Plus Recruitment Pty Ltd v Phillips (No 2) - [2019] VSC 611

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST – LYONS J

S ECI 2017 00079

PLUS RECRUITMENT PTY LTD (ACN 159 257 093)	Plaintiff
v
SIMON JOHN PHILLIPS (IN HIS OWN CAPACITY AND AS TRUSTEE OF THE PHILLIPS FAMILY TRUST)	First Defendant
CHANTELLE RENEE FRANKS	Second Defendant
AND
SIMON JOHN PHILLIPS	Plaintiff by Counterclaim
v
PLUS RECRUITMENT PTY LTD (ACN 159 257 093)	First Defendant by Counterclaim
INSTITUTE OF TRAINING AND FURTHER EDUCATION PTY LTD (ACN 086 004 097)	Second Defendant by Counterclaim

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JUDGE:	LYONS J
WHERE HELD:	Melbourne
DATE OF HEARING:	4 September 2019
DATE OF RULING:	13 September 2019
CASE MAY BE CITED AS:	Plus Recruitment Pty Ltd v Phillips (No 2)
MEDIUM NEUTRAL CITATION:	[2019] VSC 611

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PRACTICE AND PROCEDURE – Freezing order – Undertaking or order over limited assets of defendant – Carve out sought for payment of legal expenses and tax debt – Evidential burden on defendant to establish insufficient available assets to meet those costs – Evidential burden not met on facts.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff/Applicant	Mr C G Juebner with Mr T M Dowling	Mills Oakley
For the First Defendant/First Respondent and Mrs Natasha Phillips, the Second Respondent	Mr D J Williams QC with Mr S P Woolley	Hall & Wilcox

HIS HONOUR:

Summary

In this application the plaintiff seeks a freezing order over three properties registered in the name of the defendant’s wife, Mrs Phillips, and, given that some of the properties have been sold, that 50% of the net proceeds of sale be frozen pending the hearing and determination of this proceeding.

Mrs Phillips is content to give an undertaking to that effect. However Mr and Mrs Phillips seek that Mr Phillips be entitled to withdraw or ‘carve out’ from those frozen proceeds of sale funds to pay both Mr Phillip’s legal costs in defending this proceeding and his liability to the Australian Taxation Office for the 2018 financial year of $451,667.10 plus interest accrued to August 2019 in the order of $75,000 (the ‘ATO debt’). The plaintiff opposes such a carve out on the basis that Mr Phillips has not shown that he has an inability to pay these liability from other assets.

I have concluded that, on the evidence before me, Mr Phillips has not met the evidential burden that he does not otherwise have sufficient assets to meet his legal expenses and the ATO debt. As a result, at this time, I will not order a carve out of the kind sought.

This proceeding

In this proceeding, the plaintiff seeks damages allegedly suffered as a result of the purchase of a business of and shares in the Institute of Training and Further Education (‘ITFE’) from the defendant Mr Phillips pursuant to a sale agreement dated 31 May 2014. The purchase price was in the order of $5 million and was paid in late 2014. The plaintiff brings claims for breach of that agreement, including for breach of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] VSC 611
Decision Date: 13 September 2019

CaseChat Overview and Summary

Plus Recruitment Pty Ltd, a plaintiff, sought a freezing order against Phillips, the defendant, to secure a debt owed. The dispute arose in the Federal Circuit and Family Court of Australia, where the plaintiff aimed to freeze the defendant’s assets to ensure satisfaction of the debt. The plaintiff also sought a carve out from the freezing order to allow the defendant to use limited available assets to pay legal expenses and tax debts. The court was required to decide whether the defendant met the evidential burden of demonstrating that the available assets were insufficient to meet these costs.

The court examined the defendant’s evidence regarding the availability of assets and the necessity of the carve out for legal expenses and tax debts. It held that the defendant failed to meet the evidential burden of proving that the available assets were insufficient to cover these costs. The court emphasised the importance of the defendant providing clear and comprehensive evidence to support the claim of insufficient assets. The evidential burden, as per the applicable legal principles, required the defendant to show that the available assets were genuinely insufficient to meet the specified costs, and this burden was not met in the circumstances presented.

The court concluded that the evidential burden was not discharged by the defendant’s evidence. Consequently, the plaintiff’s application for a carve out from the freezing order was dismissed. The decision underscored the necessity for defendants in such cases to provide detailed and substantiated evidence to support their claims regarding the sufficiency of available assets. The court’s reasoning was grounded in the legal principles concerning the evidential burden and the requirements for obtaining a carve out from a freezing order.

No further orders were made beyond the dismissal of the application for a carve out from the freezing order. The court did not address the broader issues of the freezing order itself or the merits of the underlying debt claim, focusing solely on the specific issue of the carve out.

Orders