Sciacca v Langshaw Valuations Pty Limited
[2013] NSWSC 1393
•19 September 2013
Supreme Court
New South Wales
Medium Neutral Citation: Sciacca and ors v Langshaw Valuations Pty Limited and ors [2013] NSWSC 1393 Hearing dates: 17 September 2013 Decision date: 19 September 2013 Before: Bellew J Decision: 1. The Notice of Motion is dismissed.
2. The plaintiffs are to pay the costs of the 11th and 12th defendants.
Catchwords: FREEZING ORDERS - application to vary - where orders in existence for lengthy period without breach - where no evidence adduced to suggest that judgment would go unsatisfied because of disposition or diminution in value of asset - where balance of convenience favoured the respondents Legislation Cited: Uniform Civil Procedure Rules Cases Cited: Patterson v BTR Engineering Pty Limited (1989) 18 NSWLR 319 Texts Cited: Uniform Evidence Law (9th Edition) - Odgers Category: Interlocutory applications Parties: Frank Sciacca and ors (Plaintiffs)
Arnap Pty Limited (11th defendant)
Peter John Evans (12th defendant)Representation: Mr A Maroya (Plaintifff)
Mr J Hutton (11th and 12th defendants)
WKA Legal (Plaintiff)
Ashurst Australia (Defendants)
File Number(s): 2011/90522 Publication restriction: Nil
Judgment
Before the Court is a notice of motion filed on 10 September 2013 by the plaintiffs seeking, as against the eleventh and twelfth defendants, variations of a freezing order made by Nicholas J on 27 October 2011. The orders sought in the notice of motion are opposed by the eleventh and twelfth defendants. The matter came before me for hearing as duty judge on 17 September 2013.
BACKGROUND
Before considering the issues which have been raised, it is necessary for me to set out some relevant background in relation to the matter. That background is not relevantly in dispute and the summary which follows is taken, in part, from the helpful written submissions provided by counsel for each party.
The plaintiffs loaned a sum of money to a Mr Gerald Waldron and a Mrs Josephine Waldron, such loan being secured by way of a second mortgage. There was subsequently default under that mortgage, following which the loan agreement was restructured by Mr Waldron giving, to the plaintiffs, a mortgage over one of two redeemable preference shares held by him in a company known as Arnap Pty Limited ("Arnap"). Arnap is named as the eleventh defendant in the proceedings. Peter John Evans ("Evans") who is the holder of the second redeemable preference share in Arnap, is the twelfth defendant.
There is no dispute that the business of Arnap is that of a property developer. In or about 2007 Arnap purchased some land at Lilli Pilli for development and commenced, at some time thereafter, to sell individual lots within the land which had been purchased. On 30 April 2008 Mr Waldron apparently transferred his redeemable preference share to Evans without discharging the mortgage to which I previously referred. There are presently a large number of defendants joined in the proceedings as a result, it seems, of a consolidation of more than one action. The plaintiffs' case against the eleventh and twelfth defendants arises from the transfer by Mr Waldron of his redeemable preference share to Evans.
On 27 October 2011 the plaintiffs sought and obtained (on an ex-parte basis) freezing orders from his Nicholas J against Arnap and Evans. It is necessary for me to set out some paragraphs of those orders.
Order 6(a) was in the following terms:
"You must not remove from Australia, or in any way dispose of, deal with or diminish the value of, any of your assets in Australia ("Australian assets") up to the unencumbered value of AUD$3,417,668.60 ("the relevant amount") except by further order of the Court."
Order 7 was in the following terms:
"For the purpose of this order:
(1) your assets include:
(a) all your assets, whether or not they are in your name and whether they are solely or co-owned;
(b) any asset which you have the power directly or indirectly to dispose of or deal with as were your own (you are to be regarded as having such power if a third party holds an asset in accordance with your direct or indirect instructions); and
(c) the following assets:
(i) the properties being the whole of the lands contained in the following Certificates of title folio identifiers (the lands):
49/1145035, 58/1145035, 59/1145035, 71/1158507, 76/1158507, and 77/1158507 and
(ii) all shares of any kind in Arnap Pty Limited or
(iii) if the above lands or shares or any part thereof have been sold, their net proceeds of the sale."
Order 10, which appeared under the heading "Exceptions to this Order" was in the following terms:
"(10) This order does not prohibit you from:
(a) dealing with or disposing of any of your assets other than those specified at paragraph (7) above (namely the specified land and shares) in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred."
There are other subparagraphs of order 10 which I do not need to refer to for present purposes.
On 28 November 2011 the matter came before White J, at which time, his Honour made a number of orders in relation to the further conduct of the proceedings. Relevantly however, his Honour also made a further order which had the effect of varying the orders that had previously been made by Nicholas J. In that regard paragraph 5 of the Short Minutes of Order which were before his Honour on that day was in the following terms:
"Pursuant to paragraph 11 of the freezing orders made on 27 October 2011, the applicants and the defendants, by consent, vary orders 6 and 7 of the freezing orders by inserting a new order numbered 7(3) as follows:
'The defendants are entitled to deal with the properties defined in order 7(c)(i) for the purposes of developing, improving or preparing for sale the said property, provided that the defendants do not encumber in any way the said properties or enter into any contracts for sale, leases, licences, easements or covenants or similar dealings with respect to the said properties without first obtaining the plaintiff's consent in writing, which consent will not be unreasonably withheld.'"
It will be evident from those parts of the orders to which I have referred that the orders did not prevent Arnap from applying the proceeds of sale of any lot for purposes relating to the ordinary course of its business.
A number of the lots referred to in paragraph 7(c)(i) of the orders have apparently since been sold. In accordance with the variation made by White J, those sales were effected with the consent of the plaintiffs.
THE NOTICE OF MOTION
The present application seeks that the orders be further varied in the terms which are more fully set out in the notice of motion. The effect of the variations which are sought is, in part, to add to order 7(1)(c) a provision which will include, as an asset of Arnap, the net proceeds of the sale of any lot.
In addition, the motion seeks a variation to the terms of order 10 so as to incorporate a requirement that the net proceeds of the sale of any lot be paid into a joint account, with Arnap being at liberty to pay expenses, without the consent of the plaintiffs, up to an amount of $1,000, but where the plaintiffs' approval is required to be obtained for the payment of any expense over and above that sum.
THE SUBMISSIONS OF THE PARTIES
Counsel for the plaintiff accepted that the orders made by Nicholas J and varied by White J did not expressly provide for the freezing of the net proceeds of the sale of any lot. However, he submitted that as a matter of commonsense, it was "unarguable" for Arnap and Evans to deny that such proceeds were not frozen. In support of this submission counsel pointed, in particular, to a number of the specific provisions contained in orders 6 and 7 which he submitted gave rise to a clear implication that the proceeds of sale, of any lot, were frozen. Counsel further submitted that the variations of the orders which were sought, did little more than impose what he described as "a small administrative task" upon Arnap in terms of the ongoing conduct of its business.
Counsel for Arnap and Evans submitted that the plaintiffs had not established that there was any danger that any judgment would go unsatisfied because of a disposition of or diminution in value of any asset held by Arnap. In this regard, counsel pointed, in particular, to the provisions of r 25.14(4)(b)(ii) of the Uniform Civil Procedure Rules. Counsel also emphasised that in the period approaching two years since the orders had been made (which is appropriately two years) there had been no breach on the part of Arnap or Evans, and that Arnap's assets were being managed appropriately in the course of it carrying out its ordinary business. Counsel further submitted that the orders which had been made were required to be construed strictly according to their terms. As I understood it, that amounted to a submission that I should not read into the orders anything which was not otherwise apparent on their face.
Counsel also made submissions in relation to the balance of convenience which, he submitted, favoured the position of Arnap and Evans. He submitted that the variations sought would impose an unwarranted intrusion and restriction upon the conduct of Arnap's business. Perhaps more fundamentally, he submitted that a variation was not necessary because the orders as they stood provided the plaintiffs with adequate protection. In this regard he pointed to the fact that the orders in their present form prevented Arnap from dealing with any asset other than in the course of its business.
Counsel also relied, in a general sense, upon the nature of freezing orders as being what he described as an "extraordinary remedy", although, as I understood it, he did accept that the plaintiffs had a prima facie case.
Finally, counsel for the defendants submitted that the relevant principles which apply to the making of freezing orders should not be applied any less vigorously in an application for a variation of such orders than would be the case if the matter was coming before the Court for the first time.
CONSIDERATION
Part of the effect of the orders sought in the notice of motion is to include, as an asset of Arnap, the net proceeds of the sale of each lot and further prevent Arnap from disposing of that asset other than in specified circumstances. There is, in my view, no reason why the relevant principles should not apply with equal force and effect to an application for their variation as would be the case on an initial application.
It is well settled that an application for a freezing order must be supported by evidence that there is some danger of assets being disposed of or otherwise dealt with, such that if the plaintiff succeeds it will not be able to have a judgment satisfied (see for example Patterson v BTR Engineering Pty Limited (1989) 18 NSWLR 319 at 321 to 322 per Gleeson CJ.) In the present case the plaintiffs have not adduced any evidence at all in that regard. An email communication between the respective solicitors for the parties was tendered in evidence in which there was a reference to an assertion having been made (it appears in earlier correspondence) by the solicitor for the plaintiffs to the effect that Evans was a flight risk. I simply note that there is no evidence at all before the Court in that regard. Indeed, the evidence of Arnap's business, and Evans' ties to the community in generally, is in my view at odds with the suggestion that he is in any way a flight risk.
I am satisfied that the balance of convenience favours the position of Arnap and Evans. Arnap, as I have said, carries on the business of a property developer. A suggested ceiling of $1,000.00, beyond which the approval of the plaintiffs would be required in order to pay Arnap's ongoing expenses, is in my view something which amounts to more than a small administrative task. It places a burden on the Arnap which is unwarranted on the evidence, particularly in circumstances where there is no suggestion whatsoever that the orders have been breached in any way in the period over which they have been in force. It may well be that when the freezing orders were originally made, Nicholas J reached a conclusion that the balance of convenience tipped in the opposite direction. However, it must also be remembered, that his Honour made the orders on an ex-parte basis. I have had the benefit of a considerable amount of evidence being placed before me demonstrating the nature and extent of Arnap's business.
The remedy sought by the plaintiffs is obviously a discretionary one. In my view it is relevant to the exercise of the discretion that not only has there been no breach of the orders since they were put in place in 2011, there has been no issue whatsoever raised by the plaintiffs, until now, about the nature of those orders. That circumstance has arisen against a background of not only the original making of the orders by Nicholas J, but also in circumstances where there was a subsequent variation of those orders by White J. In those circumstances I do not accept that the inferences and implications upon which the plaintiffs rely properly arise. The plaintiffs obviously turned their minds to the nature of the orders which were originally sought. Order 10(a) clearly imposes a prohibition upon dealing with assets, but it is one which is limited to the specified land and shares. The orders also reflect, in my view, an acceptance on behalf of the plaintiffs that Arnap and Evans should be at liberty to deal with any other asset in the course of their business, including dealing with such an asset for the payment of business expenses and associated costs.
In the course of the argument before me counsel for Arnap and Evans proffered certain undertakings to the court. I did not understand that the proffering of those undertakings amounted to a concession that they were somehow necessary, or that the plaintiffs' position was not otherwise adequately protected by the orders as they are in their current form. Counsel proffered these undertakings to the Court in support of a submission that, if a view were reached that the plaintiffs were not adequately protected, such undertakings would cure that issue. The undertakings are in the following terms:
"The eleventh and twelfth defendants undertake to the Court:
(a) to deposit the net proceeds of sale of any of lots 49, 58 and 59 of deposited plan 114035 and Lots 71, 76 and 77 of deposited plan 1158507 (or any subdivision of those lots) (lots) into ANZ account number 4839-7606 in the name of Arnap Pty Limited (Arnap Account);
(b) upon a written request being received from the plaintiffs to provide the plaintiffs with copies of monthly bank statements from the Arnap Account (such requests not to be made more frequently than every three months); and
(c) not to apply any part of the proceeds of sale of any of the lots to repay Arnap's non-trade creditors without giving the plaintiffs seven days' notice."
I propose to note the fact of the undertakings and their terms in the formal orders that I will make.
For all of those reasons it is my view that the orders which are sought in the notice of motion should be refused. Accordingly, the formal orders I make are as follows:
(1) The notice of motion filed by the plaintiffs on 10 September 2013 is dismissed.
(2) The Court notes the undertakings given by the eleventh and twelfth defendants which have been initialled by me and dated today.
COSTS
Following the pronouncement of those orders, I heard the parties in relation to the question of costs. Counsel for Arnap and Evans made application for the costs of the motion. That application was opposed by counsel for the plaintiffs who submitted that the appropriate order was to reserve the question of costs.
Counsel for the plaintiff put a number of submissions to me in support of his position. He firstly drew my attention to a letter from the solicitors for Arnap and Evans of 30 August 2013, the final paragraph of which (after the position of Arnap and Evans had been set out at length) read as follows:
"Our clients will proceed in this manner after 5pm on Wednesday 4 September 2013 so that your clients have an opportunity to list the matter before the Court if they wish to do so".
Counsel for the plaintiffs further submitted that the undertakings to which I referred in my reasons were "largely dispositive" of the notice of motion. He pointed out the form of those undertakings had been served on the plaintiff's solicitor at about 10.45pm on the evening of 16 September, that is the evening before the matter came before me for hearing. It was submitted in these circumstances that the plaintiff's solicitor had not had an adequate opportunity to obtain instructions in relation to those undertakings, particularly in circumstances where there were three individual plaintiffs from whom such instructions were required to be obtained.
The third matter upon which reliance was placed by counsel for the plaintiff concerned the terms of a letter from the solicitor for the plaintiffs of 12 December 2012 which set out, in general terms, a proposal in relation to the proceeds of the sale of lot 58. The effect of the submission put on the plaintiffs' behalf was that the proposal set out in that correspondence was a reasonable one, and not dissimilar to that which was put before the court on the hearing of the motion.
Counsel for Arnap and Evans made three submissions in response. The first was that the letter from his instructing solicitor of 10 September 2013 amounted to little more than correspondence which set out the position of Arnap and Evans and which concluded with an indication that if no agreement could be reached, they were at liberty to bring an application before the court and that, in doing so, they would be at risk as to costs.
The second submission made by counsel for the defendants was that on a proper construction of my reasons which were delivered orally today, the undertakings to which I have referred were not "largely dispositive" of the matter at all. Counsel pointed out that prior to making any reference to those undertakings I had advanced a number of other reasons why the plaintiff's application should otherwise fail.
The third submission on behalf of the defendants was that there were necessarily marked differences between the position set out in the letter of 12 December 2012 and the position of the plaintiffs as it was agitated on the notice of motion.
The defendants have been successful on the motion. In my view, in those circumstances, there is no reason why costs ought not follow the event.
The letter from the solicitor for Arnap and Evans of 10 September 2013 is, in my view, unremarkable. It simply sets out what the defendants' position is and, as counsel rightly pointed out, it concludes with what might be described as an invitation to bring the matter before the court, at risk as to costs, if the issues which then existed between the parties could not be agreed upon.
Further it is, with respect, not correct to say that the undertakings which were proffered to the court disposed of the notice of motion in large measure. It would be apparent that before making any reference to the undertakings at all, I had advanced several reasons why, as a matter of discretion, the plaintiffs ought not succeed on the notice of motion.
Moreover, as I pointed out in the course of an exchange between myself and counsel for the plaintiffs, it is my view that (being generous) the solicitor for the plaintiffs had at least two hours in which to obtain instructions as to the undertakings. That was ample time within which to do so if that course was sought to be taken. No evidence in any precise form has been placed before me as to what steps, if any, were taken in that regard.
Finally, I am of the view that there are, as counsel submitted, marked differences between the position set out in the correspondence of the plaintiffs' solicitor 12 December 2012, and the position agitated by the plaintiff in the hearing of the notice of motion.
For those reasons the further order I make is that the plaintiffs pay the costs of the eleventh and twelfth defendants on the notice of motion.
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Decision last updated: 01 October 2013
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