The plaintiff seeks various orders in the nature of freezing orders in accordance with the Uniform Civil Procedure Rules 2005 (NSW) r 25.11. In issue in these proceedings is a claim for money which was, in effect, loaned by the plaintiff to the defendant in early 2017 and which the defendant has refused to repay despite numerous requests. The freezing order and summons commencing proceedings has been sought to be filed on an urgent basis because the plaintiff's solicitors were instructed that there is a risk that property owned by the defendant in New South Wales and the only known asset he has in New South Wales is about to be sold, with settlement due to take place in the next few weeks.
The plaintiff's case was that there was a danger if the freezing order was not made that the deposit held on trust for the defendant as part of the proceeds of the sale of the apartment bought off the plan at Kensington ("Apartment 306") would be dissipated to the defendant who left for China in March 2017 and has apparently not returned. The Notice of Motion proposed a freezing order against the defendant personally in relation to any assets in Australia held by the defendant, as well as the company which manages the real estate agency which holds 10% of the purchase price for the unit as stakeholder for the defendant.
There is a high duty of candour imposed on a party who pursues a stay on an ex parte basis.
I am satisfied that the application should be heard ex parte. The correspondence attached to the affidavit of the plaintiff suggests a lack of cooperation and lack of intention on the part of the defendant to acknowledge and/or cooperate with any process to repay the money identified in the Deed. In particular, an exchange on "WeChat", which has been translated by an accredited translator shows an entry dated 1 May 2017 and timed at 7:29 pm which says, amongst other things:
I just hate being threatened by people, damn the threators always. Go ahead with the litigation if you wish. Litigation in Australia would take years anyway, and my own property is in the process, isn't it? It does not hurt adding one more, it has been uneasy for quite some time, and I have been threatened by you for many times I cannot tell … I have been damn impoverished, the property will only settle by June and I could not even get a damn couple of days for consideration, and now you have got money just after I have sent the damn email? How weird
There is a further entry from the defendant on "WeChat" timed 7:56 pm:
I think you do not have to spend your effort in vain, the Australian law is not as strong as the Chinese law, and you just need to wait with patience until June. I will write you an IOU note which is more effective than in Australia. In China, properties can be sealed at any time and cases won with such IOU notes and will not be as long or troublesome as in Australia! You can go along with litigation if you do not want it. Also, none of the properties in Australia belongs to me and hence cannot be used for the purpose of a mortgage contract, and did not your lawyer tell you that? It was only a loan contract between us, and at best it is that I owe you money and need to repay you if you win the litigation, and what does this have anything at all to do with the property?
It seems to me from these comments there is no intention to cooperate with an unlitigated approach. I have no evidence before me that the defendant is in Australia or intends to return to Australia. Accordingly, it is appropriate this application should be heard ex parte. This is particularly so because the timing relevant to the potential dissipation of Apartment 306 is that settlement of the property (and thus release of the deposit held with the agent as stakeholder for the defendant) is planned to take place in the next week or two.
I have approached the application in light of binding authority that:
The Court's power to grant a freezing order is based on its power to prevent the frustration of its process and to ensure that its judgments are not without value (see 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).)
A freezing order is nevertheless "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]" (see Frigo v Culhaci [1998] NSWCA 88 (at p 6) per Mason P, Sheller JA, Sheppard AJA) as approved in Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 (at [51]) per Gaudron, McHugh, Gummow and Callinan JJ.)
[2]
Is there a good arguable case?
As discussed by McColl J in Samimi v Seyedabadi [2013] NSWCA 279, an applicant to a freezing order must demonstrate a good arguable case in a justiciable cause of action (see UCPR r 25.14 and Tomasetti v Brailey [2012] NSWCA 6 (at [14]-[15]).
That does not require a preliminary appraisal of the plaintiff's case to be conducted on this application, but the plaintiff must show that the claim is capable of serious argument, even if not necessarily one which the judge believes to have a better than 50 per cent change of success (see Ninemia Maritime Corporation v Trace Schiffahrtsgesellschaft mbH & Co KG (The Niedersachsen) [1983] 1 WLR 1412; [1984] 1 All ER 398 (at 404) ("Ninemia Maritime") per Mustill J).
Here, the plaintiff relied upon three affidavits, one of the plaintiff Julie Shi, as well as two affidavits from the plaintiff's solicitor Chak Ming Hon, sworn 21 July 2017 and 24 July 2017. The affidavit evidence establishes that an oral arrangement to loan money was formalised into a Deed of Loan between the plaintiff and the defendant prepared by Maxim Legal Pty Ltd, and executed on 17 February 2017. The loan, in simple terms, states the lender (the plaintiff, Julie Shi), agrees to loan to the borrower (the defendant) a sum of $65,000, and the borrower is to repay the sum in full by 30 April 2017 on the basis that the borrower was to resell Apartment 306, pursuant to a resale contract that had been signed and dated 25 November 2016.
The borrower warranted, pursuant to this Deed, to keep the lender notified of any existing or new purchases being negotiated or exchanged, to keep the lender notified or aware of any financial difficulties that the borrower may have, and that the borrower shall not obtain further borrowings from any financier without the written consent of the lender, and would keep the lender notified of any progress on the resale contract. The Deed provided that if any conditions of the Deed are breached, the borrower is in default and the lender is entitled to serve a notice of default to the borrower.
A series of electronic communications on "WeChat" between the plaintiff and defendant are annexed to the Plaintiff's affidavit translated from Chinese into English. The affidavit also annexes a National Property Ownership Report noting "nil result" for property held in the name of the defendant, as well as a copy of the contract for sale dated November 2016 between the defendant and the purchasers of the Kensington Unit with a recorded purchase price of $1,180,000 with 10% of the purchase price to be retained as a deposit.
The affidavit of Chak Ming Hon, solicitor, deposes to having made contact with the agent's number shown on the contract for sale. A conversation with the person who accepted the phone call, identified as "Monique", confirmed the seller's name was the defendant and the address of the property, and that the property was going to settle "within the next 2 weeks" but that she could not give an exact date. It was also confirmed that the 10% deposit which was currently held in an interest bearing account by the agent was to be released to the defendant at settlement.
The affidavit also deposed to searches being conducted for the corporate entity that stands behind Raine & Horne Double Bay. That company was identified as Palmasgold, with a registered address at Level 12, 169 Macquarie Street, Sydney.
On the face of the Deed and the assertions made in the plaintiff's affidavit regarding the transfers of money and the apparent unwillingness to repay the debt as shown by the defendant's "WeChat" replies, the plaintiff has a good arguable case.
[3]
Is there a danger of disposal of assets?
A freezing order is not intended to provide a plaintiff or judgment debtor with security for its judgment in advance of execution (see Finn v Carelli [2007] NSWSC 261 at [4]). A claim that there is a risk that the assets will be dissipated is not enough. An applicant must establish by evidence that there is 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 (see Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321-322 per Gleeson CJ.
The evidence establishes that there is a risk that any judgment given in favour of the plaintiff will be wholly or potentially partly unsatisfied because there is a danger that the defendant, who appears to have chosen to reside out of Australia, intends to dispose of the property for sale and it seems not pay back the plaintiff the sum apparently due under the Deed of Loan.
The notice of motion was framed in terms of seeking two distinct freezing orders, one against the respondent company standing behind the real estate agency holding the deposit as stakeholder, and an additional freezing order against the defendant himself, preventing him from dealing with any assets in Australia.
It is evident that if I make a freezing order in those terms against the defendant, the sale of Apartment 306 could not go ahead. This would have the effect of de-railing the process that the plaintiff is pursuing, which is the availability of funds so that repayment of the debt can proceed. I also took the view it was an unnecessary order, given that the only asset on the evidence before me owned by the defendant in Australia is Apartment 306 and the deposit sum of $118,000 if protected by a freezing order against the agent, was sufficient funds to preserve to meet any prospective judgment. Accordingly, I decline to make a freezing order against the defendant personally.
There was an order sought that the proceeds of the 10% deposit held by the respondent company once expenses of the sale had been paid out should be paid into court pending further order of the court. I formed the view that this order was more than what was required to protect against the danger that the defendant's assets would be disposed of in the jurisdiction, having regard to the freezing order I intend to make in respect of the money held by the respondent as stakeholder, pending further submissions and further order of this court.
[4]
What does the balance of convenience dictate?
While the basis for making a freezing order on an ex parte basis has been established, the balance of convenience must also be considered.
That requires that the order sought be made only until further order, with the matter coming into the list again shortly for the purpose of the defendant and/or the respondent company being heard as to its continuation.
[5]
Costs
Costs are reserved until the parties have been heard.
[6]
Orders
Accordingly, I order that:
1. Until further order, and upon the Plaintiff by its counsel giving to the Court the usual undertaking as to damages, an order that the Respondent, Palmasgold Pty Ltd (ACN 096 307 470), be restrained from paying to the Defendant, his servant or agent, any proceeds which remain after agent fees and other expenses have been paid from the sale of Apartment 306.
2. Upon the undertaking of the Plaintiffs solicitor to pay the appropriate filing fees, grant leave to the plaintiff to file a summons in the form initialled by me, dated this day and placed with the papers.
3. Direct that the Summons and the Motion be listed for further hearing on Friday, 28 July 2017.
4. Abridge time for service of the Summons, the Motion and the Plaintiff's affidavits that have been filed in support of the motion to 5:00 pm on Wednesday, 26 July 2017.
5. These orders may be entered forthwith.
6. Direct that service of these orders, the Amended Summons, the Motion and the Plaintiff's affidavits that have been filed in support of the application may be given to the Respondent by email transmission of a PDF copy to a specified email address.
7. Direct that service of these orders, the Amended Summons, the Motion and the Plaintiff's affidavits that have been filed in support of the application may be given to the Respondent in hardcopy at its registered office.
8. Direct that service of this order, the orders made on 25 July 2017, the Summons, Amended Summons, the Notice of Motion and the plaintiff's Affidavits that have been filed in support of the application upon the defendant may be given to the defendant by email transmission by a PDF copy to a specified email address by 5:00 pm Wednesday, 26 July 2017.
[7]
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Decision last updated: 08 August 2017