Hitchcock v Goldspan Investments Pty Ltd

[2014] WASC 464

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   HITCHCOCK -v- GOLDSPAN INVESTMENTS PTY LTD [2014] WASC 464

CORAM:   ALLANSON J

HEARD:   2 DECEMBER 2014

DELIVERED          :   2 DECEMBER 2014

PUBLISHED           :  8 DECEMBER 2014

FILE NO/S:   CIV 1597 of 2014

BETWEEN:   ROBERT HASTINGS HITCHCOCK

Plaintiff

AND

GOLDSPAN INVESTMENTS PTY LTD
First Defendant

KEVIN ROBINSON
Second Defendant

NEIL ROBINSON
Third Defendant

PETER ROBERT HALLAM
Fourth Defendant

Catchwords:

Freezing order - Whether risk of dissipation of assets - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 52A, O 52A r 5(4)

Result:

Freezing order discharged

Category:    B

Representation:

Counsel:

Plaintiff:     Mr D H Solomon

First Defendant              :     No appearance

Second Defendant         :     No appearance

Third Defendant            :     No appearance

Fourth Defendant           :     Mr D J O'Callaghan QC & Mr A J Tiplady

Solicitors:

Plaintiff:     Solomon Brothers

First Defendant              :     No appearance

Second Defendant         :     No appearance

Third Defendant            :     No appearance

Fourth Defendant           :     Russells

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

Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380

Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014

Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49

National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] HCA 10; (1990) 169 CLR 271

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

Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2011] WASC 188

1. ALLANSON J:  On 4 November 2014, on an application made ex parte, I made a freezing order restraining the fourth defendant in this action, Peter Robert Hallam. 

2. Mr Hallam applied to discharge the freezing order.  After a short hearing, I ordered that the freezing order be discharged, and said I would publish my reasons.  These are my reasons for discharging the order.

The parties

1. Robert Hitchcock was a shareholder in a company which, at various times, was named Capital Turbines Australia Pty Ltd, Ctec Pty Ltd, and then Forge Power Pty Ltd.  I will refer to it simply as the Company.

2. Mr Hitchcock initially held 20% of the issued share capital in the Company.  He later transferred that 20% to Goldspan Investments Pty Ltd, and Goldspan held Mr Hitchcock's shares as trustee for his benefit.  Goldspan itself held another 20% of the shares.

3. Mr Hallam was a director of the Company, and the sole shareholder and sole director of Goldspan.

4. There were three other shareholders, each holding 20% of the issued shares.

5. In May 2014, Mr Hitchcock began proceedings against Mr Hallam, Goldspan, and two of the other shareholders.

The claim

1. The shareholders in the Company were parties to a Shareholders Agreement, made in March 2005.  On or about 30 July 2011, Mr Hitchcock and the Company entered into a Share Buyback Agreement.   The shareholders also entered into a Deed of Variation of the Shareholders Agreement. 

2. The Share Buyback Agreement followed a long period of negotiation - largely carried out by correspondence - between Mr Hitchcock and one or more of the defendants.  Mr Hitchcock was living in the United States of America, where he still lives.  The effect of the Buyback Agreement was that Mr Hitchcock's shares were transferred to the Company for the sum of USD$1,150,000 - which at the time was AUD$1,099,111. 

3. In January 2012, Forge Group entered into a conditional agreement for the purchase by Forge Group of the entire share capital of the Company for a maximum payment of $38 million.  Mr Hitchcock claims that, but for the Share Buyback, he would have received more than $7 million for his shares on the sale of the Company to Forge Group.  He pleads, under various causes of action, that he is entitled to the balance between what he received and the amount he would have received. He claims damages, alternatively equitable compensation, of $6,060,489 against the defendants.

4. Mr Hallam has applied to strike out the statement of claim, and for summary judgment.  Those applications have not yet been heard.  Although both parties made written and oral submissions on whether the claim is arguable, it is not necessary to resolve those questions for the purposes of the present application.  I also prefer to avoid unnecessarily entering areas, some of which are relatively complex, when they will later be argued in more detail.  I confine these reasons to one point, which, in my opinion, is a sufficient reason to set aside the freezing order granted ex parte on 4 November 2014.

The evidence

1. Mr Hallam has sworn two affidavits, on 25 November 2014 and 2 December 2014.  Two other affidavits, sworn by solicitors in the firm acting for him, were read, but do not go to the issue on which I have decided the application.

2. Mr Hitchcock relied on the four affidavits filed in support of the initial application.  He filed no new evidence on this application.

Freezing orders

1. Order 52A of the Rules of the Supreme Court 1971 (WA) empowers the court to make a freezing order, and ancillary orders, for 'preventing the frustration or inhibition of the Court's process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied'. The principles which inform the exercise of the power have been stated on many occasions: see, for example, Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380; Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2011] WASC 188 [133] ‑ [144].

2. Relevantly, the court may make an order if satisfied that the plaintiff has a good arguable case on an accrued cause of action against the defendants.  The case must be sufficiently arguable to justify the granting of interlocutory relief.  The plaintiff must establish that it has such a case on legal as well as factual matters:  Cardile v LED Builders Pty Ltd [68].

3. The court must also be satisfied that a danger exists by reason of the defendant removing assets from the jurisdiction, or disposing of assets within the jurisdiction, or otherwise dealing with them in some fashion whereby the plaintiff, if successful, will not be able to have judgment satisfied: O 52A r 5(4). The applicant is not required to show that the purpose of the defendant's conduct is to prevent recovery of any judgment which might be obtained. It is sufficient to show that there is a danger of dissipation of assets which is likely to prevent such recovery: National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] HCA 10; (1990) 169 CLR 271.

4. The onus of proving the risk of judgment being rendered fruitless is on the plaintiff.  The standard of proof of danger of non-satisfaction of judgment has been stated as a risk that is real and not fanciful:  Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, 327.

The order

1. The plaintiff sought orders that would restrain Mr Hallam by freezing assets, and ancillary orders that would require him to provide information about his assets.  I declined to make the ancillary orders on the ex parte application.  My intention was to have the matter returned, on notice to the defendant, within a very short period.  The parties agreed to adjournments, and the interim continuation of the restraints.  This delay enabled the defendant to file evidence to address what became the decisive issue on the application, the risk of dissipation of assets.

The risk of dissipation of assets

1. The plaintiff commenced the action by a writ filed on 2 May 2014.  The statement of claim (since amended) was filed on the same day.  Mr Hallam and Goldspan filed a joint defence on 25 June 2014.  It has since been amended on 24 October 2014.

2. At the time of the ex parte hearing, the evidence showed that Mr Hallam was the registered proprietor of a block of land in City Beach.  Since the action against him had commenced, he had taken steps to sell that property.  A transfer of the land to a third party was registered at about the same time as the hearing of the ex parte application.  Little more was in evidence about the transaction. 

3. The plaintiff also produced evidence that Mr Hallam owns land in Karrinyup, Western Australia, and on the Gold Coast in Queensland.

4. There was, in my opinion, having regard to the timing of the sale of the City Beach land, a sufficient basis to impose limited restraints upon Mr Hallam for a short period until the matter could be argued on notice to him.  An undertaking as to damages was given by a litigation funder, Bentham IMF Limited.

5. Mr Hallam has now filed evidence about the land he owns, and the sale of the City Beach land.

6. He owns, jointly with his wife:

   1.A house in Karrinyup, which is rented out and provides an income stream.  He has no current intention to sell it. 

   2.Two adjoining lots on Sovereign Island in Queensland.  The land is vacant.  It was purchased under a contract dated 26 February 2014, with settlement on 14 April 2014. 

7. Mr Hallam currently lives in a house in Queensland owned by Goldspan.

8. The City Beach land was sold under a written contract of sale dated 4 September 2014.  After the discharge of a mortgage and the payment of fees, the net balance of the proceeds was approximately $570,000.   

9. Mr Hallam says on oath:

   1.The City Beach property was vacant.  The house on it had been demolished in 2013.

   2.He decided to sell the property in early 2014 because he and his wife decided to remain in Queensland on a permanent basis.

   3.The purchasers were not previously known to him.  

   4.He intends to use the net funds from the sale of the land to reduce debt on the property he owns in Queensland.

10. There is no evidence to lead me to question that the property was sold at arms-length on the open market.  It was listed for sale and advertised.  The settlement statement includes a substantial agent's selling fee, together with advertising costs. 

11. The purchase of the Queensland land is a significant investment.  

12. The interests of justice may support the grant or continuation of a freezing order to prevent the dissipation of assets pending the hearing of an action, even though the risk of dissipation is less probable than not:  Patterson v BTR Engineering (Aust) Ltd, (325) (Gleeson CJ); Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49, 54; Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014. But taking the matters now in evidence into account, I am not satisfied that there is a real danger that justifies restraining Mr Hallam dealing with his assets. With regard to the particular transaction on which the plaintiff relied, I am satisfied that the timing of the sale of the City Beach land, in relation to the commencement of the proceedings, was coincidental. More importantly, the evidence about that transaction shows that while Mr Hallam sold one property, it did not result in a significant reduction in the net assets that would be available should there be a judgment against him.

13. I am not satisfied that any ongoing restraint is required to prevent Mr Hallam from disposing of assets before this action is determined.

14. The question of costs has been reserved, and will be dealt with on Mr Hallam's application for the action against him to be dismissed.