QBE Insurance (Australia) Ltd v Coffey
[2015] WADC 110
•17 SEPTEMBER 2015
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: QBE INSURANCE (AUSTRALIA) LTD -v- COFFEY [2015] WADC 110
CORAM: DAVIS DCJ
HEARD: 10 SEPTEMBER 2015
DELIVERED : 17 SEPTEMBER 2015
FILE NO/S: CIV 2622 of 2015
BETWEEN: QBE INSURANCE (AUSTRALIA) LTD
Plaintiff
AND
JOSHUA COFFEY
First DefendantFRANK RICCI
Second DefendantJGQ DEVELOPMENTS PTY LTD
Third DefendantJGQ COMMERCIAL PTY LTD
Third Party
Catchwords:
Freezing order - Return date of interim order - Application by defendants for discharge or variation of the order - Jurisdiction to make freezing order - Whether risk of dissipation of assets - Turns on own facts
Legislation:
District Court of Western Australia Act 1969 s 50, s 52, s 55 & s 57
Rules of the Supreme Court 1971 (WA) O 52A
Result:
Freezing order discharged
Representation:
Counsel:
Plaintiff: Mr S C M Wong
First Defendant : Mr R W Douglas
Second Defendant : No appearance
Third Defendant : Mr R W Douglas
Third Party : No appearance
Solicitors:
Plaintiff: Moray & Agnew
First Defendant : Gibson Lyons
Second Defendant : Not applicable
Third Defendant : Gibson Lyons
Third Party : Not applicable
Case(s) referred to in judgment(s):
Abella v Anderson [1987] 2 Qd R 1
Behbehani v Salem [1989] 1 WLR 723
BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25
Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488
Commercial Developments Pty Ltd v Mercantile Mutual Insurance Ltd (1991) 5 WAR 208
Elovalis v Elovalis [2008] WASCA 141
Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547
Frigo v Culhaci [1998] NSWCA 88
Koolan Iron Ore Pty Ltd v Rizhao Steel Holding Group Co Ltd (No 2) [2010] WASC 386
Mitchell v Saengjan (1994) 117 FLR 273
National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] HCA 10; (1990) 169 CLR 271
Oliver v Lakeside Resort Development Pty Ltd [2005] NSWSC 510
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Perdaman Chemicals & Fertilisers Pty Ltd v Griffin Coal Mining Co Pty Ltd [2011] WASC 188
Savcor Pty Ltd v Cathodic Protection International APS [2005] VSCA 213; (2005) 12 VR 639
Smith v Smith [1925] 2 KB 144
Thomas A Edison Ltd v Bullock (1912) 15 CLR 679
X v Y [2013] WASC 339
Z Ltd v A‑Z and AA-LL [1982] QB 558
DAVIS DCJ: On 28 July 2015, on an application made ex parte by the plaintiff, QBE, pursuant to Order 52A of the Rules of the Supreme Court 1971 (WA), Stone DCJ made a freezing order against the first and third defendants in this action, Mr Coffey and JGQ Developments Pty Ltd (JGQ Developments) and a third party, JGQ Commercial Pty Ltd (JGQ Commercial). Ancillary orders were also made.
On 10 September 2015 the return date for the freezing order and an application by the defendants to discharge the order were both heard by me.
For the reasons which follow, I discharge the freezing order.
Background
The following is a very brief background to QBE's claim, the chronology to the applications in this court and a summary of the relevant parts of the freezing order. I do not understand any of this background to be in dispute.
QBE is an insurer providing a range of products including Residential Home Builders Warranty Insurance. This type of insurance is compulsory for all residential building work carried out by a licensed builder in this State. The Insurance covers loss or damage resulting from the non-completion of work or breach of statutory warranty because of the death, disappearance or insolvency of the builder (see annexure RSH1, page 43 of the affidavit of Richard Sebastian Hutchings sworn 23 July 2015).
Capital Works Constructions Pty Ltd (CWC) is a construction company and licensed builder. Residential Home Builders Warranty Insurance policies with QBE were taken up for a number of its building contracts (the Insurances).
The directors of CWC were Mr Coffey and the second defendant, Mr Ricci.
In consideration of QBE providing the Insurances, on 26 May 2011 Mr Coffey and Mr Ricci entered into a deed of indemnity by which they each agreed to indemnify QBE. The relevant contractual term cl 1.1 (with 'You' referring to Mr Coffey and Mr Ricci and 'us' referring to QBE) provides:
You unconditionally and irrevocably indemnify us and keep us indemnified against any Loss or other cost or expense we incur directly or indirectly under or in connection with the Insurances or this document.
You must immediately upon demand pay us any amount so indemnified.
The definition clause of the deed, cl 11.1 provided (the 'Contractor' referring to CWC):
'Insurances' means each and every Residential Home Builders Warranty Insurance policy issued by us at any time at the Contractor's request.
'Loss' means the aggregate of all payments made and liabilities incurred by us under or in connection with the Insurances. Loss includes any payments we make under the Insurances, any payments we make to settle a dispute in connection with the Insurances, any costs and expenses (including legal costs on a full indemnity basis) paid or liabilities incurred in connection with any claim under the Insurances, and any fee or premium that the Contractor is required to pay us in connection with the Insurances which is not paid when due, and includes interest on such amounts.
On 21 August 2014, Mr Coffey and Mr Ricci entered into a further deed of indemnity, in substantially the same terms as the earlier deed. Also on 21 August 2014 JGQ Developments, a company of which Mr Coffey is the sole director and shareholder, as trustee for the Brown Street Trust, entered into a separate deed of indemnity in the same terms.
QBE received and paid a number of claims by home owners under the Insurances in respect of losses arising from incomplete and defective works carried out by CWC. (From my review of the various claim forms annexed to the affidavit of Mr Hutchings sworn 23 July 2015, some of the claims arose because of the insolvency of CWC.)
On 7 May 2015 administrators were appointed to CWC. On 12 June 2015 a liquidator was appointed to CWC. The ASIC search shows that this was a creditors' voluntary winding up.
On 2 July 2015 QBE's solicitors sent letters of demand to each of Mr Coffey, Mr Ricci and JGQ Developments setting out the claims payments made by QBE under the Insurances, and seeking payment of the total sum of $716,606.55 pursuant to the deeds of indemnities. (There is an issue as to when Mr Coffey received that letter, which I discuss below).
By writ issued on 17 July 2015 QBE commenced proceedings against each of Mr Coffey, Mr Ricci and JGQ Developments to recover the amount of $716,606.55 plus interest and costs.
On 23 July 2015 QBE brought its ex parte application for a freezing order against Mr Coffey and JGQ Developments. QBE sought to restrain Mr Coffey from dealing with the only property found to be registered in his name, which I will refer to as the Francis Street property. Two properties were found to be registered in the name of JGQ Developments and I will refer to these as the Brown Street property and the Villena Parade property. Another property was registered in the name of JGQ Commercial, another company of which Mr Coffey is a director. I will refer to that property as the Bellevue Terrace property. The hearing of that application took place before his Honour Judge Stone on 27 July 2015.
The freezing order made on 28 July 2015, was relevantly as follows (with details of the properties omitted):
6.You (being the First Defendant) must not in any way dispose of, deal, with, or diminish the value of your interest as joint tenant of … (the Francis Street Property).
7.You (being the First and Third Defendants) must not in any way dispose of, deal with, or diminish the value of your interest in:
(a)(the Brown Street property); and
(b)(the Villena Parade property).
8.You (being the First Defendant and JGQ Commercial Pty Ltd) … must not in any way dispose of the sale proceeds of … (the Bellevue Terrace property).
Ancillary orders were also made. Order 9 required Mr Coffey, by the return date, to inform QBE of all of his assets in Australia 'giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject)' and the extent of his interest in the assets (including bank accounts over which he has control). Mr Coffey was required within seven working days after being served with the order to swear and serve on QBE an affidavit setting out that information (Order 9(b)). Order 11 required Mr Coffey and JGQ Developments to provide QBE with details, including the amount owed, of the loan or credit facilities secured by mortgage to the National Australia Bank (NAB) over the Brown Street and Villena Parade properties. Order 12 required Mr Coffey and JGQ Commercial to provide QBE with details of the loan or credit facilities secured by a mortgage over the Bellevue Terrace property.
There was a return date for the freezing order of 3 August 2015, when the matter came before his Honour Judge Eaton.
On 6 August 2015, following a minute of consent orders filed by the parties, his Honour Judge Eaton extended and varied the order. Orders were also made for the filing and service of any application by the defendants and third party to discharge the freezing order.
The parties provided information pursuant to the ancillary orders. The first and third defendants filed their chamber summons seeking discharge and variation of the freezing order on 21 August 2015. On 25 August 2015 the third party, JGQ Commercial, filed a chamber summons seeking discharge of the orders against it.
On 4 September 2015 the freezing order against JGQ Commercial was discharged, as was order 8 of the freezing order as against Mr Coffey. Other variations to order 7 were made to take into account the interests of NAB as the mortgagee of the Brown Street and Villena Parade properties. The remaining parties, QBE and Mr Coffey and JGQ Developments, requested time to see if the matter could be resolved. For this purpose the matter was adjourned to 8 September, and then on 8 September at the parties' request the matter was adjourned again to 10 September. To preserve the status quo the freezing order was extended on each occasion. All of the extensions and variations were made with the defendants reserving their rights to argue against the freezing order.
The issue of the freezing order could not be resolved and so a hearing of both the return date of the freezing order and the defendants' chamber summons took place before me on 10 September 2015. After the hearing and following further concessions made by QBE, further variations to the freezing order (to reflect the now known position with respect to the assets) were made. Again, this was to preserve the status quo, pending my decision.
Principles relating to freezing orders
The court may make a freezing order 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: O 52A r 2.
Order 52A r 4 provides:
(4)The Court may make a freezing order or an ancillary order or both against a judgment debtor or 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 any of the following might occur -
(a)the judgment debtor, prospective judgment debtor or another person absconds; or
(b)the assets of the judgment debtor, prospective judgment debtor or another person are -
(i)removed from Australia or from a place inside or outside Australia; or
(ii)disposed of, dealt with or diminished in value.
On the principles which apply to the making of a freezing order the parties referred me to a number of authorities, however, the principles contained in those authorities and the parties' contentions are encapsulated in a summary by Beech J in PerdamanChemicals & Fertilisers Pty Ltd v Griffin Coal Mining CoPty Ltd [2011] WASC 188 [133] - [144]:
133Order 52A is part of the substantially uniform set of federal and state rules governing what were known as Mareva orders. Mareva orders and freezing orders have the same objects and, subject to the specific provisions in the rules, the same governing principles under O 52A. In my view, the following general law principles apply to an application for a freezing order.
134The purpose of a Mareva order is to preserve the efficacy of the execution which would lie against an actual or prospective judgment debtor: Jackson v Sterling Industries Ltd (1987) 162 CLR 612, 623; Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 [25]. Thus the object is to protect the integrity of the court's processes once they are set in motion: Cardile [25], [40].
135The object is to prevent the abuse or frustration of court processes. That does not necessarily involve an intention to produce those results: Cardile [26].
136The object of a Mareva order is not to provide security to a plaintiff: Jackson v Sterling Industries Ltd (619, 625 - 626); Cardile [43].
137A Mareva order serves a different purpose from an interlocutory injunction, and Mareva orders are not moulded by reference to the principles applying to interlocutory injunctions: Cardile [25] ‑ [43].
138The moulding of appropriate relief depends upon the circumstances of the case. The general principle which informs the exercise of the power is that the court may make such orders as are needed to ensure the effective exercise of the jurisdiction invoked: Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1, 32; Cardile [41] ‑ [42].
139In Cardile, the court identified a number of reasons why a Mareva order should be granted only with a high degree of caution. As a matter of practical reality, it operates as a tight 'negative pledge' species of security over property. The contempt sanction is attached to it. It is granted at the suit of a plaintiff whose status as a creditor is in dispute: Cardile [50] - [51]. Thus, a Mareva order is a drastic remedy which should not be granted lightly.
140Further, in many cases there may be difficulties associated with the quantification and recovery of damages pursuant to the undertaking if it were to turn out that the order should not have been granted: Cardile [52].
141Further, attention should be given, before an order is made, to the identification of the events to trigger the dissolution of the undertaking or to an entitlement to damages: Cardile [52].
142The 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 whether to grant Mareva orders: Perth Mint v Mickelberg (No 2) [1985] WAR 117, 119; Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49, 54 - 55.
143In 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: O 52 r 5(1)(b)(i). Before O 52A came into operation, the authorities revealed various formulations about the extent of the requisite strength of the plaintiff's claim. See Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG [1984] 1 All ER 398; Perth Mint v Mickelberg (No 2). The expression 'good arguable case' has its provenance in the judgment of Mustill J in Ninemia (404), approved in the Court of Appeal (415): Errigal Ltd v Equatorial Mining Ltd [2006] NSWSC 953 [26]. See also LexisNexis Australia, Richie's Uniform Civil Procedure NSW (at 1 August 2011) [25.14.5]. Mustill J expressed the test as being a good arguable case 'in the sense of 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' (404).
144In BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25 [5], Le Miere J treated the requirement of a 'good arguable case' as equivalent to the general law requirement stated in Cardile [68] that the plaintiff must establish that it has a reasonably arguable case on legal and factual matters.
As to what Beech J stated in [136], that the object of a Mareva order is not to provide security to a plaintiff, I would add that nor is the object to improve the position of the plaintiff in the event of an insolvency of the defendant: Cardile [50], referred to by Beech J in Perdaman [118]; see also Abella v Anderson [1987] 2 Qd R 1, 2 (McPherson J).
The onus of proving the danger of frustration of a prospective judgment is on the plaintiff. The plaintiff must prove that there is a real risk of the dissipation of assets: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, 323 (Gleeson CJ); 327 (Meagher JA). The risk must be real and not fanciful: BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [2010] WASC 25 [15] (Le Miere J).
The plaintiff is not, however, required to show that the defendant's purpose is to prevent recovery of any judgment which might be obtained. It is sufficient to show that there is a danger of dissipation of assets which is likely to prevent such recovery: National Australia Bank Ltd v Bond Brewing Holdings Ltd [1990] HCA 10; (1990) 169 CLR 271; BGC Contracting Pty Ltd v WA Construction Hire Pty Ltd [12] ‑ [13].
An ancillary order is one requiring that assets be identified. As set out in O 52A r 3 an ancillary order may be made for either or both of the following purposes:
(a)enlisting information relating to assets relevant to the freezing order or prospective freezing;
(b)determining whether the freezing order should be made.
There is a wide power to make an ancillary order and such an order can be made without the making of a freezing order: Koolan Iron Ore Pty Ltd v Rizhao Steel Holding Group Co Ltd (No 2) [2010] WASC 386; Perdaman [132].
The issues on the hearing before me
There is no issue taken by the defendants that QBE has an arguable case. The issue is whether there is a danger or risk of dissipation of assets.
However, the defendants argued that the freezing order should never have been made for the following reasons:
(a)there was insufficient evidence before his Honour Judge Stone to demonstrate a danger or risk of dissipation of assets;
(b)the order was overreaching and exceeded the monetary value of QBE's claim and therefore went beyond the jurisdiction of the court; and
(c)there had been non-disclosure at the hearing before his Honour Judge Stone.
At the hearing I raised with the defendants' counsel whether what he was asking me to do was, in effect, hear an appeal from his Honour Judge Stone's decision. It was submitted that it was 'entirely open' to complete a de novo review of the circumstances in which the freezing order was made. Counsel for the defendants urged me to look at the evidence that was before his Honour Judge Stone in isolation, without regard to the other evidence before me.
Given that the freezing order was made ex parte on an interim basis and was not a final order of the court, I accept that I am able to review the freezing order. However, that review is one done on all of the information which is now before me: see Abella v Anderson (3). The court comes to consider the whole of the evidence on the application inter parties to discharge an injunction or freezing order: Patterson v BTR Engineering (324B).
I will, however, deal first with the three matters raised by the defendants, and of those the first I will deal with is the issue of jurisdiction, since that issue would apply equally to the matters I am determining, namely whether the freezing order should be discharged or continued.
For the sake of completeness and in light of the submissions made by the defendants, when I consider the question of whether the freezing order should be continued or discharged, I will do so in a three stage process – first by considering the evidence before his Honour Judge Stone, secondly by looking at the issue of non-disclosure, and then reviewing whether there is a risk or danger of dissipation of assets, having regard to the evidence now before me.
Jurisdiction
By s 50(1) of the District Court of Western Australia Act 1969 (WA), the District Court has the same jurisdiction to hear and determine, and may exercise all the powers and authorities that the Supreme Court has and may exercise from time to time in relation to 'all personal actions' where the amount sought to be recovered is not more than the jurisdictional limit (s 50(1)(a)). The claim by QBE is a 'personal action' within the meaning of s 50(1)(a). The jurisdictional limit is $750,000.
Section 52 of the District Court Act provides:
In all respects, except as expressly provided by or under this Act, the practice and procedure of the court as a court of civil jurisdiction including the trial of certain cases with or without a jury, shall be the same as the practice and procedure of the Supreme Court in like matters.
By s 55 of the District Court Act, the District Court has, as regards any action or matter within its jurisdiction, the power, in effect, to grant relief, redress or remedy 'in as full and ample a manner as might, and ought, be done in like case by the Supreme Court'. By s 57 of the Act, the rules of equity and law declared by the Supreme Court Act 1935 apply, subject to statutory contrary express provision, and law and equity shall be administered according to the provisions of s 25 of the Supreme CourtAct as though that section were enacted in the District Court Act: see also Chianti Pty Ltd v Leume Pty Ltd [2007] WASCA 270; (2007) 35 WAR 488 [44] ‑ [52].
The District Court thus has an equitable jurisdiction to grant such equitable remedies. This is in the nature of an ancillary or auxiliary power to be exercised in the determination of claims otherwise within the jurisdiction of the court: Commercial Developments Pty Ltd v Mercantile Mutual Insurance Ltd (1991) 5 WAR 208, 217.
At the hearing before me, counsel for the defendants did not argue that the District Court did not have jurisdiction to make a freezing order. Rather it was argued that the freezing order was unlimited and should not have been. All that should have been frozen was the aggregate value of the amount of QBE's claim.
The consequence of an unlimited freezing order, it was submitted, was that the freezing order should never have been made and should be discharged ab initio, or set aside, on the basis that it was made beyond the court's jurisdiction, in monetary terms, of $750,000.
Counsel took me to the case of Frigo v Culhaci [1998] NSWCA 88. This concerned an appeal to the NSW Court of Appeal from a single judge decision to grant a Mareva injunction. The NSW Court of Appeal held that the injunction should be set aside.
Counsel for the defendants relied on parts of a passage from Frigo which discussed the fact that the Mareva injunction had been made without limit. It is necessary to set out all of the observations of the Court of Appeal on this issue:
It is the practice for Mareva injunctions normally to be qualified by a proviso that limits the restraint against disposal of assets so that it does not exceed the sum which the plaintiff may be thought likely to recover: Z Ltd v A‑Z and AA-LL [1982] QB 558, 576, 589; Clark Equipment at (568).
The usual form of such an order restrains the defendant from disposing of assets 'save insofar as the unencumbered value of such assets exceeds $... ': see Williams' Civil Procedure Victoria at 4280-1; Ough, The Mareva Injunction and Anton Piller Order 2nd ed 1993 at 22. Even this form is arguably ambiguous insofar as a defendant with encumbered assets exceeding the limit might take the view that it will be enough if he or she brings into account the unencumbered value of those assets without taking into account the amount for which they are charged or mortgaged. Tighter drafting would see the qualification recast as:
save to the extent that the value of the defendant's unencumbered interest in such assets does not fall below $...
Maximum sum orders seek to frame relief that is no more extensive than that to which the plaintiff is entitled, and they may obviate the necessity of contested applications by the defendant needing access to assets for legitimate purposes, including those discussed in (a) above: see Z Ltd (589).
But it must, however, be recognised that they present difficulties of enforcement, even when precisely cast. There are at least two difficulties. The first was identified by McPherson J (as he then was) in Abella v Anderson [1987] 2 Qd R 1, 4. His Honour said that he regarded as a defect in the form of the order the fact that it was expressed by reference to assets of the defendant in a sum of money. He referred to the fact that, insofar as the defendant's assets did not consist of cash, it would presumably be necessary for the defendant to have them valued in order to ensure that he or she avoided contravening the Court's order. McPherson J pointed out that this was contrary to the requirement that the language of an injunction should not be ambiguous, uncertain or indefinite.
The second difficulty exists when the Mareva injunction is directed at a bank or other third party. In Z Ltd, Lord Denning MR (576) and Kerr LJ (at 589 ‑ 590) spoke of the problems faced by a third party that could not be expected to know the value of the defendant's assets - at least unless and until the defendant complied with the common ancillary order requiring the filing of an affidavit of assets and liabilities.
These difficulties are avoided in cases where it is clear from the outset that the defendant's assets do not exceed the sum claimed by the plaintiff, although here the order may run into other difficulties given that it is not the function of a Mareva injunction to give the plaintiff a preferential right over creditors. In Z Ltd, the English Court of Appeal reached the conclusion (somewhat tentatively) that a 'maximum sum' order was fairer than an unlimited restraint as a general rule.
In some cases these difficulties can be met by agreement, sometimes reached after the return date of the notice of motion for interlocutory relief, or in the light of the assets disclosed by the defendant.
Because this matter was not fully debated before us, and because the order must clearly be discharged for other reasons we leave further discussion of this difficult issue for an appropriate case.
What was said by Denning MR in Z Ltd v A‑Z and AA-LL [1982] QB 558, 576, was as follows:
When we first granted Mareva injunctions, we did not insert any maximum amount. But nowadays it has become usual to insert the maximum amount to be restrained. The maximum amount is the sum claimed by the plaintiff from the defendant. This is done in case it should be that the defendant has assets which exceed the amount of the plaintiff's claim. If such should be the case, it is not thought right to restrain him from dealing with the excess. That is all very well so far as the defendant is concerned, because he knows, or should know, the value of his assets. But it is completely unworkable so far as the bank or other innocent third party is concerned: because it does not know what other assets the defendant may have or their value.
What then is to be done? In some cases the best course may be to omit the maximum amount altogether: and to make the injunction comprehensive against all the assets of the defendant, as we used to do. This would cause the defendant little inconvenience. Because he could come along at once to the court and ask for the excess to be released – by disclosing the whereabouts of his assets and the extent of them. If he chooses not to do so, it would be because he knows there is no excess. If notice is given to a bank or other third party, they know that they must not deal with any of the assets of the defendant.
In other cases, however, it may still be desirable to insert a maximum amount in the general injunction as against the defendant himself. But, as this is unworkable against a bank, it would at the same time be desirable to add a special injunction restraining the defendant from disposing of any of the sums standing to the credit of the defendant in a specified bank account in excess of the maximum: or from disposing of any item deposited with the specified bank for safe custody. The reason being that every bank or other innocent third party should know exactly what it should or should not do.
Kerr LJ in Z Ltd (589) also discussed this and expressed the view that the 'norm' should be the 'maximum sum' order and that an order applying to all assets should be the exception.
Whether it is necessary to limit a freezing order to the sum claimed by the plaintiff was not actually decided by the Court of Appeal in Frigo. The Court of Appeal left 'further discussion of this difficult issue for an appropriate case'. The injunction in Frigo was set aside for other reasons. Those were that there was an absence of reasons from the judge when granting the injunction, the injunction had been granted without any undertaking given as to damages (the Court of Appeal would have dissolved the injunction on that ground alone), there had been reliance on inadmissible evidence in the form of a without prejudice communication, and there was a lack of evidence of a danger that the defendant would dispose of assets.
Frigo does not suggest that the absence of a limit to the sum claimed by the plaintiff is fatal to or voids an injunction. All that is suggested is that it is the normal practice to set such a limit.
The injunction in Frigo had been granted in the widest possible terms, over all of the assets of the defendant. That is not the situation here. The operation of the freezing order is limited to each defendant's interest in specific properties. There was and is no prohibition on either defendant from disposing of assets or their interest in assets other than those properties.
QBE's claim fell within the jurisdiction of the District Court. While the power given to the court to grant equitable remedies is an ancillary or auxiliary power to be exercised in the determination of claims otherwise within the jurisdiction of the court, as noted by Kendall C & Curthoys J, Civil Procedure Western Australia [13,540]:
The purpose of this grant of power is to make complete and more effective any jurisdiction the court may otherwise have (Smith v Smith [1925] 2 KB 144 at 147).
In Smith v Smith [1925] 2 KB 144, a county court judge gave judgment for a sum of money owed under an agreement, and also a declaration as to future payments under the agreement. On appeal, it was held that the county court judge had no power to make a declaration involving the payment of sums of money in excess of that court's jurisdiction. This was because the claim for a declaration was a separate cause of action. This must be compared to an injunction, which is not a cause of action, but a remedy: see the discussion of this by Bankes LJ in Smith v Smith (148 ‑ 150).
In my view, on a plain construction of s 55 and s 57 of the District Court Act and a consideration of the authorities, as a matter of jurisdiction, this court has the discretion to freeze assets of any value to preserve a remedy in relation to a matter within its jurisdiction. The granting of a freezing order and its terms are a discretionary matter for the court. As it was put by Beech J in Perdaman[138]:
The moulding of appropriate relief depends upon the circumstances of the case. The general principle which informs the exercise of the power is that the court may make such orders as are needed to ensure the effective exercise of the jurisdiction invoked.
It may be accepted that normally, as a matter of discretion, the court ought not freeze assets which would exceed the value of the claim, plus interest and costs (since interest and costs are not included when looking at whether an action is not more than the jurisdictional limit: see s 51(1a) of the District Court Act). However, it is also necessary to know the realisable value of the defendant's assets, the encumbrances on any asset (in particular any mortgage) and the defendant's equitable interest in the asset. Thus circumstances may dictate, on the making of an interim order, that no maximum amount is inserted, with an ancillary order being made so that, at the return date, the value and extent of the defendant's interest in an asset may be known.
At the time when QBE brought its ex parte application for the freezing order, QBE did not know, nor do I consider that it was possible for it to know, either the value of the properties or the equity which the defendants have in those properties. That was one of the purposes of the ancillary orders.
In his discretion, his Honour Judge Stone made the freezing order over the defendants' interest in the specific assets, and the ancillary orders. The defendants, on the return date, needed to point out what the assets are worth and the value of their interest in those assets and if necessary (assuming the order was to continue), vary the order.
That the freezing order did not express a limit in relation to each of the properties does not, in my opinion, mean that it should be set aside, either on the basis of the failure to stipulate a maximum amount or on the basis of exceeding jurisdiction.
In any event, the evidence before me is that:
(a)The unencumbered value of the Francis Street property is substantially less than the jurisdiction of this court (Statement of Assets of Mr Coffey annexed to both the affidavit of Mr Hutchings sworn 21 August 2015 (page 242) and the affidavit of Mr Coffey sworn 25 August 2015).
(b)The value of the Villena Parade property, according to Mr Coffey's opinion based on his experience (Mr Coffey's affidavit par 101), is less than the jurisdiction of the court and the unencumbered value is less again (Mr Coffey's affidavit par 102).
(c)There is no value given for the Brown Street property, however, there is a substantial mortgage to the NAB (Mr Coffey's affidavit par 10).
(d)There is no equity in the Bellevue Terrace property.
It was further submitted by the defendants, however, that the freezing order was overreaching and exceeded the court's jurisdiction because the cumulative effect of the three properties frozen would have the effect of securing more than the likely judgment debt. As it was put in written submissions, 'with the cumulation of the different assets the applicant will enjoy protection in a sum which exceeds both jurisdiction and its claim'.
Mr Coffey's unencumbered interest in the Francis Street property is approximately $138,000. While the interest of JGQ Developments in the Brown Street property has not been ascertained, the unencumbered interest of JGQ Developments in the Villena Parade property is less than one half of the amount of QBE's claim. I am not satisfied that the accumulation of these assets in the freezing order means that QBE would enjoy protection in a sum which exceeds both jurisdiction and its claim.
It must also be remembered that if the defendants are found liable to QBE, they are each liable for the full amount of the claim, plus interest and costs. Upon judgment, QBE may elect against which of the defendants it will enforce that judgment. In these circumstances, in my view it was appropriate that the freezing order addressed the assets of both the first and third defendants.
For these reasons I am not satisfied that the freezing order is beyond the jurisdiction of this court.
The evidence at the initial ex-parte application
The following evidence was before his Honour Judge Stone:
(a)An affidavit of Richard Sebastian Hutchings sworn 23 July 2015 (Mr Hutchings' first affidavit). Mr Hutchings is a lawyer employed by QBE's solicitors.
(b)A statutory declaration (not verified by affidavit) of Mr Ricci made on 22 July 2015.
In relation to the danger of dissipation of assets, in summary the situation from those two documents before his Honour was that:
(a)CWC had been placed into administration on 7 May 2015 and then liquidation on 12 June 2015 (Mr Hutchings' first affidavit annexure RSH-1 pages 2 and 3);
(b)Mr Coffey is the sole director and shareholder of JGQ Developments, and one of the directors but the sole shareholder of JGQ Commercial. The other director is Mr Mark Basso‑Bruso (Mr Hutchings' first affidavit pars 7 ‑ 10 and company searches annexure RSH-1 pages 8 ‑ 13);
(c)searches had revealed that the only real property in Mr Coffey's name was the Francis Street property which he held as a joint tenant (Mr Hutchings' first affidavit pars 63 and 64 and annexure RSH-1 pages 211 ‑ 219). Searches also showed the Brown Street and Villena Parade properties owned by JGQ Developments and the Bellevue Street property owned by JGQ Commercial (Mr Hutchings' first affidavit pars 65 ‑ 70). A 'Google' search revealed that the Bellevue Terrace property was on the market and advertised for sale (Mr Hutchings' first affidavit pars 71 and 72);
(d)the letter of demand to Mr Coffey dated 2 July 2015 had been left in the letter box of the Francis Street property (Mr Hutchings' first affidavit par 53);
(e)there were, however, renovation works being undertaken at the Francis Street property and it appeared to be vacant (Mr Hutchings' first affidavit par 53 and annexure RSH-1 page 208);
(f)Mr Ricci, the other director of CWC, had been having problems in contacting Mr Coffey since that company had gone into administration. Before the administration he had been in regular contact with Mr Coffey who took his calls and answered his emails (Ricci Statutory Declaration par 7). Some creditors had made claims against Mr Ricci and Mr Coffey pursuant to personal guarantees. Mr Ricci estimated the quantum of the claims presently made (Ricci Statutory Declaration par 5). On 17 July 2015 Mr Ricci attempted to contact Mr Coffey by email and mobile telephone without success. The mobile telephone number had been disconnected and the email addresses returned 'undeliverable ' notices (Ricci Statutory Declaration par 8). Mr Ricci had not heard from Mr Coffey at all since approximately 6 May 2015 (the day they signed the papers for the appointment of the company administrators) and as at the date of his declaration Mr Coffey had not contacted Mr Ricci or provided details of how Mr Ricci may contact him (Ricci Statutory Declaration pars 7 and 9). Mr Ricci was concerned he was being 'abandoned' by Mr Coffey to fend for himself in relation to the claims (Ricci Statutory Declaration par 10);
(g)QBE's lawyer, Mr Hutchings, had attempted himself to contact Mr Coffey without success. The two landline telephone numbers (described as 'his' meaning Mr Coffey's landline telephone numbers) which Mr Hutchings had used to try to contact Mr Coffey on 10 July 205 had been disconnected, as had 'his' mobile phone number when Mr Hutchings called it on 16 July 2015 (Mr Hutchings' first affidavit pars 54 ‑ 56).
(h)Mr Hutchings then, on 16 July 2015, caused an email to be sent to a solicitor known to be acting for Mr Coffey, Bruce Duckham of Duckham B W & Co Lawyers. On that evening, Mr Hutchings received an email response from Mr Duckham in which he acknowledged receipt of the email and stated 'For the avoidance of doubt pls note that I do not undertake to pass this on to Mr Coffey unless he calls to my office' (Mr Hutchings' first affidavit pars 57 and 58 and annexure RSH-1 pages 204 ‑ 207);
(i)QBE employed investigators to locate Mr Coffey. The investigators reported, by a written report dated 21 July 2015, that they were unable to locate a current residential address for Mr Coffey and that the latest address was the Francis Street property. Mr Coffey had never had a listed telephone number and the investigators were unable to 'trace him back far enough to identify his parents'. The investigators also reported on other companies of which Mr Coffey is a director, two of which are under external administration and also the fact that there a number of court writs and judgments noted against him. (Mr Hutchings' first affidavit par 59 and annexure RSH-1 page 208);
(j)On 21 July 2015 Mr Coffey sent Mr Hutchings an email (Mr Hutchings' first affidavit par 60 and annexure RSH-1 page 209) which read:
Dear Richard,
Regarding above I have only received the letter dated the 2/6/15 on Friday the 17th of July.
Could I request two weeks to review the letter and associated paper work and then I can respond to your letter?'
Thus in this email Mr Coffey acknowledged having received the letter of demand dated 2 July 2015 on 17 July 2015.
(k)Mr Hutchings responded by email to Mr Coffey, on the same day (Mr Hutchings' first affidavit par 61 and annexure RSH-1 page 209). The email stated:
We are willing to consider providing you with an appropriate amount of time to respond to our letter. There are further papers, being a writ and statement of claim, which we propose to serve on you.
For that purpose, could you please attend our Perth offices by 2 pm on Thursday, 23 July [address provided] to collect the writ and statement of claim. We can then discuss the amount of time required to respond once you have considered all of the material. If you are unable to attend our offices by Thursday, could you please contact Richard Hutchings on [telephone number provided], as soon as possible, to make alternate arrangements.
We have also attempted to contact you several times at various telephone numbers. All the telephone numbers appear to have been disconnected. We would be grateful if you could provide us with a telephone number which we can contact you on by 2pm on Thursday, 23 July.
(l)Mr Coffey did not attend QBE's solicitor's offices and did not provide a contact telephone number. No further response had been received by Mr Hutchings (Mr Hutchings' first affidavit par 62).
In the hearing before me, the defendants took objections to both Mr Hutchings' first affidavit and Mr Ricci's statutory declaration.
The principle objection taken to Mr Hutchings' first affidavit related to pars 54 ‑ 56, because in those paragraphs Mr Hutchings had referred to the two landlines and mobile phone as being Mr Coffey's – 'his' landline and 'his' mobile phone. It was submitted that these statements had no foundation. However, from Mr Hutchings' affidavit it is clear that he had been given QBE's file and that he was calling telephone numbers which he believed were Mr Coffey's.
Part of the defendants' counsel's reasons for objecting to this is based on the affidavit subsequently sworn by Mr Coffey on 21 August 2015 in support of the application to discharge the freezing order. In this affidavit Mr Coffey deposed to the fact that the landline telephone numbers were 'owned' by CWC and cancelled when the company went into administration, and that the mobile phone number, which he used, was also owned by CWC and cancelled when the company went into liquidation. There appears to be no issue that these were numbers on which Mr Coffey could be contacted and that, when Mr Hutchings called each of them the number had been disconnected. At the time of its ex‑parte application, QBE and its solicitors had no way of knowing that these phone numbers were 'owned' or paid for by CWC.
In relation to the objections to Mr Ricci's statutory declaration, these were to pars 4, 6, 8 and pars 10 ‑ 12 and have now been conceded by QBE.
As to the evidence of Mr Ricci to which no objection was raised, counsel for the defendants submitted that all that was advanced is that Mr Ricci has not heard from Mr Coffey since CWC was placed under administration. This was, as submitted to me, not an adequate foundation for a freezing order.
Counsel for the defendants took me to the evidence in relation to some of the other matters I have set out, making arguments in relation to each of them and submitting with each of them that they provided no adequate foundation for the making of a freezing order.
Individually each of these matters would not support the making of a freezing order, however, the court is entitled to draw inferences: X v Y [2013] WASC 339 [35] (Pritchard J). The court may draw an inference from a combination of factors, none of which would, on its own, constitute sufficient proof of the danger of a dissipation of assets.
It is the factors together which need to be looked at, to see if they give rise to such a 'feeling of unease' so that the judge considers that there is sufficient danger that a defendant will deal, in some fashion, with his assets in such a way that, if the plaintiff were to succeed in the action, it will not be able to have the judgment satisfied: X v Y [37], applying Mitchell v Saengjan (1994) 117 FLR 273, 284 (Milden J).
Leaving aside the evidence as objected to in Mr Ricci's statutory declaration, there remains the other factors I have set out in [63] above. I am not satisfied that there was, as submitted, insufficient evidence to ground the freezing order. At the time of the making of the freezing order, Mr Coffey's current address was unknown, and he was uncontactable by telephone, or through solicitors (given the content of his email to Mr Hutchings it is apparent that Mr Duckham was not acting generally for Mr Coffey). While Mr Coffey did make contact with QBE by his email of 21 July 2015, he did so to request a two week extension, five days after receiving QBE's letter of demand (which he admitted receiving on 17 July). He did not attend QBE's solicitors' office on 23 July as they had requested. Perhaps that may be explained by the fact that he did not want to be served with the writ but that, in itself, demonstrates some avoidant behaviour on Mr Coffey's part. He also did not provide QBE's solicitors with a contact telephone number, as they had requested. As a sole director and shareholder of JGQ Developments, Mr Coffey could control the sale of that company's properties. The property owned by JGQ Commercial was being sold.
In my view there was sufficient evidence to show that a danger existed that a prospective judgment of the court would be wholly or partly unsatisfied, and a sufficient basis to impose the limited restraints for a short period until the matter could be argued on notice to the defendants.
The issue of non-disclosure
It is a duty of a party asking for an ex parte freezing order to bring forward all the material facts which the absent party would presumably have brought forward in his defence to that application: Thomas A Edison Ltd v Bullock (1912) 15 CLR 679, 681 ‑ 682 (Isaccs J).
The obligation is to disclose material facts, that is, facts material to the decision, and whether or not to set aside the order is a matter of discretion: Savcor Pty Ltd v Cathodic Protection International APS [2005] VSCA 213; (2005) 12 VR 639 [27]. If there has been a material non-disclosure, it is most important that the court assess the degree and extent of the culpability with regard to the non-disclosure, and the importance and significant to the outcome of the application for an injunction of the matters which were not disclosed to the court Behbehani v Salem [1989] 1 WLR 723.
Further in support of the defendants' argument that the freezing order ought not to have been made, submissions were made that there had been non-disclosure by QBE or its solicitors because of a failure to bring certain matters, in particular the following matters, to the attention of the court.
It was contended that his Honour Judge Stone should have been told that the relief sought is outside the court's jurisdiction, on the two grounds argued before me, which I have dealt with in [37] ‑ [61] above. I do not consider this to be a non-disclosure.
It was contended that the court was misled by a suggestion in written submissions that Mr Coffey had disconnected the two landlines and mobile phone number. Given my review of this matter at [65] above, and my review of the transcript of the hearing on 27 July 2015, I do not consider this to have been a material non-disclosure.
It was also contended that during submissions before his Honour at the hearing on 27 July 2015, counsel for QBE failed to bring to the court's notice that the Francis Street property appeared to be vacant. There was no such failure. This was, in fact, a matter specifically drawn to his Honour's attention at the hearing (ts 13).
It was submitted that there was reliance upon Mr Ricci's statutory declaration in which Mr Ricci expressed subjective opinions about Mr Coffey's motives, included unattributed hearsay and opinions. I agree that Mr Ricci's opinions in pars 11 and 12 were inadmissible. However, I do not consider this to be material in light of the other facts which I have set out in [63] above.
It was submitted that there were further inquiries which should have been undertaken by QBE before bringing the freezing order application, in particular that it was incumbent upon QBE to contact the administrators (or liquidators) of CWC to ascertain Mr Coffey's details. In making that submission there is an assumption that had such contact been made Mr Coffey's details would have been provided to QBE. That is not something I am able to assume.
It was also submitted that QBE should have accessed the CWC administrators' report to creditors, which is a publicly available document. If it had, it could have been seen that in fact Mr Coffey had complied with his statutory obligations, while Mr Ricci had not (evidence about which I discuss below). This was submitted to be a matter relevant to the issue of Mr Coffey's evasiveness and also the reliability of Mr Ricci's statutory declaration. I am not satisfied that QBE's duty of disclosure extended to obtaining a copy of this administrators' report. I do not consider the administrators' report to be something that Mr Coffey 'would presumably have brought forward in his defence to his application': Thomas v Edison. If I am wrong and there has been non‑disclosure, in my assessment it does not change the fact of Mr Coffey's non‑contact with Mr Ricci after the appointment of administrators to CWC, nor does it change the failure to communicate with QBE's solicitors after Mr Hutchings' email of 21 July 2015.
I am not satisfied that the freezing order should be set aside on the basis of any of these matters.
The evidence on the return date of the freezing order and in support of the defendants' application to discharge the order
The evidence before me on the return date of the freezing order was as follows:
(a)Mr Hutchings' first affidavit;
(b)Mr Ricci's statutory declaration, now verified by an affidavit sworn on 4 September 2015;
(c)an affidavit of Mark Basso‑Bruso, a director of the third party, JGQ Commercial, sworn 19 August 2015 (Mr Basso‑Bruso's first affidavit);
(d)a second affidavit of Mr Hutchings sworn 21 August 2015 (Mr Hutchings' second affidavit);
(e)the affidavit of Mr Coffey sworn 21 August 2015 (Mr Coffey's affidavit);
(f)a further affidavit of Mr Coffey sworn 25 August 2015 (referred to as the asset disclosure affidavit), together with the covering letter from the defendants' solicitors to QBE's solicitors dated 25 August 2015. The asset disclosure affidavit had been served on QBE's solicitors, but not filed; and
(g)a second affidavit of Mr Basso‑Bruso sworn 27 August 2015 (Mr Basso‑Bruso's second affidavit).
There was some argument before me about whether the asset disclosure affidavit should be received into evidence on the hearing before me. I allowed it to be admitted, given the fact that I was hearing both the return date of the freezing order and the defendants' applications to discharge or vary the orders. Having now received and read the asset disclosure affidavit I do not understand why the defendants so vehemently opposed the admission of that affidavit. It merely attaches copies of an original and amended asset statement for Mr Coffey, copies of which were already annexed to the affidavit of Mr Hutchings' second affidavit (pages 242 and 261) which has been read into evidence, without objection from the defendants.
In relation to the danger of dissipation of assets, in summary Mr Coffey's situation as explained by him in his affidavit is as follows:
(a)the disconnection of the telephone numbers is explained, as I have already summarised. Mr Coffey obtained a new mobile phone number after CWC went into administration (pars 60 ‑ 62);
(b)Mr Coffey had two email addresses, both 'owned' by CWC which were cancelled about a week after CWC went into administration (par 64);
(c)Mr Coffey co-operated with the administrators of CWC and provided a directors report as to affairs (a RATA). Mr Ricci did not provide a RATA (pars 53 ‑ 58 and the administrators' report to creditors, annexure E, page 97);
(d)Mr Coffey was not aware of any attempts by Mr Ricci to make contact with him (pars 65 and 69) and had not received any correspondence from Mr Ricci since 7 May 2015 (par 70);
(e)Mr Coffey has given a large number of personal guarantees for the liabilities of CWC and has received a number of demands from various parties which he has been trying to deal with as best as he can (par 66). I should note that the claims being made against him are not anywhere detailed. I do not know whether the claims include the present claim by QBE, however Mr Coffey's estimate of the quantum of the claims is a similar to the estimation given by Mr Ricci. The administrators of CWC in their report to creditors also gave an estimate for both the joint potential exposure of Mr Ricci and Mr Coffey and an additional exposure of Mr Coffey, the total of which is not much less than Mr Coffey's and Mr Ricci's estimate: annexure E page 109). It is a significant exposure;
(f)Bruce Duckham acts for Mr Coffey in relation to some court actions commenced against him on guarantees, but is not engaged to act for Mr Coffey generally or to accept service. This is because of Mr Coffey's limited financial resources (par 67);
(g)a number of creditors have lodged caveats over the Francis Street property (par 78 and the search of the property annexed to Mr Hutchings' first affidavit, page 216);
(h)Mr Coffey is married with two small children. His wife is the joint proprietor of the Francis Street property, which was the family home. That home was being renovated. While renovations were underway, it was not possible to live in the house and so the family moved. CWC was undertaking the renovation works and when that company went into administration, work on the property ceased;
(i)on 25 July 2015, Mr Coffey and his wife entered into a contract of sale for the Francis Street property, selling it with the renovations incomplete (par 80 and annexure F, page 156);
(j)the purchase price is consistent with the market value, as given in a property valuation obtained by Mr Coffey and his wife in August 2015 (annexure G, pages 158 - 181);
(k)Mr Coffey made the decision with his wife to sell the Francis Street property and 'use the nett proceeds from my share to try and meet some of the claims being made against me' (par 79).
In relation to JGQ Developments, the evidence from Mr Coffey's affidavit and the annexures is that the Brown Street and Villena Parade properties are both development properties, the latter being a strata subdivision with pre‑sold lots. I have already discussed that NAB is the mortgagee. It advanced two separate loans to JGQ Developments for the two properties. The NAB has cross-security for these loans over both of the properties. The NAB has issued a default notice to JGQ Developments. Mr Coffey in his affidavit (pars 88 ‑ 110) has set out the arrangements made with the NAB and the situation with the Villena Parade property. It is not necessary to set out all of the details. It is fair to say, however, that NAB is taking a supervisory role in dealings with that property.
Counsel for QBE has submitted there is evidence of evasive conduct by Mr Coffey, and a sense of unease which justifies the continuance of the freezing order, based primarily on the following.
First, there is the sale of the Francis Street property, and the timing of that sale, which took place a matter of days after Mr Coffey received QBE's letter of demand dated 2 July 2015. Counsel for QBE submitted that the sale occurred quickly in circumstances where the property had been vacant since renovations began and then a valuation was obtained only after the contract of sale.
In my view the circumstances of the sale do not raise any unease when all of the circumstances which I have set out in [86](e) and [86](g) ‑ [86](k) above are taken into account. The sale took place not just because of the demand from QBE but because of a number of other claims by creditors. Although no details of the debts owed to these creditors have been provided by Mr Coffey, upon a review of all of the evidence, including the details of the caveats lodged over the Francis Street property - there are nine caveats lodged between 25 November 2014 and 15 April 2014, well before any demand by QBE - I have no reason to disbelieve the reasons given by Mr Coffey for the sale.
It is also apparent from the contract of sale itself that there were negotiations for the purchase price (there are figures crossed out, replaced and initialled in the document). The contract is also subject to a special condition that the offer is subject to the property being valued to the satisfaction of the buyer, which may explain the obtaining of the valuation. There is no evidence to suggest that the sale is anything other than an arms-length transaction on the open market.
The second factor which QBE submitted raised a sense of unease was the withdrawal of a sum of money from a bank account which Mr Coffey had disclosed in his asset statement (this bank account was not his or JGQ Development's bank account). It was submitted that this was evidence of a dissipation of assets and, further, that this was a breach of the freezing order, however, clearly there was no freezing order in relation to bank accounts. I am unable to accept QBE's submissions on this factor.
The third factor relied on by QBE was Mr Coffey's alleged non‑compliance with the ancillary order, order 9. I have considered the matters raised by counsel for QBE, most of which was the subject of correspondence between the solicitors for the parties (Mr Hutchings' second affidavit pages 241 ‑ 261). There has been a failure to provide details for two bank accounts between two specified dates, however an explanation has been provided for that and I do not consider there has been any material non-compliance by Mr Coffey. While his solicitors did take a technical point about whether certain bank accounts were within Mr Coffey's control, these bank accounts were nonetheless disclosed. Finally, while QBE complains that the value of Mr Coffey's interest in certain discretionary trusts has not been disclosed, as his solicitors pointed out in correspondence, although not exactly in these terms, because of the nature of a discretionary trust (as set out in Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547, 551 ‑ 552; see also Elovalis v Elovalis [2008] WASCA 141) it is difficult to place a value on Mr Coffey's interest. None of the matters raised by QBE in relation to the ancillary orders cause me any unease.
The fourth factor relied on by QBE was the difficulty in contacting Mr Coffey. Counsel for QBE submitted that if it be accepted that the telephone numbers were disconnected because of the external administration of CWC, it still did not explain why Mr Coffey refused the simple request to open up lines of communication with QBE and provide his new mobile telephone number. There was just silence, until the return date for the freezing order on 3 August 2015. It was submitted that Mr Coffey's former business associates had encountered similar difficulties. In this regard reliance was placed on Mr Ricci's evidence of not having received any contact from Mr Coffee since the appointment of administrators over CWC, as well as evidence from Mr Basso‑Bruso about the difficulties he had in getting Mr Coffey to respond to emails and telephone and text messages between March and May 2015. Further, after the appointment of receivers [sic – administrators] to CWC, Mr Coffey ceased all contact with Mr Basso-Bruso (Mr Basso-Bruso's second affidavit, par 9). It was submitted by counsel for QBE that Mr Coffey's conduct in not communicating with those people affected by the collapse of CWC was not consistent with a man allegedly trying to do his best to deal with creditors.
Mr Coffey's non‑communication is of concern, but I must take into account all of the evidence now before me and that includes the position in which Mr Coffey found himself at the time of the appointment of administrators to CWC. Given his exposure on his personal guarantees for the liabilities of CWC, this non‑communication is equally consistent with a man who is in severe financial difficulties and is probably overwhelmed by them. As Mr Coffey stated in his affidavit, par 66, which I accept, 'the collapse of CWC and the financial consequences has been very stressful …'.
A further matter relied on by QBE was the circumstances of the sale of the Bellevue Terrace property, the subject of the original freezing order against the third party JGQ Commercial, which has been discharged. JGQ Commercial is the trustee of the Bellevue Terrace Trust, a unit trust. The units in the trust are held equally by two other companies. One company is a trust company which was controlled by Mr Coffey, but is now also under external administration. The other is a company controlled by Mr Basso‑Bruso. It was submitted that there was some unease about the distribution arrangement for the proceeds of sale of the property because of a unit holder's deed of priority, and an agreement that the cost of the building constructed on the property be paid first, before any distribution to the unit holders. The evidence from Mr Basso-Bruso's second affidavit is, however, that the proceeds of sale are not an asset that could flow to Mr Coffey, nor does he have any claim or expectancy in relation to the sale proceeds as distribution of profit, because there is no profit.
Having regard to all of the evidence now before me, and considering all of the factors put forward by QBE, I am unable to draw the inference which QBE has asked me to draw, which is that there is a real risk of the dissipation of assets. I am not satisfied that there has been conduct on the part of Mr Coffey which can reasonably be interpreted as evasive or abusive or potentially having the effect of frustrating the ordinary process of the court.
There is nothing to indicate that any of the properties owned by Mr Coffey and JGQ Developments have been or will be dealt with in an irregular way in order to defeat a judgment in the action. The claim made by QBE does not involve any dishonesty. I should not assume that Mr Coffey, in his capacity as a director of JGQ Developments, would behave irresponsibly or dishonestly unless some substantial ground for fearing that he would do so has been shown: Oliver v Lakeside Resort Development Pty Ltd [2005] NSWSC 510 [20] (Barrett J). In my view, this has not been shown.
It is true that QBE will be in a difficult position when enforcing any judgment, should one be obtained, given the asset and liability position of each defendant. However, it is not open to me to continue the freezing order on the basis of providing any security to QBE, and I should not make the order to improve QBE's position in the event of the insolvency of either defendant.
Conclusions
I am not satisfied that there is a real danger of dissipation of assets that justifies restraining either of the defendants in dealing with the specified assets. The freezing order must be discharged.
I will hear from the parties as to the terms of the orders I should make, including costs.
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