Nedroc Pty Ltd v Welling [No 3]

[2016] WASC 427

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   NEDROC PTY LTD -v- WELLING [No 3] [2016] WASC 427

CORAM:   PRITCHARD J

HEARD:   15 NOVEMBER 2016

DELIVERED          :   15 NOVEMBER 2016

FILE NO/S:   CIV 2756 of 2016

BETWEEN:   NEDROC PTY LTD

Plaintiff

AND

PAULINE LESLEY WELLING
First Defendant

BARRY KIM WELLING
Second Defendant

Catchwords:

Practice and procedure - Suppression orders - Whether order should be extended - Where criminal investigations may be commenced

Practice and procedure - Costs - Freezing Order - Whether ordinary approach to costs should be taken - Where application for freezing order made on notice to defendant and defendant did not oppose application

Legislation:

Rules of the Supreme Court 1971 (WA), O 52A r 8

Result:

Suppression order continued for 6 months to 15 May 2017
Costs of the application for freezing orders be in the cause of the underlying action

Category:    B

Representation:

Counsel:

Plaintiff:     Mr J E Scovell

First Defendant              :     Mr J Smith

Second Defendant         :     Mr J Smith

Solicitors:

Plaintiff:     Vogt Graham Lawyers

First Defendant              :     Patrick Legal

Second Defendant         :     Patrick Legal

Cases referred to in judgment:

Frigger v Professional Services of Australia Pty Ltd [No 3] [2014] WASCA 69

Nedroc Pty Ltd v Welling [2016] WASC 363

Nedroc Pty Ltd v Welling [No 2] [2016] WASC 364

PRITCHARD J:

(This judgment was delivered extemporaneously on 15 November 2016 and has been edited from the transcript.)

1. Before me today are two issues.  The first is whether the suppression order which I made on 17 October 2016 (the Suppression Order)[1] should be continued until further order of the Court, or for some more limited period.  The Suppression Order pertained to reasons for decision I gave in respect of the plaintiff's successful application for a freezing order against each of the defendants (the Freezing Order Reasons)[2].  In the Freezing Order Reasons, I indicated that I proposed to make freezing orders for a limited time.  This was to give the defendants the opportunity to be heard in respect of the extension of those freezing orders.  The continuation of the Suppression Order was, to some extent, consequential upon the outcome of that hearing in respect of the freezing orders.  In the end, the defendants have consented to the continuation of the freezing orders until the order of the Court.

   [1]Nedroc Pty Ltd v Welling [No 2] [2016] WASC 364.

   [2] Nedroc Pty Ltd v Welling [2016] WASC 363.

2. Secondly, there is a dispute between the parties as to the costs order which should be made in respect of the plaintiff's application for freezing orders.

Suppression order

1. Having now heard from counsel for the parties, and in view of the defendants' consent to the continuation of the freezing orders until further order, the question arises as to whether the Suppression Order should also continue and, if so, for what period.

2. The concern that largely underlay the making of the Suppression Order was the potential that the publication of the Freezing Order Reasons might have a prejudicial impact on the conduct of any criminal trial which might be pursued in respect of the defendants.  At this stage, no criminal investigation is even underway.  Nevertheless, the conduct of the defendants, as disclosed by the affidavits relied upon by the plaintiff in its application for the freezing orders, is in the nature of alleged serious dishonesty or fraudulent conduct.

3. Counsel for the plaintiff has indicated that although general inquiries of the police to date have not resulted in the commencement of a criminal investigation, it is anticipated that further inquiries may be made of the police and the matter may be taken further.  That then raises the prospect of criminal proceedings potentially being commenced at some stage in the future.

4. On the other hand, the making of a suppression order runs contrary to the principle of open justice.  For that reason, in my view, in the present circumstances, it would be inappropriate to continue the Suppression Order in respect of the Freezing Order Reasons without some limit on the duration of that order.

5. The appropriate course, in my view, is to continue the Suppression Order for a period of 6 months and to review its continuation at that point in time.  Whether it will be further continued at that stage will depend on whether the police have commenced, or intend to commence, an investigation into the conduct of the defendants.  If it appears at that point that no criminal proceedings are likely to be commenced, the Suppression Order can be lifted.

Costs

1. The plaintiff seeks an order that the defendants pay the plaintiff's costs of the application for freezing orders, including the costs reserved to date, to be taxed if not agreed.  That application is opposed by the defendants, whose counsel submits that the usual order in applications for a freezing order should be made, namely that the costs be in the cause of the underlying action.  Counsel for the plaintiff submits that this is a case outside the parameters of the usual approach to costs in freezing order applications.

2. At the outset, I note that under O 52A r 8 of the Rules of the Supreme Court 1971 (WA), the court may make any order as to costs it considers appropriate in relation to an order made under O 52A.

3. However, as the Court of Appeal observed in Frigger v Professional Services of Australia Pty Ltd [No 3],[3] normally when a freezing order is made, costs will be made dependent on the outcome of the underlying dispute.  That is not an invariable rule, and as the Court of Appeal itself observed,[4] a departure from that general approach may be warranted in some cases.

   [3] Frigger v Professional Services of Australia Pty Ltd [No 3] [2014] WASCA 69 [110].

   [4] Frigger v Professional Services of Australia Pty Ltd [No 3] [2014] WASCA 69 [110] ‑ [111].

4. Counsel for the plaintiff submits that this case falls outside the general approach because, somewhat unusually, its application for freezing orders was made on notice to the defendants.  The defendants were invited to provide an undertaking to the plaintiff that they would not deal with, or undermine the value of, their assets, which include real property.  Counsel for the plaintiff submits that had such an undertaking been provided, the application for a freezing order would have been unnecessary.

5. In addition, counsel for the plaintiff points to the fact that the defendants did not attend the initial hearing of its application for freezing orders, nor did they provide a minute of the orders which should be made in respect of that application.  And, as it turns out, the defendants did not ultimately oppose the continuation of the freezing orders that were made.

6. In a case where a plaintiff chooses to put a defendant on notice of an intention to apply for a freezing order, it is highly desirable that the parties confer in respect of whether any orders can be agreed, or whether an alternative to litigation can be pursued in order to resolve the parties' dispute.  Having said that, it must be acknowledged that the nature of freezing orders, and the restraints that they impose, suggests that the prospect of agreement between the parties, as a result of conferral, might be rather less than in ordinary litigation.

7. I am not persuaded that the conduct of the defendants in this case is such as to take the matter outside the ordinary approach to costs in relation to freezing order applications.  I have formed that view for two reasons.  First, with all due respect to counsel for the plaintiff, it is difficult to avoid some scepticism in response to his submission that had an undertaking by the defendants been provided, that would have eliminated the need for an application for freezing orders to be made.  The reason for that scepticism is that the allegations made by the plaintiff are that the defendants engaged in dishonest or fraudulent conduct.  In those circumstances, it is difficult to see how the provision of personal undertakings by the defendants not to undermine the value of their assets would have been sufficient to assuage the plaintiff's concerns about the prospects of enforcing a judgment against the defendants in due course.

8. The second consideration is that, irrespective of whether the defendants consented or did not oppose the making of freezing orders, it would nevertheless have been incumbent upon the plaintiff to satisfy the court that it should exercise its discretion to make such an order.  Given the nature of a freezing order, the court needs to be positively satisfied that it is appropriate to make an order of that kind.  Consequently, it would have always been necessary for the plaintiff to make its application and to provide affidavit evidence in support of it.  In other words, it would have been necessary for the plaintiff to have incurred the costs that it did to bring the application, albeit that in the end those costs were kept to a minimum, by virtue of the fact that the defendants did not actively oppose the orders being made or continued.

9. In all of the circumstances, the appropriate outcome, in my view, is an order that the costs of the plaintiff's application for freezing orders be in the cause of the action.