In The Matter Of Colorado Products Pty Limited

[2012] NSWSC 1251

Supreme Court

New South Wales

Medium Neutral Citation:	In The Matter Of Colorado Products Pty Limited [2012] NSWSC 1251
Hearing dates:	25 September 2012
Decision date:	25 September 2012
Jurisdiction:	Equity Division - Corporations List
Before:	Brereton J
Decision:	Interim preservation orders
Catchwords:	EQUITY - Equitable remedies - Injunctions - Injunctions to preserve status quo or property pending determination of rights - Mareva injunctions - whether the evidence establishes prima facie risk of dissipation of assets
Category:	Interlocutory applications
Parties:	Clare Huang - First Plaintiff CH Design Solutions Pty Ltd - Second Plaintiff Colorado Products Pty Limited - First Defendant HY International (Australia) Pty Ltd - Second Defendant Phoenix Explorer Pty Ltd - Third Defendant
Representation:	RRI Harper SC & F Assaf (Plaintiffs) J Horowtiz (Defendants) Yau & Wang Lawyers - Plaintiffs Jackson Lalic Lawyers Pty Ltd - Defendants
File Number(s):	2011/ 214522

Judgment (ex tempore)

1. HIS HONOUR:  The parties agree that upon the plaintiffs giving to the Court the usual undertaking as to damages, the first defendant will undertake to the Court, that, until 11 October 2012, she will:

(1)   Cause any net proceeds from the sale of the property known as 55 Coxs Road, North Ryde, in the State of New South Wales ("the property"), to be deposited into an interest bearing bank account operated jointly by the solicitors for the plaintiffs and the solicitors for the defendants immediately upon the receipt of such funds; and

(2)   Not encumber or otherwise diminish the value of the property.

1. In addition, the plaintiff seeks that the first defendant give an undertaking, which the first defendant declines to give, that the defendants not remove from Australia or in any way dispose of, deal with or diminish the value of any of her assets in Australia, save for the property, up to the unencumbered value of $500,000. The plaintiffs acknowledge that if such an undertaking were offered or ordered, additional orders providing for exceptions for living expenses, legal expenses, dealings in the ordinary course of business and in discharge of existing obligations would be required.

1. The evidence establishes that the second defendant, which is a company controlled by the first defendant, has previously disposed of its major Australian asset. At that time, the plaintiffs sought an undertaking that it preserve the proceeds, which undertaking was apparently not forthcoming, and the plaintiffs took no further action in that respect. Now there is evidence the first defendant proposes to sell her Coxs Road property, to which the undertakings relate. The evidence also establishes that the first defendant has businesses in, and dealings with, China.

1. The proposed exception from the order, contained in paragraph 4(c) of the plaintiff's short minutes - dealing with or disposing of their assets in the ordinary and proper course of their respective businesses including paying business expenses bona fide and properly incurred - would therefore not prevent the defendants from continuing the ordinary and proper course of their respective businesses, including international aspects of it.

1. The defendants submit that there is no urgency, but in the context of this type of application, the urgency is simply that if an order not be made, there is a risk that the plaintiffs will suffer irreparable harm in the meantime, in that assets might be put beyond their reach that would otherwise be available for satisfaction of a potential judgment. The defendants also submit that the plaintiffs have delayed in seeking relief of this type, having regard to the circumstance that the disposal of the second defendant's Rydalmere property was known to them a year ago, yet ultimately provoked no action, and the alleged misappropriation of funds was also known many months ago.

1. It seems to me that in the context of a Mareva application, the plaintiff is not necessarily bound to come to court to seek a freezing order at the first possible opportunity. It is hardly a case in which a plaintiff by not acting promptly occasions prejudice to a defendant. To the contrary, it is the plaintiff who accepts risk by not acting promptly. It may often be prudent for a plaintiff not to make an application at the first opportunity; for example, in this case, a judgment could legitimately have been formed that, so long as the Coxs Road property remained available, the dissipation or alienation of the second defendant's property did not pose such a threat to the enforceability of the plaintiff's judgment as to justify, on the totality of the picture, a Mareva application at that point.

1. As it seems to me at present, the evidence, to a very prima facie level on an interim application, establishes a risk of dissipation - a conclusion somewhat fortified by the first defendant's initial refusal to give any undertaking when sought in respect of the Coxs Road property. There is no apparent prejudice to the defendants from making the additional orders sought, having regard to the ordinary course of business exception proposed; and if there has been delay on the part of the plaintiff, the trigger for making an application now, namely the threatened sale of the Coxs Road property, adequately explains it, and it has occasioned the defendants no prejudice.

1. Essentially, as I apprehend the plaintiff's case, they rely on the cumulative effect of the allegations in the substantive proceedings, plus the actual disposal of the second defendant's former Rydalmere property, and now the threatened disposal of the Coxs Road property, which, taken together at this very prima facie review of the matter, and in the absence of evidence of prejudice to the defendants, favour the grant of interim relief, until the matter can be examined on interlocutory hearing.

Orders

1. Upon the first and second plaintiffs by their counsel, giving to the Court the usual undertaking as to damages:

(1)   The Court notes the undertaking of the first defendant by her counsel to the Court, that until and including 15 October 2012:

(a)   She will cause any net proceeds from the sale of the property known as 55 Coxs Road, North Ryde ("the property") in the state of New South Wales to be deposited into an interest bearing bank account operated jointly by the solicitors for the plaintiffs and the solicitors for the defendants, immediately upon receipt of such funds.

(b)   She will not encumber or otherwise diminish the value of the Property, and

(2)   The Court orders that the defendants be restrained from, by themselves, their servants or agents, removing from Australia or in any way disposing of dealing with or diminishing the value of the first defendant's assets in Australia, save for the property, up to the unencumbered value of $500,000 AUD, provided that the foregoing undertakings and orders do not prohibit the first and second defendants from:

(c)   Expending up to $3,000 a week for the first defendant's ordinary living expenses;

(d)   Expending up to $100,000 on their reasonable legal expenses;

(e)   Dealing with or disposing of their assets in the ordinary and proper course of their respective businesses including paying business expenses bona fide and properly incurred;

(f)   In relation to matters not falling within exceptions (a), (b) or (c), dealing with or disposing of any of their assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so, the first and second defendants give the first and second plaintiffs, if possible, at least two working days written notice of the particulars of the obligation.

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Decision last updated: 10 May 2013