Duo Flowers Pty Ltd v Villa Verona Pty Ltd

[2016] FCCA 3163

FEDERAL CIRCUIT COURT OF AUSTRALIA

DUO FLOWERS PTY LTD v VILLA VERONA PTY LTD & ANOR [2016] FCCA 3163

Catchwords:
CONSUMER LAW – Interlocutory application – whether there is a prima facie case to grant interlocutory injunctive relief – not an appropriate matter to grant a freezing order – balance of convenience not made out to warrant a grant of interlocutory injunctive relief.

Legislation:

Competition and Consumer Act 2010 (Cth), s.138A.

Applicant:

DUO FLOWERS PTY LTD

ACN 607 290 371

First Respondent:

VILLA VERONA PTY LTD

ACN 603 865 603

Second Respondent: DAZHENG LIANG

File Number: SYG 3404 of 2016

Judgment of: Judge Street

Hearing date: 7 December 2016

Date of Last Submission: 7 December 2016

Delivered at: Sydney

Delivered on: 7 December 2016

REPRESENTATION

Solicitors for the Applicant:

Ms Y Hua

Goodwin & Co Lawyers

Solicitors for the Respondents:

Mr S Li

Longton Legal

ORDERS

1. The application in a case for a freezing order is dismissed.

2. The costs of the application for a freezing order are reserved.

3. The Applicant to file and serve a statement of claim by 20 January 2017.

4. The Respondents to file and serve a defence by 9 February 2017.

5. Any reply is to be filed and served on or before 16 February 2017.

6. The matter is referred under s.34 of the Federal Circuit Court Rules 2001 to a Registrar for mediation as soon as reasonably practicable.

7. Direct the parties to cooperate with each other for the purpose of the conduct of the mediation.

8. Liberty to apply on 2 days’ notice.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 3404 of 2016

DUO FLOWERS PTY LTD ACN 607 290 371

Applicant

And

VILLA VERONA  PTY  LTD ACN 603 865 603

First Respondent

DAZHENG LIANG

Second Respondent

REASONS FOR JUDGMENT

Background

1. This is an application within the Court’s jurisdiction under s.138A of the Australian Consumer Law in respect of proceedings that were commenced on 2 December 2016 alleging misleading conduct concerning the sale of a café business. The applicant was granted a short leave for service, as the originating process sought a freezing order in respect of the corporate first respondent and its director. The applicant identified evidence relating to alleged representations concerning the takings of the business prior to entering into the contract for purchase. 

2. The applicant negotiated a contract that included a special condition clause 18 relevantly, as follows:-

   “Both parties agree to a two week trial period after the date of this contract and before completion. In this period, the average turnover per week of the business must be no less than AUD $12,000 with 10% leeway, otherwise the purchaser is entitled to rescind the contract in accordance with clause 23.”

3. The applicant was aware prior to completion, as a result of the two-week trial period, that the average turnover per week of the business did not reflect the amount identified in that clause. Nonetheless, the applicant proceeded with the purchase of the business. The applicant in these proceedings seeks statutory relief on a final basis in the nature of rescission and in the alternative, damages for misleading and deceptive conduct. 

4. The second respondent director was identified as having an interest in two different properties, one at Wentworth Point, New South Wales and one at Castle Hill, New South Wales. The basis for the alleged fear of dissipation of assets by the respondents arose from a conversation between the applicant’s director and the second respondent in relation to the sale of an Audi A5 and an alleged statement that:-

   “Once the café is sold, I plan to leave Australia indefinitely to pursue business opportunities in China.” 

5. The respondent disputes the version of the conversation, albeit the respondent has not at this stage put on evidence. Where a case is brought in relation to an allegation of misleading and deceptive conduct in respect of the sale of a business, an obvious and critical document to be provided in relation to any allegation of a prima facie case is the contract for sale of the business. The applicant did not tender or disclose the whole of the contract of the sale of the business. 

6. If an ex parte injunction had been granted in circumstances where the whole of the contract was not provided and it was shown that that contract had provisions relevant to the alleged representation and issue of reasonable reliance, there would have been a failure to discharge the obligation of full and frank disclosure. In this interlocutory application the applicant did not tender the contract for sale of business. 

Consideration of injunctive relief 

1. The Court is not satisfied that there is a sufficiently arguable prima facie case of a threat by the respondents to dissipate assets or to engage in conduct that could be said to amount to an abuse of process to make out a prima facie case for the grant of injunctive relief. The solicitor for the applicant indicated that the applicant wished to secure the potential relief that the applicant might obtain if the applicant were successful in the statutory relief sought in respect of rescission. 

2. Freezing orders are not granted for the purpose of an applicant securing an outcome in relation to their proceedings. Freezing orders are granted in circumstances where the Court is satisfied that there is a prima facie case of abuse of process whereby assets will be dissipated with the intention of defeating the successful outcome by a party.  Such an intention is generally inferred where a prima facie case of fraud is made out. 

3. The circumstances of the present case are one where the allegation in the application reflects misleading and deceptive conduct. It is not apparent on the material before the Court at this stage, that there is any prima facie case of fraud. The Court is not satisfied that a prima facie case has been made out for the grant of interlocutory injunctive relief. The Court is not satisfied that the balance of convenience in the present case would warrant the grant of injunctive relief.

4. Further, the Court is of the view that the existence of the real properties identified in the evidence of the plaintiff materially undermines the allegation upon which the applicant seeks to advance a case for a freezing order. 

I certify that the preceding ten (10) paragraphs are a true copy of the reasons for judgment of Judge Street

Date: 25 January 2017