Chong v David

[2024] NSWSC 609

Supreme Court

New South Wales

Medium Neutral Citation:

Chong v David [2024] NSWSC 609

Hearing dates:

16 May 2024

Date of orders:

17 May 2024

Decision date:

21 May 2024

Jurisdiction:

Equity - Duty List

Before:

Richmond J

Decision:

Notice of motion dismissed. Costs reserved.

Catchwords:

CIVIL PROCEDURE — interim preservation — freezing orders

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Cardile v LED Builders Pty Ltd (1999) 198 CLR 380

Curtisv NID Pty Limited [2010] FCA 1072

Finn v Carelli [2007] NSWSC 261

Jackson v Sterling Industries Pty Ltd (1987) 162 CLR 612

Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319

Category:

Procedural rulings

Parties:

Lee Li Chong (Plaintiff)
Sid David (First Defendant)
Shilo Consultants Pty Ltd (Second Defendant)

Representation:

Counsel:
RJ Pietriche (Applicant)
A Macauley with Ms N Bailey (Defendants)

Solicitors:
Hall and Wilcox Lawyers (Plaintiff)
Kekatos Lawyers (Defendants)

File Number(s):

2024/00069127

Publication restriction:

Nil

JUDGMENT – EX TEMPORE (Revised)

1. Before the Court is a notice of motion filed in court on 10 May 2024 seeking freezing orders against each of the defendants. The proceedings were commenced by statement of claim filed on 22 February 2024. The plaintiff’s claim relates to funds provided by the plaintiff to the first defendant (Mr David). It is not in dispute that the plaintiff paid amounts of $376,700 in cash, $1,613,000 by way of a bank cheque payable to the second defendant and NZ$890,000 by transfer to a New Zealand company. The plaintiff claims that the cash amount was greater – she says that there is also an amount of $32,000 of wages retained by Mr David and not paid to her and that the cash that she gave him was $622,048 rather than $376,700.

2. By the statement of claim the plaintiff brings various claims against the defendants seeking immediate return of the money, including a claim against Mr David that he induced her to make all the payments by fraudulent misrepresentations as to the intended use of the funds and her right to the return of the funds. While a defence has not yet been filed (it is due on 22 May), the evidence of Mr David on this motion is that the amounts of $376,700 and $1,613,000 are loans to the second defendant on the terms of a loan agreement which is in evidence and that the amount of NZ$890,000 was a loan to a New Zealand company incorporated by Mr David. That entity is not a party to these proceedings.

3. The principles applicable to the making of a freezing order were not in dispute. The Court has a broad power to make a freezing order under both its inherent jurisdiction and Part 25 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Rule 25.11 confers power to make an order “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.” The purpose of a freezing order is not to provide security for the applicant’s claim: Jackson v Sterling Industries Pty Ltd (1987) 162 CLR 612 at 619, 625. While the power conferred by r 25.11 is broad, it is a drastic remedy and must not be granted lightly: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [51].

4. Three requirements must be satisfied for the grant of a freezing order. First, the applicant must have a good arguable case on an accrued or prospective cause of action. The threshold for a good arguable case is a low one – it is one which is more than barely capable of serious argument and yet not necessarily one the judge considers would have a better than 50% chance of success. Second, there must be a danger that, by reason of the defendant absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if she succeeds, will not be able to have her judgment satisfied: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321-2; UCPR r 25.14. While the cases have not indicated a single test for determining the degree of risk of dissipation, what is settled is that there needs to be solid evidence of a danger of dissipation and not mere assertion: see Edmonds J in Curtisv NID Pty Limited [2010] FCA 1072 at [10] and the observations of Brereton J in Finn v Carelli [2007] NSWSC 261 at [4].

5. Third, if these two requirements are met, the Court must be satisfied that as a matter of discretion it is in the interests of justice to grant an order bearing in mind, among other things, the balance of convenience and that the jurisdiction is to be exercised with a high degree of caution.

6. In the present case, I accept that the plaintiff has a good arguable case. In particular, on the evidence before the Court, there is a good arguable case that the two amounts which the defendant accepts were lent to the second defendant are immediately due and payable.

7. In relation to the second requirement, a number of matters were raised by the plaintiff as indicative of a risk of dissipation in her affidavit and in submissions. The first concerns the fact that someone she had never heard of, Ms Nihan Hincal, appeared on bank statements for the second defendant. This has been explained by Mr David as due to the fact that when the second defendant was initially incorporated he was an undischarged bankrupt and therefore could not be a director. Ms Hincal gave evidence by affidavit on the motion.

8. Second, the plaintiff refers to an apparent “phoenixing” of the New Zealand company to which the amount of NZ$890,000 was paid. However, Mr David has given evidence to explain the circumstances in which another New Zealand company was incorporated which is plausible and negates an inference that the incorporation of the new entity was designed to frustrate the recovery of the amount of NZ$890,000 she paid.

9. Third, the plaintiff submitted that the underlying causes of action involve allegations of fraud by the defendants. However, these allegations are denied and are a matter for trial. While there is evidence that Mr David has in the past denied an obligation to repay the funds advanced, that can be explained on the basis that, on his case, all the amounts are subject to loan agreements which under their terms did not entitle the lender to repayment of the funds advanced when the denials were made.

10. Fourth, it is said that Mr David has not adduced evidence as to the investment activity conducted by the second defendant using the funds advanced. However, I note that under the loan agreement (clause 6.5) the plaintiff is entitled to require the second defendant to provide details of its financial position within 14 days of a request being made, and apparently no request has ever been made by her for that information.

11. In my opinion, none of these matters provide solid evidence of a risk of dissipation of assets by either of the defendants, an issue on which the plaintiff bears the onus.

12. In relation to the balance of convenience, the defendants rely upon two matters, delay and the inability of the plaintiff to fulfil the undertaking as to damages. In the circumstances of this case, I would not regard an inability of the plaintiff to provide a meaningful undertaking due to her financial position as a disqualifying factor for the reasons submitted by the plaintiff. As to delay, the delay in bringing the proceedings has been explained by her evidence, but there is no explanation for why having instituted proceedings in February the application for freezing orders was not brought until May. In my view, that unexplained delay coupled with the lack of solid evidence of a risk of dissipation of the assets of the defendants to frustrate any judgment that may be obtained point against the grant of the freezing orders sought.

13. For these reasons, the notice of motion will be dismissed. In my view, the appropriate order is that costs of the motion be reserved because, in order to do justice between the parties in the circumstances of this case, the incidence of those costs should await the ultimate determination of the proceedings.

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