Core Building Group Pty Ltd v Dickson Developments

[2023] ACTSC 202

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title:

Core Building Group Pty Ltd v Dickson Developments Precinct 1 Pty Ltd

Citation: 

[2023] ACTSC 202

Hearing Date: 

28 July 2023

Decision Date: 

28 July 2023

Before:

Mossop J

Decision: 

1.    Orders in the form of annexures 1 and 2 of the originating application filed 27 July 2023, amended so that they are in the form attached.

2.    These orders be drawn up in the Registry and entered forthwith.

3.    Direct that the defendants file and serve any evidence not later than 12 noon on Monday 7 August 2023.

4.    The matter be adjourned until 10am on 10 August 2023.

Catchwords: 

FREEZING ORDERS – Freezing orders sought against two companies – where each company is a special purpose vehicle for a construction project – orders sought in circumstances where developers have called on security bonds provided by builder – plaintiff fears dissipation of assets in order to frustrate potential judgment – whether plaintiff has good arguable case against each defendant – temporary freezing orders made

Legislation Cited: 

Court Procedures Rules 2006 (ACT) r 743

Cases Cited: 

Bloc (ACT) Pty Ltd v Crafted Capitol Pty Ltd [2021] ACTSC 81

Frigo v Culhaci [1998] NSWCA 88

Parties: 

Core Building Group Pty Ltd (Plaintiff)

Dickson Developments Precinct 1 Pty Ltd (First Defendant)

Dickson Developments Precinct 5 Pty Ltd (Second Defendant)

Representation: 

Counsel

D Cook SC with W Chan (Plaintiff)

B Buckland (First and Second Defendant)

Solicitors

Crisp Law (Plaintiff)

HFW Australia (First and Second Defendant)

File Number:

SC 309 of 2023

MOSSOP J:  

Introduction

1․The plaintiff, a building company, has applied for freezing orders against two companies. The plaintiff is involved in two different building projects. One relating to the first defendant, Dickson Development Precinct 1 Pty Ltd, which I will refer to as DDP1, and one relating to the second defendant, Dickson Development Precinct 5 Pty Ltd, which I will refer to as DDP5.

2․Both developers are, through a chain of $1 or $2 companies, controlled by Johnny Roso and Elisa Roso. The first project was referred to in the evidence as the “Mulberry Project”. It involves the building of 370 residential apartments on Northbourne Avenue in Dickson. The developer is DDP5. It is a $1 company. On 10 July 2023 the plaintiff learnt that DDP5 had, on 5 July 2023, called on bonds that had been provided as security for its performance under the building contract. The total amount provided pursuant to the bonds was $4,499,796.

3․The second project was referred to as the “Kashmir Project”. The developer is DDP1. It is a $2 company. It is involved in constructing 141 residences in two buildings on Northbourne Avenue. On 10 July 2023 the plaintiff learnt that DDP1 had called upon bonds that it had lodged in the sum of $1,860,000. Having regard to the circumstances in which the calling upon those security bonds occurred, the plaintiff fears that the money paid as a result of those calls will be dissipated so as to frustrate any judgment that it ultimately obtains pursuant to causes of action which it has against each of those companies.

Nature of the hearing

4․The application today proceeded on an ex parte basis notwithstanding that Mr Buckland appeared and was permitted to make some submissions on behalf of the first and second defendants. Notwithstanding the invitation of Mr Cook, who appeared for the plaintiff, to treat that appearance and the making, by leave, of some submissions as altering the nature of the proceedings, I continued to treat them, as if they proceeded ex parte having regard to the need to determine an application today even in circumstances where no proper opportunity had been provided to the defendants to respond to the application and the evidence in support.

Factual background

5․The features of the case which give rise to the plaintiff's contention that the claims on the security bonds were in breach of the contract and that the money has been or will be moved away from the relevant defendant in order to frustrate its ultimate recovery are as follows. First, no warning or notice was given that the bonds would be called upon. Rather than giving notice of the call by email, as had been the customary form of communication between the parties, the defendants gave that notice by regular mail which was only received on 12 July 2023. An email notice seeking topping up of the security was the first notice that was given to them that calls had been made upon the security and that occurred on 10 July 2023.

6․Second, there is evidence that on 7 July 2023, that is, two days after the call had been made, representations were made at a meeting, either by or on behalf of and in the presence of Mr Roso, that the bonds would be returned.

7․Third, in relation to the Mulberry Project, there is evidence that at the point of practical completion of that project in May 2022, the sole director of the plaintiff, Mr Cappello, made specific enquiries as to whether any claim for liquidated damages would be pursued as a result of delays in completion and was told by the superintendent, after the superintendent had enquiries of Mr Roso, that they would not be pursued and as a result Mr Cappello did not contest the stated number of days, identified at the time of completion, by which the project was said to be past the contractual completion date. It was only for the first time, approximately one year after the date of practical completion, that the possibility of a claim for liquidated damages was, inconsistently with the earlier representations, first pursued.

8․Fourth, there is also evidence that another project being carried out by companies associated with Mr Roso had a major setback when the excavation pit for car parking in that development collapsed shortly before Christmas last year.

9․The inference sought to be drawn from these facts is that there has been a course of deception engaged in by the defendant companies and breaches of the construction contracts by the obtaining of the performance bonds in circumstances where that was not justified and that this is indicative of a danger that funds from this project are being taken out of the company and used elsewhere by the companies controlled by Mr Roso.

Requirements for a freezing order

10․The requirements for a freezing order under r 743 of the Court Procedures Rules 2006 (ACT) are that the applicant have a good arguable case on an accrued or prospective cause of action that is justiciable in the Supreme Court and, having regard to all the circumstances, there is a danger that an order or prospective order of the court will be completely or partly unsatisfied because assets of the enforcement debtor or prospective enforcement debtor will be disposed of or dealt with or diminished in value.

Good arguable case?

11․In my view, the plaintiff has a good arguable case against each of the defendants. In relation to the Mulberry Project the claim is approximately $5 million in claims relating to the project and $5 million wrongly called upon. In relation to the Kashmir Project there is a claim of $7 million plus a claim of $1.8 million for the amount alleged to have been wrongly claimed from the bonds. There are also other amounts which will also form part of each of the claims.

Danger that amounts will be disposed of or diminished in value

12․I consider that there is a danger that the assets will be dealt with or diminished in value so as to defeat a prospective claim for payment under the construction contract or repayment of the secured funds.

13․That is an inference that can be drawn from the course of conduct which I have outlined.

Should relief be granted?

14․As I have indicated, the matter proceeded on an ex parte basis notwithstanding that Mr Buckland appeared for the defendants and was permitted to make some submissions. Those submissions were principally directed to the lack of evidence of dissipation of assets. Applications for freezing orders in cases like this involve the collision between two separate principles. The first is that contracting parties are free to arrange their affairs in a way they see fit and allocate risk as they see fit. In a case such as the present, that involves companies knowingly contracting with other companies that have no relevant assets and taking the risks that may be associated with that fact. The second is the principle relating to the granting of freezing orders which recognised that the courts should limit the capacity of parties to frustrate judicial processes by the moving of assets away from a potential defendant.

15․In circumstances where parties have knowingly contracted with assetless companies, to what extent should the courts intervene so as to intercept assets as they are passed through those companies? 5pm on a Friday afternoon is not a convenient time to expound on that general issue. In my view, this application can be determined on a basis very much dependent upon the particular circumstances of the case.

16․Here, although the company has always been assetless, there is a prima facie case supported by evidence of a course of conduct intended to acquire funds in a manner contrary to the undertakings previously given, and a corporate group which may benefit from those funds. It is evidence of that course of conduct which, in my view, is sufficient to give rise to a sufficient danger to pass the threshold test for the grant of relief.

17․I do not accept the submission based on the decision of the New South Wales Court of Appeal in Frigo v Culhaci [1998] NSWCA 88, that the circumstances disclose an insufficient danger of the dissipation of assets, or that the circumstances of this case merely involve a plaintiff attempting to obtain security for a future judgment.

18․A further submission made was that the expert determination clause in the respective building contracts was applicable, and as a consequence, there would be no proceedings to which a freezing order may be ancillary. I do not accept that submission. Although the case was put by reference to a draft Statement of Claim in relation to at least one of the developments, that, in my view, does not preclude the granting of relief in circumstances where there is an expert determination clause.

19․I accept that there is such a clause in clause 51 of the respective contracts but the exercise of the rights under those clauses will ultimately lead to court proceedings, even if not directly through proceedings commenced in this court in the first instance. The clauses specifically contemplate the availability of the urgent injunctive relief from courts and, in my view, the indirect pathway by which the court's jurisdiction will be enlivened is not a reason to hold that the granting of a freezing order is precluded, nor does it tell against the granting of a freezing order on a discretionary basis.

20․Further, a submission was made that there was not a proprietary interest in the funds which would allow them to be followed into the hands of any other parties, so as to make relevant the ancillary orders sought in the originating application concerning the disclosure of how the funds obtained by the defendants have been disposed of. While there is no such proprietary interest, that is not a requirement in circumstances where the court may ultimately be asked to exercise powers to restrain dealings with funds in the hands of third parties: see Bloc (ACT) Pty Ltd v Crafted Capitol Pty Ltd [2021] ACTSC81 at [64]-[65].

21․Otherwise, it is significant to note that as the matter proceeded on an ex parte basis, the orders that I will make today will only operate for a short interim period until the defendants can be properly heard. Given the special purpose nature of the vehicle, it is unlikely that a freezing order in the terms proposed will have a significant effect on the legitimate business activities of the entity. It is noted that the orders proposed do not prevent the dealing with or disposing of assets of the company in the ordinary and proper course of the company's business, including paying business expenses, bona fide and properly incurred.

22․The position of the defendants is protected by the undertaking as to damages given by the plaintiff company. Having regard to the terms of Mr Cappello's affidavit at paragraph 45, I do not accept the submission that there is inadequate evidence of the value of the undertaking given by that company.

Orders

23․The orders of the Court will be:

1.Orders in the form of annexures 1 and 2 of the originating application filed 27 July 2023, amended so that they are in the form attached.

2.These orders be drawn up in the Registry and entered forthwith.

3.Direct that the defendants file and serve any evidence not later than 12 noon on Monday 7 August 2023.

4.The matter be adjourned until 10am on 10 August 2023.

I certify that the preceding twenty-three [23] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop

Associate:

Date: