Hacer Group NSW Pty Ltd v Mona Vale 3 Pty Ltd as Trustee for Mona Vale 3 Unit Trust (No 2)

[2024] NSWSC 66

Supreme Court

New South Wales

Medium Neutral Citation:

Hacer Group NSW Pty Ltd v Mona Vale 3 Pty Ltd as Trustee for Mona Vale 3 Unit Trust (No 2) [2024] NSWSC 66

Hearing dates:

02 February 2024

Date of orders:

02 February 2024

Decision date:

06 February 2024

Jurisdiction:

Equity - Commercial List

Before:

Stevenson J

Decision:

Freezing order extended until final determination or further order; defendant to comply with previous order for financial disclosure

Catchwords:

CIVIL PROCEDURE – application to set aside freezing order – whether non-disclosure sufficient to discharge order

Cases Cited:

Aristocrat Technologies Australia Pty Ltd v Allam [2016] HCA 3

Garrard (t/as Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662

International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319; [2009] HCA 49

Thomas A Edison Ltd v Bullock (1912) 15 CLR 679; [1912] HCA 72

Town & Country Sports Reports (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540

Category:

Procedural rulings

Parties:

Hacer Group NSW Pty Ltd (Plaintiff)
Mona Vale 3 Pty Ltd as Trustee for Mona Vale 3 Unit Trust (Defendant)

Representation:

Counsel:
A Langshaw (Plaintiff)

Solicitors:
Maddocks (Plaintiff)
HWL Ebsworth Lawyers (Defendant)

File Number(s):

2023/443514

JUDGMENT

1. On 8 December 2023, I made a freezing order restraining the defendant from diminishing its assets up to an unencumbered value of $525,000.

2. I also ordered that by 14 December 2023 the defendant provide the plaintiff with details of its assets and its most recent available draft or final financial statements or management accounts.

3. The order was made ex parte, although the solicitor for the defendant, Mr Jury, was in court at the time. In that regard, I recorded in my reasons that:

“Mr Jury, solicitor, with his customary candour appeared today to inform me that although he had received instructions very shortly before the hearing, he is not in a position to contest or otherwise deal with the application which, for that reason, has in effect proceeded ex parte; although Mr Jury is at present at the back of the Court at the moment.”

4. I found that there was a serious question to be tried that the parties had entered into an agreement, one element of which was that the defendant would pay the plaintiff $500,000 within 60 days of the achievement of practical completion of the relevant development, or the issue of an occupation certificate in relation to that development.

5. I also found:

“The defendant ^[1] currently holds six apartments but has exchanged contracts to sell those apartments on terms that completion must take place within 28 days from the exchange or 21 days from service of a notice to complete.

Thus, it appears that those six remaining sales may settle at any time. There is evidence to suggest that there is at least a fair probability that the proceeds of all those sales will, in due course, be distributed to the unit holders of the relevant unit trust and thus be unavailable to the plaintiff were it to succeed in recovering the $500,000.

In those circumstances, I am satisfied that the Court’s jurisdiction to make a freezing order has been enlivened, there being a danger that any judgment that the plaintiff obtains against the defendant will be unsatisfied and there being evidence to show that the defendant is disposing of or dealing with its assets in the manner I have described.”

1. I wrongly referred to “the plaintiff”; this has been corrected.

6. I stood the matter over for directions to 2 February 2024.

7. On 2 February 2024, Mr Jury applied to set aside the freezing order on the basis that the statement that I had made in the judgment, that the defendant had exchanged contracts to sell the six apartments it still held, was not correct, and that there was no evidence before me, on 8 December 2023, that that statement was correct.

8. I dismissed the defendant’s application to set aside the freezing order and made orders extending it, together with other orders necessary to progress the matter, including an order that the defendant comply with the order I made on 8 December 2023 that it provide the plaintiff, by 14 December 2023, with the information to which I have referred at [2] above.

9. These are my reasons for dismissing the application.

10. On the application to discharge the freezing order, Mr Jury adduced no evidence that, in fact, it was not correct to say that the defendant had “exchanged contracts” to sell the six apartments it still retained. However, argument proceeded upon the basis that the defendant could establish that that was the position.

11. The evidence before me on 8 December 2023 included evidence from the plaintiff’s solicitor, Mr Mathew Stulic, on information belief, that the plaintiff was concerned that the defendant:

“ … may dissipate its assets by completing the sale of the remaining lots in the Strata Plan and distributing the proceeds of sale to unitholders, with the effect of rendering [the plaintiff’s] claim to recover the outstanding sum of $500,000 by these proceedings fruitless …”

12. Mr Stulic did not contend that the defendant had exchanged contracts in relation to those “remaining lots”.

13. On 8 December 2023, there was also before me evidence of a letter sent by the plaintiff’s solicitor to the defendant’s solicitor on 16 November 2023, in which it was stated, under the heading “Dissipation of Assets”:

“Your client is a special purpose vehicle acting as trustee for the Mona Vale 3 Unit Trust (Trust). Pursuant to cl 55 of the Contracts, your client’s liability to our client (at least for claims arising under the Contracts) is limited to your client’s right of indemnity against the assets of the Trust. As we understand it, the sole asset of the Trust is presently its interest in the remaining properties in strata plan 103786 (the Strata Plan) which are yet to be sold.

We assume, in accordance with common industry practice, that your client intends (or, indeed, is obliged) in its capacity as trustee of the Trust to distribute dividends to the unitholders of the Trust within a short period after receipt of any proceeds of sale.

We are instructed that an off the plan sales campaign conducted by your client resulted in the entry of contracts for sale between your client and purchasers for each of the lots that were to be created by the Strata Plan.

If the above understandings or assumptions are in any way incorrect, please indicate the correct position immediately.

We have conducted land title searches for the lots within the Strata Plan, which reveals that of 22 total lots, your client remains the registered proprietor of 7 lots.

We note that clause 37.1 of the draft contract for sale of land annexed to the Contract, indicated that the completion date for each contract of sale was to be the later of:

20.1.1      28 [days] from the date of the contract for sale; or

20.1.2      21 days from the date the strata plan is registered and the Occupation Certificate is provided.

It is now more than 21 days after the date on which the Occupation Certificates were given on 20 July 2023 and the registration of the Strata Plan on 1 September 2023. We therefore assume, but seek confirmation from your client, that completion of the sale of each of the remaining 7 lots in the Strata Plan is imminent.

In circumstances where it appears imminent that your client will shortly complete those remaining sales, and will shortly thereafter distribute the proceeds of sale to unitholders, our client is concerned there is a real risk that the proceedings foreshadowed above will be frustrated by your client’s disposal of all available assets that may be available to satisfy our client’s claim in circumstances where your client is, and has for some time, been on notice of the claims advanced by our client.

To that end, in the event that payment of the amount sought by our client is not made by the above deadline, and in order to preserve the utility of the prospective proceedings and prevent their frustration, our client in the alternative seeks that your client give written undertakings either or both:

23.1.1    not to take any steps to dissipate the total value of the assets held by your client pursuant to the terms of the Trust (whether that be      property, cash or otherwise) below the sum of $550,000; and/or

23.1.2    to provide our client with no less than 14 days’ notice before the date fixed for completion of the sale of the final remaining lots in the Strata Plan of which your client presently remains the registered proprietor.

In the event that the sum demanded is not paid by the above deadline, and neither of those undertakings are provided, our client reserves its right to approach the Court for urgent relief to the same or similar effect. Should that become necessary, our client will rely on this letter and any response in support of that application.” (Emphasis in original.)

14. The defendant’s solicitor did not reply to that letter.

15. Mr Langshaw first approached me as duty judge on 7 December 2023, on which occasion I granted the plaintiff leave to file and serve the Summons and supporting affidavits on short notice.

16. In his written submissions, Mr Langshaw said, referring to the plaintiff’s solicitor’s letter of 16 November 2023, to which I have referred:

“Given the above matters, and in the face of [the defendant’s] failure to respond to its correspondence or give the undertakings sought, [the plaintiff] is concerned that [the defendant] may complete the sale of the remaining lots in the Development and thereafter distribute the proceeds of sale to unitholders with a view to concluding the affairs of [the defendant] and the Trust, such as to render [the plaintiff’s] substantive claim in this proceeding fruitless.”

17. During the course of the application on 7 December 2023, Mr Langshaw and I had this exchange:

“LANGSHAW: The fourth matter is that the standard form contracts for sale, and I can take your Honour to them, contemplate that a completion date for each of the lots is a date which has already passed. So we are concerned about an imminent risk of completion on the final lots and, once those are completed, and liquid assets come into the Trust, they will be right for dissipation.

HIS HONOUR: But there are six unsold, are there?

LANGSHAW: Sorry, your Honour. We understand that they are all subject to contracts for sale, but they have not been completed. I have been too loose in my language.

HIS HONOUR: So there is six units where there is contract exchanged, not yet completed.

LANGSHAW: On our understanding, yes. And, finally, there is the fact that we raised all of these concerns two and a half weeks ago in a letter to the defendant’s solicitors.”

18. It was on the basis of that exchange that I made the statement in the judgment that the defendant had “exchanged contracts” in relation to the remaining units held by it.

19. In those circumstances, Mr Jury submitted that the freezing order should be set aside on the basis of what he described as “non-disclosure”.

20. Mr Jury referred to the familiar authorities concerning the obligation of candour on the making of an ex parte application, including the following statement by Gageler J in Aristocrat Technologies Australia Pty Ltd v Allam: ^[2]

“It is an elementary principle of our ordinarily adversarial system of justice that full and fair disclosure must be made by any person who seeks an order from a court ex parte, with the result that failure to make such disclosure is ordinarily sufficient to warrant discharge of such order as might be made. ^[3] The principle is not confined to particular types of interlocutory orders. ^[4] Its rationale lies in the importance to the administration of justice of the courts and the public being able to have confidence that an order will not be made in the absence of a person whose rights are immediately to be affected by that order unless the court making the order has first been informed by the applicant of all facts known to the applicant which that absent person could be expected to have sought to place before the court had the application for the order been contested. ^[5] ”

2. [2016] HCA 3 at [15].

3. Thomas A Edison Ltd v Bullock (1912) 15 CLR 679 at 681-2; [1912] HCA 72; International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319; [2009] HCA 49 at [130]-[133].

4. See, for example, Garrard (t/as Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 677.

5. Town & Country Sports Reports (Holdings) Pty Ltd v Partnership Pacific Ltd (1988) 20 FCR 540 at 543.

21. In my opinion, there is no relevant non-disclosure by Mr Langshaw such as would warrant setting aside the freezing order.

22. Mr Langshaw said, in response to my enquiry, that it was “our understanding” that the defendant had exchanged contracts in relation to the six units it retained, referring immediately to his instructing solicitor’s letter of 16 November 2023, to which I have referred. In that letter, the plaintiff’s solicitor stated they assumed that the defendant had entered contracts for sale and invited the defendant’s solicitor to correct any incorrect assumptions. The defendant’s solicitor did not do so leading, reasonably in my opinion, to the plaintiff’s legal team, including Mr Langshaw, to assume that contracts had been exchanged.

23. It is true that the suggestion that the defendant had actually exchanged contracts to sell the remaining six units in the development bespoke an urgency to grant ex parte relief that would have appeared less pressing had Mr Langshaw told me that the plaintiff did not actually know whether the defendant had exchanged contracts in relation to those units; but assumed they had based on the defendant’s solicitor’s failure to respond to the 16 November 2023 letter.

24. However, I doubt that I would have come to any different decision concerning the granting of ex parte relief had Mr Langshaw addressed me in those terms.

25. In any event, as I have said, Mr Jury was present when I delivered the ex tempore judgment, albeit without formally appearing in the proceedings.

26. Further, Mr Jury was present when I granted the plaintiff leave to apply on short notice in relation to the ex parte freezing order that I made.

27. Nonetheless, Mr Jury’s firm did not enter an appearance in the proceedings until 25 January 2024.

28. Further, the defendant has not yet complied with my order that it provide the plaintiff with the financial information to which I have referred.

29. In all those circumstances, I was not persuaded that the freezing order should be discharged.

30. In the result, I made the following directions:

1. Order 2 of the orders made on 8 December 2023 (freezing order) is extended until final determination of the proceedings or until further order of the Court.

2. Direct the defendant to comply with order 3 of the orders made on 8 December 2023 (financial disclosure) by no later than 5.00pm on 7 February 2024.

3. The defendant is to file and serve its Commercial List Response by 14 February 2024.

4. The plaintiff is to file and serve any Reply to the defendant’s Commercial List Response by 21 February 2024.

5. The proceedings are listed for directions on 23 February 2024.

6. Liberty to apply on three working days’ notice.

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Endnotes

Decision last updated: 06 February 2024