Linney v Solomou

[2020] NSWSC 499

Supreme Court

New South Wales

Medium Neutral Citation:	Linney v Solomou [2020] NSWSC 499
Hearing dates:	On the papers
Date of orders:	06 May 2020
Decision date:	06 May 2020
Jurisdiction:	Equity
Before:	Ward CJ in Eq
Decision:	1.   Dismiss with costs the notice of motion filed on 2 March 2020 by the plaintiff.
Catchwords:	CIVIL PROCEDURE — Interim preservation — Freezing orders
Legislation Cited:	Legal Profession Uniform Law (NSW), s 128 Limitations Act 1969 (NSW), s 16 Succession Act 2006 (NSW) Uniform Civil Procedure Rules 2005 (NSW), rr 25.11, 25.14
Cases Cited:	Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 Mareva Compania Naviera SA v International Bulkcarriers SA [1980] 1 All ER 213 Poulos v Pellicer; In the Estate of Culina [2004] NSWSC 504 Re C & L Cameron Pty Ltd [2012] NSWSC 676 Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102
Texts Cited:	Practice Note SC Gen 14 Ritchie’s Uniform Civil Procedure NSW
Category:	Procedural and other rulings
Parties:	Irene Linney (Plaintiff) Nicholas Solomou (Defendant)
Representation:	Counsel: E White (Plaintiff) B Regener (Defendant)   Solicitors: Lighthouse Law Group (Plaintiff) Young and Muggleton (Defendant)
File Number(s):	2019/00261565
Publication restriction:	Nil

Judgment

1. HER HONOUR: By notice of motion filed on 2 March 2020, the plaintiff (Irene Linney) seeks an order that, upon the grant of probate of the estate of her father, the late Andreas Solomou (the deceased), any funds released to the defendant (Nicholas Solomou), from two specified Commonwealth Bank accounts (a pensioner security account and a term deposit) be limited to the sum of $1,247,668.45 plus half the interest accrued since 15 December 2015. Ms Linney also seeks an order that the balance in either or both of the said bank accounts remain held on trust for both parties pending final orders in the proceedings.

2. The notice of motion was listed before me in the applications list on 23 March 2020. By consent, orders were made for the filing of written submissions in accordance with an agreed timetable and for the motion to be determined on the papers.

Background

3. The following summary of the background to the present application is gleaned from the material on the present application and should not be taken to amount to any finding as to any disputed issues of fact. Ms Linney has filed an affidavit sworn by her on 2 March 2020 in support of her application for interlocutory relief.

4. The underlying dispute between the parties apparently concerns the proper construction of a deed dated 20 May 1997 (the Deed) between Ms Linney, Mr Solomou and the deceased. (Although reference is made in the material before me on the current application to the Deed, there does not appear to be a copy of the Deed on the Court file.) By her summons filed 22 August 2019, Ms Linney seeks an order that the Deed be rectified by replacing the word “then” with the word “current” in cl 7 of the Deed. Ms Linney also seeks other relief, including a declaration that the agreement made between the parties and the deceased, as contained in the Deed, is valid and enforceable and ought be specifically performed; and an order that the Deed as rectified be specifically performed. From the submissions before me it seems not to be disputed that the obligations sought to be enforced under the Deed are obligations owed by Mr Solomou in his personal capacity.

5. The estate of the deceased (the father of both Ms Linney and Mr Solomou) has not been distributed. The deceased died on 26 February 2019. Mr Solomou is named as executor in the deceased’s May 1997 will (the Will). Ms Linney is said not to be a beneficiary under the Will. Probate of the Will was granted to Mr Solomou on 9 March 2020. Mr Solomou does not appear to have been joined to the present proceeding in his capacity as executor of the deceased’s estate.

6. Ms Linney has deposed that, prior to the deceased’s death, Ms Linney was appointed as financial manager of the deceased (in about 2011). The deceased had owned a house in Burwood (the Burwood Property). The Burwood Property was sold in 2015 for the sum of $3,105,000. The proceeds of sale were used, inter alia, to meet the nursing home expenses of the deceased. It would appear from Mr Solomou’s affidavit (sworn 3 February 2020) that Mr Solomou takes issue with the sale of the Burwood Property (which, he deposes, “robbed him” of the security that he would inherit his father’s house, left him homeless, and caused him enormous stress and financial loss – see [27]-[28]).

7. The balance of the proceeds of sale of the Burwood Property have been held in a controlled moneys account since the death of the deceased (the Fund). The initial amount of the Fund, in about 14 December 2015, was $2,195,336.90.

8. Although, as commenced, this proceeding is noted as having been brought in the Family Provision List, no claim for provision out of the estate of the deceased pursuant to the Succession Act 2006 (NSW) is made in the proceeding; nor does it appear that there is any probate claim as such (although Ms Linney did earlier lodge a caveat to prevent a grant of probate to Mr Solomou pending resolution of this dispute (the Caveat), the Caveat since having lapsed). Rather Ms Linney’s claim relates to the construction and/or rectification, and specific performance, of obligations contained in the Deed which was entered into by the deceased prior to his death. Ms Linney, in her 2 March 2020 affidavit, has deposed that she is “loath” to file another caveat and would prefer the grant of probate be made in order to allow the distribution of moneys to Mr Solomou that are not in dispute between the parties (see [10] of her affidavit).

9. So far as I can discern (from Mr Solomou’s affidavit, sworn 3 February 2020, at [20]), cl 7 of the Deed relates to the proceeds of sale of the Burwood Property. Mr Solomou has deposed to his understanding that if he sold the property for an amount equal to or less than the valuation he obtained in accordance with cl 6 of the Deed then he would not “owe any money” to Ms Linney, but that if he sold the property for more than that then he would pay Ms Linney 50% of “that premium”, described by him as “being the difference in the sale price and the valuation obtained under clause 6, minus the premium [he] had already paid [Ms Linney] above the 1997 valuation (as per recital 3), being $15,000, which $15,000 was to be adjusted in accordance with movements in the Sydney Consumer Price Index”. Mr Solomou has also deposed that he did not expect this “premium” to be a large sum. It would appear that Ms Linney takes a different view.

10. By letter dated 24 February 2020, Ms Linney’s solicitors put forward to Mr Solomou’s solicitors a regime whereby, on the grant of probate, Mr Solomou would only withdraw the sum of $1,247,668.45, plus half of the interest since 15 December 2015 (being the date of sale of the Burwood Property); and that Mr Solomou would confirm that the balance of the Fund would remain in the controlled moneys account pending finalisation of the substantive proceeding (by which I understand is meant the proceeding in relation to the Deed). (Ms Linney says that the necessary consequence, if the orders sought by her are made, is that she would be awarded the balance of the Fund.) Mr Solomou did not agree to the holding of any funds in a controlled moneys account.

11. The substantive dispute is listed for a 2 day hearing commencing on 8 October 2020.

Ms Linney’s submissions

12. Ms Linney submits that the evidence raises a real question about the construction of the Deed and says that the version relied upon by her is open to be accepted by the Court. I can make no comment on this, not least because the Deed is not in evidence before me. (It may be that Ms Linney has, wrongly, assumed that the evidence in the substantive proceeding is presently before me – since her submissions make reference to documents not before me on this application but, in any event, nothing turns on this because (even assuming that Ms Linney has an arguable cause of action on the Deed) for other reasons I am not persuaded that the relief here sought should be granted.)

13. Insofar as Mr Solomou (by his affidavit sworn 3 February 2020) contests any liability to pay any part of the balance of the Fund to Ms Linney, her concern is that, if granted unfettered access to those funds, Mr Solomou may otherwise expend those moneys pending a resolution of the substantive proceeding. Ms Linney says that, were Mr Solomou to disburse or otherwise expend the balance of the Fund, any order made by the Court as sought by her may be rendered futile and of no utility.

14. It is submitted that, in the meantime, the balance of the Fund should remain in a controlled moneys account and continue to earn interest; and that such course of action would result in Mr Solomou suffering no prejudice in the event that Ms Linney is unsuccessful in the substantive proceeding.

15. Ms Linney says that, in “offering to release the majority of the Fund” to Mr Solomou, she has attempted in good faith to limit as far as possible any detriment that Mr Solomou may otherwise suffer in not obtaining access to all of the Fund before the substantive proceeding is finalised. On this basis, Ms Linney submits that, on the balance of convenience, the balance of the Fund should remain held within the controlled moneys account pending resolution of the substantive proceeding.

Mr Solomou’s submissions

16. Mr Solomou takes issue with the submission by Ms Linney that the substantive proceeding concerns the distribution of the estate; rather, he says that the principal question in the proceeding is one of construction of cl 7 of the Deed.

17. As noted, Mr Solomou has filed an affidavit sworn 3 February 2020. In that affidavit, Mr Solomou deposes that the summons is not maintainable on any, or all, of the following grounds: that the claim for rectification is statute barred by s 16 of the Limitations Act 1969 (NSW); that the claim for rectification is futile since, even if cl 7 of the Deed is rectified as sought in the summons, cl 7 cannot operate (because Mr Solomou did not convey the property which is the subject of the Deed to a bona fide purchaser for consideration, as required by cl 7); and that, even if Ms Linney was mistaken as to the terms of the Deed, there was no common mistake.

18. As to the relief sought in the notice of motion, Mr Solomou says that order 2 cannot be made as it seeks the continuation of a state of affairs which does not currently exist (namely that certain funds held in the estate “remain” held on trust for both parties). Mr Solomou maintains that Ms Linney has adduced no evidence that any funds in the estate are presently held on trust for her, whether jointly or otherwise (referring to Ms Linney’s affidavit, sworn 2 March 2020). (Pausing here, it may be that Ms Linney is attributing a particular significance to the status of the moneys being held in a controlled money account, see the definition in s 128 of the Legal Profession Uniform Law (NSW); or otherwise by reference to the holding of funds in the capacity of an executor, but this is mere supposition on my part. Mr Solomou says that Ms Linney is a stranger to the estate, being neither a beneficiary of the estate nor a person with a notified claim on the estate; and that her claim in this proceeding is against Mr Solomou personally.

19. Mr Solomou characterises Ms Linney’s present application as being in the nature of an application for freezing orders (see rr 25.11 and 25.14 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR)), noting that the effect of the orders sought would be to prevent the distribution to Mr Solomou out of the estate of any funds exceeding the nominated sum. It is said that the amount of the funds which would be subject to the orders sought by Ms Linney is not specified, nor have any calculations been provided as to how much money Ms Linney says she would be entitled to if the proceeding were successful.

20. Mr Solomou points to Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 as to the principles applicable to the making of freezing orders and notes that a freezing order is an exceptional remedy and one that should not be granted lightly (citing Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102 at [57], per Bathurst CJ, Beazley P, as Her Excellency then was, and Barrett JA agreeing).

21. It is submitted that Ms Linney has not satisfied the demanding threshold for an order of this nature, as set out in rr 25.11 and 25.14 of the UPCR: namely, that she has (which Ms Linney does dispute) not proved that judgment has been given in her favour (which cannot be disputed); nor has she established that she has a good arguable case (see r 25.14(1) of the UCPR); that she has not sought to argue the merits or otherwise of the summons (referring to her submissions at [16] in which Ms Linney disavows any such attempt); and that she has not identified the clause of the deed of which she seeks rectification or the grounds on which she contends her action for rectification will succeed.

22. It is submitted that Ms Linney wrongly conflates Mr Solomou’s failure to seek summary dismissal of the summons with an acknowledgement that she has a prima facie case. Mr Solomou says he makes no such acknowledgement. In that regard, Mr Solomou says that the dispute is confined to a narrow question of construction; and notes that the hearing has now been listed for 8-9 October 2020. It is said that, in these circumstances (where it is not inconceivable that a summary dismissal application might take up a similar amount of the Court’s time as the substantive proceedings), nothing can be drawn from the fact that there has been no application for summary dismissal.

23. Indeed, Mr Solomou here asserts that the claim for rectification of cl 7 of the Deed is hopeless and maintains that, even if Ms Linney were to succeed, she has no prospects of obtaining a money judgment (reiterating the futility argument referred to at [17] above).

24. It is submitted by Mr Solomou that there is no evidence that there has been any mismanagement of the estate; nor that the estate would be ordered to bear any judgment in this proceeding. Further, it is said that there is no evidence before the Court that there is any danger that Mr Solomou could not satisfy a money judgment; or that there is any risk that he might abscond, or remove assets from this State. (In this regard, it appears that Mr Solomou relies on the fact that Ms Linney does not oppose payment out to him of funds totalling $1,247,668.45 as an acknowledgement that she has no claim to them.)

25. It is said that, at the highest, Ms Linney’s submissions contain bare assertions (unsupported by evidence) that because Mr Solomou denies her claim in these proceedings, if he were “granted unfettered access”, he may expend those moneys pending a resolution of the proceedings so as to render futile any order sought by her (referring to Ms Linney’s submissions at [18] and [20]).

26. It is submitted that even if Mr Solomou were to “expend” the “unspecified” amount of money which is the subject of the (freezing) orders sought by Ms Linney in the present application, he would still have at least the $1,247,668.45 which it is said Ms Linney “admits should be released to him”. He says that there is no evidence before the Court of any risk that these moneys would be transferred out of the jurisdiction or otherwise put beyond the reach of the Court.

27. Further, Mr Solomou complains that Ms Linney has made no attempt to comply with the relevant Practice Note governing freezing orders (Practice Note SC Gen 14). In particular, it is said that none of the matters set out at [20] of the Practice Note has been addressed in Ms Linney’s affidavit in support of this motion; noting that Ms Linney has not specified: the basis of the claim for substantive relief; the amount of the claim; and the nature and value of Mr Solomou’s assets, so far as they are known to Ms Linney, within and outside Australia; or the matters referred to in r 25.14 of the UCPR; and that Ms Linney has not offered any undertaking as to damages.

28. As to the caveat which Ms Linney placed on the grant of probate (which appears to have been allowed to lapse on 2 October 2019), it is said that in her submissions Ms Linney acknowledges that Mr Solomou is entitled to moneys (insofar as she refers to the distribution of moneys that “are not in dispute between” the parties) which Mr Solomou says would more than satisfy any judgment against him in these proceedings. It is further said that Ms Linney fails to acknowledge (when she deposes to her reluctance to file any further caveat) that she would have been placing herself at risk of a cost order and a claim for damages if she filed a further such caveat (it being contended that Ms Linney had no right to file a caveat in the first place because she does not raise any issue as to the validity of the Will).

29. While Mr Solomou accepts that, as a daughter of the deceased, Ms Linney may have had a potential family provision claim, he says that this is an insufficient interest to justify placing a caveat on the grant of probate (citing Poulos v Pellicer; In the Estate of Culina [2004] NSWSC 504 at [13], per Windeyer J).

Determination

30. As Mr Solomou has noted, the power here sought to be invoked by Ms Linney is not specified in her application. Insofar as it purports to operate as a restraint on the distribution of estate funds to Mr Solomou (who, as I understand it, is the beneficiary of the estate), and he (as executor) is in control of those funds, I accept it is tantamount to an application for a freezing order. That this is the case appears to be demonstrated by the concern raised by Ms Linney in her submissions that her claim may be rendered futile if Mr Solomou were to expend what she has described in her submissions as the balance of the Fund.

31. Rule 25.11 of the UCPR provides that a freezing order may be made “for the purpose of 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”. As Mr Solomou has noted, r 25.14 of the UCPR applies if, inter alia, an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in the Court. In those circumstances, sub-r 25.14(4) provides that 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 a judgment or prospective judgment will be wholly or partly unsatisfied because, among other things, the assets of the prospective judgment debtor or another person are “disposed of, dealt with or diminished in value”. I note that sub-r (6) provides that “[n]othing in this rule affects the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so”.

32. In the present case, even leaving aside the difficulty that there is no clear articulation on the present application of what is said to be the “good arguable case” that Ms Linney maintains in the substantive proceeding (in that I am left to speculate as to the basis on which, and precisely how, the rectification claim is brought), I am not persuaded that there is sufficient evidence to warrant the making of what in effect would be a freezing order in respect of what I understand would represent half of the remaining proceedings of sale of the Burwood Property.

33. What must be shown is a basis for apprehension that there would otherwise be a dissipation of Mr Solomou’s assets so as to give rise to a real risk that any judgment in the proceedings would be unsatisfied (see for example the case after which freezing orders were commonly so-called - Mareva Compania Naviera SA v International Bulkcarriers SA [1980] 1 All ER 213). There is nothing to support such a finding here, other than the refusal of Mr Solomou to consent to a process by which the balance of the Fund be retained in a controlled moneys account. That, to my mind, is insufficient to give rise to a real apprehension that, absent the orders sought, Mr Solomou will take steps to dispose of the funds in order (or calculated so as) to frustrate any adverse judgment.

30. It is well known that the jurisdiction to grant freezing orders is not intended to provide a plaintiff with security for judgment; rather, it has been said to be founded on the jurisdiction to prevent abuses of the court’s process by preventing a defendant from embarking on a course of conduct which would have the effect of frustrating the processes of the court or defeating the court’s jurisdiction (see Ritchie’s Uniform Civil Procedure NSW at [25.11.17] and Re C & L Cameron Pty Ltd [2012] NSWSC 676 at [201]).

31. It is, as has been noted by Mr Solomou, to be viewed as an extraordinary remedy and, ordinarily, as a condition of the making of a freezing order, appropriate undertakings would be required (including the usual undertaking as to damages). No such undertaking has here been proferred.

32. I am therefore not persuaded that Ms Linney has established a basis for the making of such an order in the present case. In saying that, it may well be that, if steps were to be taken by Mr Solomou between now and the hearing in October this year that gave rise to a reasonable apprehension of the dissipation of assets so as to frustrate any subsequent judgment Ms Linney might obtain, then a fresh application for such an order (supported by the appropriate evidence and accompanied by the usual undertaking as to damages) would meet with a different result. However, at present, I am not persuaded that such relief would be appropriate.

33. In those circumstances, I dismiss the notice of motion filed 2 March 2020 by Ms Linney. I see no reason not to follow the ordinary rule and order that she bear the costs of the application. Even if she is successful on her substantive claim, this application was not supported by the evidence.

Order

38. Accordingly, I order as follows:

1. Dismiss with costs the notice of motion filed on 2 March 2020 by the plaintiff.

**********

Decision last updated: 06 May 2020