Hyperbaric Health International Pty Ltd v Healing Chambers of Australia Pty Ltd (No 2)

[2019] FCA 513

FEDERAL COURT OF AUSTRALIA

Hyperbaric Health International Pty Ltd v Healing Chambers of Australia Pty Ltd (No 2) [2019] FCA 513

File number:	NSD 1746 of 2015
Judge:	NICHOLAS J
Date of judgment:	4 April 2019
Cases cited:	Hyperbaric Health International Pty Ltd v Healing Chambers of Australia Pty Ltd [2018] FCA 2082
Date of hearing:	4 April 2019
Registry:	New South Wales
Division:	General Division
National Practice Area:	Intellectual Property
Sub-area:	Copyright and Industrial Designs
Category:	No Catchwords
Number of paragraphs:	14
Counsel for the First Applicant/Cross-Respondent:	Dr T J Baret appeared on his own behalf and on behalf of Ms K E Maxwell who also appeared. The first applicant did not appear
Counsel for the Second Applicant	The second applicant did not appear
Counsel for the Respondents/Cross-Claimant:	Mr HPT Bevan
Solicitor for the Respondents/Cross-Claimant:	Adendorffs Solicitors & Conveyancers

ORDERS

NSD 1746 of 2015

BETWEEN:

HYPERBARIC HEALTH INTERNATIONAL PTY LTD
(ACN 132 818 715)

First Applicant

98TH PERCENTILE PTY LTD (ACN 169 514 390)

Second Applicant

AND:

HEALING CHAMBERS OF AUSTRALIA PTY LTD
(ACN 161 399 855)

First Respondent

PETER STONE

Second Respondent

AND BETWEEN:

HEALING CHAMBERS OF AUSTRALIA PTY LTD
(ACN 161 399 855)

Cross-Claimant

AND:

HYPERBARIC HEALTH INTERNATIONAL PTY LTD
(ACN 132 818 715)

Cross-Respondent

JUDGE:	NICHOLAS J
DATE OF ORDER:	4 APRIL 2019

THE COURT ORDERS THAT:

1.The interlocutory application made orally by Dr Baret and Ms Maxwell on 4 April 2019 be dismissed.

2.Dr Baret and Ms Maxwell pay the respondents’ costs of and incidental to the said application.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

NICHOLAS J:

1. On 19 December 2018 I made an order dismissing the application in this proceeding with costs fixed in the amount of $100,000 payable by the first applicant to the respondents.  The first applicant (“Hyperbaric”) is, and was at that time, a company in liquidation.  Dr Baret and Ms Maxwell were at all relevant times directors of Hyperbaric. 

2. I also made other orders including orders 4-8 which provide as follows:

   4.Pursuant to the undertaking given to the Court given on 22 March 2017 Dr Trevor John Baret and Ms Kylie Eva Maxwell pay to the Respondents the sum of $100,000.00 in respect of the Respondents’ costs of the proceeding (inclusive of GST).

   5.The liability of Dr Trevor John Baret and Ms Kylie Eva Maxwell pursuant to Order 4 is joint and several.

   6.The Respondents take no steps to enforce the order referred to in Order 4 for a period of 90 days from today.

   7.Dr Trevor John Baret and Ms Kylie Eva Maxwell each be restrained, until further order, or until full payment is made to the Respondents of the costs referred to in Order 4, from encumbering, mortgaging, assigning or transferring the property known as 58 Boronia Road, Bullaburra New South Wales (Folio Identifier C/419358) without the leave of the Court.

   8.Dr Trevor John Baret and Ms Kylie Eva Maxwell have liberty to apply to the Court on 7 days’ notice to be given to the Court and to the Respondents in relation to order 7.

3. Further background to the matter appears in my reasons for judgment published on 20 December 2018 explaining why the orders of 19 December 2018 were made (see Hyperbaric Health International Pty Ltd v Healing Chambers of Australia Pty Ltd [2018] FCA 2082).

4. Dr Baret and Ms Maxwell (who I shall in these reasons refer to the applicants) have exercised the leave granted pursuant to order 8.  They have not filed an interlocutory application specifying the orders they seek, but informed me today that the orders sought by them are as follows:

   (1)An order vacating the freezing order made on 19 December 2018; and

   (2)An order allowing them an additional 11 months in which to pay the costs judgment.

5. The 11 months is based on the estimation given by Dr Baret of how long it will take Ms Maxwell and him to complete the renovation of their property (“the Bullaburra property”) and sell it at a reasonable price.

6. The evidence relied upon by Dr Baret and Ms Maxwell is an affidavit of Dr Baret made on 1 April 2019.  Much of that affidavit is irrelevant to any issue before me and also inadmissible insofar as it canvases discussions that occurred at various mediations that took place prior to the dismissal of the proceeding. My rulings in relation to that affidavit are recorded in the transcript when read in conjunction with MFI-1.

7. The respondents rely on an affidavit of Mr Peter Stone who is the second respondent and the sole director of the first respondent.  He annexes to his affidavit a report of the liquidator of Hyperbaric that shows that Hyperbaric is insolvent and unable to pay any of its debts.  In his report the liquidator expressed the view that the directors of Hyperbaric may have allowed it to trade while insolvent.  The liquidator’s report also indicates that the applicants’ property (to which the freezing order relates) is mortgaged to the National Australia Bank but does not say for how much. 

8. Mr Stone’s affidavit indicates that the respondents incurred legal costs of approximately $145,000 up to mid-December 2018.  Since that time further legal costs have been incurred by them including in relation to the present application.  These costs are in addition to those covered by the orders made on 19 December 2018.  According to Mr Stone’s evidence, neither he nor the first respondent has the financial resources to pay all of the legal costs that have been incurred, and they are currently indebted to the respondents’ legal representatives in an amount of $25,000.  His affidavit indicates that he is attempting to arrange funding to pay the ongoing legal costs associated with the enforcement of the costs judgment. 

9. There is some discussion in the affidavit evidence by both parties concerning the effect of the freezing order.  It is important to note that the freezing order does not operate to provide the respondents with any security interest in the Bullaburra property.  However, it does provide the respondents with some protection, as unsecured creditors of the applicants, from the risk that the applicants will attempt to hinder or frustrate recovery of the costs judgment by transferring or encumbering the Bullaburra property without leave of the Court. 

10. In my previous judgment I made clear that it was open to the applicants to apply to the Court for leave to transfer or encumber the Bullaburra property in accordance with the terms of the freezing order.  As I said in that judgment at [26]:

    I made clear during the course of the hearing that it is open to Ms Maxwell and Dr Baret to apply to the Court for leave to mortgage, encumber, assign or transfer the Bullaburra property which, it may be assumed, would not be opposed in the event that the respondents’ entitlement to their costs remains adequately secured.  Of course this is a matter about which Dr Baret and Ms Maxwell would be well advised to seek their own legal advice. 

11. During the course of his submissions to me today Dr Baret said that he did not understand that it was open to he and Ms Maxwell to re-finance the property while the freezing order remained in place.  I have explained to him that his mortgagee or another lender are able to give approval for additional financial accommodation subject to a condition requiring the applicants to obtain the leave of the Court pursuant to the freezing orders.  Dr Baret told me that he should be able to re-finance the Bullaburra property through the National Australia Bank (the existing mortgagee) although he did say he was not certain that this could be done.  I am not presently inclined to vary the freezing order until such time as he is able to provide some evidence of conditional commitment of the kind I have described.

12. More generally, the evidence relied upon by the applicants in support of their application today does not provide any statement of their assets, liabilities or income. Further, the affidavit evidence does not provide any information as to what steps have been taken by the applicants to raise additional funds with which to pay the costs judgment in whole or substantial part.  It is not apparent to me why those matters were not dealt with in the affidavit evidence.  In any event, as I suggested in the last judgment, I recommend that Dr Baret and Ms Maxwell obtain some professional assistance to facilitate refinancing their property.

13. I am not satisfied that any sufficient reason has been shown why the respondents should not be permitted to enforce the costs judgment in accordance with the Federal Court Rules 2011 (Cth). Nor am I satisfied that there is any sufficient reason why the freezing order previously made should be discharged. As previously mentioned, I would consider a further application supported by proper evidence to vary the freezing order to facilitate refinancing of Dr Baret and Ms Maxwell’s property.

14. Accordingly, the interlocutory application made by Dr Baret and Ms Maxwell will be dismissed with costs.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.

Associate: 

Dated:       11 April 2019