Kee Management Pty Ltd v Casey - [2023] WASC 259

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   KEE MANAGEMENT PTY LTD -v- CASEY [2023] WASC 259
CORAM:   FORRESTER J
HEARD:   11 JULY 2023
DELIVERED          :   11 JULY 2023
PUBLISHED           :   13 JULY 2023
FILE NO/S:   CIV 1729 of 2023
BETWEEN:   KEE MANAGEMENT PTY LTD
Plaintiff
AND
NEIL CASEY
Defendant

Catchwords:

Practice and procedure - Freezing orders - Application for freezing order - Whether plaintiff has good arguable case - Whether the assets might be disposed of, dealt with or diminished in value - Whether there is a danger of a prospective judgment being wholly or partly unsatisfied - Whether discretion should be exercised to grant the freezing order

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Application granted
Freezing Order made

Category: B

Representation:

Counsel:

Plaintiff	:	A D McDonald & D R Purdy
Defendant	:	In Person

Solicitors:

Plaintiff	:	Pragma Lawyers
Defendant	:	In Person

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

Belmont Tyre & Auto Service Centre Pty Ltd v Ampak Holdings Pty Ltd [2023] WASC 230
Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380
Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (In liq) [2018] WASCA 174
Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2011] WASC 188

FORRESTER J:

(This judgment was delivered extemporaneously on 11 July 2023 and has been edited from the transcript).

Introduction

The plaintiff has commenced proceedings by writ filed on 10 July 2023 claiming that the defendant has breached contractual and fiduciary duties arising out of his contract of employment with the plaintiff and as a result the plaintiff has suffered loss and damage. The writ has been served on the defendant.
By the present application, also filed on 10 July 2023, and served on the defendant, the plaintiff has sought urgent relief pursuant to O 52A of the Rules of the Supreme Court 1971 (WA) (RSC), by way of a freezing order over the defendant's assets, to prevent him disposing of or dissipating any proceeds of his alleged breaches of duty.
The defendant has appeared today, although he has not had an opportunity to properly seek legal advice and he was hampered in making full submissions in that regard. I have given him the opportunity to be heard insofar as he is able to make submissions, but I have taken his lack of opportunity to seek legal advice into account.

Conferral

Pursuant to O 59 r 9(2) of the RSC, the plaintiff has sought an order that the conferral requirement be waived on the basis that notice to the defendant of the application might render the application inutile. As it turns out, notice was ultimately given to the defendant, but I accept that further advance notice of the application would have defeated the purpose of it and, accordingly, I waive the conferral requirement insofar as it has not been complied with.

Undertaking as to Damages

The plaintiff has filed an undertaking as to damages.

Factual basis

The plaintiff has filed an affidavit of Hale Preston‑Samson sworn 10 July 2023 in support of its application.
Mr Preston-Samson has been employed by the plaintiff as its Transport Manager since June 2022. The plaintiff operates a civil support business, which includes hiring civil earthworks equipment, providing surfacing materials, transport services to civil, mining and infrastructure business in Western Australia and a diesel delivery business.
The plaintiff and the defendant entered into a written employment contract on or about 8 September 2020. That contract is annexed to Mr Preston‑Samson's affidavit as HPS‑3.
Clause 4.1 states, in part, that the employee:
… agrees that he owes a fiduciary duty to the Employer and is obliged to act in good faith and fidelity to it including without limitation:
…
(b) ensuring there is no conflict between the Employee's personal interest and the Employee's duties to the Employer;
(c) not without the prior written consent of the Employer, entering into any transaction, contract or arrangement where such a transaction, contract or arrangement is in direct or indirect conflict between his personal interest and his duties to the Employer;
(d) not for the duration of this Agreement directly or indirectly being engaged, employed, concerned with or interested as principal, employer, employee, consultant, partner, director, shareholder (other than as an ordinary shareholder in a publicly listed company) or otherwise with or in any business in competition with the business operated by the Employer; and
(e) not for the duration of this Agreement on the Employee's own account or for any other person soliciting, interfering with, or endeavouring to entice away from the Employer any person who is a client, customer or employee of the Employer.
The defendant worked within the transport business arm of the plaintiff, and his duties included quoting and scheduling new transport requests received by the plaintiff, organising maintenance of transport vehicles, and ensuring consistent commercial pricing. He was provided with a work mobile phone.
The plaintiff uses an Excel spreadsheet to internally manage scheduling requests and an invoicing system called 'Inspire'.
Loadshift is an online marketplace for transport operators and customers to place and find work. The plaintiff does not use Loadshift for making or receiving payments.
On 28 June 2023, the defendant took leave for medical reasons. During his leave, his work mobile phone was diverted to Mr Preston‑Samson's phone.
On 3 July 2023, a man (Mr A) telephoned the defendant's work phone, and the call was diverted to Mr Preston‑Samson. Mr A asked when the plaintiff would be collecting items for a haulage from South Australia (Haul). Mr Preston‑Samson did not know about the Haul, and Mr A said that the Haul was organised through Loadshift.
Mr Preston-Samson asked Mr A to send through the details so he could organise the task. Inquiries Mr Preston‑Samson made with other office staff of the plaintiff revealed that no one else was aware of this Haul. The driver had been sent an email by the defendant with details of the Haul.
Mr Preston-Samson logged onto the defendant's work computer. He used the defendant's work email address to find out the password for the defendant's account with Loadshift and was able to access it.
The defendant's work mobile phone number was listed on the account page. The bank account linked to the Loadshift account was in the name of the defendant and was not an account maintained by the plaintiff.[1] The defendant's salary was paid into a different account with the same bank.
[1] HPS-9.
The plaintiff has found one email sent from the defendant to a driver employed by the plaintiff regarding the Haul, telling him it was for a mate and 'on the quiet'.[2]
[2] HPS-10.
Mr Preston‑Samson has been unable to search for Loadshift transactions on the defendant's account from more than six months ago. He claims that his review of the account has revealed that the defendant used the Loadshift account in two ways:
(1) causing an initial payment for haulage jobs to be paid through the Loadshift account and then the balance was invoiced by the plaintiff and this was unable to be detected by the plaintiff's staff, as to them it appeared invoices were being paid in full;
(2)scheduling a new haulage job in the plaintiff's records, that is, allocating plaintiff's staff to the job, but then cancelling the job on the plaintiff's system without telling anyone. The plaintiff's staff would then complete the job but the payment was made through the Loadshift account.
This second way alleged is not supported by evidence of any documents to that effect annexed to Mr Preston‑Samson's affidavit.
A job was scheduled for 24 November 2022 for delivery to South Hedland. The plaintiff has a consignment note on file from an employee who completed the job.[3] In the Loadshift Portal, the plaintiff has found communications between the defendant and an apparent customer for that South Hedland delivery.[4] A transaction summary in the Loadshift portal suggests that partial payment was made to the defendant.[5] No payment was ever made to the plaintiff for this job.
[3] HPS-11.
[4] HPS-12.
[5] HPS-13.
The Loadshift portal shows six other payments for work which appear to be of a similar nature to the plaintiff's business. The transactions in total amount to approximately $24,385.[6]
[6] HPS-13.
One of the plaintiff's employees requested insurance information held by Loadshift and the certificates supplied to the plaintiff in response to this request were the plaintiff's insurance certificate.[7]
[7] HPS-14.
Mr Preston-Samson estimates that the plaintiff's loss from the defendant's conduct is approximately $30,000 and it could be more. He says that there are also additional costs arising from the defendant 'underquoting jobs' but this is not particularised and I do not take it into account.
Mr Preston-Samson claims that full access to the defendant's bank accounts, work and personal emails and messaging services will be required to determine the full extent of the defendant's conduct. I note that the plaintiff already has access to the defendant's full work email services.
The plaintiff also relies on the affidavit of Daniel Robert Purdy sworn on 10 July 2023, in which Mr Purdy attests to having conducted searches which demonstrate that the defendant does not own any real property in Western Australia.
To date, the defendant has declined to sign an undertaking not to deal with money received from the provision of vehicles owned by the plaintiff including, but not limited to, accounts on Loadshift or to disclose transactions from which he has personally derived a benefit.
In correspondence annexed to Mr Purdy's affidavit, purporting to be from the defendant to the plaintiff's solicitors, the defendant says:
As we discussed the only transaction on my load shift account that was anything to do with Kee was the D10 Blade that Martin did for me (although he may invoice Kee but being as I am on Sick Leave, I cannot do anything about this currently), It was also only a part payment for this movement as well
The other is a job that should be currently happening from SA to WA of which I did not know any more details apart from a Name and Number (this is now being dealt with by Hale)
The funds from the SA move were going to be deposited to Kee's Account but without access to my emails and also my load shift account which has been accessed by someone other than myself and is now locked out I have no means of correcting this movement.
All the other movements were completed by other companies of which I paid directly and no Kee Equipment was used to complete these moves at all
If I put a monitory value on the moves that have involved Kee, Currently is the D10 Blade Movement, I don't know if Martin has invoiced Kee but if this is so then My Annual Leave should cover this amount owed to Kee.
…
I believe that yes this a breach of contract between Kee and myself but it was never meant that way at all[8]
[8] DRP-5.
The final affidavit of Mr Purdy, sworn on 11 July 2023, effectively constitutes an affidavit of service.

Relevant legal principles

The plaintiff's application is made pursuant to O 52A r 5 of the RSC, which relevantly provides:
(1) This rule applies if -
…
(b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in -
(i) the Court
…
(4)The Court may make a freezing order or an ancillary order or both against a…prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that the … prospective judgment will be wholly or partly unsatisfied because any of the following might occur:
(a)the … prospective judgment debtor … absconds; or
(b)the assets of the … prospective judgment debtor are -
(i)removed from Australia or from a place inside or outside Australia; or
(ii)disposed of, dealt with or diminished in value.
The key principles applicable to the grant of freezing orders were recently summarised as follows by Seaward J in Belmont Tyre & Auto Service Centre Pty Ltd v Ampak Holdings Pty Ltd,[9] drawing on the decisions in Cardile v LED Builders Pty Ltd,[10] Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (In liq)[11] and Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd:[12]
[9] Belmont Tyre & Auto Service Centre Pty Ltd v Ampak Holdings Pty Ltd [2023] WASC 230 [37] ‑ [38].
[10] Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 [25] ‑ [53].
[11] Duro Felguera Australia Pty Ltd v Trans Global Projects Pty Ltd (In liq) [2018] WASCA 174 [39] ‑ [61].
[12] Perdaman Chemicals & Fertilisers Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2011] WASC 188 [129] - [144].
(a)the court has inherent or implied power to make a freezing order to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction. The purpose of a freezing order is to preserve the efficacy of the execution which would lie against an actual or prospective judgment debtor. The object is to protect the integrity of the court's processes once they are set in motion;
(b) the object of a freezing order is not to provide security to a plaintiff;
(c) a freezing order is a drastic remedy which should not be granted lightly;
(d) in order that a freezing order be made, a plaintiff must show, relevantly, a good arguable case that it has an accrued or prospective cause of action justiciable in the court. A good arguable case will be, 'a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success'. The test has also been described as being a case which is reasonably arguable on legal and factual matters;
(e) a plaintiff must also show that:
(i) the assets of the prospective judgment debtor might be disposed of, dealt with or diminished in value;
(ii)there is a danger that the prospective judgment will be wholly or partly unsatisfied; and
(iii) that danger arises because the assets of the prospective judgment debtor are disposed of, dealt with or diminished in value;
(f) the risk of danger must be real or substantial, as opposed to a remote, speculative or theoretical possibility. The facts from which the risk or danger is to be inferred must be proved on the balance of probabilities, but it is not necessary to establish that it is more probable than not that judgment will be unsatisfied unless a freezing order is made. Ultimately, it is a question for evaluation by the issuing court as to whether the degree of the danger or risk is sufficient to justify an order in the terms which the court is asked to make;
(g) it is not necessary that the respondent must act for the purpose of avoiding judgment before a freezing order can be granted; and
(h) the strength of the plaintiff's case, the danger of frustration of a prospective judgment, the balance of convenience and any other relevant discretionary factors are all considered together in the exercise of the discretion.
Accordingly, before the discretion to make a freezing order is enlivened I must be satisfied of the jurisdictional requirements that first, the plaintiff has a good arguable case against the defendant on either an accrued or prospective cause of action that is justiciable in the court, and second, that there is a danger that the prospective judgment will be wholly or partly unsatisfied because assets of the defendant might be removed or otherwise disposed of, dealt with or diminished in value. If the jurisdictional requirements are satisfied, I must then consider any relevant discretionary factors.

Jurisdictional requirements

Strength of the plaintiff's case

For the purpose of this application, I accept that the evidence to which I have referred establishes that the plaintiff has a good arguable case in respect of the claims set out in the indorsement to the writ. The evidence is capable of demonstrating the defendant was a party to a contract which had conditions which, among other things, prevented him from engaging in business in conflict with that of his employer. On the face of it, the defendant has both generally and specifically admitted engaging in conduct which may constitute a breach of contract.
I make this assessment for the purposes of this application only and on the basis of the evidence before me, which I acknowledge may not completely establish the facts, given the matter is being heard in the absence of evidence from the defendant. It should not be taken as a conclusive finding as to the merits of the plaintiff's claim or its prospects.

Danger that the prospective judgment will be wholly or partly unsatisfied

The quantum of any prospective judgment which might be made in favour of the plaintiff, if it were to be successful, is far from clear. The plaintiff has identified a number of transactions in the last six months which might suggest damage to the plaintiff in the amount approximating $24,000. However, much more information will need to be obtained from the plaintiff before the amount can be quantified.
The inability to quantify a claim at this early stage is not necessarily a bar to the grant of a freezing order. However, it is relevant to the question of whether the defendant's assets will likely be dissipated so as to frustrate any prospective judgment.
There is also, in my view, an issue as to whether the plaintiff will be entitled to substantial damages as a result of any breaches made out by the plaintiff. While any conduct which diverted business from the plaintiff, or used the plaintiff's equipment without payment, would in all likelihood trigger a payment by way of damages, conduct on the part of the defendant which did not do either of those things might be less likely to result in compensable loss or damage to the plaintiff. That appears to be in issue in this case.
In addition, the transactions identified by the plaintiff date back to November 2022. It is most unlikely that any funds from the less recent transactions remain unspent.
However, the most recent, and most significant, is a transaction on 29 June 2023 for more than $11,000. That amount appears to have already been withdrawn from the Loadshift account but some or all of those funds may still be available.
The evidence establishes that the defendant has no real property. There is no evidence suggesting he has any other substantial assets. On the basis of the available evidence, I do have some difficulty in finding that the danger that any prospective judgment in favour of the plaintiff would go unsatisfied arises because the defendant might dissipate his funds. Indeed, the proceeds of the alleged conduct of the defendant, constituting the claimed breach of contract have not, so far, been established to be of such a nature as to suggest that they would not have been immediately spent.
However, the plaintiff is in a difficult position in this regard. The plaintiff has been unable, at this stage, to quantify the potential losses which have arisen in this case as a result of the defendant's conduct. The plaintiff has sought information from the defendant as to his assets and, in particular, his bank records, which he has presently declined to provide. As I have already indicated, he has also declined to voluntarily sign an undertaking not to deal with moneys received as a result of alleged breaches. Finally, the absence of evidence as to the defendant's assets is not evidence that he does not have any.
The defendant has only just been dismissed from his employment. He was put on notice as to the allegations by a Show Cause letter dated 7 July 2023[13] and he has also been put on notice of the intention on the part of his former employer to seek recompense for his conduct.
[13] DRP-3.

In those circumstances, if the defendant does have any assets of note, there is, in my view, an imminent and not insignificant risk that he may attempt to dispose of or otherwise deal with them in order to frustrate an attempt on the part of his former employer to make good any prospective judgment. I am therefore satisfied that the jurisdictional considerations are satisfied.

Discretionary considerations

It is still necessary for me to consider whether to exercise my discretion to make the order.
In so doing, I have considered the exceptional nature of making such an order.
I have also considered the respective hardships likely to flow from my decision. The defendant is an individual, and is now unemployed. He informed me today that he has no dependants. There is no particular information which is available to me which suggests that an order in the terms sought by the plaintiff will cause any particular hardship.
The plaintiff is a relatively large company, with a well-established business and no ongoing exposure to loss or damage. Further, the amount, or likely amount, of the prospective claim, as shown at this stage, is relatively modest. While not to be minimised, the potential impact on the plaintiff if the prospective judgment in that sum goes unsatisfied is unlikely to be significant. However, it is possible that the potential damage may ultimately turn out to be greater.
I have come to the conclusion that an interim freezing order should be made in the terms proposed. The order enables the defendant to pay for his ordinary living and legal expenses, and to produce evidence of his assets and banking records. In possession of this information, the plaintiff will be in a position to more readily assess the quantum of its claim, and thereafter the duration of the order can be re‑evaluated. In the interim, both parties will have liberty to apply at short notice.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AT
Associate to the Honourable Justice Forrester
13 JULY 2023