Blaze International Ltd v Enthrone Pty Ltd - [2011] WASC 64

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BLAZE INTERNATIONAL LTD -v- ENTHRONE PTY LTD [2011] WASC 64

CORAM: SIMMONDS J

HEARD: 2 MARCH 2011

DELIVERED : 2 MARCH 2011

FILE NO/S: CIV 1326 of 2011

BETWEEN: BLAZE INTERNATIONAL LTD
Plaintiff
AND
ENTHRONE PTY LTD
First Defendant
JOHNSTONE PROPERTIES PTY LTD
Second Defendant

Catchwords:

Application for freezing order made ex parte - Whether preconditions for making freezing order met - Terms of freezing order

Legislation:

Corporations Act 2001 (Cth), s 601AA
Property Law Act 1969 (WA), s 89
Rules of the Supreme Court 1971 (WA), O 52A r 2, r 3, r 5

Result:

Freezing and ancillary orders made

Category: B

Representation:

Counsel:

Plaintiff:     Mr J Eastoe
First Defendant            :     No appearance
Second Defendant        :     No appearance

Solicitors:

Plaintiff:     Jonathan Eastoe
First Defendant            :     No appearance
Second Defendant        :     No appearance

Case(s) referred to in judgment(s):

BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25
Cannane v J Cannane Pty Ltd (in liq) [1998] HCA 26; (1998) 192 CLR 557
First Industry Corp v Goh [2002] WASC 111
Marcolongo v Chen [2011] HCA 3
The Bell Group Ltd (In liq) v Westpac Banking Corporation [No 9] [2008] WASC 239; (2008) 39 WAR 1

SIMMONDS J:
(This judgment was delivered extemporaneously and is edited from the transcript. A post-script has been added.)

Introduction

This is an application by motion for freezing and other orders that is being heard ex parte. I will call it the Application. The Application arises out of proceedings (I will call them the Principal Proceedings) by recently filed writ of summons seeking declarations and other relief in respect of a transfer of shares in a public company, Power Resources Ltd (Power).
The relief sought in the Principal Proceedings rests on a claim that the transfer was an alienation made with intent to defraud creditors and to the prejudice of any person, and is voidable at the instance of the plaintiff (I will call the plaintiff Blaze) as a person thereby prejudiced, under the Property Law Act 1969 (WA) s 89(1).
The first defendant (I will call it Enthrone) was the transferor, and the second defendant (Johnstone) was the transferee. The orders sought by the motion and the Application are directed to Johnstone and the principal orders are a prohibition on Johnstone removing from Australia or disposing of, dealing with or diminishing any of Johnstone's shares in Power and requiring Johnstone to inform the plaintiff of all shares held by Johnstone in Power in the detail stipulated in the orders.
In these reasons for making the orders, subject to certain modifications, I will first set out the law applicable to the Application before considering Blaze's case in support of it. The last section will be my overall conclusion and orders.
As to the law applicable to the Application, the Application is brought under the Rules of the Supreme Court 1971 (WA) O 52A. Order 52A in material part (O 52A r 2, r 3(1), r 3(2)(a), r 5(1)(b), and r 5(4)(b)(ii)) is as follows:
2.Freezing order
(1)The Court may make an order (a freezing order), upon or without notice to the 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.
3.Ancillary order
(1)The Court may make an order (an ancillary order) ancillary to a freezing order or prospective freezing order as the Court considers appropriate.
(2)Without limiting the generality of subrule (1), an ancillary order may be made for either or both of the following purposes -
(a)eliciting information relating to assets relevant to the freezing order or prospective freezing order;
…
...
5.Order against judgment debtor, prospective judgment debtor or third party
(1)This rule applies if -
…
(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.
…
(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 -
…
(b)the assets of the judgment debtor, prospective judgment debtor or another person are -
…
(ii)disposed of, dealt with or diminished in value.
The terms of the orders sought follow those in the example form in the Consolidated Practice Directions 9.6, but with some modifications that I will reach.
There is a recent most useful summary of the law applicable to applications for orders of the present kind in BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd[2010] WASC 25 (Le Miere J). I adopt what Le Miere J said in [4] ‑ [5], [13] ‑ [15] and [22] as follows:
Requirements for freezing order
4The court must be satisfied that the plaintiff has a vested and accrued cause of action against the defendant that is sufficiently arguable to justify the granting of interlocutory relief. The court must also be satisfied that a danger exists by reason of the defendant removing assets from the jurisdiction or disposing of assets within the jurisdiction or otherwise dealing with them in some fashion whereby the plaintiff, if successful, will not be able to have judgment satisfied.
A good arguable case
5The plaintiff must establish that it has a reasonably arguable case on legal as well as factual matters: Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 [68].
…
Risk of frustration of judgment
…
13… The correct test is that set out in O 52A r 5(4) of the Rules of the Supreme Court 1971 (WA), that is, the court must be satisfied that there is a danger that a prospective judgment will be wholly or partly unsatisfied because the assets of the prospective judgment debtor are removed from Australia or from a place inside or outside Australia or disposed of, dealt with or diminished in value. I respectfully agree with the authors of the Laws of Australia where the authors state in footnote 20 to the text at [15.8.760]:
'The occasional statements in the authorities referring only to the intention of placing assets beyond the reach of the plaintiff, if they are intended to state the test exhaustively, put the test too high and are contrary to authority: see Perth Mint v Mickelberg (No 2) [1985] WAR 117 (FC), Burt CJ at 118-119. The higher and, arguably erroneous if stated as exclusive, test was applied by Ipp J in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 8 WAR 183. Contrast what is arguably the correct decision of the Queensland Court of Appeal in Northcorp Ltd v Allman Properties (Aust) Pty Ltd [1994] 2 QDR 405, that the applicant for a Mareva order is not required to show that the purpose of the defendant's conduct is to prevent recovery of any judgment which might be obtained, but rather that it is sufficient to show that there is a danger of dissipation of assets which is likely to prevent such recovery.'
14In Cardile (394) the High Court said:
'In National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 at 277, Mason CJ, Brennan and Deane JJ described as mistaken any proposition that Mareva relief could only be obtained against the defendant to an action if there were a positive intention to frustrate any judgment.'
See also Western Australian Real Estate Investments Ltd v Pontoon Holdings Pty Ltd [1999] WASC 162 (Miller J) [12] ‑ [15] and Hayden v Teplitzky (1997) 154 ALR 497; (1997) FCR 7.
15The onus of proving the risk of judgment being rendered fruitless is on the plaintiff. The standard of proof of danger of non-satisfaction of judgment is that the risk must be real and not fanciful. While the inference of risk cannot usually be drawn from the fact that a plaintiff has a sufficiently arguable cause of action, evidence going to the plaintiff's cause of action can in some cases be relied upon in drawing the inference of danger. One example of this is where the case made out against the defendant is one of serious dishonesty involving diversion of money from its proper channels: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319.
…
Balance of convenience
22The balance of convenience is relevant to the granting of a freezing order. Having regard to the nature of the remedy, once the other prerequisites are made out and subject to any other discretionary factors, the balance of convenience will almost inevitably lie in favour of the grant of the order, because the potential damage to the plaintiff of being unable to satisfy the judgment will outweigh the inconvenience to the defendant of being subjected to a properly drawn freezing order: see Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49, 54 (Young J); Goumas v MacIntosh [2002] NSWSC 713.
In applying the law so stated I should note that the Principal Proceedings, unlike those in BGC, are concerned with relief of a specific or in rem kind, not monetary relief. This may affect both what Blaze must establish and the terms of the orders that should be made if Blaze establishes its case.
I turn now to consider Blaze's case. I should note that my conclusions as to factual matters are simply for the purposes of the Application and do not represent in any way findings of fact for the purposes of maintenance of any orders made on the Application, let alone for purposes of the Principal Proceedings. The Application is of course ex parte in character and any orders made in it are subject to any application to set them aside or vary them that Johnstone might be minded to make.
I turn then first to a good arguable case.

A good arguable case: the elements

The Principal Proceedings rest, as I have indicated, on the Property Law Act s 89 which reads as follows:
89.Voluntary conveyances to defraud creditors voidable
(1)Except as provided in this section, every alienation of property made, whether before or after the coming into operation of this Act, with intent to defraud creditors is voidable, at the instance of any person thereby prejudiced.
(2)This section does not affect the law of bankruptcy for the time being in force.
(3)This section does not extend to any estate or interest in property alienated for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the alienation, notice of the intent to defraud creditors.
It may be seen that there are the following elements to s 89, first, an alienation of property, second with intent to defraud creditors, and third the person concerned or any person, being the person who is bringing the proceedings, is thereby prejudiced.
I turn now to consider whether Blaze has established it has a reasonably arguable case as to the legal and factual matters relevant to each element. For this purpose I consider I may only rely upon the indorsement of claim (there is no statement of claim) to the writ of summons in the Principal Proceedings (save of course as to the establishment of factual matters), as well as the affidavits in support of the present application, both sworn 24 February 2011, of Jonathan Eastoe (the Eastoe affidavit), and of David Nathan Zukerman (the Zukerman affidavit). The deponent to the Eastoe affidavit is stated to be Blaze's solicitor. The deponent to the Zukerman affidavit is stated to be the company secretary of both Blaze and Power, as well as of another company to which I do not need to make further reference.
I turn then to alienation of property.

A good arguable case: the alienation of property

The indorsement of claim relies on a transfer from Enthrone to Johnstone of 600,000 ordinary shares in Power that occurred on 6 September 2010. I will call that the Transfer. The Zukerman affidavit annexes what purports to be a copy of a transfer form for non‑market transactions (I will call that the Transfer Form) which appears to record a transfer between those parties for that number of Power shares on that date. It seems to me that on that basis a good arguable case has been made out that this element is met.
The next element is with intent to defraud creditors.

A good arguable case: with intent to defraud creditors

There is a recent review of the meaning and proof of this element in the The Bell Group Ltd (In liq) v Westpac Banking Corporation [No 9][2008] WASC 239; (2008) 39 WAR 1 (the entirety of that volume, I note) [9097] ‑ [9146] (Owen J). I adopt the following summary of Owen J's conclusions from that review as a most useful statement of that meaning and proof for my purposes [9146]:
In my view, the relevant law (in relation to the State Acts and as it applied to s 121 in the form in which it stood prior to the 1996 amendments) can be summarised in the following points.
1.The person seeking to set aside a disposition must prove that the disponor has a real or actual intention to defraud creditors. 'Defraud' includes defeat or delay.
2.A real or actual intention means a dishonest intention.
3.Intention can be established by inference.
4.If the natural and probable consequences of the disposition are such that its effect will be to defeat or delay creditors, the necessary inference can be drawn and a court might more readily do so. But a finding to that effect is a finding of an actual or real intention, not one that is imputed to the disponor by virtue of a legal presumption.
5.The essence of the concept of defrauding creditors lies in a disposition which subtracts from the property which is the proper fund for the payment of the debts, an amount without which the debts cannot be paid: see also Peldan v Anderson [2006] HCA 48; (2006) 227 CLR 471 [43].
6.Other relevant circumstances from which the necessary inferences might be drawn include:
(a)the insolvency or difficult financial circumstances of the disponor (although establishing insolvency at the time of the disposition is not a necessary element); and
(b)whether the transaction was voluntary or the consideration was colourable, negligible or trivial.
7.It is not necessary to establish that the intent to defraud was the only intent with which the disponor acted: Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370, 375.
8.It is not necessary that the disposition affects creditors as a class generally; it is sufficient if one or some creditors are adversely affected. In this context 'creditor' is not confined to those to whom a debt is (at the time of the disposition) presently due and owing. It extends to impending liabilities and future creditors: Trustees of the Property of Cummins (a bankrupt) v Cummins [2006] HCA 6; (2006) 227 CLR 278 290 - 291.
There is one element in that summary of which I need to take special note at this point. It is element 2, on a dishonest intention. Owen J indicates in [9115] ‑ [9117] and [9141] ‑ [9142] that this means an actual intention to cheat or swindle the creditors or deny them their entitlement by deceit.
I will note below there appears to be a difference in view within this court's first‑instance judgments as to whether there is any such element, and it does not appear that there are any appellate decisions of this court that resolve the matter. I will explain below, when I note the difference, why I consider Owen J's inclusion of element 2 is correct.
The submissions for Blaze, both written and oral, emphasise the following evidentiary matters with respect to drawing the inference (as inferences are necessary for the most part in this area) as to the relevant intention, for each of which I consider the evidentiary support from the Eastoe affidavit or the Zukerman affidavit, or both, as the case may be.
I turn first to the submission there was no consideration for the Transfer.
The Transfer Form shows nil as the consideration for the transfer it records.
As will appear, there is some support, in an annexure to the Eastoe affidavit that includes a reference to a 'Loss on Sale of Shares' in a 'Trial Balance' for Enthrone, for the view that the Transfer was for some consideration or possibly that the Power shares transferred had no value. However, in the face of the entry on the Transfer Form and the evidence in the financial statements in the same annexure, to which I will return, I do not consider that material in the 'Trial Balance' to be sufficient to prevent the conclusion that the Transfer was of a valuable asset without consideration.
Whether the transaction was without consideration is a relevant circumstance from which the necessary inferences as to Enthrone's intention may be drawn: see The Bell Group [9146(6)(b)].
I turn then to whether there is the appearance of a relationship between Enthrone and Johnstone.
On the evidence there is such a relationship through an officer and shareholder of a now deregistered company, Sapphire Management Services Pty Ltd (Sapphire).
While there is no reference to a relationship between a transferor and a transferee as relevant to drawing an inference of intent to defraud creditors in The Bell Group [9146] or elsewhere in Owen J's discussion of the issue, I consider such a relationship is potentially so relevant. However, relevance, in my view, depends on the nature of the relationship. As an example, a relationship sufficient to show the transferee likely had knowledge of circumstances of insolvency or difficult financial circumstances (see The Bell Group [9146(6)(a)]) in which the transfer was made and so may have colluded with the transferor may tend to show an inference of intent to defraud creditors on the part of the transferor.
In this case, the person through whom the relationship might be established had knowledge, as will shortly appear, of a potential liability which, it seems to me, is sufficient for the purposes that I describe. As to Enthrone, the Zukerman affidavit states that prior to the deponent's appointment to the board of Blaze, that company had a consultancy agreement or agreements with Sapphire, which had a registered office at 800 Canning Highway, Applecross.
The Eastoe affidavit annexes letters from the deponent, as solicitor for Blaze, to Enthrone dated 23 June 2010 and 25 August 2010 (respectively, the Eastoe letter of 23 June 2010 and the Eastoe letter of 25 August 2010) concerning a payment made by Blaze to Enthrone of $33,000 including GST for a Blaze placement consultancy fee (the Blaze placement consultancy fee payment).
The Zukerman affidavit also refers to the Blaze placement consultancy fee payment and indicates that there had been communication with the person in Sapphire, to whom I will shortly refer, concerning the difficulty the deponent, Mr Zukerman, was having ascertaining the details of the basis upon which the payment was made. Although the affidavit does not clearly indicate that the person associated with Sapphire was informed of the nature of the difficulties, it seems to me that it is reasonable I should understand the reference in Mr Zukerman's affidavit in those terms. Both of the Eastoe letters are addressed to Enthrone, 'c/o Sapphire Management Services Pty Ltd, 800 Canning Highway, Applecross, 6153, current registered office and principal place of business'.

I also note that in an application for voluntary deregistration of Enthrone, which I will reach subsequently, there is a reference for the applicant, a director of Enthrone at that time, to his address 'c/o Sapphire Management Services' at '800 Canning Highway, Applecross'.
In fact it appears from an historic company reference for Sapphire prepared by the Australian Securities and Investments Commission (ASIC), 4 November 2010, annexed to the Eastoe affidavit (the extract for Sapphire), that on 11 February 2010, Sapphire had been deregistered under the Corporations Act 2001 (Cth) s 601AA.
However, the extract for Sapphire also shows its former registered office had, until 11 February 2010, indeed been at 800 Canning Highway, Applecross, 6153, as well as another address to which I will return. The Eastoe affidavit also states that on 24 September 2010, an action was commenced in the Magistrates Court between Blaze, as claimant, and Enthrone, as defendant, for the recovery of the Blaze placement consultancy fee payment. I call these the Magistrates Court proceedings.
Those proceedings resulted, as I will indicate again, in a default judgment on 14 December 2010. The Eastoe affidavit annexes a letter dated 25 October 2010 from Lindsay Klein in his capacity as sole director of Enthrone Pty Ltd (Mr Klein) to Mr Eastoe (the Klein letter of 25 October 2010) stating that Enthrone denied the claim, the filing of a response to the claim had been arranged and in any event the defendant 'does not have any assets'. The letter bears as Enthrone's address 'c/o 800 Canning Highway, Applecross, WA, 6153'.
All of this material, in my view, gives me sufficient reason to conclude that at the time of the transfer, Enthrone had a connection to Sapphire. The Sapphire extract to which I have previously referred includes not only the former registered office details for Sapphire (as previously indicated) but also that a ceased or former director of that company was one 'Kimberlee Jane Abonnel, born 30 November 1972, Sydney, New South Wales', as one of the two directors and also as one of the two secretaries, and, in addition, as one of the two former members of the company, holding two ordinary shares of that company beneficially.
As to Johnstone, the Eastoe affidavit annexes a current company extract for Johnstone prepared by ASIC of 25 October 2010 (the extract for Johnstone) showing as the current registered office and current principal place of business 800 Canning Highway, Applecross. The extract for Johnstone also shows the current director and current secretary as 'Kimberlee Jane Lemon, born 30 November 1972, Sydney, New South Wales'. She is also shown as one of the three beneficial holders of one ordinary fully paid share of the company.
I should note that in the Sapphire extract an address for the Kimberlee Jane Abonnel shown there, in addition to the address given for her as an officer, secretary and shareholder, is also given as the other address for Sapphire's former registered office.
A comparison of the details I have described for Ms Abonnel in the extract for Sapphire and the details I have described for Ms Lemon in the extract for Johnstone leads me to conclude they are the same person. This is notwithstanding a difference in the address for each: Applecross and Ardross in the extract for Sapphire, and Bicton in the extract for Johnstone.
This material, of some complexity, in my view gives me sufficient reason to conclude that at the time of the transfer, Johnstone had connections with Ms Abonnel, who is the same person as Ms Lemon, a former officer of the then deregistered company, Sapphire. This conclusion and the other conclusions under the present heading leads me to the further conclusion that there is an appearance of a relationship between Enthrone and Johnstone through the person connected to Sapphire that I have described.
The nature of that relationship, as well as the matter in the Zukerman affidavit having to do with approaches made concerning the Blaze placement consultancy fee, is such that I would conclude that Johnstone was aware of the circumstances in which the transfer was made. There were two sets of such circumstances of particular relevance to me. One is the financial circumstances of Enthrone at the relevant time, considered with the fact that the Transfer was made, on my calculation, 16 days after the Eastoe letter of 25 August 2010. The other circumstance is that the Transfer was made four days before an application for voluntary deregistration of Enthrone.
I return to that latter temporal relationship in a moment, where I conclude that it is relevant to drawing the inference of intent to defraud creditors. My focus here is on the financial circumstances of Enthrone and the other temporal relationship, that is, that the Transfer was made 16 days after the Eastoe letter of 25 October 2010. That temporal relationship, considered with those circumstances, in my view goes to show difficulties in the financial circumstances of the transferor, Enthrone.
If its financial circumstances were difficult, they are relevant to drawing the necessary inferences with respect to intent: see The Bell Group [9146(6)(a)]. Indeed, I note what was said by his Honour Justice Pullin in First Industry Corp v Goh [2002] WASC 111 [30]:
Section 89 is not to be narrowly construed: Langdon v Gruber [2001] NSWSC 276 at 52. An intention to defraud is satisfied by an intention to put the property beyond the reach of creditors, and includes an intention to defeat, hinder or delay, the process of making the property available for division among creditors: Electrical Enterprises Retail Pty Ltd v Rodgers (1989) 15 NSWLR 473 at 479 and PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 525. In the absence of direct proof of intention to defeat creditors, such intent may be inferred from all the circumstances, including the transferor's aims, the objective background circumstances existing at the time, and the consequences of the transfer: Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557 at [12], [31] and [92]. It is not necessary to make a finding of 'dishonesty' or 'deceit', to be able to conclude that there was relevantly an intention to defraud creditors on the part of the alienator: Cannane (supra) at 96. Where a transfer of property is made without valuable consideration in circumstances where the transferor was experiencing financial difficulties, a heavy evidentiary onus is cast on any party seeking to rebut the inference that the transfer was made with an intention to defraud creditors: PT Garuda (supra) at 524 and Cannane (supra) at 12.
However, with respect to Pullin J, I am of the view that the intention to be found is indeed a dishonest intention, as indicated by Owen J in The Bell Group [9146(2)], and that in Cannane v J Cannane Pty Ltd (in liq) [1998] HCA 26; (1998) 192 CLR 557 [96] (Kirby J) is not in fact authority for a view contrary to Owen J's.
As Owen J indicates in The Bell Group, Kirby J was in dissent in Cannane, and the judgments of a majority in that case, of Brennan CJ and McHugh J, and of Gummow J, are, when closely analysed, to the contrary of the view expressed by Kirby J [96]: see The Bell Group [9124] ‑ [9135], [9141] ‑ [9143].
However, it seems to me that difficult financial circumstances known to the transferor at the time of transfer would tend to show the necessary intention, including for that purpose the element of dishonesty, whether or not the evidentiary onus thereby cast on the other side was 'heavy', as indicated in First Industry Corp [30], a matter I consider I do not need to address.
In this case, the Eastoe affidavit annexes a letter dated 16 November 2010 from Mr Klein to Eastoe (the Klein letter of 16 November 2010) in reply to the letter from Mr Eastoe dated 29 November 2010 to Mr Klein in which Mr Eastoe notes the comments in the Klein letter of 25 October 2010 that the defendant 'does not have any assets' and Mr Eastoe asks to be supplied with financial statements for Enthrone for the last three financial years. The Klein letter of 16 November 2010 annexes such financial statements, and in addition annexes a 'Trial Balance' as at 30 September 2010.
The three balance sheets show little in 'Total Assets', Total Liabilities' and 'Net Assets' as at the three balance sheet dates, 30 June 2008, 30 June 2009, 30 June 2010.
Enthrone's principal asset, as shown in the balance sheets, is 'Shares in Public Companies at Cost' in amounts ranging from $22,000 ‑ $22,500, representing 82.5%, 94.8% and 94.8%, respectively, of 'Total Assets'. The principal liability in each case is shown as 'Directors' Loans unsecured', 100% of 'Liabilities' in each case, in an amount of $24,452.49 for the first two financial years and $23,952.49 for the last.
'Net Assets' in each case are shown as a negative figure for each financial year.
The 'Trial Balance', for its part, shows a 'Loss on Sale of Shares' of $20,000, and with expenses and filing fees and accumulated losses also shows the same figure as the negative 'Net Assets' figure from the 2010 balance sheet, and a total for 'Accumulated Losses' of $20,616.70.
'Assets' are shown as 'Shares in Public Companies at Cost' of $2,500, formation expenses at cost of $600, and cash at bank at $235.79, while the remaining figure shown is for 'Directors' Loans unsecured' at $23,952.49, the figure from 2010, but with a 'CR' added. I assume, with statements that appear in the application for voluntary deregistration I will come to, that this should be taken to show that directors' loans have all been forgiven or forgiven in material part, such as to produce a net zero amount.
The balance sheets and 'Trial Balance' may not be sufficient of themselves to show that Enthrone was in financial difficulties at any of the dates to which they spoke. Indeed, they show it had assets as at those dates, even if negative net assets, contrary to the Klein letter of 25 October 2010.
However, the 2010 balance sheet and trial balance do show that if account is also taken of a possible liability, if the Magistrates Court proceedings are successful, or otherwise the reversal of the Blaze placement consultancy fee is achieved, Enthrone might be unable to meet that liability from its own assets, to varying degrees, depending on assumptions made about the realisable value of the public company shares.
Now, I note that the Transfer came only 16 days after the Eastoe letter of 25 August 2010, which stated that Eastoe had instructions to allow Enthrone a further opportunity to respond to the Eastoe letter of 23 June 2010, failing which 'within seven days I am to commence legal proceedings'.
In my view, I should conclude, on the financial statements and Trial Balance and the date relationship I have described, that Enthrone was in financial difficulties at the time of the transfer, which again I note was for no consideration.
I turn then to the further matter in the submissions, that there was no response to the Eastoe letter of 23 June 2010.
The Eastoe letter of 23 June 2010 concerned the Blaze placement consultancy fee that I referred to. That letter referred to instructions of the client, Blaze, that the payment of the Blaze placement consultancy fee was made at a time when one of the directors of Blaze was a cousin of the then sole director of Enthrone, Mr Klein; that staff of Blaze could not find anything relating to the payment, other than Enthrone's invoice calling for it; and that Blaze made no share placement in or around July 2009 when the payment was made. The letter asked for information and called for a response as soon as possible. The Eastoe affidavit states Mr Eastoe received no reply to that letter, as the Eastoe letter of 25 August 2010 would tend to indicate.
In my view, the failure to respond, considered with other circumstances to which I have referred to this point in my reasons, offers some, if limited, support for drawing the inference that the Transfer was made with intent to defraud creditors. The support is limited in view of the denial of liability on the claim in the Magistrates Court proceedings in the Klein letter of 25 October 2010, to which I have previously referred.
I turn then to the submissions concerning the fact that the Transfer occurred within about two weeks of the Eastoe letter of 25 August 2010.
I previously dealt with this circumstance and do not need to say anything more about it.
I turn then to the fact drawn to my attention that there was an application for voluntary deregistration of Enthrone made four days after the Transfer.
The Eastoe affidavit annexes a copy of the application for voluntary deregistration on the ASIC form in that regard, signed by Mr Klein as a director of Enthrone, with the further details I previously described. I will call this application the Voluntary Deregistration Application.
The Voluntary Deregistration Application is dated 10 September 2010. It may be noted that the Voluntary Deregistration Application includes a declaration that Enthrone had no outstanding liabilities and was not a party to any legal proceedings. Those are among the circumstances that must exist at the time of the application: see the Corporations Act s 601AA(2)(e) and (f).
It was not put to me that either circumstance did exist at the time of the Voluntary Deregistration Application. In particular, I note that the 'CR' for Enthrone's only liability, the directors' loans to which I referred above, and the Magistrates Court proceedings were not commenced until 24 September 2010. However, it seems to me that the Voluntary Deregistration Application was at the least possibly misleading where Mr Klein was aware of the risk of legal proceedings being shortly commenced against Enthrone, proceedings which if successful would result in a liability of significance to that company.
Had ASIC received that information after the publication and notice of proposed deregistration provided for by s 601AA(4), I am prepared to conclude, at least for present purposes, that ASIC might have reached the view that it should not deregister Enthrone: see s 601AA(4), closing words, particularly the word 'may'.
In any event, as an annexure to the Eastoe affidavit indicates, Blaze applied to ASIC by a document dated 15 December 2010 for reinstatement of Enthrone. This application was made the day after the default judgment in the Magistrates Court proceedings. The application for reinstatement, if successful, would have the effect - see s 601AA(5) - of reinstating Enthrone for all purposes, including, I am prepared to conclude, the Magistrates Court proceedings. The Eastoe affidavit also states that ASIC notified Blaze on 23 February 2011 that Enthrone had been reinstated.
I consider, from the temporal relationship of the Voluntary Deregistration Application to the Transfer, that that relationship represents a circumstance from which the necessary inferences might be drawn.
I summarise on intent to defraud, then, as follows.
Blaze has established a reasonably arguable case on the legal and factual matters involving the element of intent to defraud. I consider this to be so particularly by reference to my conclusions that the Transfer was made without consideration, in circumstances where Enthrone was experiencing financial difficulties, of which Enthrone was aware, to an entity, Johnstone, with which it appeared to have a relationship of the kind I have described, and that the Transfer occurred not long before Enthrone made an application for voluntary deregistration.
This evidence is sufficient, in my view, to establish the dishonest intention that I am satisfied the Property Law Act s 89 requires to be established, but I stress, solely for the purposes of the Application.
I turn then to the last element of the three elements of s 89, prejudice to the person seeking to have the transfer declared void.

A good arguable case: prejudice to the person seeking to have the transfer declared void

Here, Blaze had, through the Blaze placement consultancy fee payment, a potential claim the subject of the default judgment in the Magistrates Court proceedings against Enthrone.
Whether or not the Magistrates Court proceedings default judgment is liable to be set aside because at the time it was given Enthrone was a deregistered company is not a matter that I believe I need to concern myself with, although again I note the Corporations Act s 601AA(5). That is because there is an underlying claim, the subject of those proceedings, in the amount of $33,000 which is at least a potential claim.
I do not believe I need to go further into the matter, save to note that the claim was considered to be a sufficiently serious one by Blaze to justify its commencement of the Magistrates Court proceedings. That, it seems to me, is sufficient for the purposes of this element.
I turn then back to the requirements for making of the present orders, being the risk of the frustration of the judgment: see BGC.

The risk of frustration of the judgment

In the Principal Proceedings judgment for Blaze would be in the nature of relief in rem being a declaration the transfer was void and consequential relief including an order for transfer back of shares.
The Zukerman affidavit states that shortly before the date of the Transfer on 10 September 2010 the second defendant, Johnstone, sold 317,500 Power shares; and subsequently, shortly before 24 December 2010, it sold a further 240,000 Power shares. As at 22 February 2010 the affidavit indicates Johnstone's Power holdings were 770,100 shares, down from a holding of 1,327,501 shares as at 8 September 2010.
I consider this evidence indicates that Johnstone has shown a preparedness to engage in active trading of substantial quantities of Power shares sufficient to reduce its holdings below levels that could satisfy a judgment for Blaze in the Principal Proceedings. This is sufficient, in my view, to establish a danger such prospective judgment, which I stress is a judgment in the nature of an in rem judgment, would be wholly or partly unsatisfied: see O 52A r 5(4)(b). I note for this purpose that Blaze is not required to show that Johnstone has any intention to frustrate any such judgment: see BGC [13].
This takes me then to the balance of convenience from BGC.

Balance of convenience

On BGC [22] I consider that, on my conclusions thus far, the balance of convenience favours the grant of a 'properly drawn freezing order'. There is nothing in the evidence before me that would lead me to suppose the balance of convenience might lie against such grant, I should add.
I turn then to the terms of the order sought, to consider if it is properly drawn.

The terms of the order

The order follows in general terms Consolidated Practice Directions 9.6 example form of freezing order, with the following variations or other matters I need to consider and which were considered in my exchange with counsel.
The first of these is exceptions.
In the order as originally presented there was no exception to the freezing order of the kind in the example form or otherwise. What is called an 'Exception' in the original order simply reaffirmed that the freezing order was limited to the Power shares holding.
However, given the in rem nature of relief it might be put that the only exception would be to permit dispositions of Power shares providing that holding did not reduce them below 600,000 shares, the number the subject of the Transfer.
However, in that regard it seems to me that at this point it is not clear whether or not satisfaction in any judgment for Blaze would involve a tracing claim into Johnstone's holding of Power shares, on which it may be there is more than one claimant. See Heydon JD and Leeming MJ, Jacobs' Law of Trusts (7^th ed, 2006) [2708] ‑ [2709]. On that basis and given that the holdings appear not to exceed 600,000 by a relatively large number it did not seem to me such an exception should be made.

However, a separate matter is represented by the exception in the example order for legal costs. It seems to me that it would be an unusual case indeed in which the effect of a freezing order would be to put it beyond the respondent's capacity, at least at the ex parte stage in the proceedings, to fund its legal defence in the proceedings, including the freezing order proceedings.
It therefore seemed to me that an exception did need to be created to the freezing orders which would allow for dealing with or disposing of shares in Power for the sole purpose of paying reasonable legal expenses.
The other possible exception, to allow Johnstone to carry on its ordinary business, from the example order does not seem to me at this stage to be appropriate. I say this for two reasons. First, the freezing order is limited in its scope, and secondly, Johnstone is a company that has, as it were, only recently been revived. It is therefore not clear that it has an ordinary course of business to be sustained.
The other matter that I should address is that of the undertaking.
The undertaking as originally provided was not in form the 'Schedule A' to the order as the order itself provides. However, it is by suitable drafting, that was settled with counsel, possible to incorporate the undertaking provided to the Court dated 24 February and filed 25 February to cure that omission.
More significant might be said to be the lack of any provision for an irrevocable undertaking to be issued by a bank in respect of Blaze's undertaking. However, such an irrevocable undertaking would normally only be required where it is demonstrated that the applicant for the freezing orders has or may have insufficient assets within the jurisdiction of the court to provide substance for the usual undertakings to damages. There has been no such demonstration here, and I would not require this provision at least at this point.
There were further matters in the orders concerning the return date and the liberty to apply, which were settled as part of the ordinary process.

Conclusion and orders

It follows from these reasons that I have concluded that the plaintiff established its case for freezing orders and that freezing orders should be made generally in terms of the freezing orders sought, but with the modifications to which I have previously referred.
I should note by way of post‑script to this judgment that after it was delivered the judgment of the High Court in Marcolongo v Chen [2011] HCA 3 (9 March 2011) was delivered. In my view that judgment (see [28] ‑ [41]), French CJ, Gummow, Crennan and Bell JJ at the least calls into question the correctness of the conclusion in this judgment that the intention for the purposes of Property Law Act s 89 is 'a dishonest intention'.