Aqualand North Sydney Lavender Development Pty Ltd v The Owners - Strata Plan No. 102081

[2025] NSWCA 143

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Aqualand North Sydney Lavender Development Pty Ltd v The Owners – Strata Plan No. 102081 [2025] NSWCA 143

Hearing dates:

27 May 2025

Date of orders:

2 July 2025

Decision date:

02 July 2025

Before:

Mitchelmore JA at [1];
Ball JA at [36];
Free JA at [37]

Decision:

The summons seeking leave to appeal is dismissed with costs.

Catchwords:

PRACTICE AND PROCEDURE – application for leave to appeal – interlocutory decision – decision to grant freezing orders – whether primary judge erred in determining that the Court had jurisdiction to grant freezing orders against the appellant – whether ‘ordinary course of business’ transactions can ground the requisite danger for the purpose of Uniform Civil Procedure Rules 2011 r 25.14 – whether application raised a point of general principle

Legislation Cited:

Supreme Court Act 1970 (NSW), s 101(2)(e).

Uniform Civil Procedure Rules 2005 (NSW), rr 25.11,

25.14

Cases Cited:

Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164

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

Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23

Jaycar Pty Ltd v Lombardo [2011] NSWCA 284

National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271; [1990] HCA 10

Organic Grape Spirit Ltd v Nueva IQT, SL [2020] EWCA Civ 999

Palmer v Parbery; QNI Metals Pty Ltd v Parbery [2019] QCA 27; (2019) 136 ACSR 26

Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1; [1998] HCA 30

Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264

Skyworks v 32 Drummoyne Road [2017] NSWSC 343

Texts Cited:

Steven Gee QC, Gee on Commercial Injunctions (Sweet & Maxwell, 7th ed, 2022)

Category:

Principal judgment

Parties:

Aqualand North Sydney Lavender Development Pty Ltd (Applicant)
The Owners – Strata Plan No. 102081 (Respondent)

Representation:

Counsel:
D T Miller SC / S D Puttick (Applicant)
D S Weinberger / L J McIntyre (Respondent)

Solicitors:
Keystone Lawyers (Applicant)
JS Mueller & Co Lawyers (Respondent)

File Number(s):

2025/00090673

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court

Jurisdiction:

Equity - Technology and Construction List

Citation:

[2025] NSWSC 31

Date of Decision:

6 February 2025

Before:

Stevenson J

File Number(s):

2023/201402

HEADNOTE

[This headnote is not to be read as part of the judgment]

The applicant (the Developer) sought leave to appeal from freezing orders made by Stevenson J on the application of the respondent. The Developer is a special purpose vehicle incorporated for the sole purpose of developing a commercial and residential development in Milsons Point. The respondent is the owners corporation of the development and has brought proceedings against the Developer and a related entity seeking damages for alleged building defects.

The primary judge made orders enjoining the Developer from disposing of, dealing with or diminishing the value of any of its assets below the unencumbered value of $10,628,123.00, being the amount of the respondent’s claim. His Honour noted that the Developer had sold all but four of the residential units in the development in the ordinary course of its business, and had distributed the proceeds of sale either by dividend or through loans to other entities in the corporate group. The primary judge considered it likely that the Developer would sell the remaining four units before the finalisation of the proceedings and, absent restraint, it would distribute the proceeds of sale beyond the reach of the respondent, as it had done with the proceeds of sale from the balance of the units. His Honour described this as the “normal” and “commercially rational” course. His Honour considered that the requisite danger referred to in the rules was established and noted that the Developer did not point to any prejudice it would suffer if it were obliged to retain the figure the subject of the respondent’s claim.

The Developer sought leave to appeal on the basis that the primary judge misapplied the test in r 25.11 of the Uniform Civil Procedure Rules 2005 (NSW) and/or to enliven the Court’s inherent jurisdiction to grant a freezing order. The Developer’s primary contention was that the primary judge was not entitled to grant the extraordinary remedy of a freezing order where his Honour found that the Developer sold units “in the ordinary course” of its business and that its conduct in distributing profits by way of dividend or loaning some part of the proceeds to other companies in the group was normal and commercially rational. The Developer’s secondary contention, advanced in oral submissions, was that the orders were premature in circumstances where the remaining units were not yet sold and were not being actively marketed. The application for leave was heard concurrently with the appeal.

The Court held (Mitchelmore JA, Ball JA and Free JA agreeing at [36]-[37]), dismissing the summons seeking leave to appeal:

(1) The Developer’s arguments were directed at the primary judge’s application of settled principles to the particular circumstances of the case. They did not raise an injustice which was reasonably clear in the sense of going beyond what was merely arguable: [3].

(2) As to the Developer’s primary contention, the primary judge did not find that the manner in which the Developer dealt with the proceeds of sale were “ordinary course transactions” akin to paying trading debts and satisfying ordinary trading liabilities, such as might otherwise have immunised them from enjoinder. His Honour’s description of the conduct of the Developer reflected its status as a special purpose vehicle whose only function was to develop the subject site. His Honour’s findings provided a sufficient basis on which to conclude that there was a danger that the prospective judgment would be wholly or partly unsatisfied (in the language of UCPR r 25.11). Reliance upon the notion of an “unjustifiable” disposition of assets places an unnecessary gloss on the language of the rules. The authorities relied upon by the Developer did not call for a contrary conclusion or otherwise demonstrate error on his Honour’s part: [18]-[33].

Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264; National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277; [1990] HCA 10; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18, applied.

Palmer v Parbery; QNI Metals Pty Ltd v Parbery [2019] QCA 27; (2019) 136 ACSR 26; Organic Grape Spirit Ltd v Nueva IQT, SL [2020] EWCA Civ 999; Skyworks v 32 Drummoyne Road [2017] NSWSC 343, considered.

(3) Per Ball JA (Free JA agreeing): The obvious purpose of the Developer’s corporate structure was to insulate the other business activities of the shareholders from the financial risks associated with the venture. The special purpose vehicle having served its purpose apart from the sale of the remaining units, the clear consequence of permitting it to distribute its remaining profits (the only source it had to meet claims for defects) before defects claims were resolved would be to deny the claimant any remedy if its claims succeed. In the circumstances of this case, that was sufficient to satisfy the requirements of UCPR r 25.14(4)(b)(ii) and to justify the grant of a freezing order. 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”: at [36].

(4) As to the Developer’s secondary argument, it did not follow from the Developer not having sold the four remaining units that it was not open to his Honour to find that the requisite danger existed, having regard to the Developer’s prior conduct: at [34].

JUDGMENT

1. Mitchelmore JA: The applicant, Aqualand North Sydney Lavender Development Pty Ltd, sought leave to appeal from freezing orders made by Stevenson J on the application of the respondent, the owners corporation of a mixed commercial and residential development in Milsons Point that the applicant developed (I will refer to the applicant below as the Developer). The respondent has brought proceedings seeking damages against the Developer and another company in the Aqualand group in respect of alleged building defects. The orders which are the subject of the application for leave enjoin the Developer from disposing of, dealing with or diminishing the value of any of its assets below the unencumbered value of $10,628,123.00, being the amount of the respondent’s claim.

2. The Developer sought leave to appeal on the basis that the freezing orders are interlocutory: Supreme Court Act 1970 (NSW), s 101(2)(e). The draft notice of appeal contained a single proposed ground, alleging that the primary judge misapplied the test in r 25.11 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) and/or to enliven the Court’s inherent jurisdiction to grant a freezing order. The application for leave was heard concurrently with the appeal.

3. Although the Developer contended that the application raised a point of general principle, its arguments in support of the proposed ground of appeal were directed at the primary judge’s application of settled principles to the particular circumstances of the case, and did not raise an injustice which was reasonably clear in the sense of going beyond what was merely arguable: see eg Jaycar Pty Ltd v Lombardo [2011] NSWCA 284 at [46]; Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32]-[39]. Accordingly, I would refuse leave to appeal.

The decision of the primary judge

4. The respondent made the application for freezing orders under Part 25 Division 2 of the UCPR. Relevantly for present purposes, r 25.11 provides:

25.11 Freezing order

(1)    The court may make an order (a freezing order), upon or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the court’s process by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied.

(2)   A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets.

5. Rule 25.14 relevantly provides:

25.14 Order against judgment debtor or prospective judgment debtor or third party

(1)    This rule applies if—

(a)    …

(b)   an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in—

(i) the court, or

(ii) in the case of a cause of action to which subrule (3) applies—another court.

(2)    …

(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)   …

(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.

6. The primary judge heard and determined the respondent’s application for freezing orders on the same day. His Honour noted that the respondent had filed all of its evidence in the proceedings, including from a quantity surveyor evidencing the amount of its claim: at [5]. At the time of his Honour’s decision, the Developer’s evidence was due in March 2025 (senior counsel for the Developer informed this Court that the due date has since been pushed back).

7. There was no dispute that the respondent had a good arguable case in terms of its underlying claim for damages: at [8]. The issue between the parties was whether the respondent had shown that there was “a danger that any judgment it obtains will be wholly or partly unsatisfied because the Developer will or may dispose of its assets”: at [9]. As to that issue, the primary judge stated at [10]:

“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)].”

8. Turning to the facts of the present case, his Honour noted that the development was completed in July 2021, and “[s]ince August 2021, the Developer has been selling the residential units in the ordinary course”: at [11]. Four units, with a total value of some $23.8 million, remained unsold and in the Developer’s name: at [12]. The Developer also retained the two commercial lots, which were valued at some $5.3 million and were subject to leases with third parties expiring in 2031: at [14].

9. His Honour noted that the four remaining residential units were listed for sale on the Domain.com and Aqualand websites: at [12]. Although none of the units was placed with an agent for sale at the time of his Honour’s decision (one of the units has since been sold), there was “no reason to think the Developer has lost interest in selling those units and every reason to think that, in due course and very likely before the finalisation of these proceedings, it will sell them”: at [13]. The Developer had adduced no evidence to suggest otherwise: at [13]. In relation to the commercial lots, his Honour noted that their combined value would be insufficient to meet the respondent’s claim if successful: at [14].

10. The primary judge then made the following findings:

“[15] The Developer is a special purpose vehicle whose only function was to develop the subject site. Its financial records show that as it has sold the 121 units in the building it has not retained the proceeds of sale of those units. I would infer that, as might be expected of a special purpose vehicle within a large development group such as Aqualand, it has either distributed the profit by way of dividend or, as its financial records suggest, from time to time, loaned some part of the proceeds to other members of the group.

[16] It appears to me reasonable to infer that, absent restraint, the Developer will act in the same way in relation to the remaining four units once they are sold. That would be the normal and commercially rational course for the Developer to follow.”

11. His Honour considered that one fact supporting the inference he drew in [16] “albeit perhaps faintly” was that the Developer had refused the respondent’s request for an undertaking that it not dispose of the proceeds of sale of the remaining lots below the amount needed to meet the respondent’s claim. Although his Honour acknowledged that the Developer was not obliged to give that undertaking, “its failure to do so is at least consistent with the inference that I have drawn that, absent restraint, it would continue to deal with proceeds of sale as it has in the past”: at [17]. His Honour also noted that the Developer did not point to any prejudice it would suffer if it were obliged to retain the figure the subject of the respondent’s claim: at [18]. In all of the circumstances, his Honour was “persuaded that the requisite ‘danger’ exists and to make the order that the Owners Corporation seeks”: at [19].

The application for leave to appeal

12. The primary judge recognised, in [9], that the purpose of the power to make a freezing order is, as expressed in r 25.11, to prevent “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”. The Developer did not take issue with his Honour’s summary, in [10], of the test to be applied when considering whether there is such a danger.

13. At the outset of his oral submissions, senior counsel for the Developer submitted that what was unusual about the present case was that the primary judge granted the respondent’s application “when there were no facts found suggesting something in the scheme of circumstances that would give rise to a frustration of the assets to abuse the court's processes”: Tcpt, 27 May 2025, pp. 1(47)-2(2). As articulated at the hearing, the Developer’s primary contention was that his Honour was not entitled to grant the extraordinary remedy of a freezing order where his Honour found that the Developer sold units “in the ordinary course” of its business and that its conduct, in distributing profits by way of dividend or loaning some part of the proceeds to other companies in the group, was normal and commercially rational.

14. Senior counsel’s invocation of the language of frustration and abuse of process reflected that used in cases addressing applications for orders of this nature, a number of which he took the Court to during oral submissions. In Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264 (“Riley McKay”), which concerned an application for a Mareva injunction, in explaining its conclusion that the Court had jurisdiction to make such an order deriving from s 23 of the Supreme Court Act or the Court’s inherent power, the Court (Street CJ, Hope JA and Rogers AJA) stated at 276:

“The basis of jurisdiction is founded on the risk that the defendant will so deal with his assets that he will stultify and render ineffective any judgment given by the Court in the plaintiff's action, and thus impair the jurisdiction of the Court and render it impotent properly and effectively to administer justice in New South Wales. As has appeared, the jurisdiction to grant the injunction is not to be exercised simply to preclude a debtor from dealing with his assets, and in particular to prevent him from using them to pay his debts in the ordinary course of business. It is directed to dispositions which do not fall within this category and which are intended to frustrate, or have the necessary effect of frustrating, the plaintiff in his attempt to seek through the court a remedy for the obligation to which he claims the defendant is subject.”

15. The Developer also highlighted the general principles that Gaudron, McHugh, Gummow and Callinan JJ endorsed in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 (“Cardile”) at [41] by reference to the joint judgment of Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 32-33; [1998] HCA 30. Relevantly for present purposes, the joint judgment in Cardile stated at [42] that where relief is directed against parties to the proceedings and against whom final relief is sought, the focus is “the frustration of the court’s process”. By contrast, if relief is available against non-parties, their Honours said that “the focus must be the administration of justice”.

15. The Developer accepted that it was not necessary for an applicant for freezing orders to establish a positive intention on the part of their opponent to frustrate the court’s processes, consistently with National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277; [1990] HCA 10. Nonetheless, it submitted that there needed to be something about the identified conduct to justify the remedy in the circumstances, given its extraordinary character. Without drawing the precise limits of that “something”, the Developer submitted that it was absent from the present case. The primary judge’s finding that the conduct the Developer was likely to engage in (with the effect of diminishing its assets below the amount of the claim) was expected, ordinary and commercially rational was not sufficient to constitute the requisite danger to which r 25.11 of the UCPR refers.

16. The Developer submitted that in proceeding on the basis that the matters on which his Honour relied were sufficient, the primary judge significantly lowered the jurisdictional threshold for the grant of a freezing order. On his Honour’s approach, freezing orders could effectively be used as security for judgments, contrary to authorities that have warned against such orders being used for that purpose: see eg Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 621, 625; [1987] HCA 23, and the passage from Riley McKay at 276 that I have extracted at [14] above.

17. 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.

18. 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.

19. 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.

20. The Developer referred to a number of cases to support that the primary judge made the error for which it contended and that his Honour’s findings should have marked the beginning and not the end of an evaluative exercise. Those authorities do not call for a contrary conclusion to that which the primary judge reached in the present case or otherwise demonstrate error on his Honour’s part.

21. The first of these was Palmer v Parbery; QNI Metals Pty Ltd v Parbery [2019] QCA 27; (2019) 136 ACSR 26 (“Palmer v Parbery”), which involved the equivalent rules to rr 25.11 and 25.14 in the Uniform Civil Procedure Rules 1999 (Qld) (rr 260A and 260D). McMurdo JA (Fraser and Gotterson JJA agreeing) considered at [54] the following statement of Gloster LJ in Holyoake v Candy [2017] 3 WLR 1131 at [34]:

“There must be a real risk, judged objectively, that a future judgment would not be met because of unjustifiable dissipation of assets. But it is not every risk of a judgment being unsatisfied which can justify freezing order relief.”

(Emphasis added.)

23. The primary judge in Palmer v Parbery had been critical of the use of “unjustifiable” on the basis that it would involve an inquiry into the defendant’s purpose or motivation, but McMurdo JA considered that what Gloster LJ meant by “unjustifiable” was informed by the relevant text that was cited, Gee on Commercial Injunctions (6^th ed) at [12-032] (the relevant section in the latest edition (Gee on Commercial Injunctions (7^th ed)) is [12-040]). As McMurdo JA stated by way of summary, at [55]:

“…Not every disposition of a defendant’s property might be unjustifiable so that the payment of ordinary trading debts, which might affect ultimately the recovery of the plaintiff’s judgment, would not be an unjustifiable disposal in this sense. But that is not to say that an applicant must prove that the purpose of a likely disposition is to put the defendant’s assets beyond the plaintiff’s reach.”

24. His Honour then referred to TTMI Ltd of England v ASM Shipping Ltd of India [2006] 1 Lloyd’s Rep 401, in which Clarke J similarly stated at [25]:

“The purpose of the Mareva jurisdiction is sometimes referred to as the prevention of the ‘dissipation of assets’. Without explanation that phrase is, itself, obscure. As Colman J stated in Gangway Ltd v Caledonian Park Investments (Jersey) Ltd (2001) 2 Lloyd’s Rep 715 the underlying purpose of the jurisdiction is not to provide a claimant with security for its claim but to restrain a defendant from evading justice by disposing of assets otherwise than in the ordinary course of business so as to make itself judgment proof with the result that any judgment or award in favour of the claimant goes unsatisfied. The purpose is not to provide security for the claimant in respect of his claim. It is well established that it is not necessary to establish that the defendant is likely to act with the object of putting his assets beyond reach. What has to be shown is that there is, absent an injunction, ‘a real risk that a judgment or award in favour of the plaintiffs would go unsatisfied’: The ‘Niedersachsen’ [1983] 2 Lloyd’s Rep 600. That formulation cannot, however, be regarded as a complete statement of the law. A defendant may be likely to make perfectly normal dispositions, such as the payment of ordinary trading debts, the effect of which may be that, when any award is made, it is, in whole or in part unsatisfied when, absent those payments, it might have been satisfied or satisfied to a greater extent. Something more than a real risk that the judgment will go unsatisfied is required.”

(Emphasis in original.)

25. McMurdo JA considered the passage from Riley McKay at 276 that I have set out at [14] above to be to the same effect: at [56].

26. The Developer sought to emphasise the focus in these passages, and in Palmer v Parbery itself, on the nature of the dispositions in question. The transactions and attempted transactions that formed the basis for the relief sought in Palmer v Parbery were, as McMurdo JA described them at [57], “extraordinary by any measure”. The Developer submitted that by contrast, on the primary judge’s findings, its sale of the units took place in the ordinary course and its payment away of profits in the form of dividends or loans was normal and commercially rational, the implication being that they provided an insufficient basis on which to find an unjustifiable disposition of its assets.

27. Reliance on the notion of an unjustifiable disposition of assets places an unnecessary gloss on the language of the rules. Ultimately, senior counsel for the Developer returned to the policy behind r 25.11, submitting that its purpose was not to provide a plaintiff with security but rather to prevent a frustration of the court’s processes, and that this “looks at whether something exists in the factual spectrum that takes this out of the ordinary into the extraordinary”: Tcpt, 27 May 2025, p. 14(15)-(18). For the reasons I have already explained, the primary judge’s findings as to the Developer’s “ordinary” activities met that threshold, and are not to be equated with the satisfaction of ordinary trading liabilities.

28. The Developer also referred to Organic Grape Spirit Ltd v Nueva IQT, SL [2020] EWCA Civ 999 (“Organic Grape”) in support of the proposition that ordinary course business transactions do not ordinarily ground jurisdiction to make a freezing order (although senior counsel did not submit that such transactions were incapable of giving rise to the requisite danger). Newey LJ (Arnold LJ and Richards LJ agreeing) stated at [17]:

“Expenditure on business need not be regarded as unjustified, either. A freezing order against a trading company should normally include a provision stating that it does not prohibit dealing with or disposing of assets in the ‘ordinary and proper course of business’. In Halifax plc v Chandler [2001] EWCA Civ 1750, the Court of Appeal approved at paragraphs 19 and 20 a passage from what is now Gee on Commercial Injunctions, 6th ed., in which it is said that ‘there can be no objection in principle to the defendant's dealing in the ordinary way with his business and with his other creditors, even if the effect of such dealings is to render the injunction of no practical value’. Clarke LJ observed in paragraph 18:

‘In cases of what may be called ordinary business expenses the court does not usually consider whether the business venture is reasonable, or indeed whether particular business expenses are reasonable. Nor does it balance the defendant’s case that he should be permitted to spend such monies against the strength of the claimant’s case, or indeed take into consideration the fact that any monies spent by the defendants will not be available to the claimant if it obtains judgment.’

In a similar vein, Christopher Clarke J said in Perry v Princess International Sales & Services Ltd at paragraph 28:

‘The court will not restrain a person from dealing with his assets in the usual or ordinary course of business, provided of course that that business is a lawful one. I do not think that the position is different because that business involves a degree, even a substantial degree, of risk or speculation. Each case must of course depend on its own facts. I can envisage circumstances in which the use to which a defendant’s assets might well be put is so speculative or so different from his ordinary or usual activities that a freezing order should be made. If it should transpire that transactions are being entered into, whose apparent purpose is to ensure that funds are not available to satisfy any judgment, an order would equally be made in those circumstances.’”

29. In Organic Grape, the primary judge had granted a freezing order enjoining transactions in pursuit of a new business venture. Newey LJ first considered whether the transactions were “in the ‘ordinary’ course of business” and concluded that they were not, as there was no prior pattern of trading or pre-existing business by reference to which the pattern of transaction behaviour could be judged as ordinary: at [29]. Nonetheless, Newey LJ considered that the primary judge had erred in granting the freezing order because doing so enjoined the legitimate pursuit of a business venture, and that business venture was not of sufficiently low prospects and was not pursued in bad faith, stating at [31]:

“…As I have said earlier in this judgment, I do not think that a business should be prohibited merely because it carries even a substantial degree of risk and I do not see the Harrison case as representing the law in this jurisdiction. ‘Question marks’, ‘real risk’ and the fact that the business could be described as ‘speculative’ do not provide adequate reasons for preventing trading.”

(Emphasis added.)

30. These parts of the reasons of Newey LJ in Organic Grape serve to highlight the differences with the present case. True it is that the Developer sold units as a matter of course, and dealt with the proceeds of those sales in the same way each time, and its conduct in that respect was, as his Honour found, common and expected of a special purpose vehicle. Far from assisting the Developer, however, that is precisely what gave rise to the requisite danger.

31. The Developer also referred to the decision of McDougall J in Skyworks v 32 Drummoyne Road [2017] NSWSC 343, in which his Honour granted freezing orders in respect of a risk of dissipation of assets by a special purpose vehicle incorporated for the purpose of developing property, which had a pattern of loaning proceeds to other entities within its corporate group. The Developer sought to emphasise what it submitted were the exceptional circumstances on which McDougall J relied in that case, being:

1. There were no grounds for considering the respondent would be able to meet any claim: at [32]; and

2. the appointment of a new Superintendent (without apparent explanation), replacing a Superintendent who had demonstrated some support for the applicant’s claims, in respect of which McDougall J stated that “(a)bsent some explanation, this could be viewed as a ruse or, at best, tactical manoeuvre” which gave rise to an inference that the respondent might not wish to pay the claim: at [33]-[34].

32. These matters do not relevantly distinguish this case in the manner contended by the Developer. So much is apparent from McDougall J’s conclusion. Ultimately, his Honour was satisfied that the jurisdiction to grant a freezing order was enlivened because the evidence demonstrated that the respondent’s assets in that case, if available, would be used to pay down debt owed to other companies in the corporate group, and it was not relevant that this dissipation might be for “legitimate business purpose[s]”:

“[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 [[2017] NSWCA 53].

[53] In those circumstances, I conclude that if the defendants are released from their undertaking to the court and an equivalent order is not made, there is a very real likelihood that the amount presently held in trust will be paid away, beyond the reach of the builder, and a very real risk that if the builder recovers judgment against the defendants, that judgment will go unsatisfied.”

33. As was raised with the Developer during the hearing, the logical conclusion of its submission that this conduct was no more than ordinary was that if it sold the four units and paid any remaining expenses, the Developer would be justified in distributing the net proceeds of sale to the shareholders of the company (or loaning it to other entities in the corporate group) even though it faced claims of defective workmanship. Taking the argument to its logical conclusion, which would, in the words of Riley McKay, have “the necessary effect of frustrating” the respondent in its attempt to seek a remedy, highlights the difficulty with the Developer’s primary contention that “something more” was required than what the primary judge found.

34. The Developer also submitted, as a secondary point, that the primary judge granted the freezing order prematurely (accepting, implicitly, that the conduct that the Developer sought to characterise as ordinary could ground the requisite danger). The point advanced in this context was that it was not open to the primary judge to find that there was the requisite danger at the time his Honour heard the application when the four units remained unsold and were not being actively marketed (although listed for sale online). As senior counsel put it, the primary judge made the determination “at a point far removed from getting to the point in time where that evaluative exercise might be undertaken”: Tcpt, 27 May 2025, p. 9(20)-(25). I do not accept the submission. His Honour found that there was a pattern of conduct on the part of the Developer that would be repeated when it sold the four remaining units. That finding was based on the sale of the previous 121 units. It did not follow from the Developer not having sold the four remaining units at the time of his Honour’s orders (one having since been sold) that his Honour could not find that the requisite danger existed, having regard to what had gone before. This secondary point, which only crystallised during oral submissions, does not warrant a grant of leave to appeal.

Conclusion

35. I propose the following order:

1. The summons seeking leave to appeal is dismissed with costs.

36. BALL JA: I agree with Michelmore JA. The language used in other cases to explain when it may and when it may not be appropriate to grant a freezing order should not be permitted to obscure the facts of this case. 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. In the circumstances of this case, that was sufficient to satisfy the requirements of UCPR r 25.14(4)(b)(ii) and to justify the granting of a freezing order.

36. FREE JA: I agree with Mitchelmore JA, and with the additional reasons given by Ball JA.

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Decision last updated: 02 July 2025