from a place inside or outside Australia, or (ii) disposed of, dealt with or diminished in value. ... (6) Nothing in this rule affects the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so. 25.15 Jurisdiction (cf Federal Court Rules Order 25A, rule 6) Nothing in this Division diminishes the inherent, implied or statutory jurisdiction of the court to make a freezing order or ancillary order." 17Pursuant to UCPR 51.17(2)(b), the owner was required to file and serve any notice of cross-appeal within 14 days after the filing of the builder's notice of appeal, or such other time as the Court may fix.

Submissions: parties' prospects of success on appeal 18Both parties advanced submissions, relevant to each application, as to their respective prospects of success on the appeal and the proposed cross-appeal. Not surprisingly, those submissions sought to point to objective material which would have enabled the primary judge to find in their respective favour notwithstanding his Honour's adverse views about their credibility. It is convenient to set out those submissions at this stage before considering each motion. 19Mr Freeman submitted that such an objective route to a conclusion in the builder's favour on his claim for $333,000 from the owner could be established by reference to admissions the owner made concerning overpayment to the builder which, because those overpayments could not be proved, led to an admission of underpayment to the tune of $145,000 (the "overpayment route"). Secondly, he argued that the primary judge failed to deal with evidence which explained the apparent late production of the invoices on which the builder sought to rely (the "invoice route"). In this respect he also submitted that there had been no cross-examination of many of the witnesses to suggest that invoices they had submitted were fake and, further, the owner's witnesses had relied upon some of those invoices. Thirdly, he submitted that there was evidence from an architect, Mr Helmold, to the effect that the invoice claim was reasonable in the circumstances and contended that the primary judge had misdirected himself in rejecting that expert's opinion (the "expert route"). 20Mr Auld submitted that the appeal was not arguable because, in effect, it really sought to challenge findings fundamentally based on adverse credit findings against the builder which, in turn, underlined the unreliability of the invoice based judgment for which the builder contended. He argued that the overpayment route was not supported by the judgment but, rather, that the passages of the reasons on which Mr Freeman relied appeared in that part of the judgment in which the primary judge recorded the builder's submissions. Next, he submitted that the primary judge was entitled to reject Mr Helmold's opinion because it had been based on no more than his acceptance of the builder's solicitor's assumptions. He also relied upon Mr Helmold's admission in cross-examination that he could not say the invoices provided to him for the purpose of his report related to work on the owner's site and, in effect, that all he had done was add up the amounts in those invoices. 21The proposed notice of cross-appeal seeks to challenge the primary judge's finding that the parties were bound by the costs plus contract, his Honour's rejection of the owner's defective works case and his characterisation of them as finishing works. It contends that the primary judge should have found that the builder breached the fixed price contract because the work he carried out was defective and incomplete - the latter contention being said to be supported by expert opinions which his Honour should have accepted and the Scott Schedule. It also seeks to complain that the primary judge erred in refusing the owner leave to amend his defence to the cross-claim to rely on a defence pursuant to s 7 and s 10 of the Home Building Act 1989. 22As I have said Mr Freeman filed extensive submissions challenging the arguability of the grounds in the proposed notice of cross-appeal. In short he seeks to argue that it is not open to the owner to dispute that the parties had entered into the costs plus contract because, he says, this is a matter that was not pleaded or raised in the owner's opening address at trial. He also advanced lengthy further submissions in relation to this ground of appeal which relied upon portions of the cross-examination, expert evidence and annexures to statements at trial. He engaged in a similar detailed analysis in relation to the defective works proposed ground of appeal and, too, in relation to the incomplete works ground. Insofar as the unsuccessful amendment application ground is concerned, Mr Freeman submitted, in substance, that the owner would be unable to demonstrate that the primary judge's discretion to refuse the amendment miscarried.

Application for an extension of time to file the cross-appeal 23The owner swore an affidavit in support of his application for an extension of time to file a notice of cross-appeal. He accepted that he had been told since around the time the liability judgment was delivered that time to appeal ran from the date of that judgment. He said he was reluctant to appeal at that time because he wanted to put the proceedings behind him. On 12 March 2013 the builder served submissions seeking costs orders against both the owner and his solicitor personally. As a result of that application, the owner's solicitor had to retain his own legal representatives to deal with the application and, further, due to the possibility of conflict had not actively represented him since that date. 24The owner took advice again when, in early April 2013, he received the builder's notice of intention to appeal. At that stage, he said, he did not know which part of the judgment the builder intended to appeal from, still wanted to put the proceedings behind him and was advised that he could respond to the builder's appeal, if one came, and that time began to run from the date of receiving the appeal. He was also advised that his senior counsel at trial would not appear without a solicitor on the record and that he would need to retain another solicitor because of the conflict. 25The owner received the notice of appeal on or about 31 May 2013. Once again, he took advice and was informed that time was running on the appeal. Although he was aware time was running, the owner said he was still reluctant to appeal as he wanted to put the matter behind him and, too, that he was awaiting the primary judge's decision on costs "to see what my final position was". He also spoke with a solicitor about the costs of an appeal, but once he received an estimate of those costs, was unable to retain the solicitor as he was not in a position to "put those moneys in trust". Once the primary judge delivered his costs judgment, the owner met with Mr Auld, who appeared on the applications and had been the junior counsel retained for most of the trial, to discuss appealing. 26The builder's notice of appeal was listed for directions on 31 July 2013. About ten days before that date the owner decided to appeal and gave those instructions to Mr Auld.

Submissions: application to extend time to file the notice of cross-appeal 27Mr Auld accepted that the notice of cross-appeal should have been filed and served by 14 June 2013, 14 days after the notice of appeal was filed. Accordingly the owner needed an extension of time of 61 days. He submitted that there was no evidence that the builder had, or would, suffer any prejudice if leave were given to extend the time to file that document. He argued that the owner had an arguable case on appeal which could be litigated consistently with the dictates of justice and that the owner had a reasonable explanation for the delay. 28Mr Freeman submitted that the builder had been prejudiced because his application to get a date for hearing of the appeal in 2013 had been refused on the basis of the owner's foreshadowed application for an extension of time to file the notice of cross-appeal. He also argued that the owner's proposed appeal was misconceived, in support of which he relied upon extensive written submissions.

Consideration: extension of time application 29In Nanschild v Pratt [2011] NSWCA 85 I observed in relation to an application to extend time to file a notice of appeal that: "38 The discretion to extend time is given for the sole purpose of enabling the court to do justice between the parties. This means that the discretion can only be exercised upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time: Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458 (at 459) per McHugh J. 39 The underlying premise to these propositions in Gallo (as is made apparent in Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516 (at [7]) per Brennan CJ and McHugh J) is that the Court's approach to an application to extend the time for filing an appeal from a judgment determining substantive rights (or here to seek leave to appeal) 'at any time' recognises that 'the respondent to the application has a vested right to retain the judgment' proposed to be the subject of appeal: Jackamarra v Krakouer (at [4]); Tomko v Palasty (No 2) [2007] NSWCA 369 (at [55]) per Basten JA (Hodgson and Ipp JJA agreeing)." 30In Tomko v Palasty (No 2) [2007] NSWCA 369; (2007) 71 NSWLR 61 (at [55]) Basten JA referred to the following factors as relevant to the question as to whether to grant an extension of time to appeal as being the length of delay, the reasons for the delay, whether the applicant has a fairly arguable case and the extent of any prejudice suffered by the respondent. 31Hodgson JA said (Tomko v Palasty (No 2) at [14]) that: "... there may be circumstances where it is appropriate to go further into the merits of the case of a person seeking an indulgence such as this, than to ask whether or not the case is fairly arguable. If such a person has a reasonable explanation of delay and the opponent does not have a strong case of prejudice, then a fairly arguable case is sufficient. However, if the explanation for the delay is less than satisfactory, or if the opponent has a substantial case of prejudice, then it may be relevant that the person seeking the indulgence shows that his or her case has more substantial merit than merely being fairly arguable." 32I am acutely conscious of the Court's overriding purpose to ensure that litigation is resolved in a timely fashion and, in particular, that applications to extend time should be considered in the framework constituted by ss 56 - 60 of the Civil Procedure Act 2005 and, too, against the background of the modern approach to despatch of litigation and the need for reasonable expedition: Richards v Cornford (No 3) [2010] NSWCA 134 (at [98], [110]) per Allsop P (McColl JA agreeing). Section 58(1) requires the court, in considering whether to make any order of a procedural nature, to seek to act in accordance with the dictates of justice. That includes the effect of s 56 and s 57 of the Civil Procedure Act (s 58(2)(a)) as well as such matters as the court considers relevant as set out in s 58(2)(b). The latter matters include the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction: s 58(2)(b)(vi). 33Any delay in complying with time provisions is prima facie unacceptable. The owner's delay of 61 days is considerable, but not what I would describe as in the worst category. Further, in my view the owner has a reasonable explanation for the delay. It is understandable that after 38 days of hearing in the District Court at the end of which both parties were unsuccessful, he tried to put the matter behind him. In addition, although it is apparent that he had access to his counsel from time to time and received correct advice as to time running for the purposes of filing any appeal, the period during which he delayed was one in which the question of who would bear the burden of the costs of the proceedings had not yet been resolved. Once that position was clarified by the costs judgment delivered on 18 July 2013 the owner relatively speedily gave instructions to Mr Auld to prepare a cross-appeal, a matter which was advised to the Court at the first return of the builder's notice of appeal on 31 July 2013. 34I also take into consideration the fact that the owner is seeking an extension of time to file a cross-appeal. The substantive dispute is already before the Court on the builder's appeal. The issues raised by the notice of appeal and the proposed notice of cross appeal are intertwined, arising out of the same matrix of facts and their proper characterisation. It would, in my view, work an injustice upon the owner if only the builder was able to litigate his side of the dispute. 35Insofar as prejudice or countervailing injustice (Richards v Cornford (No 3) (at [118]) is concerned, I confess to having been somewhat surprised when Mr Freeman indicated that on the first return of the notice of appeal (31 July 2013) the Court might have allocated a hearing date in December for the appeal. Nevertheless, on that assumption, it does not appear to me that if leave to file the notice of cross-appeal is given and the matter listed for directions at the earliest possible opportunity, the time for the hearing of the appeal will be substantially postponed. 36Insofar as the question whether the owner has a fairly arguable case is concerned, I cannot accept the builder's submission that the question whether the parties were proceeding on a costs plus basis from November 2003 was not, in effect, a real issue at trial, having regard to the primary judge's description of the question as "the major dispute between the parties": Red 136. I would accept that insofar as and to the extent that the owner's fixed price contract case rests on the fake invoices, the owner's case appears weak. However the proposed notice of cross appeal relies on a number of other matters which do not relate to the invoices. I cannot say that those other matters are not fairly arguable. 37Insofar as Mr Freeman seeks to rely upon a detailed analysis of other proposed grounds of cross appeal relating to contradictions in the owner's evidence at trial, assertions concerning the evidence of the various expert witnesses and their respective criticisms of each other and assertions as to the credit of the various expert witnesses, it is simply not open to me to reach any concluded view as to the force of those submissions. However, I do note that the appeal which is on foot seeks to rely, at least, upon Mr Helmold's evidence as to quantification. It is clear that the Court will have to have regard to the various experts' opinions and, accordingly, that such matters will be before the Court in any event. 38Finally, in relation to Mr Freeman's submissions concerning the unlikely prospect of the owner challenging the primary judge's discretionary decision to refuse the owner leave to amend the defence to rely upon s 7 and s 10 of the Home Building Act, I note that the primary judge recorded (Red 182) that when the amendment application was made, Mr Freeman submitted: "This is a complete shut-out defence, a complete shut-out defence, that may have caused me to get advice and possibly we wouldn't have run the case." 39The primary judge rejected the application to amend on the basis that it would be extremely unfair. There is ample authority to support his Honour's approach: Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175. However if, as Mr Freeman appears to have conceded at trial, such a defence would have been a complete barrier to the builder's claim, it seems to me that it is fairly arguable that was a matter the primary judge ought to have taken into account when considering the amendment application. His Honour did not do so. 40Accordingly, as the owner has a reasonable explanation for the delay, a fairly arguable cross appeal and the builder does not have a substantial case of prejudice, I conclude that the dictates of justice require that the owner should be given an extension of time to file and serve his cross-appeal. 41The owner's motion sought an order extending the time to file and serve the notice of motion until 14 August 2013, the day after the application was filed. That date is inappropriate. The extension should be granted to a date later than the disposition of the motion. That is reflected in the orders I have made. 42As the owner is in default of the rules relating to the time for filing the cross-appeal he should pay the costs of the motion, notwithstanding his success: cf UCPR 42.1.

Freezing order application 43A freezing order and undertaking given to the Court by the owner during the District Court proceedings restricted his ability to deal with his assets. That freezing regime was created in the following circumstances. 44During the course of the proceedings the builder's solicitor carried out searches of the owner's property. In November 2011 one such search conducted in relation to the Naremburn property disclosed a dealing that had not appeared on previous searches. Further inquiry revealed the dealing related to a proposed subdivision of the land on which the works had been undertaken. That would have permitted the duplexes to be sold independently. 45Correspondence ensued between the parties' solicitors. The builder's solicitors expressed concern that the owner was seeking to sell the properties in an endeavour to deprive the builder of the benefit of any judgment. The owner's solicitors denied any such intention and advised that the owner wished to sell one of the duplexes to discharge the mortgage on the title and any mortgage relation to his legal fees. Nevertheless the owner agreed to give an undertaking to the District Court, in effect, to secure the position. 46The undertaking was given on 22 December 2011 (the "December undertaking"). Paragraph (d) relevantly stated: "I will not in any way otherwise further encumber or diminish the value of the Property or of my right title and interest therein, except to make provision for my legal fees, without first giving 14 days written notice of my intentions in this regard to the Cross Claimant and/or his solicitors on the record." 47The owner sold one of the duplexes for $1.23 million. He gave notice of the sale as required by paragraph (a) of the December undertaking. Completion occurred on 10 August 2012. Prior to completion the builder sought a freezing order in the District Court in respect of the proceeds of sale. On 14 August 2012, by consent, the District Court made a freezing order in which, without admission, the owner agreed not to disburse the proceeds of sale other than as set out in the Consent Order document. The December undertaking continued. 48Prior to delivery of the costs judgment, the owner applied to the District Court to be released from the December undertaking. On hearing of that application, the builder's solicitors sought the owner's urgent advice as to whether he intended to dispose of, encumber or otherwise deal with the remaining duplex. He received no reply. 49The primary judge dismissed the owner's application. 50The remaining duplex is the owner's only real property in New South Wales. The builder's solicitor estimates that his costs to date exceed $1.3 million. 51In his affidavit in support of the application the builder deposed to a conversation with a man identified as a joint friend of himself and the owner in which they discussed his success in relation to the costs order. The builder said the friend informed him that the owner was "putting ... about in the Persian community" that "he is going to transfer the name over his property in a sale real soon so that you get nothing from him". In cross-examination on the application, the builder agreed that he had never seen his friend and the owner together and had no personal knowledge of the owner's friends, but said he had been told the owner and his "informant" were friends. 52The owner swore an affidavit stating that he currently owes $940,000 - $950,000 on the remaining duplex, that he wants to open a café and that his only source of capital to do so is that property. He said he had taken no steps to sell the duplex while bound by the December undertaking. He said he did not know what the builder referred to as the "Persian community" and did not know the builder's friend. 53It is common ground that the December undertaking did not subsist following the final determination of the issues before the District Court on 18 July 2013.

Submissions: freezing order application 54Mr Freeman, who appeared for the builder on the application and at trial, submitted that the Court would be satisfied that there was a danger, if a freezing order was not granted, that the builder would be unable to enforce, at least, the costs judgment of which he was the beneficiary because the owner had engaged in conduct which was intended to frustrate or inhibit such recovery. In substance, he contended, that the Court would be satisfied that during the period when he was the subject of paragraph (d) of the December undertaking, the owner had, in breach of that undertaking, further encumbered or diminished the value of the property without giving the requisite notice of his intention to do so. 55Mr Freeman also relied on the fact that the owner was restrained, by virtue of the 14 August consent order, from disbursing the funds from the 2012 sale of one of the duplexes other than in the manner set out in those orders. Those orders specified the conventional disbursements to providers of utilities, the local rating authority and, in particular, disbursements totalling $550,020.17 to the Commonwealth Bank. They also specified amounts payable to legal practitioners, persons who appear to have been experts retained for the purposes of the trial as well as an amount of some $317,000 in favour of a Mr Sukkar. The sums referred to in the consent orders totalled approximately $1.31 million. 56On 14 August 2012 the owner's solicitors wrote to the builder's solicitors referring to the consent orders and confirming the owner's instructions, conveyed during discussions between counsel prior to the orders being made, that the indebtedness in respect of the sold duplex was previously $1.31 million and that upon settlement of the sale, that indebtedness was reduced by the payment of the sum aforementioned to the Commonwealth Bank. The letter also confirmed the owner's intention to use any surplus on the sale for his living expenses, payment of legal fees and payment of any other fees, such as surveyor's fees, that the owner was required to pay in respect of the property and to which the builder had agreed. The letter also confirmed the counsels' discussions that the December undertaking remained in place. 57Mr Freeman submitted that after paying the $550,020.17 to the Commonwealth Bank, the owner had reduced the indebtedness in respect of the property to $759,979.83. He argued that, based on the owner's statement that he currently owes around $940,000 - $950,000 on the property, the inference was readily available that the owner had breached the December undertaking because he had increased that indebtedness by close to $200,000. Mr Freeman emphasised that the owner had not explained the increase in the encumbrances upon the property disclosed in his affidavit. 58Mr Auld submitted that Mr Freeman's submissions were premised on a misreading of the owner's solicitors' 14 August 2012 letter and the consent orders of even date and the proposition that that conveyed to the builder's solicitors that all the amounts secured against the property were the amounts set out in the consent order and that, as a result of the settlement, the owner would be debt free. 59Mr Auld also argued that the owner's impecuniosity, or his intention to sell the remaining duplex and invest in a café, were not factors which would make good the proposition that the owner was attempting to dissipate his assets to frustrate judgment. 60There was a controversy between the parties as to the payment to Mr Sukkar to which I have referred. Mr Scarfone, the builder's solicitor, said in his affidavit that on 14 August 2012 the owner's counsel had informed the District Court that that was an amount secured by registered second mortgage, a loan obtained by the owner solely for the purpose of paying existing legal fees whereas, on 18 July 2013, that counsel informed the primary judge that he had no knowledge that that loan was for the previously stated purpose. Mr Freeman submitted that if that mortgage had been paid out as permitted by the consent orders then the breach of the December undertaking for which he contended was more egregious.

Consideration: freezing order application 61UCPR 25.11 is a "formulation of the Mareva injunction jurisprudence ... based upon the power of a court to prevent the frustration of its process and to ensure that its judgments are not without value ... [A] narrow or technical approach to such a power is not appropriate": Newcastle City Council v Caverstock Group Pty Ltd [2008] NSWCA 249; (2008) 163 LGERA 83 (at [43]) per Spigelman CJ (Bell JA and Handley AJA agreeing). 62An appellate court has jurisdiction to grant a freezing order on the application of an appellant who has failed in the court below: Tomasetti v Brailey [2012] NSWCA 6 (at [13]) ("Tomasetti") per Campbell JA. 63There was no debate during the hearing of the application about the ambit, or basis, of the Court's power to make the freezing order. In my view, insofar as the builder seeks to protect any judgment he may receive upon appeal, the court's statutory power is found in UCPR 25.14(1)(b)(i). 64Insofar as the freezing order application seeks also to protect the costs judgment of which the builder is the beneficiary, it is arguable that the provisions of Part 25 of the UCPR would require that application to be made in the court which made the order: see Tagget v Sexton [2009] NSWCA 91; (2009) 255 ALR 522 (at [58]) per Beazley JA. 65UCPR 25.14(1)(a)(ii) does give power to the Court to make a freezing order where a judgment has been given in favour of an applicant by another court which, it is plain, could include the District Court. However that rule only applies if there is "sufficient prospect that the judgment will be registered in or enforced by the court" (UCPR 25.14(2)), meaning the court in which the application is made. No submissions were addressed to whether such a circumstance could arise in the present case. Ordinarlily one would expect a District Court judgment to be enforced by process issued by that court. 66Nevertheless, I consider I have power, at least pursuant to the Court's inherent jurisdiction, to entertain the freezing order application insofar as it seeks to preserve the integrity of the costs judgment which is part of the judgment under appeal: United Telecasters Sydney Ltd v Hardy (1991) 23 NSWLR 323 (at 333) per Samuels AP (Clarke and Meagher JJA agreeing); John Fairfax Publications Pty Ltd v District Court of New South Wales [2004] NSWCA 324; (2004) 50 ACSR 380 (at [29]) per Spigelman CJ (Handley JA and Campbell AJA agreeing); SG v Director of Public Prosecution (NSW) [2003] NSWCA 128 (at [3]); Finn v Carelli [2007] NSWSC 261 (at [1]) per Brereton J. 67A freezing order "is a drastic remedy which should not be granted lightly ... Its purpose is to preserve the status quo, not to change it in favour of the [applicant]": Frigo v Culhaci [1998] NSWCA 88 (at p 6) per Mason P, Sheller JA, Sheppard AJA); approved Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 (at [51]) per Gaudron, McHugh, Gummow and Callinan JJ. 68Both UCPR 25.14 and established principles developed in relation to Mareva injunctions require that the applicant for such an order, at least at first instance, demonstrate a good arguable case on a justiciable cause of action: Tomasetti (at [14]). In Tomasetti (at [15]), Campbell JA held that to the extent that requirement now appears in UCPR 25.14, it applies when a freezing order is sought in the Court of Appeal. I have proceeded on that basis, which accords, in any event, with the parties' approach. 69The expression "good arguable case" is used "in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50 percent chance of success": Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co KG 'The Niedersachsen' [1983] 1 WLR 1412; [1984] 1 All ER 398 (at 404) ("Ninemia Maritime") per Mustill J. His Honour added (at 404) that "the court should not be drawn into a premature trial of the action, rather than a preliminary appraisal of the plaintiff's case". 70Mustill J's observation was made in relation to a dispute which was going to arbitration. Nevertheless, it is clearly of broader application, particularly where a freezing order application is made to a court not seized with an ample appreciation of the factual controversy. Such is the case on this application where I find myself in much the same position as Campbell JA in Tomasetti. In that case, his Honour was troubled, (at [19]), "by the prospect that an application for a freezing order in a case such as the present could turn into a dress rehearsal of the appeal itself", and that it was difficult to form a view about the prospects of success of the appeal merely on the basis of the reasons for judgment, and the Notice of Appeal. Because he had reached the view that the applicant had not otherwise established a case for the order, his Honour found it unnecessary to form any concluded view about the way in which an appellate court should approach the requirement for demonstrating a good arguable case. 71Once again, there was no debate before me as to the scope of the "good arguable case" test on appeal. It is, I should have thought, necessary, on such an application being made on appeal, to give some weight to whether or not the applicant has been successful at trial, as well as to the grounds of appeal. An applicant who has been successful at trial is obviously in a relatively strong position: Finn v Carelli (at [6]). 72The question whether there is a danger that any judgment obtained by the builder against the owner, or that already obtained, will be wholly or partly unsatisfied because the owner's assets might be disposed of, dealt with or diminished in value (UCPR 25.11; 25.14(4)(b)) reflects the general law concepts again developed in accordance with Mareva injunctions, that the applicant must demonstrate "a danger that by reason of the defendant's ... assets being ... disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied": Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 (at 321 - 322) per Gleeson CJ. 73In Ninemia Maritime (at 406), in a passage effectively approved in Frigo v Culhaci (at p 8), Mustill J discussed the nature of the evidence the applicant for a freezing order should adduce as follows: "It is not enough for the plaintiff to assert a risk that the assets will be dissipated. He must demonstrate this by solid evidence. This evidence may take a number of different forms. It may consist of direct evidence that the defendant has previously acted in a way which shows that his probity is not to be relied on. ... Or ... the plaintiff may be able to found his case on the fact that inquiries about the characteristics of the defendant have led to a blank wall. Precisely what form the evidence may take will depend on the particular circumstances of the case. But the evidence must always be there..." (Emphasis added) 74It is not necessary for an applicant to show that the respondent has a positive intention of evading a judgment, and it is sufficient to show that the course on which the respondent proposes to embark is, objectively speaking, calculated to have that effect: Finn v Carelli (at [4]). As Brereton J added: "5 It is important to bear in mind that the jurisdiction to make orders of this type was never intended simply to enable a plaintiff or judgment debtor to obtain security for its judgment in advance of execution, but was firmly founded on the jurisdiction of the Court to prevent abuses of its process by preventing a defendant or judgment debtor from embarking on a course of conduct which would have the effect of defeating the Court's jurisdiction. It also needs to be borne in mind that the mere fact that a judgment may not be satisfied for reasons of impecuniosity does not mean that there is an abuse of process. Indeed, it has been pointed out on several occasions that the prospect of impending insolvency is not a reason to grant a Mareva injunction [Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545, 558]." (Emphasis added). 75Finally, in determining whether a freezing order should be made, the Court must take into account any discretionary considerations, including the balance of convenience.

Conclusion: freezing order application 76In my view the builder has demonstrated that there is a risk that the costs judgment will be wholly or partly unsatisfied because there is a danger that the owner will dispose of the remaining duplex or diminish the value of that asset by further encumbering it. I accept Mr Freeman's submission that, at the very least, after the settlement in 2012, and the disbursement of the sum of $550,020.17 to the Commonwealth Bank the indebtedness on the property which had been $1.31 million should have been reduced to $759,979.83. The owner's admission that he currently owes around $940,000 to $950,000 on that property supports the inference Mr Freeman invites me to draw that in the intervening period the owner has breached the December undertaking by an amount close to $200,000. The owner has not given any explanation for that increase in the encumbrances upon the property. Prima facie, therefore, it appears that the owner has acted in breach of the December undertaking. The effect of the course he has adopted is, objectively, calculated to have the effect of leaving the costs judgment and any judgment the builder may secure in this Court wholly or partly unsatisfied. In so concluding, I do not accept that the costs estimate the builder's solicitor has made is the amount which would be allowed on assessment, but I should expect those costs after a 38 day trial would at least be commensurate with what appears to be the remaining equity in the property. 77I also take into account the fact that the owner failed to respond to the builder's solicitor's request for urgent advice as to whether he intended to dispose of, encumber or otherwise deal with the remaining duplex. I have not paid any regard to the contentious issue as to the loan to Mr Sukkar as, in my view, the increase in the encumbrances upon the property of approximately $200,000 (or the reduction in the value of the equity in the property)are a sufficient prima facie breach of the December undertaking to found the conclusion that the owner has acted in a way which shows that his probity is not to be relied upon: Ninemia Maritime (at 406). 78In making a preliminary appraisal of the builder's case on appeal I am, having regard to the property materials available for consideration on the application, particularly in an appeal which is clearly heavily fact based, in the hands of counsel. In other words, on the preliminary appraisal approach (Ninemia Maritime (at 404)), it seems to me that I must give weight to the builder's submission that, notwithstanding his Honour's credit findings, the primary judge failed to take into consideration incontrovertible facts or uncontested testimony which would have supported an invoice based judgment: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 (at [28]) per Gleeson CJ, Gummow and Kirby JJ. State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 ALJR 306 (at [63]) per Gaudron, Gummow and Hayne JJ. 79In this respect I note, for example, that the primary judge does not appear to have considered the builder's submission that if, as occurred (Red 139), the owner's overpayment claim was rejected, that constituted, in effect, an admission by the owner that he owed the builder $145,000. 80In my view, the grounds of appeal as explained by Mr Freeman, satisfy the test propounded in Ninemia Maritime (at 404), in the sense that they are more than barely arguable, albeit I cannot say that they have a better than 50 per cent chance of success. 81Having regard to my findings concerning the danger of the owner disposing of the property or diminishing its value, it will be apparent that I have not had regard to the owner's comparative impecuniosity in deciding to make the freezing order. The owner did not rely on any discretionary considerations to resist the application. 82Finally, I also take into consideration the fact that the purpose of the application, at least in part, is to protect the builder's costs judgment. There is no challenge to that costs judgment although, it is possible that it may be varied depending upon the outcome of the appeal and cross-appeal. However, at present, the builder has a vested right to preserve the status quo insofar as that would enable him to look to the remaining equity in the property in satisfaction of the costs judgment. 83As will be apparent from the foregoing, I have formed the view that the owner has engaged in conduct which could reasonably be interpreted as potentially having the effect of frustrating the builder's ability to enforce his costs judgment, has been evasive (in the sense of non-responsive) when asked what his intentions were in relation to the property and has, prima facie, breached the December undertaking: see Aquasun Pty Ltd v Coverdale Ram Pty Ltd [2000] NSWSC 1146 (at [5]) per Bryson J. A freezing order is, accordingly, warranted. 84The owner did not take any point about the breadth of the order the builder sought. However in the course of argument, Mr Freeman withdrew that part of the proposed orders which related to a payment into Court. The proposed order also applies, as presently drafted, until further order. In my view it is appropriate that the order operate only until the disposition of the appeal and cross-appeal, having regard to the principle that, in the normal course, a freezing order should only be made for a limited period: Tagget v Sexton (at [67]). 85As the builder has been successful on the application, the owner should pay his costs.

Mediation 86The proceedings have clearly taken their toll on the owner and I would be surprised if they have not had a similar effect on the builder. What appears to have been a relatively modest building project has led to lengthy, expensive legal proceedings. The Court encourages parties to seek to resolve their disputes by mediation, an approach which reflects the statutory exhortations to like effect (ss 25 - 34, Civil Procedure Act; UCPR Pt 20, rr 20.1 - 20.7) as well, too, as the overriding purpose to ensure that litigation is resolved in a timely fashion to which I have already referred. 87I would urge the parties to seek to resolve their disputes by mediation with a view to both being able to put the matter behind them as soon as possible and minimise further costs.

Orders 88Accordingly, I dispose of each notice of motion as follows.

Extension of time notice of motion 89I make the following orders: (1) Extend the time for the cross-appellant to file and serve his notice of cross-appeal until 5pm on 4 September 2013. (2) Cross-appellant to pay the costs of the application.

Freezing order notice of motion 90I will make the orders the builder now seeks in the notice of motion filed on 14 August 2013, save that order 1 should be amended to replace the words "until further order" with the words "until the disposition of the appeal and cross-appeal" and proposed order 2 should be excised. I direct the builder to bring in short minutes of order on or before 5pm on Friday 30 August 2013 engrossing the freezing order in the manner I have indicated, such orders to include the giving by the builder of the usual undertaking as to damages. 91I order the owner to pay the costs of the application for the freezing order.

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: 29 August 2013

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