Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia (A Firm) [No 2] - [2020] WASC 245

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   DALIAN HUARUI HEAVY INDUSTRY INTERNATIONAL COMPANY LTD -v- CLYDE & CO AUSTRALIA (A FIRM) [No 2] [2020] WASC 245
CORAM:   KENNETH MARTIN J
HEARD:   29 MAY 2020
DELIVERED          :   29 MAY 2020
PUBLISHED           :   1 JULY 2020
FILE NO/S:   CIV 1279 of 2020
BETWEEN:   DALIAN HUARUI HEAVY INDUSTRY INTERNATIONAL COMPANY LTD
Plaintiff
AND
CLYDE & CO AUSTRALIA (A FIRM)
First Defendant
DURO FELGUERA AUSTRALIA PTY LTD (ADMINISTRATORS APPOINTED)
Second Defendant

Catchwords:

Practice and procedure - Application by company in voluntary administration for freezing orders over funds in Australia - Claim to freezing order effectively a counterclaim by defendants without leave - Basis of freezing order grounded upon potential for second defendant to enter into liquidation and for future liquidators to advance unfair preference or voidable transaction claim - Plaintiff/respondent a Chinese supplier of goods - Applicant a subsidiary of Spanish-based parent corporation - No suggestion of dealings by plaintiff/respondent with its funds other than in ordinary course of business - Discretionary factors

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Application for freezing order refused

Category: B

Representation:

Counsel:

Plaintiff	:	Mr J D MacLaurin SC
First Defendant	:	No appearance
Second Defendant	:	Ms J Taylor SC & Ms L D Coci

Solicitors:

Plaintiff	:	Squire Patton Boggs (AU)
First Defendant	:	Assured Legal Solutions
Second Defendant	:	Ashurst Australia

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

Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Dalian Huarui Heavy Industry International Company Ltd v Clyde & Co Australia (a firm) [2020] WASC 132
Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (in liquidation) [2018] WASCA 174
Herridge v Electricity Networks Corporation t/as Western Power [No 5] [2020] WASC 145
Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612
Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 18] [2018] WASC 307
National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] HCA 10; (1990) 169 CLR 271
'Niedersachsen' [1983] 2 Lloyd's Rep 600
Palmer v Parbery [2019] QCA 27; (2019) 136 ACSR 26
Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1
PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2015] HCA 36; (2015) 258 CLR 1
Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264
TTMI Ltd of England v ASM Shipping Ltd of India [2006] 1 Lloyd's Rep 401

KENNETH MARTIN J:

(This judgment was delivered extemporaneously on 29 May 2020 and has been edited from the transcript)

The present application of Duro for interlocutory freezing order relief

As general background, I refer to my earlier reasons in this action: see Dalian Huarui Heavy Industry International Company Ltd v Clyde & CoAustralia (a firm) [2020] WASC 132. Defined terms in these reasons carry the same meaning as defined in those earlier reasons.
I am now dealing with the application made by summons in general form of 13 May 2020 by the second defendant, Duro Felguera Australia Pty Ltd (Administrators Appointed) (Duro), which is currently in administration and has been since 28 February 2020.
The first defendant in this action, Clyde & Co, is not a participant in the present application by Duro and has not sought to be heard. The plaintiff (Dalian), is presently the respondent to Duro's application for freezing order relief brought against it on an interlocutory basis.
Pursuant to the Rules of the Supreme Court 1971 (WA) (RSC) O 52A r 2, alternatively in the court's inherent jurisdiction under its application, Duro now seeks that upon it giving the usual undertaking as to damages, Dalian be restrained by itself, its servants and its agents from disposing of, encumbering or otherwise dealing with or diminishing the value of the Trust Amount or removing any part of the Trust Amount from Australia, until further order of the court. I omit Duro's chamber summons reference to s 441D of the Corporations Act 2001 (Cth) which, as advised by Duro's senior counsel today is no longer relied upon.
The application for that relief which is essentially directed at the substantial funds in the order of $AUD26.5 million (referred to as the Trust Amount), currently held for Dalian in the trust account of its Australian lawyers, Squire Patton Boggs (SPB), is resisted by Dalian.

Further background

The present action was commenced by Dalian, although that Chinese corporation is variously referred to by the abbreviation DHHI, or also, as Huarui.
Necessary background to the action, which has given rise to the present application, may be seen in Dalian v Clyde & Co. A brief background may be seen as follows.
As those reasons explain at some length, Dalian commenced the action in this court under its originating summons of 25 February 2020, seeking relief in respect of a substantial amount of money (the Trust Amount), then held in the trust account of Clyde & Co as express trustee of the funds under the Trust Agreement. Clyde & Co were the lawyers for Duro in a contested arbitration between Dalian and Duro, settled by the Tribunal seated in Singapore.
Duro entered voluntary administration on 28 February 2020, some three days after the present action was commenced by Dalian. Duro had been joined to the matter as a second defendant, effectively an interested or necessary party to relief over the Trust Amount money as was sought by Dalian against Clyde & Co as first defendant and trustee of the funds.
An urgent trial was convened and heard by me on 23 March 2020.
From the outset of the present litigation, Clyde & Co effectively interpleaded to abide the court's decision. But Duro, now in administration, claimed the funds comprising the Trust Amount either via provisions of the Corporations Act applicable to administrators of corporations and/or by the suggested negating effects (as regards the funds as originally paid by Duro to Clyde & Co) of the Personal Property Security Act 2009 (Cth) (PPSA).
Having heard the trial, I delivered my reasons for decision under Dalian v Clyde & Co on 24 April 2020.
Essentially, I found for Dalian over all the arguments of Duro. I published reasons that day, without final orders, so the parties could have an opportunity over time to study them and consider whatever implications those reasons might deliver: see [270] - [273] and [277].

Orders of 8 May 2020

After another contested hearing over final orders on 8 May 2020, my final judgment orders as to the fate of the Trust Amount issued that day. The consequence by order 1, was that the Trust Amount (save for amounts of, all up, $580,000 that I allowed to be retained in the trust account of Clyde & Co in Victoria to cover that trustees' actual costs and future potential legal costs), was remitted to Dalian's lawyers (SPB's) trust account in Perth.
Order 2 deals with the accrued interest on the Trust Amount.
Thus, I ordered then that the amount of $AUD26,420,000 plus interest (on the original amount of $AUD27 million) be paid over by Clyde & Co to the trust account of SPB. That is, those funds are now still held under my 8 May 2020 orders, until at least today.
I also issued further auxiliary orders after the hearing on 8 May 2020. For convenience I set out below those orders in full:
PRIMARY PROCEEDINGS
1.The First Defendant is hereby ordered to pay to the Plaintiff by no later than on Monday, 11 May 2020 by payment to the Plaintiff's Australian solicitor's (Squire Patton Boggs') nominated trust account, the sum of $AUD26,420,000.00 being the trust moneys under the Trust Agreement (Funds).
2.Without prejudice to any claims of the Plaintiff against the First Defendant in respect of the nonpayment of the Funds prior to the date of payment pursuant to Order 1 herein, by no later than Monday, 11 May 2020, the First Defendant is further ordered to pay to the Plaintiff, by payment to the Plaintiff's Australian solicitor's (Squire Patton Boggs') nominated trust account, all interest accrued on the $AUD27 million original amount held on trust since 24 January 2020 until these payments (Interest).
3.By Wednesday, 13 May 2020, the Second Defendant may file any application by chamber summons to prevent the Plaintiff in periods beyond the dates as mention [sic] in Order 4 below, from disposing of, encumbering or otherwise dealing with or diminishing the Funds and Interest, or removing any part of the Funds or Interest from Australia (Application), following payment of the Funds and Interest by the First Defendant to the Plaintiff's solicitor's nominated trust account under Orders 1 and 2.
4.Upon and following the payment of the Funds and Interest by the First Defendant to the Plaintiff's solicitor's nominated trust account under these Orders 1 and 2, the Plaintiff is hereby restrained until Friday, 29 May 2020 or until further order, by itself, its servants, and its agents, from disposing of, encumbering or otherwise dealing with or diminishing the value of the Funds and Interest, or by removing or directing the removal of any part of the Funds or Interest from Australia.
5.By Friday, 15 May 2020, the Second Defendant is to file and serve any evidence on which it intends to rely for the Application.
6.By Friday, 22 May 2020, the Plaintiff is to file and serve any evidence on which it intends to rely in relation to the Application.
7.By Wednesday, 27 May 2020, the Plaintiff and the Second Defendant are to file written submissions of not more than 10 pages in support of their positions regarding the Application.
8.The Application as between the Plaintiff and Second Defendant is listed for hearing for 1 day on Friday, 29 May 2020 at 10.15am.
9.The Second Defendant is to pay the Plaintiff's costs in these proceedings to date and, subject to Order 10 below, to be assessed on a party/party basis, and taxed, if not agreed.
10.By Friday, 15 May 2020, the Plaintiff may file and serve any application (and materials in support) to obtain special costs orders pursuant to section 280(2) of the Legal Profession Act 2008 (WA) in respect of an upwards adjustment of, or a removal of aspects of the costs scale contained in the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2018 (WA), for the purposes of a taxation of its costs awarded against the Second Defendant under Order 9 above.
ADVICE ON COUNTERCLAIM & FURTHER DIRECTIONS
11.The Court's advice, as sought by the First Defendant's counterclaim pursuant to 92(1) of the Trustees Act 1962 (WA) upon questions (as amended and varied in accordance with the reasons for decision), is hereby provided as follows:
(a)        Question 1:
Is Clyde & Co as the named Trustee under the written Agreement made between Dalian, the second defendant (Duro) and Clyde & Co dated 23 October 2019, and order 2 of the Procedural Order Number 17 dated 24 January 2020, obliged to pay the sum of $AUD27 million presently held by Clyde & Co (fund), to Dalian or to Duro?
(b)        Answer 1:
Subject to the matters addressed under the answer to Question 3 below, to the Plaintiff (Dalian).
(c)        Question 2:
If so, from when was Clyde & Co so obliged?
(d)        Answer 2:
From the time of Clyde & Co's receipt of a written direction the subject of (PO17) issued by the Tribunal on 24 January 2020, upon a timeous ascertainment and a verification that such written instruction was given in accord with cl 4 and cl 6 of the Trust Agreement (as it was), then from that time Clyde & Co was so obliged as regards Dalian.
(e)        Question 3:
Does Clyde & Co's obligation continue in circumstances where voluntary administrators have been appointed for Duro on 28 February 2020?
(f)        Answer 3:
In the circumstances, the answer is Yes, but subject to Clyde & Co's right as trustee, in equity and under s 71 of the Trustees Act, to be indemnified out of the trust fund amount of $AUD27 million for its:
(i)actual legal costs properly incurred in respect of these proceedings to date and provisionally assessed for the purposes of retention from the trust fund pending further order, at $AUD80,000.00; and
(ii)contingent future legal costs of defending proceedings foreshadowed by the Plaintiff in an amount provisionally assessed for the purposes of retention from the trust fund pending further order, at $AUD500,000.00.
12.As per Orders 1 and 2, the First Defendant is to pay on or before Monday, 11 May 2020 to the nominated trust account of Squire Patton Boggs on behalf of the Plaintiff the amount of AUD$26,420,000.00 that it holds on trust pursuant to the trust agreement dated 23 October 2019 and the Interest. The First Defendant may retain $AUD580,000.00 of the Trust Amount on account of its:
(a)actual legal costs properly incurred to [sic] in respect of these proceedings to date and provisionally assessed for the purposes of retention from the trust fund pending further order, at $AUD80,000.00; and
(b)contingent future legal costs of defending the proceedings foreshadowed by the Plaintiff and provisionally assessed in the amount of $AUD500,000.00.
13.The obligation of the Plaintiff to file and serve a statement of claim, with full particulars, in respect of any allegation of breach of trust against the First Defendant, as trustee is temporarily suspended pending further directions.
14.Within CIV 1279 of 2020, leave is granted to the First Defendant to counterclaim for further relief as a trustee pursuant to the provisions of Pt 7 Div 3 of the Trustees Act.
15.The matter as between the Plaintiff and the First Defendant is listed on Tuesday, 2 June 2020 at 2.15pm, for programming directions as to costs orders and as to the filing and service of evidence and submissions in respect of the First Defendant's application under s 92 of the Trustees Act, and for a listing of that application for hearing if necessary.

A freezing order application by Duro is foreshadowed

Nevertheless on 8 May 2020, it was foreshadowed by senior counsel for Duro that, notwithstanding the determination which I had then reached under Dalian v Clyde & Co, Duro wished to seek freezing order relief over the Trust Amount. The amount of $AUD27 million had been ordered by PO 15 as security for Dalian for its claims to payment pending a determination in the Tribunal in Singapore. Following Dalian's success as at 19 December 2019 in that arbitration, the $AUD27 million held by Clyde & Co on trust as security had become fully vested and so became beneficially held by Clyde & Co for Dalian. That consequence arose by reason of PO 17 as issued and notified by the Tribunal on 24 January 2020.
The tale of how the Trust Amount, which had been provided by Duro as ordered by the Tribunal and then held on trust by Clyde & Co pending the outcome in the arbitration, had matured from a security interest for Dalian, so as to become a fully perfected beneficial interest in Dalian at 24 January 2020, is explained in Dalian v Clyde & Co.
The Trust Amount of AUD$26,420,000, plus accrued interest, as remitted to SPB, on the implementation of orders 1 and 2 of my 8 May 2020 orders, were then in every respect under Dalian's control, subject only to the court's intervention (and to that end see order 4 of the orders of 8 May 2020).
A freezing order application as was first foreshadowed on 8 May 2020 by Duro at the behest of the administrators, was said to be required pending the course of Duro's administration or, perhaps, even beyond that, depending on what eventuated.
A future application to freeze the Trust Amount received by Dalian was explained then on the basis of concerns of Duro's administrators that when Dalian, a Chinese corporation, took control of the money (via SPB) after it was paid over from the Clyde & Co trust account, that should Duro eventually be wound up and liquidators appointed, some aspect of the transaction was a possible voidable transaction as an unfair preference payment. This was said to arise on the basis that, at the time in October 2019 when the Trust Amount of AUD$27 million was paid over by Duro (under PO 15) at (18) October 2019, it was said that Duro was to have likely then been insolvent.
On that basis, provisions of the Corporations Act, as they are applicable to so‑called unfair preferences by Ch 5, Pt 5.7B Div 2 (but in particular by s 588FA and s 588FF), were said to render such payments or transactions to be voidable transactions that could effectively be set aside on the application by any future liquidator that was appointed to Duro.
However, demonstrably, Duro as second defendant, was at 8 May 2020 and indeed today (on 29 May 2020), is still only the subject of a voluntary administration.
It was and is fully accepted by Duro that 'setting aside relief', by challenging the $AUD27 million payment transaction to Clyde & Co as a possible voidable transaction as an unfair preference, is relief that could be only be pursued as a cause of action by a liquidator of Duro, if a liquidator is ever appointed to Duro. Such relief would be the liquidator's cause of action, not Duro's, although the liquidator would of course then be acting on behalf of Duro. By the terms of the provisions of the Corporations Act, such as s 588FF(1), it is upon an application made by a company's liquidator that a court might eventually be satisfied that a prior transaction of the company is to be assessed as voidable. The court may then make various setting-aside orders in consequence.

The evidence

Duro

The opposed application of Duro seeking interlocutory freezing order relief must first be seen as being made in circumstances where Duro still remains merely in voluntary administration.
The application is supported by two affidavits sworn by Mr Rahul Goyal (one of Duro's joint and several administrators) of 18 May 2020 (18 May Goyal affidavit), of some 327 pages in length, and his subsequent shorter affidavit of 28 May 2020, respectively. They put various financial matters before the court - providing the perspective to the current state of Mr Goyal's investigations and enquiries to date as an administrator of Duro.

Dalian's evidence

In resisting the application, Dalian relies on several affidavits of Mr Timothy James O'Shannassy, one of Dalian's local SPB lawyers of record, and particularly Mr O'Shannassy's affidavit sworn on 22 May 2020.

Duro's financial position

As only the briefest of summaries, Mr Goyal in essence finds himself along with his fellow Duro administrators in a position where there presently look to be unsecured creditors of Duro in the amount of just over $AUD100 million, to which he refers at par 16 of the 18 May Goyal affidavit. One of those unsecured creditors is Dalian itself - as regards at least the residue of the $AUD50 million arbitral award of 19 December 2019, which as seen was only partly secured by the $AUD27 million Trust Amount the subject of PO 15. Another unsecured creditor is Duro's Spanish parent corporation, Duro Felguera S.A. (DFSA), in the claimed amount of $AUD1,471,442.32.
The primary Duro asset presently at Mr Goyal's disposal is the funds in the amount of $AUD15 million as held in Duro's pre‑appointment bank accounts - referred to at the 18 May Goyal affidavit, par 20.
At par 25 of the 18 May Goyal affidavit, Mr Goyal says that he has conducted an analysis, preliminary as that obviously is, towards the solvency position of Duro. He relates:
Based on the information that I have as at the date of -
(that affidavit - 18 May 2020), in his view, Duro -
may have become insolvent on 18 October 2019.
Under following paragraphs, Mr Goyal provides a number of potential unsecured creditor distribution return outcome scenarios. Each of those involves making various different assumptions in terms of potential outcome returns to unsecured creditors of Duro under a potential future winding up of Duro. This has all been helpfully summarised under a table Dalian's lawyers put together in responding to the present application. I will append this table as Schedule A at the end of these reasons. At the hearing there was no controversy about that table's utility. Both sides referred to it extensively through respective senior counsel's submissions in elaboration of their respective arguments.

The table basically illustrates six (6) different hypotheses as regards the retained Trust Amount sum of $AUD26.5 plus million now held by SPB for Dalian. Various eventualities include a recovery of substantial further funds back for Duro from its Spanish parent DFSA of another amount - also speculated upon as being a potential unfair preference payment (of some $AUD68 million). Depending on the various assumptions made under and for a possible future winding up of Duro, there could arise a situation under which Dalian would there be viewed as being a preferred creditor - assuming Dalian did not disgorge to a future liquidator of Duro the $AUD26.5 plus million or thereabouts as is now held in trust for it by its lawyers SPB (see particularly Scenario 6).
The assumptions made under Scenario 6 (seen from the table), of course, also assume there is no future recovery of any as remitted funds back to Duro from DFSA, some recovery from some of Duro's sundry Australian creditors (including the ATO) and critically, a full recovery of the $AUD26.5 plus million that has been received by Clyde & Co and is now held by SPB for Dalian.
By Scenario 6 there would be a hypothesised recovery in the end of only 52.86 cents in the dollar for Duro's unsecured creditors, by reference to an end return hypothesised of only $AUD32 million for Dalian. That monetary outcome under Scenario 6 is to be contested against a different hypothetical where Dalian, having held the $AUD26.5 plus million and interest, remains as a claimant to being an unsecured creditor in a future possible liquidation of Duro for the balance of the arbitral award moneys (approximately $AUD23 million) that are now due, but have not been paid by Duro (see Scenario 1). The retention of the trust money position would see Dalian better off, all up then at $39 million (over Scenario 6's $AUD26 million). However by Scenario 6, Dalian is then seen as being preferred as a Duro creditor.
If Duro does eventually fall into liquidation, I will accept for today's application that the Scenario 6 hypothesised outcome is a potential eventuality for present purposes, and which, on such facts, could then give rise to an arguable voidable preference cause of action for any future liquidator of Duro to pursue against Dalian.

Freezing orders: legal principles

I will just deal briefly with the law applicable to interlocutory freezing orders, although there has been no dispute about it at all between the parties today.
The principal guiding case authorities of course, are the quintet of leading High Court decisions applicable to 'Mareva injunctions' or 'Mareva orders', as this relief was referred to in the joint reasons of Gaudron, McHugh, Gummow and Callinan JJ in Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 at [42].
However, as a very brief summary, the law towards this equitable interlocutory relief took root in England under the guiding parentage of Lord Denning MR in the early 1980s. It then flourished and expanded, including under decisions of the High Court of Australia commencing at 1987 with Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612, followed in 1990 by the High Court's decision in National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] HCA 10; (1990) 169 CLR 271, then in 1998 in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1, subsequently in Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 and finally, and most recently and relevantly, by the High Court's decision in PT Bayan Resources TBK v BCBC Singapore Pte Ltd [2015] HCA 36; (2015) 258 CLR 1, delivered on 14 October 2015.
PT Bayan v BCBC was an appeal by special leave from the Court of Appeal of this State, and argued by specific reference to the local freezing order (as the remedy is now renewed) rules of this court as they had been enacted, that is, RSC O 52A and its provisions, particularly r 5(5).
The local RSC are an expression of a deployment of the inherent power of a superior court to prevent its processes from being frustrated, abused or rendered nugatory in effect, due to the possible future adverse impacts of transactions which, unless restrained, may adversely impact against the prospect of a plaintiff who later obtains a judgment from then registering and viably enforcing that judgment in this State under the applicable Commonwealth recognition legislation - to viably recover on the judgment in Western Australia against assets of a defendant. That is so even if the judgment is obtained overseas, if it is capable of being recognised and enforced locally against local assets (under the Foreign Judgments Act 1991 (Cth)), albeit the defendant is the subject of overseas litigation. The processes of a superior court that can be protected by such orders extend to protecting against the potential frustration of the enforcement process for a judgment that is ultimately made enforceable in this jurisdiction, as was the case in PT Bayan v BCBC.
In PT Bayan v BCBC the power of this court to deploy the regime of its rules under RSC O 52A against a non‑party who was not present personally, but who held assets in Australia, was challenged as being beyond the power of the court under its inherent jurisdiction, as expressed in O 52A. But that challenge as regards enforcement (under O 52A) of a future foreign judgment, even against persons not present within the local jurisdiction, was in the end rejected unanimously by all seven members of the High Court. The PT Bayan v BCBC decision explains the application of this court's inherent power to issue such freezing orders by reference to the embodiment of that power in its rules of court.
Subsequent to the High Court's decision in PT Bayan v BCBC, there followed a significant freezing order decision by the Court of Appeal of this State which issued against Duro in other litigation. That application was made at the behest of Trans Global Projects (TGP), against whom it appears that Duro is also engaged in an arbitral dispute over alleged non‑payments due, to TGP by Duro around the Roy Hill Iron Ore Project in this State: see Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (in liquidation) [2018] WASCA 174. That decision concerned an appeal against a freezing order obtained at first instance against Duro by TGP. A unanimous decision of the Court of Appeal in that case (Buss P, Murphy and Mitchell JJA) dismissed that appeal.
Even more contemporary, however, as a useful local case authority on freezing orders and providing a helpful starting summary of principles, and particularly by explaining the Court of Appeal's abovementioned decision, is Herridge v Electricity Networks Corporation t/as Western Power [No 5] [2020] WASC 145 of Le Miere J, delivered on 7 May 2020.
Again, in the interests of time, I do not cite laboriously from those reasons. But I do incorporate aspects of them by reference.
At [38] and [39] onwards of Herridge, Le Miere J summarises from out of Duro Felguera v Trans Global Projects eight principles, which his Honour extracts as applicable. These were (at [38] - [45]):
First, the court has inherent or implied power to make a freezing order to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction.
Secondly, it is a condition of the exercise of the court's power to make a freezing order that it be satisfied, relevantly, that:
(a)the assets of the prospective judgment debtor might be disposed of, dealt with or diminished in value;
(b)there is a danger that the prospective judgment will be wholly or partly unsatisfied; and
(c)that danger arises because the assets of the prospective judgment debtor are disposed of, dealt with or diminished in value.
Thirdly, the risk of danger must be real or substantial, as opposed to a remote, speculative or a theoretical possibility. The degree of danger or risk must be sufficient to justify an order in the terms which the court is asked to make.
Fourthly, a freezing order is a drastic remedy which imposes a severe restriction on the respondent's right to deal with its assets.
Fifthly, the purpose of a freezing order is not to provide security for a judgment which the applicant hopes to obtain and fears might not be satisfied.
Sixthly, a freezing order is not designed to stop a debtor from sliding into insolvency.
Seventhly, it is not necessary that the respondent must act for the purpose of avoiding judgment before a freezing order can be granted. If the effect of a dealing is to give rise to a danger that a prospective judgment will be wholly or partly unsatisfied, then the jurisdictional requirement in O 52A r 5(4)(b) will be satisfied irrespective of the purpose for which the respondent must act.
Eighthly, the irregular nature of the transaction will be relevant to the exercise of the power to grant a freezing order. When the court exercises its discretion having found the jurisdictional requirement to be satisfied, the absence of any purpose of defeating the court's process or any irregularities in the transaction will be a relevant factor. For example, the discretion is not likely to be exercised in favour of granting a freezing order where the danger referred to arose only because of dealings such as the payment of normal trading debts in the course of business. In such a case, while the court may be satisfied of the existence of a danger, and the judgment will be unsatisfied because of such dealings, the court would not exercise its discretion to make a freezing order.
(footnotes omitted)
That, with respect, provides a convenient contemporary summary of the law concerning interlocutory freezing orders, and that I reiterate was really not in dispute in terms of my evaluation of the present application.
I will return later to some more aspects of his Honour's reasons in Herridgeand to his Honour's ultimate conclusion to decline a freezing order in that case, essentially by reference to discretion and the balance of convenience. That decision provides an insightful illustration of a (non) deployment by the court of this unique power to issue a freezing order.
Fundamentally however, it is always to be remembered that freezing orders do not provide any level of security to a successful application for an eventual judgment. At best such orders will only preserve a status quo in respect of an asset or assets, under circumstances where the as now seen key criteria are otherwise met.
Compressing those criteria even further, first then, I am looking to ascertain a potentially meritorious cause of action held by an applicant at an eventual trial. Second, is consideration of whether there is shown a risk of future asset removal from the jurisdiction or a dissipation, if the court does not intervene. Last, discretionary factors are to be weighed towards what is ultimately equitable interlocutory relief by a restraint issued as a freezing order of the court.
I advance then to the position under the present application which essentially sees me urgently evaluate all these respective considerations. Before that, however, I need to say something more about two ostensibly unique features of the present application.

The novelty of the application

Form

The application is novel in at least two respects. At the outset there presented a question of form, in terms of the present application of Duro which, as I assess it, is unprecedented. Here, a voluntary administrator has caused a corporation (as controlled) to pursue an interlocutory restraint from a court by way of proposed freezing order, on the hypothesis that, at some undetermined later time in the future, there is said to be a potentiality that the company may descend into liquidation. On that hypothesis, a liquidator is appointed and then that liquidator could (admittedly on behalf of the company), advance what would be the liquidator's statutory cause of action to seek to set aside a payment received by a creditor upon a transaction - on the basis that the payment is to be evaluated (then) as an unfair preference in the winding up.
As is seen, the present application is made essentially on the basis that Duro is suggested to have been insolvent since mid‑October 2019. Given that Duro is the named second defendant in the present action, it effectively would be a counterclaimant in seeking interlocutory freezing order relief against the plaintiff, Dalian.
So far in this action all relief granted to date (as explained in Dalian v Clyde & Co), was for the situation where I was dealing with the Trust Amount held by the trustee in trust vis-à-vis Duro and Dalian. Nevertheless, I allowed Clyde & Co leave so as to counterclaim for directions as a trustee, within the context of Dalian's originating summons - and which I also ordered should proceed as if Dalian had commenced the action by writ. Duro was merely heard, as a potentially interested party, in then resisting Dalian's claims for the Trust Amount which Dalian claimed as then being held entirely for its benefit by Clyde & Co. As seen, Dalian succeeded.
Nevertheless, for Duro itself now to seek to raise a counterclaim against Dalian as it does, in effect, on a basis that there is a prospective future cause of action or, more correctly, that a future liquidator of Duro may hold such a prospective statutory cause of action, is, in my commercial experience, novel. It will require me at least to give further leave in this action for such a counterclaim to be presently advanced by Duro (whilst in administration) as against Dalian.
The present substantive problem is that Duro's as argued good cause of action to support its pursuit of the freezing order, based on a future possible unfair preference claim, would only be the cause of action of the liquidator, not of Duro whilst it is still in voluntary administration.
Of course, form ought not triumph over substance. So although I do observe upon the unprecedented character of the present application, I am not presently ruling against it on the basis of form - because Duro lacks leave to counterclaim for such relief in the present action. Indeed, if I had real concerns over that, I would have given Duro (while under administration) leave to urgently commence a fresh action against Dalian to seek the very same relief. To do that would mean that the issue of form would not have been the obstacle and would not divert what might otherwise be assessed as a viable argument for Duro. But the substantive novelty of the present application made by Duro's administrators, prior to liquidation, remains.

Cause of action

The absence of a present cause of action in Duro (as second defendant), as regards a future unfair preference action before a winding up is without any prior case precedent to support it.
However, there are obiter remarks in Cardile that are pointed to by senior counsel for Duro and relied upon which might, on their face, just be wide enough as there expressed to support the present application. In Cardile the High Court plurality had said this at [57]:
What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word 'may', be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which: (i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including 'claims and expectancies', of the judgment debtor or potential judgment debtor; or (ii) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor. (citations omitted and my emphasis in bold)
See also PT Bayan v BCBC at [47] referring to the same passage.
Clearly, the remarks in Cardile were directed at a third party holding assets of a putative judgment debtor and a prospect of a future liquidator being appointed to the anticipated judgment debtor embarking upon a recovery exercise of the assets potentially, say, in a liquidation, all, of course, to the benefit of the plaintiff judgment creditor with a viable cause of action. Such facts are some way different to the present position of a hypothesised liquidator some day being appointed to the claimant (ie, to Duro) and thereby creating in someone else (ie, a Duro liquidator) a statutory cause of action that is not yet in existence against anyone.
Nevertheless, I do not find against the present applications of Duro on that basis, although I retain significant, in principle, concerns that the passages from Cardile as relied upon are being deployed for an environment well beyond their intended sphere of operation as regards dealing with the ever evolving 'wiles' of judgment debtors and their assets.

The usual undertaking as to damages of an applicant for freezing orders

In accordance with local Consolidated Practice Direction 9.6.1 par 16, Duro duly filed an undertaking as to damages on 28 May 2020 to support its present application. This undertaking was executed by Mr Goyal in his capacity as administrator of Duro.
I was troubled, at least until the start of proceedings today, by the longer term fiscal viability of that undertaking. Duro is presently said by Mr Goyal to be insolvent and likely have been so, since 18 October 2019. My first impression was that an undertaking as to damages given only by Duro may thus not carry a sufficient long term viability under Duro's insolvent circumstances.
The function of the usual undertaking is protective. If a court does grant relief on an interlocutory basis, but subsequently finds, longer term, against the final substantive relief then, in the interim, the affected respondent party suffering the interlocutory restraint may be caused very considerable fiscal damage. Thus the undertaking must usually carry longer term monetary viability to fully respond to such an eventual outcome, if required: see generally as to the usual undertaking Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249per Aickin J, and Quinlan CJ in Mineralogy Pty Ltd v Sino Iron Pty Ltd [No 18] [2018] WASC 307.
Of course, if the usual undertaking as given is obviously seen to be diminished in its long term worth, then its viability to protect the exposures of the restrained party longer term is correlatively diminished.
Here, I was initially troubled over that longer term exposure position for Dalian. I was also troubled that if an unfair preference action were ever commenced against Dalian by a liquidator of Duro, then it would be the liquidator personally (no doubt then suitably indemnified or funded and themselves protected), who would give the usual undertaking then to obtain a freezing order if sought by the liquidator, pending a defended preference recovery action.
However, in the end, I was satisfied by what was put before me today by senior counsel for Duro, to the effect that I do not need to be unduly troubled over the fiscal viability of the undertaking issue. Essentially, it was put by senior counsel that there would be enough funds to cover such an exposure. I see no basis not to accept the contention that the situation will be covered under s 556(1)(a) of the Corporations Act, on a basis of a priority payment for any undertaking exposure scenario. But if that undertaking was ever called on substantively for Dalian, that may deliver the effect of further eroding the value of Duro's available assets. Duro's current asset position stands at only $AUD15 million vis-à-vis potential exposures to the other unsecured creditors of Duro of some $AUD100 million or thereabouts.

Having discussed those novel factors concerning the application, I can return to the necessary criteria for a freezing order.

The essential criteria for a freezing order under RSC O 52A

The relevant criteria when an order is sought against a prospective judgment debtor are found expressed in RSC O 52A r 5. The essential three criteria are first, for Duro, whilst in voluntary administration, to establish a good arguable case against Dalian upon a prospective cause of action, see RSC O 52A r 5(1)(b)(i). The second broad limb is for Duro to show a risk of Dalian's property or assets being removed from the jurisdiction, see RSC O 52A r 5(4)(b)(i). Or by the words of that rule, that is there a 'danger' of a prospective judgment of the court against Dalian will be left wholly or partly unsatisfied. The third component is the discretion of the court or a consideration of what is, as is embodied under the terms of the rule, in 'the interests of justice', see RSC O 52A r 5(6).
These three key criteria can be expressed in different ways. But very importantly it must be appreciated that as a test they intersect and overlap. They do not exist in wholly separated silos. There is an overlapping interdependency as between the different factors in their eventual application to a particular transaction. Of course, for the purposes of a coherent analysis, the factors are necessarily discussed, individually. But the components are ultimately to be weighed together as one test towards the end determination of the merits of an application for freezing order relief.

Good arguable case

In terms of the good arguable case by Duro, the first emerging question is a good arguable case as to what?
Argument over this factor necessarily descends to a potential future unfair preference claim run against Dalian by a future liquidator of Duro. One day, maybe, a liquidator might be appointed to Duro. One day, maybe, that liquidator might commence an action in this court seeking to claim back from Dalian, as an unfair preference, the $AUD26.5 million or thereabouts from trust funds that Dalian has received as a result of PO 15 and what followed. One later day, maybe, having taken that dispute to a trial, Duro's liquidator might succeed, to obtain and then hold a judgment against Dalian to reclaim that sum of money. Only then, if these hypotheses all come to their full fruition, could Duro's liquidator seek to compel a repayment from Dalian.
At that later time, and on all those assumptions, that liquidator of Duro, in seeking to enforce such a judgment against Dalian, might then find themselves met with a possible response, whereby Dalian, being a Chinese‑based corporation, does not or will not pay. Then the Trust Amount in SPB's trust account may be assumed as likely to have been remitted by Dalian out of Australia to the People's Republic of China. In that case, it would then be said that there might be no available Australian assets otherwise of Dalian against which such the judgment obtained by the Duro liquidator might be viably enforced locally.
Dalian's substantial assets then are assumed as being in the People's Republic of China. There is no viable enforcement treaty as between the People's Republic of China and Australia (as I discussed in passing in Dalian v Clyde & Co). With that hypothetical enforcement horizon in mind, it is said to be feared today that a Duro liquidator's future enforcement efforts to procure repayment upon a successful judgment obtained at a future time could then all come to naught - from a fiscal return result outcome perspective of the future Duro liquidator.

Danger and risk

Through canvassing the issue of a prospective good cause of action in a future Duro liquidator, I have necessarily traversed into the second element. That, of course, is for Duro to presently show a danger or risk, that the Dalian assets, relevantly here the Trust Amount currently in SPB's trust account, will be moved out of the Australian jurisdiction. Duro must establish that there is some danger that a prospective Duro liquidator's judgment (assuming success against Dalian as regards the liquidator's future preference claim) will ultimately not be fruitful by reason of a default in payment by Dalian and the correlative want of any attachable assets of Dalian in Australia then to enforce against.

Discretion

The third broad element in the freezing order evaluation is of course the discretion of the court (or by the rule, the interests of justice) to be exercised on the basis that, although a freezing order is not strictly an interlocutory injunction, as was explained in the joint reasons in Cardile [30] - [34]), that the present relief as sought is, of its nature, inherently equitable, as well as interlocutory in character.
Interlocutory freezing order relief is thus to be evaluated and is administered by reference to principles of a court of equity. And so, for such circumstances, the court holds a broad (but principled) discretion in terms of whether or not such relief is appropriately engaged.

Evaluation and determination

Good arguable case

Overall, here it seems to me that the good arguable case for an unfair preference outcome, one day to be obtained by a Duro liquidator, advanced at the behest of Duro's administrators, cannot be assessed as a strong case. As seen, it relies on, for its in‑principle foundation, remarks by the High Court in Cardile, as reiterated in PT Bayan v CBCB, as regards potential recoverability under scenarios where a liquidator might come to be appointed later in time as regards a judgment debtor or prospective judgment debtor.
I have also observed towards Duro's present situation of voluntary administration that there is no case precedent for a freezing order granted at the behest of a corporation in voluntary administration that is even broadly akin to the present facts.
In Cardile, the discussed scenario of a future liquidator was under contemplation contextually as regards that future liquidation of a prospective judgment debtor. In Cardile, the prospective judgment debtor had dispersed its assets away, in anticipation of an exposure to significant damages payable to the claimant upon it losing a pending copyright action under proceedings commenced. Those facts all present as clear enough to suggest a situation of asset dissipation by a prospective judgment debtor to other third parties. It is no real surprise then that the law would, for such circumstances, provide redress to assist the recapture (say, by a future liquidator of the judgment debtor) of the former assets of the debtor if, in fact, those assets had otherwise been dispersed away before judgment by the debtor's directors to shareholders or, in turn, were assets channelled away to use by a new company that effectively took over the debtor's and business assets and had basically started trading again in a phoenix‑like way for the debtor's former business.
That was the context of the Cardile observations as to prospective relief via a future liquidator against any third party recipient of the debtor's former assets under freezing order relief. Thus, those observations are premised on a future recovery assumption of a future liquidator being appointed to the judgment debtor corporation, to thereby facilitate recovery of the debtor's lost assets. But Cardile said nothing as to a prospect of a future liquidator being appointed to the judgment creditor to thereby create and deliver a later statutory cause of action to a new claimant for relief.
It is no real surprise then upon the facts of Cardile or in PT Bayan v BCBC, that the inherent power of a court to protect against a longer term possible frustration of its processes or the viability of its future judgments being enforced, would fully countenance a claim advanced on the hypothesis that a liquidator might one day be eventually be appointed over a future judgment debtor, in order to pursue a claim to claw back that debtor's divested assets as against third parties who had received those assets.
Nor is it surprising that such disbursed assets where held by third parties on an interim basis could be ordered as preserved in the hands of the third party recipients - so that they might be viably recaptured in a future winding up of the prospective judgment debtor.
But the very differently suggested fact hypothesis here of a future Duro liquidator potentially being appointed in due course and so, at then as to pursue their statutory cause of action that does not yet exist, looks to me to be a stretch of principle. That step, with respect, would seek to take the freezing order remedy in an expansionary way, beyond even where it currently operates. Such an expansion, if it is to take place, is a task for others.
Having said all that, the remarks by the High Court plurality in Cardile could just arguably be stretched to cover the liquidation of a plaintiff/applicant freezing order situation. So, and only, for the purposes of today and for Duro's application, I am prepared to accept that the preference cause of action against Dalian by a future liquidator of Duro is just arguable. However, when I combine that with the further hypothesis of potential future litigation begun in this court by a Duro liquidator seeking to cut down an unfair preference on the contended insolvency of Duro at 18 October 2019, it still does seem that there remain a great many obstacles to be overcome in the analysis - to ultimately reach the hypothesis of a favourable judgment outcome one day for Duro against Dalian. It is simply impossible to presently say that there is a good arguable case of any strength held in Duro whilst still in administration.
Whilst then I accept, for the purposes of today, that the case is arguable, nevertheless I cannot evaluate it in any way as a strong or persuasive case. Mr Goyal in his two affidavits, quite properly, as Duro's administrator has not sought to characterise Duro's present case as of being at any level of strength. In essence, the case was put at the level of a possible Scenario 6 future outcome as one possible outcome of six.
I do not think it feasible, on an application such as this, to conduct any detailed evaluation of the more likely outcomes towards a potential future preference case, run by a Duro liquidator, given all the assumptions and future uncertainties necessarily associated with such a predictive exercise. Nor could I safely evaluate today the counter strength of all the possible good faith and other defences to be potentially raised against a future s 588FG of the Corporations Act claim by Dalian. A number of likely defences to any future preference action were touched upon today, as issues arising in such a preference claim case, if it were ever even begun, and if it ever went to a trial.
There emerged also what I assessed, prima facie, as another reasonable argument for Dalian that, as a result of PO 15 and all of what followed it as regards the establishment of the Trust Amount, Dalian holds a defence that it, in truth, has the status of being a secured creditor, as regards $AUD27 million. Such issues and counter issues as regards a future unfair preference action by a Duro liquidator, as I assess matters today, will all be arguable at a future trial.
So, ultimately, I accept Duro's arguable case is just that - namely, of being arguable. But I repeat that I cannot say today that it is a strong or persuasive future arguable case.

Danger and risk

I will return then to the issue of a risk or danger of Dalian's assets being removed from Australia. Clearly, as is explained in the affidavit of Mr O'Shannassy sworn 22 May 2020, there is such a present risk of the Trust Amount, if not further restrained, being remitted out of the country to the People's Republic of China and being significantly consumed there, including by paying fees to overseas legal advisers to Dalian and otherwise.
But as regards that overseas remission of funds prospect by Dalian, here I need to look very closely and holistically at the underlying Roy Hill Project venture that saw Dalian engaged by Duro in the first place. Originally, of course, Dalian was a subcontractor to Duro in the Roy Hill Project. Dalian was engaged by Duro to provide parts or goods, indeed, ore mining products of a very sophisticated and expensive nature - mining apparatus known as reclaimers - which goods Dalian duly constructed, delivered and, not unnaturally, expected to be paid for once supplied as had been contractually agreed with Duro.
The goods supplied by Dalian were manufactured by Dalian in China and shipped to Western Australia to be acquired by Duro for use within the overall Roy Hill Project which was being established effectively as a start-up mine in Western Australia by interests associated with Hancock Prospecting.
In short, Dalian was never paid by Duro as it should have been for its goods as supplied years earlier. That non‑payment issue was resolved by the Tribunal's award of 19 December 2019. In the wake of not being paid by Duro for some years, Dalian had been forced to pursue an expensive and lengthy international arbitration process in Singapore (seeking to obtain its $AUD50 million arbitral award) where Dalian's claim was actively resisted by Duro over time. And it was only in September 2019, just before the culmination arbitral award of 19 December 2019 finally saw, in effect, Dalian manage only then to obtain security for a part of its money claim against Duro, by PO 15. This security order was obtained under the unique provisions of Singapore law (discussed in Dalian v Clyde & Co at [129] - [147]), requiring Duro then to provide some amount of security for Dalian's otherwise wholly unsecured creditor claim for payment against Duro in the defended arbitration.
Ultimately, the First Partial Final Award as obtained from the Tribunal on 19 December 2019, saw Dalian succeed to the extent of obtaining an award against Duro in the amount of roughly $AUD50 million. Hence the PO 15 September 2019 security order of AUD$27 million is for far less than for all of Dalian's payment claim against Duro. It was the PO 15 order of the Tribunal that led to the AUD$27 million then being paid by Duro into Clyde & Co's trust account to abide, in effect, the pending outcome of the arbitration and be held pursuant to terms of a Trust Agreement expressly applicable to those funds.
As I found in Dalian v Clyde & Co, the Trust Amount at 24 January 2020 became subject to PO 17, as per the terms of the Trust Agreement, expressly ordering Clyde & Co then to pay the funds over to Dalian's lawyers.
But that did not happen immediately. Even following the PO 17, the remission of the funds to Dalian's lawyers, SPB, did not occur immediately by Clyde & Co. Proceedings needed to be commenced in this court in early March 2020 to compel that result. Ultimately, as seen, after a trial I ordered most of the $AUD27 million to be paid over into SPB's trust account for Dalian.
Returning then to my assessment of the danger of a risk of Dalian's funds (held by SPB) being imminently removed from the local jurisdiction. It is quite clear that this removal is likely. But the event is hardly surprising. Dalian was clearly known to be a Chinese company that is based in and operates from the People's Republic of China. That was all demonstrably well known and understood when Dalian was chosen to be engaged as a sophisticated mining goods supplier to Duro for the Roy Hill Project. Dalian duly manufactured and supplied the goods as agreed and was entitled to payment by Duro. Duro had the benefit of the supplied goods, but did not pay Dalian.
The evidence put before me under Mr O'Shannassy's affidavit, and which was submitted on a hearsay basis, is to the effect that Dalian is a substantial Chinese company with significant assets in China in the billions of dollars. It is said that Dalian will still retain a presence in the Australian jurisdiction for the future by continuing to do business through its Australian subsidiary corporation. Currently, it is said Dalian is still engaged within Australia in performing further work at various projects, including still at the Roy Hill Project, as is referred to in par 15 of Mr O'Shannassy's affidavit. None of that looks to be disputed.
The point I am making is that the contractor and goods supply arrangements made around the massive Roy Hill Project in Western Australia involving Duro always displayed a commercially sophisticated, high worth, international participation context. They involved Duro, as an Australian subsidiary of a Spanish‑based corporation (DFSA), contracting with a subsidiary of a Korean corporation, Samsung and then, with Dalian, a Chinese corporation. These Roy Hill Project related transactions were inherently large-scale and international in their reach, as regards the chosen and engaged participants.
So a consequence of the engaged subcontractor Chinese corporation, Dalian, eventually being paid for its supplied goods that ultimately generated its payment claim against Duro and then a likely repatriating of some or all of that consideration, once finally received, under present circumstances, presents as nothing commercially surprising, untoward or out of the ordinary. There presents nothing suspicious or artificial in any of that. Indeed, it is a natural outcome of the implementation of the underlying 'deal' made at the outset as between the Roy Hill Project's internationally chosen participants, and simply reflects a case of business as usual.
That is, given the international nature of the Roy Hill Project arrangements, a long term prospect that, Dalian as a Chinese‑based corporation having finally extracted some part payment for its supplied goods, might eventually then seek to remit proceeds to China, and from there to various of the entities that Dalian engaged in terms of actively manufacturing the supplied goods for this construction contract, is entirely routine and fully understandable. There presents as nothing unusual, or of a pejorative business conduct concern, by Dalian (as a China-based subcontractor) taking some of its part payment following a contested arbitration and using it to go about its business, by dispersing the funds, once obtained, in or at its home location. The same overseas remission of funds conduct by a project participant may equally be seen displayed in the remission of very substantial ($AUD68 million) funds by Duro out of Australia after September 2019 to its Spanish-based parent corporation DFSA (leaving Duro's local unsecured creditors to lament).
The situation that I am confronted by in these present circumstances is one very far removed from the early Mareva injunction cases - where assets of corporations who were foreign based were, if not stopped, at great risk of being surreptitiously removed to be put out of reach, so local claimants could not get paid. It is hard to imagine facts further removed from such disruptive conduct by a debtor or prospective debtor in present circumstances. My assessment as to risk dovetails, of course, with the remaining interest of justice factor and the court's discretion, as I have referred to it.
So whilst there is indeed (in the terms of the local rule) some 'danger' of the Trust Amount now held by SPB for Dalian being imminently repatriated by Dalian to China, that event needs to be seen contextually as a part of the original 'deal' by which Dalian was engaged to supply overseas manufactured mining goods in the first place.

Discretion

There are some further observations made by Le Miere J in Herridge that I assess to be of present assistance. To that end, I note his Honour's observations upon his eighth factor at [45], where he said:
For example, the discretion is not likely to be exercised in favour of granting a freezing order where the danger referred to arose only because of dealings such as the payment of normal trading debts in the course of business. In such a case, while the court may be satisfied of the existence of a danger, and the judgment will be unsatisfied because of such dealings, the court would not exercise its discretion to make a freezing order.

Next, at [46], his Honour had observed as to the usual terms of freezing orders, particularly by reference to [46(c)] and towards the normal phraseology of such an order and the expressly permitted dealings and dispositions in the ordinary and proper course of a respondent's business, including paying business expenses bona fide and properly incurred. His Honour further observed at [47]:
The practice direction accords with the usual form of a freezing order which permits the respondent to make payments in the ordinary course of business.
Here, I find that observation particularly pertinent to the present situation, referring to the terms of the Consolidated Practice Directions at 9.6.1, par 12. Again it is to be remembered that a freezing order does not deliver any level of security as a creditor for an applicant - it only proves an asset status quo in the jurisdiction for the benefit potentially of all creditors.
At [51], [52] and [53] Le Miere J cites further case authority, culminating in the reference to Palmer v Parbery [2019] QCA 27; (2019) 136 ACSR 26, a recent decision in the Queensland Court of Appeal, under the reasons of McMurdo JA (with Fraser & Gotterson JJA agreeing). One of the cases cited by Palmer v Parbery is TTMI Ltd of England v ASM Shipping Ltd of India [2006] 1 Lloyd's Rep 401. Again, in terms of present factors confronting me today by a likely future dealing with funds by a foreign based defendant, part of that citation of TTMI v ASM at [25] relevantly reads:
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.
That is a very well established proposition including by the High Court of Australia - to the extent it had needed to be confirmed in National Australia Bank Ltd v Bond Brewing Holdings Ltd. The passage in TTMI v ASM continues, there citing the 'Niedersachsen' [1983] 2 Lloyd's Rep 600:
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'.
TTMI v ASM continues:
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 an 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.
In my view, that passage also resonates strongly here to Dalian's business.
I am of course, are fully alive to Riley McKay Pty Ltd v McKay [1982] 1 NSWLR 264, 276 in terms of the paying of debts in the ordinary course of business. As was put in this case, the thrust of what is found in Mr O'Shannassy's affidavit, in terms of what is going to happen to Dalian's money in China as regards paying suppliers, or disbursement to pay Dalian's teams of lawyers or the like, can be seen, essentially, as Dalian reimbursing itself for payments it has made in the past to its suppliers for the purpose of it manifesting the reclaimer goods it supplied to Duro.
It was put by Duro, as a counter-contention to support its present application to freeze the Trust Amount, that Dalian will now suffer no real prejudice, effectively by being held up just a little bit longer, before dealing with these funds. Potentially, the delay may only be to the extent of six or seven weeks whilst decisions are being made by Mr Goyal and the other Duro administrators, in conjunction with all the unsecured Duro creditors in terms of whether or some a deed of company arrangement (DOCA) might be agreed to for Duro, or not.
Given everything that has unfolded to date, Duro suggests Dalian will suffer little extra prejudice by being held out of its own money, until matters firm up over whether or not a liquidator will be appointed to Duro and a winding up follows or then, whether a Duro liquidator will then choose to pursue the money as an unfair preference. However, I cannot accept that submission as detracting somehow from my assessment that Dalian's likely remission of the funds now held by SPB to the People's Republic of China would be a dealing undertaken within Dalian's ordinary course of business.

Final disposition

Overall, weighing together all the as now discussed considerations, which, as I have said, coalesce in the end, I find that I am not persuaded here that the funds held by SPB are going to be used by Dalian in any way other than wholly for legitimate commercial purposes and then, wholly within Dalian's ordinary course of its international business operations.
That is so for the circumstances described at [98] - [104] above. Even then, Dalian will still only be receiving a part of what it is otherwise now entitled to for the sophisticated goods it undoubtedly supplied to Duro and which the contractors and parties all the way up the line to the proprietors of the now established Roy Hill Project have held the benefit of for some years.
The international character expertise of the underlying supply of goods deal here is such that I am not persuaded in the end that a genuine risk has been demonstrated that, if a hypothesised Duro liquidation ever happens and if a hypothesised future unfair preference action in this court were ever to be commenced by a Duro liquidator and that liquidator were to succeed against Dalian (under circumstances where that is by no means assured) that such judgment against Dalian would not then be met and honoured at that time.
I do not, given all the circumstances, identify all the possible issues and counter issues in defence that will need to be canvassed in a future contested preference action. Making every possible favourable assumption for a future Duro liquidator, I still find that there is no real and convincing basis for an expressed fear, or concern, that such a future judgment against Dalian would not then be satisfied. The sole basis of the expressed 'danger' is that Duro is dealing with a plaintiff that is based in the People's Republic of China. But here, that is not enough viewed in the Roy Hill Project context of the underlying international supply of goods transaction voluntarily entered between commercially well advised and sophisticated trading corporations with obvious links either to Korean, Spain, China and Australia.
True enough, there is not yet any reciprocal enforcement of judgment treaty as between the People's Republic of China and Australia. But the fact is that the participating parties in the underlying transaction chose to obtain the desired sophisticated iron ore mining goods from Dalian as a Chinese‑based corporation, clearly known to be an internationally based entity. That deliberate decision was very much part a commercial choice they made in their dealings. That is not a criticism. Everyone benefited by a local mining project established with international inputs and participation to get it established. And so it is now something of the 'rub of the green', in effect, as one hypothesises over a future liquidation of Duro eventualities emerging from out of such an underlying international transaction, that the commercial choices were seen to have been carefully made as to who to deal with internationally. Those past decisions carry their consequences.
Upon all the evidence there is nothing to support a 'concern' that Dalian will not continue to conduct business and deal with its assets honourably and properly in the future - were any of the adverse hypothesised eventualities now suggested to later mature. Dalian continues to do business here, admittedly now through an Australian subsidiary. But the maintaining of a respectable future trading reputation in Australia by Dalian, as it currently enjoys in terms of the ongoing business through its Australian subsidiary, would be a factor influencing a responsiveness to making payment if ever it were confronted by what is today hypothesised from a Duro liquidator.

Conclusion

Taking all that into account in a context of Dalian's ordinary course of international business dealings as regards its funds, I am just not left satisfied here that this is a case where at the end the required threshold is met for the grant of a freezing order. Even then, I would not intervene as a matter of overall discretion.
And so, notwithstanding assumptions in terms of hypotheses that I am prepared to make for the purposes of ascertaining a cause of action that is arguable by Duro under its present administration, at the end, it is the discretion in the interests of justice against granting equitable relief towards Dalian's dealings with its own funds that otherwise present here as being in Dalian's ordinary international course of business, that influences me to a conclusion that this is not a case for the court to intervene by way of an interlocutory freezing order, as is sought by Duro.
Duro's application for freezing order relief is refused.

SCHEDULE A

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DW
Associate to the Honourable Justice Martin
1 JULY 2020