TROY SMSF PTY LTD -v- BUX.COM GLOBAL LTD [2016] WASC 249 (2 August 2016)

(This judgment was delivered extemporaneously on 2 August 2016 and has been edited from the transcript.)

1 There are two applications before the Court today, both made ex parte. The first is for leave to serve the Writ of Summons (the Writ) out of the jurisdiction, pursuant to O 10 r 1 of the Rules of the Supreme Court 1971 (WA) (RSC). That application is made because, according to the evidence before the Court, the first defendant is a company registered in Hong Kong. The second application made today is an application for a freezing order pursuant to O 52A RSC, which seeks to restrain the second defendant from disposing or diminishing its assets in Australia below the sum of $350,000.

The application for leave to serve the Writ out of the jurisdiction

2 The application is supported by an affidavit of Mr Mark Anthony Troy, the director of the plaintiff, sworn 25 July 2016 (the first affidavit), in which Mr Troy deposes, amongst other things, that he believes that the first defendant is located at an address in Hong Kong, having regard to particulars of registration of the company in Hong Kong.[1]

3 Under O 10 r 1 RSC, the leave of the Court is required to serve the Writ out of the jurisdiction. (In this case, it was not necessary to obtain leave to issue the Writ in the first place, because the second defendant is a company incorporated in Australia.)

4 Under O 10 r 1, the requirements for leave to serve the Writ out of the jurisdiction are twofold. First, the Court must be satisfied that the cause of action appearing in the indorsement on the Writ falls within one of the categories set out in O 10 r (1)(1). Secondly, the Court has a discretion as to whether or not to grant leave.

5 Having regard to the matters set out in the first affidavit and to the additional affidavit of Mr Troy, sworn 25 July 2016 in support of the application for a freezing order (the second affidavit), I am satisfied that the requirements for leave to serve the Writ out of the jurisdiction have been established.

6 As against the first defendant, the cause of action here is, effectively, an action for the recovery of damages in respect of the breach of a contract that was made in Western Australia. I am satisfied that this is the case having regard to the matters set out in Mr Troy's second affidavit.[2] Therefore, this seems to me to be a case falling within O 10 r 1(1)(e)(i), which provides that:

The Court may grant leave to serve a person outside Australia with a writ, or notice of a writ, that begins an action if -

(e) the action is one brought to ... recover damages or obtain other relief in respect of the breach of a contract, being ... a contract -

7 Turning to discretionary considerations, there does not appear to be any reason why the exercise of the Court's discretion should be other than to grant leave, having regard to the information before the Court at this stage. The authorities establish that one of the considerations to which the Court may have regard for this purpose is the prospects of success of the action.[3] Based on the evidence currently before the Court, there appears to be a good arguable case that there has been a total failure of consideration in respect of the Agreement between the plaintiff and the first defendant. Discretionary considerations pertaining to prospects of success of the action, therefore, do not militate against the grant of leave in this case.

8 For those reasons, there will be a grant of leave in terms of the plaintiff's amended minute of proposed orders, with the additional amendments that have been discussed with counsel in the hearing, including an order making provision for the period in which an appearance is to be entered after the date of service of the Writ.

The freezing order application The factual basis for the application

9 Turning to the application for a freezing order, the application is supported, as I have mentioned already, by Mr Troy's second affidavit, as well as the affidavit of Mr John Theodore Steenhof, sworn 1 August 2016. In addition, the plaintiff has provided the Court with an undertaking in the usual form, which is required in respect of an application for a freezing order. Counsel has helpfully provided an outline of submissions to which I will make reference.

10 The relevant factual background need not be traversed in great detail for present purposes. In his second affidavit, Mr Troy deposes to the fact that he is a shareholder and director of the plaintiff. In early 2015, Mr Troy had discussions with Mr Raymond Webber (who he understands to be the chairman and a director of the first defendant), Mr Andrew Webber (who he understands to be a director of the first and second defendants), and Mr Glenn Chittleborough (who is a friend of Mr Troy and who has apparently been acting in the capacity of a representative of the first and second defendants). Following those discussions, Mr Troy decided that the plaintiff company would enter into an agreement with the first defendant (the Agreement) to acquire two North American companies, namely Wall Street Finance LLC and Wall Street Finance Canada Ltd (the Companies). Mr Troy understood that those companies were involved in the business of the transfer of money.

11 Mr Troy deposes that he signed a document which purported to set out the terms of the Agreement in writing or, at least, the essence of those terms, and that that document was signed on 30 July 2015 in Canning Vale, Western Australia.[4] According to that document, a copy of which was annexed to the second affidavit,[5] the sum of $350,000, comprising a deposit of $50,000 and a payment of the balance of $300,000, was to be deposited into an account in the name of the second defendant at the Commonwealth Bank in Sydney. The consideration for that payment was to be an issue of 25% of the shares of the Companies and the plaintiff was to have a position on the board of the directors of each of the Companies, together with an option for the acquisition of shares. The copy of the document annexed to the second affidavit bears a signature of Mr Raymond Webber, in his capacity as the chairman of the first defendant, and is signed also by Mr Troy on behalf of the plaintiff.

12 Mr Troy deposes that he deposited funds in accordance with the Agreement into the relevant account in the name of the second defendant.[6] According to Mr Troy, since then there has been no performance whatsoever of the first defendant's obligations under the Agreement. Despite attempts to contact Mr Raymond Webber and Mr Chittleborough, there still has not been any performance of the Agreement, nor has there been any repayment or refund to the plaintiff of the moneys paid under the Agreement (that is, the sum of $350,000).[7] According to the second affidavit, performance of the Agreement was due to have taken place over a year ago.

13 The final matter to which I should make reference is that Mr Troy deposes to the fact that, in the conversations he has had with both Mr Chittleborough and Mr Raymond Webber since entering into the Agreement, he has received information which suggests that there is no prospect of the Agreement being performed. In particular, Mr Troy deposes that earlier this year he met with Mr Raymond Webber and Mr Chittleborough in Beckenham, Western Australia. At that meeting, when Mr Troy asked why the Companies had not been acquired and the shares in them had not been issued, he was told by Mr Raymond Webber that Mr Webber had never paid the deposit for the acquisition to the owner of the Companies.[8] Mr Troy deposes that, at that point, he requested the return of the $350,000[9] and Mr Raymond Webber replied with words to the effect that 'the money was gone ... and that [Mr Troy] would not be able to get anything from [Mr Webber] if [Mr Troy] took him to court'.[10]

14 In his second affidavit, Mr Troy explained why it has taken him some time to come to the Court to seek the recovery of the monies paid under the Agreement. In short, it appears that Mr Troy has refrained from doing so in the hope that he would receive a repayment of the monies paid and he did not want to prejudice any potential payment by taking legal action.[11]

15 Finally, mention should be made of the affidavit of Mr Steenhof, sworn 1 August 2016. Mr Steenhof deposes that searches have been carried out to ascertain whether either defendant owns any real or personal property in Australia.[12] The results of those searches have been that no real property is owned in Australia by either of the defendants.[13] In terms of personal property, the only property that those searches have identified is some office equipment, which appears to be owned by the second defendant.[14] I should, however, also observe that the second defendant is a wholly owned subsidiary of the first defendant, and to the extent that it owns all of the shares in the second defendant, the first defendant has property in Australia.

The principles applicable to the grant of freezing orders

16 The principles in relation to the grant of a freezing order under O 52A RSC are wellestablished. The purpose of the Court's jurisdiction to make such orders is to prevent the frustration or inhibition of the Court's processes by seeking to meet a danger that a judgment, or prospective judgment, of the Court will be wholly or partly unsatisfied. A freezing order can clearly be made under O 52A r 5 against a prospective judgment debtor arising from a cause of action in this Court if certain requirements are met.

17 First, the applicant must have a good arguable case on an accrued or prospective cause of action that is justiciable in this Court. Secondly, the Court must be satisfied, having regard to all of the circumstances, that there is a danger that the prospective judgment will be wholly or partly unsatisfied because, amongst other things, the prospective judgment debtor may abscond or because the assets of the prospective judgment debtor may be disposed of, dealt with or diminished in value. Finally, the Court must consider whether the balance of convenience favours the grant of the freezing order, given that such orders are discretionary in nature.

18 The principles applicable to the grant of freezing orders under O 52A RSC were comprehensively discussed by Beech J in Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd.[15] I am grateful for his Honour's summary of those principles. It is unnecessary to repeat them all here, save to note his Honour's reference to the decision of the High Court in Cardile v LED Builders Pty Ltd[16] where the Court made clear why the grant of a Mareva order (which is similar to a freezing order under O 52A RSC) should be approached with a high degree of caution. As Beech J noted, the reason for that caution is that, as a matter of practical reality, a freezing order operates as a tight 'negative pledge' species of security over property and a contempt sanction is attached to the order.[17] It is, as Beech J observed, 'a drastic remedy which should not be granted lightly'.[18]

19 As Beech J observed, a number of considerations will come together to assist the Court to determine whether its discretion should be exercised in favour of the making of a freezing order. Those include the strength of the plaintiff's case, the danger of frustration of the prospective judgment, the balance of convenience and other discretionary factors.[19]

20 Turning to the first requirement that the applicant must have a good arguable case, I am satisfied that the evidence (to which I have already referred, as well as the matters deposed to in the second affidavit and the affidavit of Mr Steenhof) demonstrates that the plaintiff has a good arguable case on the cause of action referred to in the Writ.

21 As I have already mentioned, as against the first defendant, the evidence suggests that the first defendant has not performed any of its obligations under the Agreement and the plaintiff has not received the repayment of any part of the $350,000 which was paid under the Agreement. Therefore, there appears to be a good arguable case that there has been a total failure of consideration, which suggests that there would be an action in restitution for the repayment of the funds to the plaintiff.[20] As against the second defendant, I am satisfied, having regard to the limited information presently available, that the plaintiff has a good arguable case in restitution for the repayment of the funds paid into its bank account, having regard to the total failure of consideration and on the basis that the monies received were impressed with a trust. In this respect, I refer to the observations made by Corboy J in Westgem Investments Pty Ltd.[21]

The danger of frustration of a prospective judgment

22 I turn now to the second requirement, that the Court must be satisfied, having regard to all the circumstances, that there is a danger that a prospective judgment will be wholly or partly unsatisfied. I am satisfied, based on the material before me, that there is such a danger in this case, having regard to the following factors.

23 First, the first defendant is a company incorporated in Hong Kong. As I have already indicated, the results of the searches annexed to Mr Steenhof's affidavit suggest that the first defendant does not have any property in Australia other than its shares in the second defendant. The only known property of the second defendant appears to be some office equipment and the account into which the $350,000 in funds was paid by the plaintiff.

24 Furthermore, the conduct of the representatives of the first and second defendant, to which I have already made reference above at [10] - [13] and which has been set out in the second affidavit, provides little comfort for any expectation that the funds paid by the plaintiff will be available for repayment to it, unless the second defendant is restrained from dissipating those funds. In particular, I refer to the comments made by Mr Raymond Webber, which I have referred to above at [13].

25 In addition, as I have already mentioned, it is apparent from the second affidavit that Mr Troy's efforts to ascertain what has happened to the monies paid, and why the obligations under the Agreement have not been performed, have been met with obfuscation by the other parties concerned. The most recent attempts to contact Mr Chittleborough have, according to Mr Troy, been unsuccessful in that Mr Chittleborough did not attend a proposed meeting which was to have been held early in July 2016, nor has he returned Mr Troy's telephone calls or text messages.[22]

26 In those circumstances, I am satisfied that there is a danger that any prospective judgment of the Court will be wholly or partly unsatisfied if a freezing order is not made.

27 Turning to the balance of convenience considerations, the material before the Court does not suggest that there is any discretionary consideration which warrants the refusal of the order sought. Although there has been a considerable delay between the date for the performance of the Agreement and the present application, that delay has been explained, in my view, by Mr Troy's evidence as to why he has not sought a remedy in the Court prior to now.[23]

28 In all of the circumstances, taking into account the matters to which I have already referred, I am of the view that this is an appropriate case for the granting of a freezing order.

29 The minute of proposed orders sought by the plaintiff are in the usual form of freezing orders made by the Court. Initially, the plaintiff sought that the Court also make an ancillary order requiring the provision of information by the second defendant. While the Court clearly has a broad power to make ancillary orders of that kind,[24] it appears to me that the preferable course would be for the making of such an order to be considered at an inter partes hearing. The plaintiff's counsel has not pressed for the making of such an order at this stage.

30 Accordingly, I will make the orders sought in the plaintiff's amended minute of proposed orders dated 1 August 2016, as further amended in the manner discussed with counsel during the hearing.

[1] First affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [8].

[2] The evidence in relation to that contract is set out in these reasons at [10] - [13].

[3] Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188 [143] [144]; BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25 [5] citing Cardile v LED Builders Pty Ltd [1999] HCA 18 ; (1999) 198 CLR 380 [68].

[4] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [26] - [27].

[5] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016, Annexure MAT-14.

[6] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [28] - [29].

[7] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [43] - [49].

[8] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [62] - [63].

[9] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [63].

[10] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [64].

[11] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [74].

[12] Affidavit of Mr John Theodore Steenhof, sworn 1 August 2016 [4] - [5].

[13] Affidavit of Mr John Theodore Steenhof, sworn 1 August 2016, Annexure JTS-1.

[14] Affidavit of Mr John Theodore Steenhof, sworn 1 August 2016, Annexure JTS-3.

[15] Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188 [129] [144].

[16] Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380.

[17] Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 [50].

[18] Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188 [139].

[19] Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188 [142].

[20] David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 353; (1992) 175 CLR 353, 382 383.

[21] Westgem Investments Pty Ltd v Saracen Project Management Pty Ltd [No 2] [2012] WASC 358, 45 56.

[22] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [76].

[23] Second affidavit of Mr Mark Anthony Troy, sworn 25 July 2016 [74].

[24] Rules of the Supreme Court 1971 (WA), O 52A r 3(2).