Yeo, in the matter of Bradi Transport Pty Ltd (in liq) v Sklenovski [2020] FCA 1541 | Case summary

Federal Court of Australia|2020-10-21|Before: Anderson J

THE COURT ORDERS THAT:

There be a Penal Notice in the form attached hereto. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. PENAL NOTICE TO: ATINLO ANTHONY SKLENOVSKI IF YOU (BEING THE PERSON BOUND BY THIS ORDER): (A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR (B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU NOT TO DO, YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT. ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.

TO: Atinlo Anthony Sklenovski This is a 'freezing order' made against you on 21 October 2020 by Justice Anderson at a hearing without notice to you after the Court was given the undertakings set out in Schedule A to this order and after the Court read the affidavits listed in Schedule B to this order. THE COURT ORDERS: INTRODUCTION (1) (a) The application for this order is made returnable immediately. (b) The time for service of the application, supporting affidavits and originating process is abridged and service is to be effected by 22 October 2020. (2) Subject to the next paragraph, this order has effect up to and including 27 October 2020 (the Return Date). On the Return Date will be a further hearing in respect of this order before Justice Anderson. (3) Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified. (4) In this order: (a) 'applicant', if there is more than one applicant, includes all the applicants; (b) 'you', where there is more than one of you, includes all of you and includes you if you are a corporation; (c) 'third party' means a person other than you and the applicant; (d) 'unencumbered value' means value free of mortgages, charges, liens or other encumbrances. (5) (a) If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions. (b) If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way. FREEZING OF ASSETS (6) (a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia ('Australian assets') up to the unencumbered value of $723,942.07 ('the Relevant Amount'). (b) If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount. (7) For the purposes of this order: (a) your assets include: (i) all your assets, whether or not they are in your name and whether they are solely or co-owned; (ii) any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and (iii) the following assets in particular: (A) the property known as 72 Hindmarsh Drive, Wyndham Vale in VIC 3024 more particularly described in certificate of title volume 10706 folio 690 or, if it has been sold, the net proceeds of the sale; (B) the property known as 3/32 Parawong Parade, Wyndham Vale, VIC 3024 more particularly described in certificate of title volume 11350 folio 371 or, if it has been sold, the net proceeds of the sale; (b) the value of your assets is the value of the interest you have individually in your assets. PROVISION OF INFORMATION (8) Subject to paragraph 9, you must: (a) at or before the further hearing on the Return Date (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing of all your assets in Australia, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets; (b) within 7 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information. (9) This paragraph (9) applies if you are not a corporation and you wish to object to complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that you: (a) have committed an offence against or arising under an Australian law or a law of a foreign country; or (b) are liable to a civil penalty. This paragraph (9) also applies if you are a corporation and all of the persons who are able to comply with paragraph 8 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively: (a) have committed an offence against or arising under an Australian law or a law of a foreign country; or (b) are liable to a civil penalty. You must: (a) disclose so much of the information required to be disclosed to which no objection is taken; and (b) prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and (c) file and serve on each other party a separate affidavit setting out the basis of the objection. EXCEPTIONS TO THIS ORDER (10) This order does not prohibit you from: (a) paying up to $1,000 week on your ordinary living expenses; (b) paying $10,000 on your reasonable legal expenses; (c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and (d) in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant at least two working days written notice of the particulars of the obligation. (11) You and the applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and you, and the Court may order that the exceptions are varied accordingly. (12) This order will cease to have effect if you: (a) pay the sum of $723,942.07 into Court; or (b) pay that sum into a joint bank account in the name of your lawyer and the lawyer for the applicant as agreed in writing between them; or (c) provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court. Any such payment and any such security will not provide the applicant with any priority over your other creditors in the event of your insolvency. If this order ceases to have effect pursuant 12 above, you must as soon as practicable file with the Court and serve on the applicant notice of that fact. COSTS (13) The costs of this application are reserved to the Court hearing the application on the Return Date. PERSONS OTHER THAN THE APPLICANT AND RESPONDENT (14) Set off by banks This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order. (15) Bank withdrawals by the respondent No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order. SCHEDULE A UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT (1) The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order. (2) As soon as practicable, the applicant will file and serve upon the respondent copies of: (a) this order; (b) the application for this order for hearing on the return date; (c) the following material in so far as it was relied on by the applicant at the hearing when the order was made: (i) affidavits (or draft affidavits); (ii) exhibits capable of being copied; (iii) any written submission; and (iv) any other document that was provided to the Court; (d) a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court; (e) the interlocutory process, or, if none was filed, any draft interlocutory process produced to the Court. (3) As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it. (4) The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent's assets. (5) If this order ceases to have effect the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect. (6) The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding. (7) The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent's assets. SCHEDULE B AFFIDAVITS RELIED ON Name of deponent Date affidavit made (1) Andrew Reginald Yeo 19 February 2020 (2) Andrew Reginald Yeo 31 August 2020 (3) Andrew Reginald Yeo 21 October 2020 (4) Bao-Han Ngoc Nguyen 31 August 2020

NAME AND ADDRESS OF APPLICANT'S LAWYERS The applicant's lawyers are: Reference: BPP:AXR:9626231 Hunt & Hunt Lawyers Level 5, 114 William Street, Melbourne VIC 3000 Binti Prasad 03 8602 9260 bprasad@huntvic.com.au Alice Rudaya 03 8602 9260 arudaya@huntvic.com.au

INTRODUCTION 1 On 19 October 2020, judgment was handed down in favour of the plaintiffs against the first and second defendants (respectively, Mrs Sklenovski and Mr Sklenovski) (judgment). That judgment is published as Yeo, in the matter of Bradi Transport Pty Ltd (in liq) v Sklenovski [2020] FCA 1540. 2 By interlocutory process, the plaintiffs seek a freezing order pursuant to r 7.32 of the Federal Court Rules 2011 (Cth) (Rules) against Mr Sklenovski on an ex parte basis. 3 The plaintiffs, through their counsel, gave the usual undertaking as to damages. 4 I made the Orders sought by the plaintiffs on 21 October 2020. These are my reasons for doing so.

APPLICABLE PRINCIPLES 5 The Court has power to make a freezing order generally under s 23 of the Federal Court of Australia Act 1976 (Cth) and Division 7.4 (rr 7.31-7.38) of the Rules. 6 Rule 7.32 of the Rules provides: (1) The Court may make an order (a freezing order), with 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. 7 Rule 7.35 of the Rules sets out the circumstances in which this power may be enlivened and provides as follows: (1) This rule applies if: (a) judgment has been given in favour of an applicant by: (i) the Court; or (ii) for 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) for 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. (5) The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that: (a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because: (i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or (ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or (b) a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment. (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. 8 The principles governing the grant of freezing orders were summarised by Wigney J in Basi v Namitha Nakul Pty Ltd [2019] FCA 743 as follows: 7. The purpose of a freezing order is to prevent an abuse or a frustration of the Court's process by depriving an applicant of the fruits of any judgment obtained in the action: Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 625. It is "no light matter" to freeze a party's assets and there is, accordingly, a need for the Court to exercise caution: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 324F. A freezing order is a "drastic remedy" which should not be lightly granted: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [51] citing Frigo v Culhari (unreported, NSW Court of Appeal 17 July 1998 at 10-11). 8. An applicant has a good arguable case if they have "a reasonably arguable case on legal as well as factual matters": Cardile at [68]; Insolvency Guardian Melbourne Pty Ltd v Carlei (2016) 111 ACSR 236; [2016] FCA 72 at [18]. It has also been said that a "good arguable case" is one "which is more than barely capable of serious argument, and yet not necessarily one the judge considers would have better than a fifty per cent chance of success": Curtis v NID Pty Ltd [2010] FCA 1072 at [6] citing Ninemia Maritime Corp v Trave Schiffahrtsgesselschaft mbH & Co KG (The Niedersachsen) [1983] Com LR 234 at 235 (affirmed on appeal: [1983] 1 WLR 1412); Deputy Commissioner of Taxation v Greenfield Electrical Services Pty Ltd (2016) 103 ATR 327; [2016] FCA 653 at [7]. 9. Where a freezing order is sought on the basis of a danger of the dissipation of assets, it is not necessary for the Court to be satisfied that the risk of dissipation is more probable than not. Nor is it necessary for the applicant to adduce evidence of an intention on the part of the respondent to dissipate assets: Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194; [2010] FCA 1014 at [8]-[10]; Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) (2012) 90 ATR 711; [2012] FCA 1064 at [23]. The making of a freezing order involves a discretionary exercise of power. The Court retains a discretion to refuse relief even if the requirements in r 7.35 of the Rules are satisfied: Patterson at 321-322.

APPLICATION TO THE FACTS OF THIS CASE 9 The plaintiffs are judgment creditors and therefore there is no need to determine whether they have a prima facie case. The quantum of the claim against the second defendant, Mr Sklenovski, is identifiable, save for the costs order. 10 The matters relevant to whether there is a danger the judgment may be wholly or partially frustrated are set out in the affidavit of Andrew Reginald Yeo dated 20 October 2020 (Yeo Affidavit). In short summary, they disclose: (1) an ongoing scheme by which Mr Sklenovski disposed of the Company's assets (to himself) and, in doing so, avoided the Company's taxation obligations (the evidence in this regard was already the subject of the trial of this proceeding and was uncontested); (2) attempts by Mr Sklenovski to frustrate the liquidation of the Company by dealing with Company trucks post liquidation (indeed immediately after leaving the liquidator's office); (3) an unsatisfactory explanation provided by Mr Sklenovski as to why he dealt with the Company trucks in that manner; (4) the transfer of Company funds by Mr Sklenovski to himself on the date of the liquidation of the Company; (5) the willingness of Mr Sklenovski to be untruthful in respect of his dealings with Company property during the liquidation (both in respect of monies withdrawn and the Company trucks); and (6) the concerns that arise due to the timing of a purported equitable mortgage over Mr Sklenovski's property, which occurred two days after the registration of the corporate mortgagee (C&G 201922 Pty Ltd). 11 Based on the affidavit material in the trial of this proceeding, the Yeo affidavit and the submissions of the plaintiffs' counsel at the hearing of this urgent ex parte application, I am satisfied that: (1) Mr Sklenovski has demonstrated a willingness to unlawfully deal with property in a way which preserves property for himself to the detriment of creditors. (2) The real property of Mr Sklenovski is newly exposed. Until 20 October 2020, Mr Sklenovski's real property was the subject of a caveat lodged on behalf of the plaintiffs which was based on their claim of a constructive trust. That claim not being pressed, the caveat has been removed and there is now an increased risk of further encumbrance of the property - for example, a risk of Mr Sklenovski's illiquid real property being converted to liquid and transferrable cash. (3) The balance of convenience favours the granting of the freezing order because: (a) the plaintiffs intend to apply to the Court for a warrant of seizure and sale of Mr Sklenovski's properties pursuant to r 41.10 of the Rules and Order 69 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic). As a result, the sale of properties owned by Mr Sklenovski is an expected eventuality of execution on the judgment; (b) at the hearing of this application, counsel for the plaintiffs, Mr Silver, was not aware of any matter that would make the granting of an ex parte order inappropriate, and Mr Sklenovski will have the opportunity to be heard on this matter on the return date of 27 October 2020; (c) the plaintiffs are judgment creditors for a significant sum; (d) the plaintiffs' now-removed caveat means Mr Sklenovski can deal with his property without the plaintiffs being notified of any such dealing. It is now comparatively simple for Mr Sklenovski to dissipate the equity that remains in his properties. 12 For the reasons set out above, I made the freezing orders on an urgent ex parte basis on 21 October 2020, with a return date of 27 October 2020. 13 The plaintiffs also seek the usual ancillary order for disclosure of assets and liabilities. Such order, pursuant to r 7.33 of the Rules, will elicit information relating to the assets relevant to the freezing order. It will also assist in identifying the usefulness of the continuation of the freezing order (given the freezing order is sought in aid of execution, the ability to identify the fruitfulness of execution will be relevant to the Court's discretion to maintain the freezing order post disclosure). 14 For these reasons, I have made the Orders sought by the plaintiffs on this urgent ex parte application. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anderson.

Supreme Court (General Civil Procedure) Rules 2015(Vic)

Yeo, in the matter of Bradi Transport Pty Ltd (in liq) v Sklenovski

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