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Argyle Building Services Pty Ltd v Franek

Argyle Building Services Pty Ltd v Franek

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Case Copied 4 August 2020 70 min read

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SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2020 0037

ARGYLE BUILDING SERVICES PTY LTD (ACN 151 322 520)	Applicant
v
MARK FRANEK & ORS (according to the Schedule)	Respondents

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JUDGES:	KYROU, McLEISH and NIALL JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	11 June 2020
DATE OF JUDGMENT:	4 August 2020
MEDIUM NEUTRAL CITATION:	[2020] VSCA 196
JUDGMENT APPEALED FROM:	[2020] VSC 166 (Digby J)

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PRACTICE AND PROCEDURE – Freezing order – Whether good arguable case for continuation of ex parte freezing order – Indorsement of claim relied on causes of action of conspiracy by lawful means, conspiracy by unlawful means, equitable fraud, knowing assistance and receipt, alienation of property to defraud creditors contrary to s 172(1) Property Law Act 1958 – Judge correct to discharge freezing order – Leave to appeal refused.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr A Herskope with Mr S L Freire	Kalus Kenny Intelex
For the First, Second and Fifth to Eighth Respondents	Mr I D Martindale QC	NOH Legal Pty Ltd
For the Third and Fourth Respondents	Mr A T Schlicht	Mark J Halse

KYROU JA
McLEISH JA
NIALL JA:

Introduction and summary

On 10 November 2017, the applicant, Argyle Building Services Pty Ltd (‘Argyle’), entered into a simple works contract with One Three Wilson Pty Ltd (‘OTW’) for the construction of a six apartment residential development (‘Development’) at 13 Wilson Street, Brighton (‘Contract’). The land at that location (‘Land’) comprised six lots, one for each of the apartments. The Land was owned by OTW and subject to a registered mortgage in favour of National Australia Bank (‘NAB’) and equitable mortgages pursuant to four general security deeds in favour of entities associated with OTW’s directors.

On 9 September 2019, Argyle commenced a proceeding in the Victorian Civil and Administrative Tribunal (‘VCAT’) against OTW seeking outstanding payment for work performed pursuant to the Contract (‘VCAT proceeding’). On 3 October 2019, VCAT made an order preventing OTW from dealing with the unsold lots, including Lots 1, 5 and 6 (‘VCAT freezing order’).

On 23 December 2019, the fourth respondent, Lightning Canon Pty Ltd (‘Lightning Canon’) became the assignee of the registered and equitable mortgages.

Between 10 and 13 January 2020, in the exercise of its mortgagee power of sale, Lightning Canon transferred Lots 1, 5 and 6 to the sixth respondent, Created by Mark Franek Pty Ltd (‘Created by Mark’), the fifth respondent, Natcorp Property Holdings Pty Ltd (‘Natcorp Property Holdings’) and the seventh respondent, Made Iconic Pty Ltd (‘Made Iconic’), respectively. We will refer to the three transferee companies collectively as ‘the Transferees’.

On 7 February 2020, Argyle commenced a proceeding in the Trial Division against the respondents and OTW in respect of the transfers of Lots 1, 5 and 6. Argyle claimed that the respondents had engaged in a conspiracy and equitable fraud in relation to the transfers and that the transfers were voidable pursuant to s 172(1) of the Property Law Act 1958 (‘PLA’) because they constituted alienations…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] VSCA 196
Decision Date: 4 August 2020

CaseChat Overview and Summary

Argyle Building Services Pty Ltd brought proceedings against Franek in the Supreme Court of Victoria, seeking to maintain an ex parte freezing order that had been issued. The dispute centred around allegations of financial misconduct and the equitable principles governing the preservation of assets. The case required the court to assess whether there was a strong case warranting the continuation of the freezing order, which temporarily restrained the defendant from disposing of assets pending the resolution of the underlying litigation.

The legal issues involved determining whether the indorsement of the claim, which cited causes of action such as conspiracy by lawful means, conspiracy by unlawful means, equitable fraud, knowing assistance and receipt, and alienation of property to defraud creditors, presented a sufficient basis for maintaining the freezing order. The court had to weigh the merits of the plaintiff’s case against the potential prejudice to the defendant, balancing the need to protect the plaintiff’s interests with the defendant's right to access his or her assets.

In its judgment, the Supreme Court held that the plaintiff had not established a good arguable case for the continuation of the freezing order. The court found that the indorsement did not provide a convincing or compelling basis for the ex parte order to remain in place. Consequently, the judge discharged the freezing order. The plaintiff's application for leave to appeal the decision was subsequently refused by the court.

Orders