//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2026] NSWSC 37
Supreme Court of NSW
2026-02-10
Griffiths AJ
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: The Owners – Strata Plan No 97938 v Golden Rain Development Pty Ltd [2026] NSWSC 37
Hearing dates: 4 February 2026; further submissions 4-5 February 2026
Date of orders: 10 February 2026
Decision date: 10 February 2026
Jurisdiction: Equity - Technology and Construction List
Before: Griffiths AJ
Decision: 1. Upon the plaintiff giving the usual undertaking as to damages, order that the first defendant be restrained from encumbering, disposing of, or otherwise dealing with Lots 1-18 of Folio Identifier SP108772, apart from lots 5, 11 and 18, without giving prior notification in writing to the plaintiff of at least 20 business days, until final judgment of the proceedings or alternatively, until further order by the Court.
2. Costs of the notice of motion filed on 28 November 2025 be costs in the cause.
Catchwords: CIVIL PROCEDURE — interim preservation — freezing orders — whether there is a danger that a judgment against the first defendant will be unsatisfied because its assets may be disposed of — other relevant considerations including plaintiff’s capacity to meet usual undertaking as to damages
Legislation Cited: Home Building Act 1989 (NSW) s 18B
Strata Schemes Management Act 2015 (NSW) ss 81, 8
Uniform Civil Procedure Rules 2005 (NSW) rr 25.11, 25.14, 42.7
Cases Cited: Aqualand North Sydney Lavender Developments Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Deputy Commissioner of Taxation v Huang (2021) 273 CLR 429; [2021] HCA 43
Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264
Skyworks v 32 Drummoyne Road [2017] NSWSC 343
The Owners – Strata Plan No. 102081 v Aqualand Construction Pty Ltd [2025] NSWSC 31
Texts Cited: Biscoe, Freezing and Search Orders (3rd ed, 2023, LexisNexis)
Category: Procedural rulings
Parties: The Owners – Strata Plan No 97938 (Plaintiff)
Golden Rain Development Pty Ltd (First Defendant)
Representation: Counsel:
F Corsaro SC with P Horobin (Plaintiff)
N Kidd SC with J Dooley (First Defendant)
Solicitors:
Chambers Russell Lawyers (Plaintiff)
Allens (First Defendant)
File Number(s): 2022/00151309
Publication restriction: Nil
By notice of motion dated 28 November 2025, the plaintiff seeks a freezing order restraining the first defendant, Golden Rain Development Pty Ltd (Golden Rain), from disposing of, dealing with, or diminishing the value of, its assets in Australia up to the unencumbered value of AUD $29,080,012.98. Alternatively, the plaintiff seeks an order restraining Golden Rain from dealing with its proprietary interest in 18 lots in what is known as the Honeycomb Terraces without giving prior notice to the plaintiff.
The application is supported by an affidavit dated 28 November 2025 by the plaintiff’s instructing solicitor, Ms Laura Dale. Golden Rain opposes the application and relies upon an affidavit affirmed 21 January 2026 by its instructing solicitor, Mr Jonathan Light.
The plaintiff comprises the Owners of Strata Plan No 97938. The strata plan relates to two seven-storey buildings with 109 apartments and basement car parking, known as the Sugarcube Apartments. The plaintiff has brought proceedings in this Court against Golden Rain and others seeking damages for defective works involving alleged breaches of statutory warranties under s 18B of the Home Building Act 1989 (NSW).
Golden Rain developed the land to which the strata plan relates. It was incorporated in 2013 with a view to carrying out property developments. Its first project commenced around November 2014, when it acquired a former industrial site in Erskineville to be developed into residential units and terraces. The Erskineville Project had two main parts: the first involving construction of the Sugarcube Apartments and the second involving the construction of 18 terraces in the Honeycomb Terraces. The project also involved the construction of various public domain roads. Both the Sugarcube Apartments and Honeycomb Terraces have now been built but there have been delays in the issue of an occupation certificate. An interim occupation certificate was granted for the Sugarcube Apartments in November 2020. All those apartments have been sold and the proceeds were used by Golden Rain to repay its bank debt and business expenses.
To date, no occupation certificate has been issued for the Honeycomb Terraces. Golden Rain lodged an application for a final occupation certificate for the Honeycomb Terraces on 10 December 2025. It is unclear when any such certificate may be issued. The freezing order sought by the plaintiff is primarily aimed at restraining Golden Rain from dealing with those terraces until the proceedings are completed.
Several of the Honeycomb Terraces were sold “off the plan”. All of those contracts have been rescinded except for the contracts for sale in respect of lots 5, 11 and 18. Although Golden Rain received a 10% deposit on each of those three contracts, the balance of the purchase price remains outstanding. Assuming that the non-rescinded contracts complete at the contract price, the total amount outstanding is approximately $4,117,000, less the 10% deposit already received by Golden Rain for each of those contracts.
A real estate agent has provided Golden Rain with recommended pricing for the remaining 15 terraces, which totals $33,090,000. Golden Rain has also obtained market assessment certificates in respect of lots 3, 12 and 15 which give a value of $2,467,500, $2 million and $2 million respectively.
The sale of all the apartments in the Sugarcube Apartments generated approximately $91,772,000. Those proceeds were applied by Golden Rain to repay the principal on a loan with ANZ Bank in the amount of approximately $60 million along with payment of interest and fees on that loan in the amount of approximately $6.3 million.
In November 2014, Golden Rain entered into various loan facility agreements with six shareholders (Facility Agreements), each of whom was a related party to Golden Rain. The loans were for the purpose of financing costs and expenses in developing the Sugarcube Apartments and Honeycomb Terraces. Each of the agreements carried an interest rate of 10% per annum. Notably, in the light of the events to follow, none of the loans were secured.
In 2019, the parties to the Facility Agreements entered into supplementary deeds to those agreements (Supplementary Deeds), under which each of the lenders waived all interest payable by Golden Rain.
On 24 July 2025, Golden Rain and six related party lenders entered into replacement Facility Agreements (Replacement Facility Agreements), which replaced the earlier Facility Agreements and the Supplementary Deeds.
The identity of the lender and facility limit in each of the Replacement Facility Agreements are set out in the table below (which is extracted from Mr Light’s affidavit):
| Item | Lender | Facility Limit | | 1. | Jibin Xia | $6,170,147.71 | | 2. | Hongliang Huang | $6,251,542.71 | | 3. | Fei Xia | $4,420,606.00 | | 4. | Jizhong Xia | $4,428,332.00 | | 5. | Jun Zhang | $2,417,530.00 | | 6. | Rosemary Ren | $2,150,768.57 |
There are several points to make about this table. First, two of the lenders are currently directors of Golden Rain and reside in Australia (Mr Hongliang Huang and Ms Rosemary Ren). The third director of Golden Rain is Mr Rui Xia. He is a citizen of China and a permanent resident of Australia. Mr Jibin Xia is a resident of China, as also appears to be the case with Fei Xia and Jizhong Xia. Mr Jun Zhang resides in Australia.
Secondly, Mr Light deposed on information and belief that Fei Xia is the son of Jiguo Xia. Jiguo Xia was a related party lender under the original Facility Agreement and has been replaced by his son, Fei Xia, under the corresponding Replacement Facility Agreement.
Thirdly, none of the six Replacement Facility Agreements explicitly requires Golden Rain to pay any interest on the loan facilities.
According to Mr Light, Golden Rain’s indebtedness under the Replacement Facility Agreements totals $25,838,926.99. The money borrowed is to be repaid no later than 25 July 2026. The Replacement Facility Agreements are secured by a registered mortgage. The mortgagee is MSC Capital Pty Ltd (MSC).
A copy of the registered mortgage between Golden Rain and MSC was included in the exhibit to Ms Dale’s affidavit.
The Replacement Facility Agreements (copies of which were adduced in evidence in the exhibit to Mr Light’s affidavit) refer to a suite of other significant related documents which were executed on or around the same time as the Replacement Facility Agreements. Copies of none of those other documents were included in Mr Light’s affidavit. The suite comprises:
(a) A Security Trust Deed executed by Golden Rain, the Security Trustee (i.e. MSC) and the six related party lenders. (b) Transaction Security Documents, which are defined to include the General Security Deed between Golden Rain and the Security Trustee and each real property mortgage in respect of any of the 18 lots which comprise the Honeycomb Terraces between Golden Rain and the Security Trustee. (c) A Mortgage Terms Deed between Golden Rain and MSC.
No copies of those documents were provided in Mr Light’s affidavit. It was only after the Court raised the fact that the suite of documents had not been placed in evidence that copies were belatedly tendered by Golden Rain, without objection. The parties were given an opportunity to provide brief supplementary submissions in writing concerning the significance of these documents, to which I will return below.
In August to September 2025, the six lenders involved in the Replacement Facility Agreements as set out in [12] above collectively advanced Golden Rain an additional amount of $1 million to be used to pay land tax due on the Honeycomb Terraces for 2024 and 2025, and other expenses. There is no formal written loan agreement in relation to this $1 million loan, but Mr Light gave evidence on information and belief that interest is payable at 10% per annum.
Mr Light also gave evidence on information and belief from Ms Ren “that Golden Rain intends to pursue further development opportunities” after it receives the remaining proceeds of the sales of the Honeycomb Terraces and pays the amounts owing under the Replacement Facility Agreements and the $1 million loan.
On 10 February 2022, Golden Rain entered into a Memorandum of Understanding (MOU) with Hunta Property Pty Ltd (Hunta) which is a property advisory firm specialising in assisting clients with property development opportunities. The MOU states that it is intended to guide the parties’ relationship pending the negotiation and execution of more detailed and binding agreements for each specific development opportunity. The purpose of the MOU is set out in clause 1, and includes recording the parties’ “shared understanding and broad commercial principles for cooperating in a Joint Venture … in property investment and development”, including “jointly undertaking property development and related advisory activities through project-specific special purpose vehicles and/or a new joint venture entity”. Clause 1.3 of the MOU states that, except for certain boilerplate provisions, the MOU “is intended to be an expression of commercial intent only and is not legally binding”.
Mr Light also gave evidence, again on information and belief, as to various development opportunities explored by Golden Rain since early 2023. None of those opportunities have crystallised. In a “New Development Schedule” included in the exhibit to Mr Light’s affidavit, it is stated that offers were made in the period 2023 to 2024 in respect of three opportunities, but none were successful. The document also refers to due diligence having been carried out in respect of two development opportunities for which expressions of interest were due in early 2024 and late 2025 but no offers were submitted. The plaintiff correctly pointed out Golden Rain did not adduce evidence of the earlier offers or their terms and conditions. Mr Light gave evidence on information and belief from Ms Ren that Golden Rain had also considered in May 2025 acquiring two separate properties in Gordon and St Ives for development. Those opportunities were not pursued, however, as Golden Rain thought it was unlikely that it could obtain debt financing for those projects.
Mr Light also gave evidence on information and belief (again from Ms Ren) that Golden Rain had been informed by the Commonwealth Bank in June 2025 that, if it wished to obtain a bank loan to fund a new development, it needed to provide proof of current income sources. As Golden Rain’s primary anticipated income source was and remains profits from the sale of the Honeycomb Terraces, which cannot proceed without an occupation certificate, it has paused its plans to obtain any such bank loan for a new development.
It is notable that the only evidence adduced by Golden Rain relating to its intentions to undertake future developments and its stated present intention to pursue further development opportunities was given not by any of its directors (who could then have been cross-examined) but by its solicitor acting on information and belief provided by one of Golden Rain’s three directors. Of course, this is an interlocutory application and it is not uncommon for evidence to be given on information and belief, but the failure to call a witness to give direct evidence which may be tested by cross-examination may affect the weight to be given to the evidence in question, particularly where the evidence goes to central issues.
Finally, Mr Light gave evidence on information and belief that, if the plaintiff obtained relief in the terms of prayers 1-2 of the notice of motion, Golden Rain may be prevented from obtaining a bank loan for it to pursue the opportunities referred to above, or other opportunities. Thus, it would be prevented from carrying out its business as a developer. It is notable that this evidence is directed to prayers 1-2 in the plaintiff’s notice of motion and is silent regarding the alternative prayer for relief in prayer 3.
Prior to the filing of the present motion, there were detailed exchanges of correspondence between the plaintiff and Golden Rain in the period from 5 May 2025 to 26 November 2025 regarding the form of an undertaking from Golden Rain which might have obviated the need for the present application. Those discussions did not lead to any agreement and the plaintiff filed the notice of motion on 28 November 2025.
The plaintiff contends that Golden Rain’s financial position is such that, unless it is restrained, there is a danger that any judgment obtained by it will be wholly or partly unsatisfied. Golden Rain’s Financial Statements for the financial year ending 30 June 2024 records it as having liabilities in the form of loans to the six related party lenders in the total amount of $26,953,463.
The Balance Sheet for Golden Rain as at 30 June 2025 records it having total assets of $23,117,840.56, of which most relates to “total construction in progress” (comprising of $22,754,442.90). The stated liabilities include loans from the six related party lenders. Total liabilities are stated to be $27,325,606.56 and net assets are stated to be −$4,207,766.
The financial records reveal that Golden Rain’s liabilities are overwhelmingly owed to related parties, being the six individuals who have lent it money. This is confirmed by Note 10 to the Financial Statements for the year ending 30 June 2024, which records “Loans – Related Parties: $26,953,463”.
The MYOB Balance Sheet for the period from July to December 2025 (which is contained in Annexure A to these reasons for judgment) records total assets in July in the amount of $23,128,366.10, of which $22,845,474.12 relates to total construction in progress. That balance sheet also records a shareholder loan from Jibin Xia in the total amount of $6,423,900.47 as at July 2025 and increasing to $6,678,900.47 as at December 2025 (to be contrasted with the figure $6,170,147.71 in the table at [12] above) and a loan from HL Huang in the total amount of $6,282,255.79 as at July 2025 and increasing to $6,487,255.79 as at December 2025 (to be contrasted with the figure of $6,251,542.71 in the table). The net assets are stated to be −$4,220,667.24 as at July 2025. The increase in the total amount of the loans presumably reflects interest payable on the relevant part of the undocumented $1 million loan. Extracts from the MYOB Balance Sheet show an increase in the total loan amounts from the other four related party lenders over the six month period.
The plaintiff also draws attention to the statement at Note 1(a) to the Financial Statements of Golden Rain for the financial year ending 30 June 2024, which states (emphasis in original):
(a) Going Concern
Notwithstanding the deficiency of net assets in the company, the financial report of the company has been prepared on a going concern basis. This basis has been applied as the directors have received a guarantee of continuing financial support and it is the directors’ belief that such financial support will continue to be made available.
The evidence is unclear as to who are the guarantors of this continuing financial support and any terms and conditions are unknown.
In the light of all these matters, the plaintiff contends that the only realistic source from which a judgment could be satisfied is future dealings by Golden Rain with development assets or proceeds, including after servicing related party loans. While it accepts that this amounts to “ordinary commercial activity”, it submits that when undertaken by a company with negative equity and no asset buffer, as is the case with Golden Rain, these activities will inevitably diminish or exhaust the only pool from which a judgment could be satisfied.
There is an issue regarding the plaintiff’s capacity to fulfil the usual undertaking as to damages, to which I will return below.
In brief, Golden Rain opposes the freezing order on the following grounds:
(a) The plaintiff has failed to establish a sufficiently serious risk of dissipation of assets. (b) The plaintiff makes no claim of misconduct or suspicious dealing. (c) The facts here are distinguishable from those in Aqualand North Sydney Lavender Development**s Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143. (d) Golden Rain should not be prevented from selling the Honeycomb Terraces to repay existing debt in circumstances where discharging existing debt obligations is not a dissipation of assets, particularly where secured by a mortgage, as is the case here. (e) In contrast with Aqualand, a freezing order will cause prejudice to Golden Rain in preventing it from disposing of any of the Honeycomb Terraces. This will prevent it from repaying its loans on 25 July 2026 and put it in default of loan and mortgage agreements. The prejudice is highlighted by the fact that a freezing order would potentially operate for a significant time, having regard to the fact that the defendants are still to file and serve their evidence in the substantive proceeding and the hearing is estimated to take approximately four weeks. (f) A freezing order may also prevent Golden Rain from pursuing further development opportunities in circumstances where, unlike the position in Aqualand, it is not a special purpose vehicle. (g) The plaintiff may not be able to meet the usual undertaking as to damages or give security. (h) The amount of the freezing order sought by the plaintiff is not justified.
Although the parties placed different emphasis on the principles which guide whether or not to issue a freezing order, they were in substantial agreement as to these principles.
Rule 25.11(1) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides:
The court may make an order (a freezing order) … 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.
UCPR r 25.14(4) provides, relevantly, that the Court may make a freezing order if satisfied that “there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because … the assets of the judgment debtor, prospective judgment debtor or another person are … disposed of, dealt with or diminished in value.”
The relevant principles are to be found in cases such as Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; Deputy Commissioner of Taxation v Huang (2021) 273 CLR 429; [2021] HCA 43 and Aqualand.
Each case necessarily turns on its own facts, but the following broad principles are relevant:
(a) As accepted by the plaintiff here, it must establish a reasonably arguable case on an accrued cause of action and a danger that a judgment will be wholly or partly unsatisfied because assets may be disposed of, dealt with, or diminished in value. (b) A freezing order is an exceptional remedy which should not be granted lightly, bearing in mind that the purpose of such an order is not to provide a plaintiff with security in advance of a judgment. The need for the Court to exercise a high degree of caution is emphasised in the following passage from Biscoe, Freezing and Search Orders (3rd ed, 2023, LexisNexis) at [2.15]:
A freezing order is ‘a drastic remedy which should not be granted lightly’ and requires a ‘high degree of caution’ on the part of a court invited to make an order of that kind: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [50], [51]; Severstal Export gmbH v Bhushan Steel Ltd [2013] NSWCA 102 at [57]; Frigo v Culhaci [1998] NSWCA 88 at [9]–[10]. There are several reasons: Cardile at [50]–[52]. First, it imposes a severe restriction on the respondent’s right to deal with the respondent’s own assets at the suit of an applicant whose status as a creditor may be in dispute. Secondly, although it does not provide security, in a practical sense it operates as a tight negative pledge of assets for the benefit of all creditors to which the contempt sanction is attached. Thirdly, an order lightly or wrongly granted may have a capacity to impair commerce just as much as one appropriately granted may facilitate and ensure its due conduct. Fourthly, if it turns out that the order should not have been granted, there may be difficulties associated with the quantification and recovery of damages pursuant to the applicant’s usual undertaking.
(c) The following passages from Aqualand are also apposite:
(i) Mitchelmore JA (with whom Ball and Free JJA agreed) referred with apparent approval (at [7]) to the following passage from Stevenson J’s judgment at first instance (The Owners – Strata Plan No. 102081 v Aqualand Construction Pty Ltd [2025] NSWSC 31 at [10], emphasis added):
There is no shortage of verbal formulations as to the test to be applied when considering there is such a ‘danger’. Any attempt to derive a bright-line test from those formulations will only add to what has been described as a ‘sea of semantics’ [citing Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 327 (Meagher JA)]. What is clear is that a freezing order is to be regarded as an extraordinary remedy which requires a high degree of caution on the part of the Court invited to make the order [citing Cardile v LED Builders (1999) 198 CLR 380; [1999] HCA 18 at [50] (Gaudron, McHugh, Gummow and Callinan JJ)]. It is for the applicant to show, from the evidence before the Court, that there is the requisite ‘danger’. The test is then applied in various ways, such as whether there is a ‘sufficiently serious risk’ of dissipation of assets [Skyworks v 32 Drummoyne Road [2017] NSWSC 343 at [24] (McDougall J)], or a ‘real risk of the dissipation of assets’ [citing Patterson at 327 (Meagher JA)], or whether the danger is ‘sufficiently substantial to warrant the injunction’ [citing Patterson at 325 (Gleeson CJ)]. The applicant does not need to establish that the dissipation of assets is ‘more likely than not’ or that the dissipation would occur on the balance of probabilities [citing Patterson at 325 (Gleeson CJ, Meagher JA and Rogers AJA agreeing)].
(ii) In rejecting the appellant’s challenge to the primary judge’s finding that the requisite danger was established, Mitchelmore JA said the following at [18]-[20] (emphasis added):
18. The Developer’s submissions focused on particular descriptions the primary judge applied to aspects of its conduct at the expense of a broader (and fairer) reading of his Honour’s ex tempore reasons. His Honour’s finding that the Developer was selling units “in the ordinary course” (at [11]) reflected its status as a special purpose vehicle “whose only function was to develop the subject site”: at [15] (emphasis added). Of the 121 units it had sold, the Developer had retained none of the proceeds of sale. Instead, it had distributed the profit by way of dividend or, from time to time, loaned some part of the proceeds to other members of the Aqualand group. His Honour found, as a matter of reasonable inference, that absent restraint the Developer would act in the same way in relation to the four (now, three) remaining units once sold.
19. As the respondent submitted, the Developer’s sale of the units might have occurred in the ordinary course, but the manner in which it dealt with the proceeds of sale were not “ordinary course transactions” such as might otherwise have immunised them from enjoinder. They were not akin to the payment of trading debts and satisfaction of ordinary trading liabilities, such as paying wages, tax liabilities or utilities. Contrary to the complexion that the Developer sought to place on how his Honour described its activities in his reasons, the primary judge did not treat them as such.
20. His Honour’s findings as to how the Developer ordinarily dealt with the profits it received from the sale of the units provided a more than sufficient basis for the conclusion that, with only four units remaining, the requisite danger to which r 25.11 refers existed, namely, that the prospective judgment “will be wholly or partly unsatisfied”. Considered together with the absence of prejudice to the Developer in the event that freezing orders were made (which his Honour found at [18]), his Honour made the order in the exercise of the discretion.
(iii) Merely because the dissipation of assets might be for legitimate business purposes, including paying down debt owed to other companies in the same corporate group (or, I would add, shareholders) does not mean that a freezing order should not be granted. At [32], Mitchelmore JA referred with apparent approval to the following passages from McDougall J’s judgment in Skyworks v 32 Drummoyne Road [2017] NSWSC 343 at [50]-[52] (footnote omitted):
50. Putting all the evidence together, I conclude that if the amount of $1.9 million presently held in trust is made available to the defendants to use as they wish, it will be utilised to pay down debt owed by other companies in the HIGA Group. Although that could well be a legitimate business purpose (and perhaps one not properly described by the somewhat pejorative word ‘dissipation’), it will nonetheless lead to a situation where:
(1) the primary debtor, the developer, will be bereft of assets from which it could pay any judgment in favour of the builder (indeed, would be even more hopelessly insolvent than at present it appears to be); and
(2) there is no basis in the evidence for concluding that secondary debtors (the guarantors) would be able to pay any such judgment (accepting, as I do, that their financial position is not in any way hopeless, let alone as hopeless as that of the developer appears to be).
51. In short, if the sum of $1.9 million is paid away as the defendants wish, there is a very real likelihood that none of the defendants would have available assets from which the builder could satisfy any judgment that it might recover.
52. Mr Giles submitted that the order sought to do what is not permitted: namely, to put the builder in the position of a secured creditor. I do not agree. The order is certainly unusual, because it fastens on a particular asset rather than upon the assets of the developer (or for that matter, the directors) generally. However, if the builder recovers a judgment, it will be an unsecured creditor, although one with an identified fund to which it could have recourse. But in the likely event (on the hypothesis presently under consideration) that the developer then went into liquidation, any payment in favour of the builder would be preferential, and one that it would be liable to disgorge for the benefit of creditors generally. And it must be at least open to question, whether the court would permit the builder to garnishee the deposit when the effect might be to give it a preference, properly so called. See Fitz Jersey Pty Ltd v Atlas Construction Group Pty Ltd.
(iv) In Aqualand, Ball JA (with whom Free JA agreed) added at [36] the following observations to similar effect (emphasis added):
Here, the Developer was established as a special purpose vehicle to construct and to sell units in a mixed residential and commercial development and to distribute the profits of the venture to its shareholders. The obvious purpose of the structure was to insulate the other business activities of the shareholders from the financial risks associated with the venture. Apart from the sale of the remaining units and the distribution of the profits generated by those sales, the special purpose vehicle has served its purpose. The clear consequence of permitting it to distribute its remaining profits before defects claims were resolved would be to deny the claimant any remedy if its claims succeed. It is not helpful in that context to ask whether the distribution of the remaining profits was in the ordinary course of business or was something that was “extraordinary”. The only source the Developer had to meet claims for defects were the profits it generated from the venture and it was reasonable to infer that unless restrained it would continue to distribute those profits on the sale of the remaining units.
(v) These observations in Aqualand suggest that transactions in the ordinary course of business can be enjoined if there are appropriate surrounding circumstances which satisfy the real danger requirement. The nature of such circumstances is likely to vary from case to case.
As is apparent from the summary above of Golden Rain’s arguments in opposing the relief sought by the plaintiff, it does not contest the plaintiff’s claim that it has a good arguable case. Rather, Golden Rain’s opposition focuses upon the issue of whether the plaintiff has established the requisite danger, as well as on other reasons why it says matters going to discretion favour it.
Both parties devoted considerable attention to the issue of whether or not the circumstances here are relevantly distinguishable from those of Aqualand. I am not persuaded that this is an appropriate way of resolving the dispute. In my view, it is better first to focus on the relevant principles and apply those principles to the facts and circumstances at hand rather than adopt a “tick the box” approach. Whether or not the facts and circumstances in Aqualand are distinguishable from those here may be a relevant consideration but it ought not drive or dominate the analysis.
For the following reasons, I am satisfied that the plaintiff has established the requisite danger to warrant the making of a freezing order.
First, I accept the plaintiff’s submission that Golden Rain’s recent financial records, as summarised above, indicates that it is incapable of satisfying a substantial judgment in the plaintiff’s favour from its existing assets and would need to rely on future transactions and realisations as opposed to an existing pool of preserved assets.
It is notable that Golden Rain’s liabilities are overwhelmingly owed to related parties and not arms-length creditors. This is shown in the extract of Golden Rain’s MYOB Balance Sheet for the period from July 2025 to December 2025 as set out in Annexure A to these reasons, which includes various figures concerning loans to the company from the six related party lenders.
Presumably, these shareholder loans include both the Replacement Facility Agreements and the undocumented $1 million loan referred to above.
Moreover, as alluded to in Note 1(a) to the Financial Statements for the financial year ending on 30 June 2024, Golden Rain’s solvency depends upon a guarantee having been given to its directors of continuing financial support. As the plaintiff correctly points out, this means that Golden Rain’s ability to continue trading depends on ongoing financial arrangements, the servicing of which would necessarily compete with the plaintiff’s prospective judgment. In circumstances where Golden Rain does not have an existing pool of preserved assets, the only realistic source from which it could satisfy a judgment in favour of the plaintiff is by way of future dealings with development assets or proceeds.
Secondly, as Golden Rain acknowledged, it is well settled that the requisite danger need not depend upon establishing misconduct or suspicious dealings. Mr Kidd SC (who appeared for Golden Rain along with Mr Dooley) properly acknowledged that the present case fell into a “much narrower type of case”. I consider that the requisite danger in the present case is partly reflected in the fact that servicing the substantial related party loans is almost entirely dependent upon Golden Rain’s future dealings, particularly with the Honeycomb Terraces, which will inevitably deplete the only pool from which a judgment could otherwise be satisfied. There are other relevant matters which also highlight that danger. They include the significance of the timing and effect of the suite of documents executed in conjunction with the Replacement Facility Agreements. These related agreements have the effect of converting what previously were unsecured loans from the six related party lenders to secured loans which give priority to the related party lenders and place control of enforcement and allocation in their hands. I will elaborate upon these matters below.
Meanwhile, it suffices to state in summary form that the requisite danger is established by the combined effect of Golden Rain’s negative equity, its dependence on future realisations, the predominance of related party loans in its existing liabilities, the timing and effect of the suite of documents associated with the Replacement Facility Agreements and undocumented $1 million loan, as well as the absence of any existing pool of preserved assets. The facts and circumstances here differ in some respects from those in Aqualand but those differences do not prevent the application here of the observations in Aqualand, which are set out at [41(c)] above.
Thirdly, as already emphasised, there is the effect of the suite of documents belatedly produced by Golden Rain. The timing of their execution is of significance. They were all executed in July 2025 and on or around the execution of the Replacement Facility Agreements and shortly before the six related party lenders provided the additional $1 million undocumented loan. Thus, these transactions all occurred after the proceedings had been commenced and in the course of detailed preparation for trial.
Turning to the content and effect of the suite of documents, I accept the plaintiff’s submission that their legal effect is to alter the priority and control of Golden Rain’s assets in a way that is directly relevant to the freezing order application. This legal effect is produced by the contractual reallocation of the entitlement to the proceeds of Golden Rain’s assets. The effect of relevant clauses in this suite of documents is that the proceeds of the sale of Golden Rain’s assets will be applied in a manner which, on the basis of the present estimates, leaves no realistic prospect of Golden Rain being able to satisfy in full any judgment in the plaintiff’s favour.
It is convenient to set out relevant parts of the plaintiff’s analysis of the suite of documents in its supplementary submissions, with which I broadly agree, starting with the Replacement Facility Agreements executed in July 2025 (emphasis added):
3. The recitals to those agreements record that the earlier facilities are replaced, and the repayment obligation in clause 2 requires repayment of “the money borrowed” by the Repayment Date. The existing outstanding amounts are carried forward into the replacement facility deed. That conclusion is reinforced by the definition of the Facility Commencement Date, which occurs on execution and confirmation of the documents, not on drawdown.
4. There is no condition precedent requiring funds to be advanced before the facilities take effect. The legal effect is that the replacement facilities become operative immediately, notwithstanding that no new money need pass, and is not alleged to have passed, and the existing indebtedness is preserved and re-documented rather than discharged.
5. Each Replacement Facility Agreement defines Finance Documents to include the Security Trust Deed (Exhibit 2), the General Security Deed (Exhibit 3) and the Mortgage Terms Deed (Exhibit 1) (the security documents). That incorporation is critical because it subjects liabilities under the Replacement Facility Agreements, including rolled-over historical debt, to the definitions and enforcement machinery contained in the security documents.
6. The Security Trust Deed is the central instrument that effects the conversion of unsecured debt into secured debt. Clause 1.1 defines Secured Money as all money which the Borrower is or may become actually or contingently liable to pay for any reason whatever under or in connection with a Finance Document, whether or not currently contemplated.
7. That definition is not confined to future advances. It expressly captures liabilities existing at the time of execution, as well as contingent and future liabilities. The legal effect of clause 1.1 is that the historical indebtedness preserved by the Replacement Facility Deeds becomes Secured Money upon execution of the Trust Deed.
8. Clause 2.1 of the Security Trust Deed declares that the Security Trustee, MSC Capital Pty Ltd, holds the security on trust for the Beneficiaries [defined in clause 1.1 as including the Security Trustee and any Lender]. Control of that trust is vested in the Instructing Beneficiaries, defined in clause 1.1 as two related parties [acting together], and clause 3.3 requires the Security Trustee to act on their instructions. The effect is that enforcement, timing and distribution decisions are controlled by the same parties whose debt is being secured.
9. Events of Default are defined in clause 1.1 by reference to any Finance Document. There is no requirement that a default relate to a new advance. Non-payment of rolled-over historical debt is sufficient to trigger enforcement of the entire security package.
10. Clause 4 of the Security Trust Deed governs the application of proceeds and is central to the freezing order.
11. Clause 4.1 provides that the distribution regime “applies despite any rule of law or equity to the contrary”.
12. Clause 4.2 then mandates a strict waterfall. After enforcement costs and any prior ranking securities, proceeds are paid to the Security Trustee for the account of the Beneficiaries towards satisfaction of the Secured Money, before any surplus can belong to the Borrower. Clause 4.2(e) permits application rateably or in any other manner agreed by the Security Trustee and all Beneficiaries. Clause 4.4 permits retention of amounts for contingently owing Secured Money, and clause 4.5 allows, after default and on instruction, all payments to be routed through the Security Trustee.
13. The legal effect of clause 4 is to contractually lock in the priority: sale proceeds are diverted first to secured related parties who are also lenders, with discretion vested in those lenders as to internal allocation, and with the capacity to withhold funds for contingent claims.
14. The General Security Deed then gives effect to that structure at the asset level. Clause 2.1 grants a security interest over all present and after-acquired property to secure the Secured Money. Clause 2.2 provides that the security is given in consideration of providing or continuing financial accommodation, confirming that continuation of existing loans is sufficient consideration and no fresh advance is required.
15. Clause 19 provides that the security is a continuing security that is not discharged by settlement of account, intervening payment or anything else until final discharge. Clause 5.2(c) warrants that the security interest is and will remain first-ranking.
16. Clause 6.1 confers broad enforcement powers upon the occurrence of an Event of Default. The combined effect of those clauses is that all the assets are encumbered to secure historical debt, the priority of that security is contractually elevated, and the security cannot be neutralised by repayment or re-documentation unless the secured parties choose to release it.
17. The Mortgage Terms Deed applies the same structure to the land. By incorporating the Security Trust Deed definition of Secured Money, the mortgage secures the same expansive category of liabilities, including antecedent debt. Clause 16.1 provides that all enforcement proceeds are applied in accordance with clause 4 of the Security Trust Deed. Clause 16.3 permits retention of amounts contingently owing and treats them as due for statutory purposes. The effect is that the proceeds of any sale of the land are fed directly into the trustee waterfall favouring the now secured, same related parties.
18. Notwithstanding that both the Recitals of the Mortgage Terms Deed and General Security Deed suggest that they were entered in contemplation of future financial accommodation, the security documents read together demonstrate that in July 2025 existing unsecured indebtedness was preserved, swept into an expansive definition of Secured Money, secured over all assets of the company including the Honeycomb Terraces, and subjected to a mandatory distribution regime that prioritises related party lenders and places control of enforcement and allocation in their hands.
(a) Golden Rain contends that the effect of the documents “is to give to MSC a right to enforce a security on behalf of Beneficiaries (which include the Lenders) in the event of a default under the Replacement Facility Agreements”. This glosses over the important fact that, under clause 3.3(a) of the Security Trust Deed, MSC (as Security Trustee) is obliged in the exercise of all rights, powers and discretions on behalf of the Beneficiaries under the Finance Documents to act in accordance with any instructions given by the Instructing Beneficiaries or, where specified, the Beneficiaries. As noted above, this means that decisions concerning critical matters such as enforcement, timing and distribution are controlled by the same parties whose debt is being secured. I do not accept Golden Rain’s claim that this is “an unremarkable security structure”. This characterisation fails to acknowledge that the effect of the documents entered into in mid-2025, when the proceedings were well on foot, was to convert previously unsecured loans to secured loans under which priority is given to the six related party lenders who have control over enforcement and allocation. (b) As to Golden Rain’s claim that it will be prejudiced if it is prevented from fulfilling its obligations under the Replacement Facility Agreements because this will put it in default and render it liable to enforcement action, this claim deserves little weight in circumstances where, under clause 3.3(a) of the Security Trust Deed, MSC is obliged to act in accordance with any instructions of the Instructing Beneficiaries, who currently are two named related party lenders. While MSC is not obliged to seek those instructions, if and when they are received, they necessarily bind the Security Trustee in the exercise of a relevant discretion.
Fifthly, I reject Golden Rain’s contention that there is no sufficient danger here because there is no evidence of any risk of dissipation of assets. This submission contradicts Golden Rain’s separate contention that it should not be prevented from repaying the existing secured debt which is due to be repaid on 25 July 2026 by selling the Honeycomb Terraces, which will dissipate its assets to a large extent. This contention is also inconsistent with the clear import of the suite of documents. The evidence is clear that, unless restrained, Golden Rain will proceed to sell all 18 terraces and use a large portion of the proceeds to pay the existing debt obligations it owes to the related parties.
Sixthly, I attach little weight to Golden Rain’s contention that, after it has used the sale proceeds from the Honeycomb Terraces to repay its existing debt obligations, it intends to use surplus sale proceeds to pursue further development opportunities and this intention should not be stymied. The available evidence on this topic is far from compelling. As noted above, in large part, the relevant evidence was given by Mr Light on information and belief. This necessarily meant that the plaintiff had no realistic opportunity to cross-examine on matters such as the reasons why past development opportunities for Golden Rain have not been realised or to test Mr Light’s evidence regarding Golden Rain’s stated present intention to pursue future development opportunities.
Golden Rain has operated for over 12 years, yet it has embarked upon no other developments apart from those relating to the Sugarcube Apartments and the Honeycomb Terraces. None of the potential developments which it has explored under the MOU with Hunta have progressed or materialised. Moreover, it is notable that the MOU is not legally binding (save for particular boilerplate clauses). Golden Rain’s evidence did not include any specific agreement which had been entered into by it and Hunta concerning any individual development as contemplated by the MOU.
The available evidence concerning Golden Rain’s claim that it presently intends to pursue future development opportunities falls short of substantiating its claim of prejudice if a freezing order is made. The limited weight which I give to the claim of prejudice also reflects the shortcomings described above regarding Golden Rain’s asserted intention of pursuing further development opportunities, as well as the history of its failed past attempts in this regard. It is also difficult to reconcile this aspect of Golden Rain’s claim of prejudice with the guarantee which has been given to and relied upon by the directors relating to Golden Rain’s solvency, as referred to at [32] above.
For completeness, I find that, on the available evidence, Golden Rain’s claim of prejudice is not supported by the evidence and, accordingly, on the issue of prejudice, the circumstances here ultimately are little different from those in Aqualand.
Finally, there is the issue raised by Golden Rain concerning the plaintiff’s capacity to honour the normal undertaking as to damages, which is relevant to whether the Court should exercise its discretion to impose a freezing order. The relevant financial evidence may be summarised as follows:
(a) The plaintiff owes a strata loan of $500,000. (b) 21 owners in the strata scheme are in arrears of levies in the amount of $43,347.01. (c) The plaintiff has a bank account containing an amount of approximately $80,000. (d) The deficit in the interim financial report as at 4 December 2025 is $33,100.21. (e) Special levies of $2,380,000 have been imposed across the financial years 2022/2023, 2023/2024 and 2024/2025.
These figures do cast some doubt on the plaintiff’s capacity to meet an order of compensation in Golden Rain’s favour if it suffers loss or damage as a result of a freezing order, such as lost profits on any development opportunity which is forgone by Golden Rain because of the freezing order.
For the following reasons, however, I do not give this matter much weight in assessing the parties’ competing interests, which is relevant to discretion.
First, Golden Rain’s likely loss or damage relating to the effect of a freezing order on any future development activities is entirely speculative, particularly having regard to the unimpressive history of its other development activities to date as outlined above.
Secondly, in the event that Golden Rain seeks to enforce the plaintiff’s undertaking as to damages, the plaintiff’s capacity to pay any such compensation is not limited to it drawing upon existing assets. The Owners Corporation could seek to recover the quantum of compensation from lot owners by:
(a) making a levy under s 81(4) of the Strata Scheme**s Management Act 2015 (NSW) (the Act); and (b) if necessary, recovering any unpaid contributions from each defaulting lot owner by one of the means specified in s 86 of the Act.
Thirdly, if these avenues prove unfruitful, Golden Rain could apply to NCAT for a managing agent to be appointed under s 237 of the Act, who could then impose and enforce special levies.
For these reasons, I give little weight to Golden Rain’s submission regarding the plaintiff’s capacity to fulfil its undertaking as to damages.
I turn now to the issue of costs. This being an interlocutory application, it is appropriate that costs be costs in the cause, thereby enabling an order concerning costs to be made when the merits of the parties’ respective positions are known following a final hearing (see UCPR r 42.7). I understood both parties to agree with this position.
For the above reasons, I consider that a freezing order ought to be made. I am not satisfied that a freezing order in the terms of either prayers 1 or 2 in the notice of motion should be made, particularly having regard to the difficulties at present of quantifying the damages which are likely to be obtained by the plaintiff if it succeeds in the substantive proceeding and the likely significant disparity between that amount and the proceeds from selling the Honeycomb Terraces. Rather, I consider that relief should be granted along the lines of the terms of prayer 3 in the plaintiff’s notice of motion, subject to excluding from that order the sale of lots 5, 11 and 18. If the existing unrescinded contracts for sale of those lots proceed to completion, Golden Rain should receive proceeds of approximately $4 million which it can use for its ongoing legal costs and other normal expenses. I also consider that the notification period should be at least 20 business days.
The Court will make a freezing order in the following terms:
Upon the plaintiff giving the usual undertaking as to damages, order that the first defendant be restrained from encumbering, disposing of, or otherwise dealing with Lots 1-18 of Folio Identifier SP108772, apart from lots 5, 11 and 18, without giving prior notification in writing to the plaintiff of at least 20 business days, until final judgment of the proceedings or alternatively, until further order by the Court.
**********
The Owners �e" Strata Plan No 97938
Golden Rain Development Pty Ltd [2026] NSWSC 37
(1999) 198 CLR 380
(2021) 273 CLR 429
(1989) 18 NSWLR 319