Suzhou Haishun Investment Management Co Ltd v Zhao (No 2)
[2018] VSC 176
•18 April 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PRACTICE COURT
S CI 2015 01669
| SUZHOU HAISHUN INVESTMENT MANAGEMENT CO LTD | Plaintiff |
| v | |
| YUE’E ZHAO | Defendant |
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JUDGE: | JOHN DIXON J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 5-6 April 2018 |
DATE OF JUDGMENT: | 18 April 2018 |
CASE MAY BE CITED AS: | Suzhou Haishun Investment Management Co Ltd v Zhao (No 2) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 176 |
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INJUNCTIONS — Application for freezing orders against defendant and non-parties — Application granted in part — Supreme Court (General Civil Procedure) Rules 2015, Order 37A.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Smallbone | Accuro Legal |
| For the Defendant | Mr A Silver | Waterson Legal |
HIS HONOUR:
By summons dated 28 November 2017 the plaintiff applied for a freezing order in respect of all of the assets of the defendant and two non-parties (‘the respondents’) to a value of AUD8 million. One respondent, Chen Heng Zhao, is the defendant’s son. The other respondent is ZCH Investment Pty Ltd, a company that the plaintiff contended is effectively controlled by the defendant. The defendant and the respondents were jointly represented.
Background
This proceeding was issued on 15 April 2015. The plaintiff sought to enforce a foreign judgment it obtained against the defendant in the People’s Court of Huqiu District, Suzhou City in the Peoples Republic of China, arising from the plaintiff’s advances of RMB20 million in total in China to the defendant pursuant to three loan agreements in July and October 2013. The plaintiff alleged the loans were not repaid and obtained judgment in its favour in October 2014. The defendant denied she is indebted to the plaintiff and says she was unaware of the judgment until served with this proceeding.
This proceeding has a chequered history, having now been twice dismissed and reinstated. Originally, the plaintiff sought registration of the judgment on the basis of s 6 of the Foreign Judgments Act 1991 (Cth). In June 2015 the defendants sought summary dismissal, which was refused on 29 June 2015. A self-executing order required the plaintiff to file and serve an amended originating motion by 13 July 2014. The plaintiff did not do so, and the proceeding was dismissed.
The proceeding was reinstated on 4 August 2015. On 2 December 2015 the defendant again sought summary dismissal of the proceeding, alternatively security for costs. Summary dismissal was again refused on 17 March 2016, but later the plaintiff was ordered to pay security for costs of $46,267 by 14 April 2016. Discovery was also ordered. None of this occurred and no action was taken by either party to the proceeding. At a directions hearing on 10 August 2016 when no party appeared, the proceeding was dismissed for a second time by an associate judge. By 10 October 2016, the plaintiff was aware that its proceeding had been dismissed.
On 29 May 2017 the plaintiff’s current solicitors filed a notice of change of solicitor. The next step taken in the proceeding was on 28 November 2017 when the plaintiff filed its summons seeking an ex parte freezing order in respect of unspecified assets to the value of AUD8 million. The following day the plaintiff by a further summons sought reinstatement of the proceeding and leave to file a further amended statement of claim.
On 30 November 2017, Cavanough J declined to hear the application on an ex parte basis and adjourned it to 6 December 2017 before Keogh J. Days prior to the hearing on 6 December 2017, the plaintiff applied to join the respondents as defendants to the proceeding. A few days prior to the return date, the plaintiff served multiple affidavits with a substantial volume of exhibits. The defendant/respondents successfully sought an adjournment. In exchange for the plaintiff’s undertaking as to damages, the defendant/respondents gave undertakings as follows:
(a)the defendant undertakes through her counsel not to deal with the land situated at 1912/39 Coventry Street, Southbank (‘the Coventry Street property’) until 4pm on the next return date;
(b)the respondent Chen Heng Zhao undertakes through his counsel to not deal with the land situated at 8 Cluney Court, Blackburn (‘the Cluney Court property’) and the shares in ZCH Investment Pty Ltd until 4 pm on the next return date; and
(c)the respondent ZCH Investment Pty Ltd undertakes through its counsel not to deal with or further encumber the land situated at 1 Ottawa Avenue, Blackburn (‘the Ottawa Avenue property’) until 4 pm on the next return date.
On 22 March 2018, the plaintiff issued 14 subpoenas purportedly in support of the application for the freezing orders that were served on the defendant, the respondents, and 11 others including banks, accountants and solicitors.
On 14 March 2018 the proceeding was reinstated. On 23 March 2018 the plaintiff was granted leave to file and serve a further amended statement of claim. The pleadings are yet to close. On 29 March 2018, Ierodiaconou AsJ set the subpoenas aside as an abuse of process,[1] commenting -
causing so many subpoenas with such wide categories to be issued, in the absence of a precise legitimate purpose, is contrary to the [Civil Procedure Act]. It has led to the unnecessary cost of this application to set aside the subpoenas and delay in the hearing of the freezing and ancillary orders, and the proceeding generally. The plaintiff and its lawyers have not assisted the Court to further the overriding purpose. This has been a costly dispute about a non-essential issue. It has occurred against a background of long delays and missteps by the plaintiff in this proceeding.[2]
[1]Suzhou Haishun Investment Management Co Ltd v Yue’e Zhao (Ruling No 2) [2018] VSC 144.
[2]Ibid [184].
The application for the freezing order was listed before me on 5 April 2018, effectively three years after the proceeding for enforcement of the judgment was filed.
Beyond the assets identified in the undertakings, the plaintiff seeks an order preventing dealings with the following additional specified assets:[3]
[3]Or the proceeds of the sale or encumbrance if the asset has been sold or encumbered.
(a) shares held in ZCH Investment Pty Ltd ACN 602 841 163;
(b) assets of ZCH Investment Pty Ltd;
(c) shares held in Forbes Finance Holding Pty Ltd ACN 611 016 963;
(d) assets of Forbes Finance Holding Pty Ltd ACN 611 016 963;
(e) shares held in Forbes Financial Holding Pty Ltd ACN 612 463 537;
(f) assets of Forbes Financial Holding Pty Ltd ACN 612 463 537;
(g) shares held in First Capital Corporation Pty Ltd ACN 613 484 576;
(h) assets of First Capital Corporation Pty Ltd ACN 613 484 576;
(i) any money in any account held in your [referring to any of the named entities] sole name, in joint names with another, or in another’s name but held on trust for your benefit.
None of Forbes Finance Holding Pty Ltd, Forbes Financial Holding Pty Ltd, or First Capital Corporation Pty Ltd is a party to the application. The plaintiff's evidence is that First Capital Corporation was deregistered in February 2017. Why the plaintiff believes in those circumstances that it has assets that might be subject to a freezing order was not explained. There was no evidence that any of these companies holds or held assets or possessed liquid funds.
The plaintiff proposes that exceptions to the freezing order include living expenses at $500 per week and $20,000 for initial legal expenses.
Applicable principles
I will briefly state the principles that I am applying. Order 37A of the Supreme Court (General Civil Procedure) Rules 2015 applies to applications for freezing orders.[4] Rule 37A.02(1) provides:
[4]See also Practice Note SC Gen 17 Freezing Orders.
37A.02 Freezing order
(1)The Court may make an order (a "freezing order"), upon or without notice to the respondent, 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.
Rule 37A.03 provides for the making of ancillary orders:
37A.03 Ancillary order
(1)The Court may make an order (an "ancillary order") ancillary to a freezing order or prospective freezing order as the Court considers appropriate.
(2)Without limiting the generality of paragraph (1), an ancillary order may be made for either or both of the following purposes -
(a)eliciting information relating to assets relevant to the freezing order or prospective freezing order;
(b)determining whether the freezing order should be made.
Rule 37A.05(4) specifies circumstances in which the Court may make a freezing order or an ancillary order against a defendant or judgment debtor. Rule 37A.05(4) provides:
37A.05Order against judgment debtor or prospective judgment debtor or third party
...
(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 of the Court 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.
As the rule makes clear, the test to be satisfied for the grant of a freezing order against the defendant as an actual or prospective judgment debtor is satisfaction that in all of the circumstances there is a danger that a prospective judgment of the court will be wholly or partly unsatisfied.
In addition to particular considerations arising in the circumstances of the case, generally a plaintiff must establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant’s absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied.[5]
[5]Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, 321-322, 326 (‘Patterson’); Trkulja v Efron & Associates [2014] VSCA 76 [28].
Hargrave J (as he then was) noted in Robmatjus Pty Ltd v Violet Home Loans Australia Pty Ltd that the court’s powers to make a freezing order or an ancillary order are not limited to the circumstances stated in the rule.[6] An order will not follow as a matter of course if the elements for the existence of the court’s power are established. The court retains a discretion and must consider the balance of convenience.[7]
[6][2007] VSC 165 [47], [52].
[7]Ibid.
The principles relevant to application for a freezing order were summarised by J Forrest J in Zhen v Mo following his review of the authorities as follows:[8]
[8][2008] VSC 300 [22]-[30]; reiterated in Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd [2009] VSC 418 [20], see also Choice Planning Pty Ltd v Mider @ Franklin Street Pty Ltd [2015] VSC 59 [10].
First, that a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party’s capacity to deal with his or her assets.
Second, the order is not designed to provide security for the applicant’s claim. It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.
Third, the applicant bears the onus both in satisfying the Court that the order should be continued and in satisfying the Court as to the amount which is to be the subject of the order.
Fourth, that an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts.
Fifth, that before such an order can be made it is necessary that the applicant establish –
(a)an arguable case against the defendant; and
(b)that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant’s actions in either removing the assets or disposing or dealing with them so as to diminish their value.
Sixth, the balance of convenience must favour the granting of the freezing order.
Seventh, that there is no set process determining the exact nature of an order. The order will be framed according to the circumstances of the case.
Eighth, the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party’s assets and property.
Finally, there may be discretionary considerations which militate against the granting of a freezing order, such as delay in bringing the application on before the court or a lack of candour in the materials placed before the court.
Some further observations are apposite for the present case. The evidence is to be evaluated against the notion that all the plaintiff need show is a danger or a risk that a prospective judgment of the court will be wholly or partly unsatisfied. The plaintiff must prove the risk of a future event. An inference of risk may be drawn from the fact that enquiries regarding the defendant or relevant business/company activity have ‘led to a blank wall’.[9]
[9]Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG (The Niedersachsen) [1984] 1 All ER 398, 406 (Mustill J); Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645, 672 (Lawton LJ); Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194, 197-198 [11]-[12].
In Hua Wang Bank Berhad v Deputy Commissioner of Taxation,[10] the Full Court of the Federal Court approved of the trial judges’ statement that facts that establish an inferential finding of danger of dissipation (the risk of a future event) will be facts from which ‘a prudent, sensible commercial’ person can ‘properly infer a danger of default if assets are removed from the jurisdiction’. The trial judge was quoting Lawton LJ in Third Chandris Shipping Corporation v Unimarine SA.[11] Lawton LJ also said:
In my judgment an affidavit in support of a Mareva injunction should give enough particulars of the plaintiff’s case to enable the court to assess its strength and should set out what inquiries have been made about the defendant’s business and what information has been revealed, including that relating to its size, origins, business domicile, the location of its known assets and the circumstances in which the dispute has arisen. These facts should enable a commercial judge to infer whether there is likely to be any real risk of default. Default is most unlikely if the defendant is a long established, well known foreign corporation or is known to have substantial assets in countries where English judgments can easily be enforced either under the Foreign Judgments (Reciprocal Enforcement) Act 1933 or otherwise. But if nothing can be found about the defendant, that in itself may be enough to justify a Mareva injunction.
[10][2010] FCAFC 140, see also Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141.
[11][1979] 1 QB 645, 672.
Inferences are incompatible with speculation and guesswork, as J Forrest J observed. Inferences must be appropriately drawn from actual evidence so that the inference of a risk of dissipation is drawn from what is described in the cases as ‘solid evidence’.
There was conflict between the parties as to whether there was evidence of a danger that assets may be dissipated.
In determining whether there is a sufficiently substantial danger of dissipation an inference is not usually drawn from acceptance that the plaintiff has prima facie a cause of action, and the court may consider the evidence adduced by the plaintiff to establish its claim to the substantive relief sought.[12] In some cases, the nature of the plaintiff's claim may permit the inference. Fraudulent appropriation is an example of claims where the plaintiff intends to prove allegations of serious dishonesty.[13] Such conclusions as may be drawn from the defendant’s conduct may assist the plaintiff and at the same time establish a substantial danger that the defendant will dissipate the assets the subject of dispute.
[12]Patterson (1989) 18 NSWLR 319, 325, 326, 330-331.
[13]Compare Uniflex (Australia) Pty Ltd v Hanneybel [1998] WASC 259 noting Patterson (1989) 18 NSWLR 319; Pearce v Waterhouse [1986] VR 603, Mort v Woolf [2002] VSC 503, Myer Stores Pty Ltd v Conforto [2000] VSC 382.
Here, the nature of the claim does not permit that inference. The claim is for registration of a foreign judgment based on default under a loan agreement. That is not to say that the presence of circumstances of dishonesty in or about the underlying transactions cannot be proved as a basis for an inference of a danger of dissipation. On this application, alleged circumstances of dishonesty in the transactions on which that judgment is based must be proved if they are to be relied on to show that risk. Further, such matters must be shown to be relevant to the issue.
It is not necessary that the plaintiff establish that the risk will probably materialise. As Redlich J (as he then was) said in University of Technology v Wilson,[14] what must be established is a sufficient likelihood of risk which in the circumstances of a particular case justifies an asset preservation order. That test may be satisfied where the risk of dissipation is less probable than not.[15]
[14][2003] VSC 299 [36].
[15]Patterson (1989) 18 NSWLR 319, 325.
Rule 37A.05(5) specifies circumstances in which the Court may make a freezing order or an ancillary order against a person other than the judgment debtor or prospective judgment debtor, referred to in the rule as a ‘third party’. The rule provides:
37A.05Order against judgment debtor or prospective judgment debtor or third party
...
(5)The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a "third party") if the Court is satisfied, having regard to all the circumstances, that -
(a)there is a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied because -
(i)the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(ii)the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or
(b)a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment of the Court, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.
In this application, the plaintiff specifically relied on r 37A.05(5)(b) in respect of the non-party respondents, Chen Heng Zhao and ZCH Investment Pty Ltd.
Where the freezing order or ancillary order is sought against a third party, the applicant must establish ‘a good arguable case’ that the third party holds, is using, or is controlling assets of the judgment debtor or prospective judgment debtor, or that the third party may be obliged to disgorge assets or contribute towards satisfying the judgment or prospective judgment.[16]
[16]There was some debate in the cases between requiring ‘a real case to be investigated’ and a test of a ‘good arguable case’ (assuming there be a material difference) - see Robmatjus Pty Ltd v Violet Home Loans Australia Pty Ltd [2007] VSC 165 [59]; Groeneveld Australia Pty Ltd v Nolten Vastgoed BV [2011] VSC 18; Deputy Commissioner of Taxation v Ekelmans [2013] VSC 346, [23]-[26]; Choice Planning Pty Ltd v Mider @ Franklin Street Pty Ltd [2015] VSC 59 [11].
Here, the plaintiff contended that the defendant had transferred property to the respondents with intent to defraud creditors (in particular the plaintiffs) and that, accordingly, the transfers are voidable in accordance with s 172 of the Property Law Act1958. The defendant submitted that no alienation of property was identified by the plaintiff that might enliven the jurisdiction under s 172. Although the plaintiff addressed the legal nature of an alienation, the issue on the application was factual. For present purposes, the applicable principles are sufficiently identified by the Court of Appeal in Jew v Holloway.[17] I see no reason to rehearse them in these reasons.
[17][2014] VSCA 260.
Submissions
Plaintiff’s submissions
The plaintiff made the following submissions in support of its application by way of a detailed written submission. Briefly stated, its submissions were as follows.
First, the Chinese court exercised a jurisdiction recognised by Australian law and the judgment given was final and conclusive. The judgment is for a sum certain and there is identity of parties. The defence, apart from a bald denial of indebtedness, alleged a denial of procedural fairness. The plaintiff met this defence by pleading an alternative claim based on default in payment due under the underlying loan agreements.
Secondly, it submitted the underlying claim against the defendant is strong. The plaintiff pointed to the written and executed loan agreements, the receipts signed by the defendant, the directions for payment given by the defendant, and alleged admissions by the defendant in text messages noting that the defendant offered nothing of substance by evidence in opposition to the application while also denying her indebtedness ‘in any way’.
Third, if the orders sought are not made, there is a real risk that the respondents will deal with the identified assets in such a way as to render any judgment wholly or partly ineffective. The plaintiff argued that the inference of risk can be drawn from the nature of the plaintiff’s claim, which it asserts contains allegations of serious dishonesty by the defendant.
The indicia of a danger that a prospective judgment of the court will be wholly or partly unsatisfied were:
(a) The defendant failed to honestly disclose the serious financial difficulties faced by her and the guarantor, Suzhou Bolun Technology Co Ltd.
(b) The defendant was acquiring assets in Australia at a time when she was failing to honour her financial obligations and those of Suzhou Bolun Technology Co Ltd in China.
(c) The defendant was fleeing her creditors in China by the application for permanent residence in Australia.
(d) The defendant borrowed without any serious intention to repay.
(e) The defendant has sought to divest herself of assets, and consequently enrich her son. Or, as the plaintiff expressed it ‘indulged in further asset dealing calculated to defeat creditors’.
(f) The respondents have refused to disclose their asset position to the plaintiff, and sought to ‘prevent access to documents produced on subpoenas issued for the purpose of this application’.[18]
[18]A curious submission given that the subpoenas were held to be an abuse of process, see [8] above.
The plaintiff also submitted that the defendant’s conduct of the proceeding supports the inferences the plaintiff seeks to draw regarding the danger of any judgment being defeated or of prejudicial dealings occurring. With the exception of objecting to subpoenas, the plaintiff did not identify the aspects of the respondent’s conduct in this proceeding with which it took issue.
Fourth, there is a good arguable case that the respondents hold or control assets that belong to the defendant or that they can be required to disgorge pursuant to s 172 of the Property Act 1958 (Vic). Neither the defendant nor the respondents has identified their intentions regarding their assets, nor any specific inconvenience to them that could arise from a freezing order.
Fifth, as to the submission that the application should fail because of delay, the plaintiff responded that laches or delay is a defence for the defendant/respondents to establish, which they have not done. Further, it is a discretionary consideration, and in the context of the nature and purpose of the remedy sought, delay is of no significance since any prejudice to the defendant/respondents occasioned by delay is of no consequence when balanced against the protective purpose of the orders sought.
The plaintiff further submitted that prejudice caused by delay must be unfair. The defendant can hardly assert that she would have disposed of more of her assets sooner to defeat the court’s jurisdiction if she had known a freezing order was coming. Lastly it was put that delay is to be measured from the point at which knowledge of all the material facts is acquired.
The plaintiff sought to explain certain periods of the delay. She deposed to the difficulties she faced with previous legal representatives, and her on-going wish to freeze the defendant’s assets. However, the explanation for the delay between retaining her current representatives and bringing this application in late November 2017 is limited to unspecified investigations carried out regarding the proceeding and this application.
Defendant and respondents’ submissions
For the most part, the defendant/respondents did not take issue with the facts relied on by the plaintiff, but disputed that the inferences sought by the plaintiff were open.
They submitted that the basis for the application was:
(a) the defendant fled China to avoid proceedings and the debts;
(b) the assets held by the respondents are held for the defendant or were transferred by the defendant to the respondents to defeat creditors;
(c) the nature of the claim, involving allegations of serious dishonesty; and
(d) the conduct of the proceeding by the defendant/respondents.
The plaintiff’s inferential case is readily answered:
(a) the defendant had been living in Australia since 2009, and was granted permanent residency in September 2013;
(b) there is no evidence that the assets of either respondent are held on trust for the defendant;
(c) with the exception of the transfer by the defendant of 50 shares in ZCH Investment Pty Ltd to her son, the plaintiff cannot identify any property that has been transferred from the defendant to either respondent. To the contrary, the son transferred shares to the defendant after the commencement of the proceeding and before the son became involved in the proceeding;
(d) the plaintiff does not identify the possible mechanism or quantum of any alleged or feared disgorging;
(e) the plaintiff relied on unparticularised allegations of fraud that are not pleaded in the proceeding and which are matters of argumentative reconstruction rather than evidence;
(f) there is no evidence that the respondents have received any money from the defendant in respect of any alleged voidable transaction;
(g) the respondent’s purchase of land occurred after the proceeding was dismissed in 2016, as did the transfer of shares in ZCH Investment Pty Ltd.
Finally, the respondent described the delay in bringing this application as being at the ‘severe end of the spectrum’. In the period from April 2015 to August 2016, the plaintiff cannot suggest that there was any conduct or transaction suggesting a danger of dissipation of assets. From August 2016 until November 2017, when the plaintiff first sought a freezing order, there was no claim on foot against the defendant. There was no explanation of the delay in not seeking a freezing order promptly after April 2015, or to have commenced the proceeding by application for a freezing order. The best evidence that there was no appreciable risk of dissipation of assets is the absence of relevant misconduct by the defendant when the proceeding was alive and the risk of execution against those assets was most obvious.
The respondent are, and were at all times, entitled to deal with their assets. That they did so did not give rise to a risk of dissipation. The plaintiff adds speculation and guesswork to give a flavour of impropriety to otherwise innocuous dealings. Mostly, the plaintiff’s application is based on dealings that occurred after the proceeding was dismissed. The respondents contended that the son, as he was entitled to do, simply went on market and purchased two properties. I pause to note that the evidence shows no more than that he became the registered proprietor of the lands and that they were subject to a registered mortgage.
In respect of the claim against the respondents, counsel acknowledged that on this application establishing an intent to defraud creditors meets a low bar and addressed no submission on that question. The critical consideration, on which the respondent’s submission was based, was that there was no evidence of any alienation of property.[19] Consequently, because the contest was not about the primary facts but the inferences that were open to be drawn, there was no need for the defendant/respondents to put on answering evidence.
[19]Groeneveld Australia Pty Ltd v Nolten Vastgoed BV [2011] VSC 18, [68].
The only alienation of property relevantly identified by the plaintiff is the defendant’s transfer of her shares in ZCH Investment, but those 50 shares were valued at $50, it being conceded that the company structure had not been actively used prior to the purchase of Ottawa Avenue.
The fact that the plaintiff has a strong case while relevant to the balance of convenience ought not be the predominant factor, since the purpose of a freezing order is not to grant security for the prospective judgment. Further, that concession does not apply to the plaintiff’s case against the respondents.
In the event I was minded to grant a freezing order, the defendant/respondents submitted that the shares and assets of Forbes Finance Holding Pty Ltd, Forbes Financial Holding Pty Ltd and First Capital Corporation Pty Ltd ought not be included as they are not respondents to this application, and no dealing was identified between them and the defendant.
It was also submitted that the asset disclosure sought in the orders was an inappropriate fishing exercise, the exempted funds for litigation were insufficient, and there was no basis for the plaintiff to seek a greater period of notice (seven days) than that which is normally provided by such orders (two days). In reply the plaintiff conceded that a greater sum for litigation funds ($50,000) would be appropriate.
Relevant events
From the affidavits emerged a chronology of events that the defendant/respondents mostly did not dispute.
In July 2010, the defendant registered Coffee Kingdom Pty Ltd and was its sole director and shareholder.
In August 2010, the defendant was registered as the proprietor of a unit at 1 Freshwater Place, Southbank for a consideration of $715,000. The property was purchased with mortgage secured finance from Westpac and the defendant’s equity in the property was not revealed.
The defendant operated a business in China through a company initially called Suzhou Fujide Technology Co Ltd but which changed its name to Suzhou Bolun Technology Co Ltd (Suzhou Bolun Co). The plaintiff contended that the defendant represented that Suzhou Bolun Co was a plastics moulding company with hundreds of employees. On 18 June 2013, a member’s resolution noted the transfer of 100% of the shares in Suzhou Bolun Co (with a registered capital of RMB 50 million) from the defendant to her son for a nil consideration. The defendant remained executive director of the company. The plaintiff asserted that neither the transfer of ownership of the shares nor the true state of the company’s affairs was revealed to it at the time of the loan, on the basis that an adverse inference might be drawn from a want of voluntary disclosure.
What the plaintiff did reveal was that it understood the purpose of the loans to be to avert a short term cash flow problem and financial embarrassment resulting from the timing of renewal of bank facilities, matters that could readily be verified by a prudent lender and which alerted a prudent sensible commercial person to a real prospect of impending financial difficulty for Suzhou Bolun Co.
On 28 June 2013 the defendant was registered as proprietor of the Coventry Street property. It appears the property was purchased off the plan in 2010. Although the instrument of transfer shows that the consideration paid was $635,000, the property was purchased with mortgage secured finance and the defendant’s equity in the property is not identified. There was no evidence, or basis for any inference about, the source of the equity contributed by the defendant to this purchase.
The defendant, who to the plaintiff’s knowledge had resided in Australia since 2009, had a close connection with this country and was granted permanent residency on 6 September 2013. Questions of residency and migration do not assist with any inference that the defendant was likely to abscond or to dissipate assets.
The relevant loan agreements were negotiated at about this time. On 23 July 2013, the parties entered into the first loan agreement to borrow RMB 10 million repayable by 22 October 2013. On 15 October 2013, the parties entered into the second loan agreement to borrow RMB 2 million repayable by 30 December 2013 and on 23 October 2013, the parties entered into the third loan agreement to borrow RMB 8 million repayable also by 30 December 2013.
The plaintiff invited the inference, which I decline to draw, that the defendant borrowed without any genuine intention to repay in circumstances of serious dishonesty because she did not reveal to the plaintiff at the time of negotiating the loans that –
(a) both the defendant and Suzhou Bolun Co were in real financial difficulty;
(b) She had applied for permanent residency in Australia;
(c) She acquired two properties in Australia when her Chinese business was in financial difficulty.
The defendant did make disclose to the plaintiff about matters of financial difficulty. The plaintiff’s evidence on this application does not suggest that the defendant could not have then held a genuine belief that bank facilities would be renewed and the loans repaid as agreed. In October 2015, the return of execution by the Chinese court suggest that the defendant and Suzhou Bolun Co appeared to be insolvent. Signs of financial stress were obvious in the circumstances of the loans in July 2013. This circumstance falls well short of permitting an inference that the defendant did not genuinely intend to repay the loans. There are other inferences open.
The second matter is irrelevant while the third matter could not support the inference sought because the extent of the defendant’s equity in these properties was likely to have been small. Moreover, no inference of dishonesty in the negotiations for the loans can reasonably be drawn simply on an assumption that the borrower was obliged to volunteer good faith disclosure.
The plaintiff said the loans were not repaid and its representative Xia Ping Xiao (Ms Xiao) in February 2014 met with the defendant seeking repayment. Thereafter the plaintiff became increasingly concerned that the loans might not be repaid.
On 16 April 2014, the son transferred his shares in Suzhou Bolun Co back to the defendant for a consideration of RMB 50 million. However, the son has denied that this consideration was in fact paid. The plaintiff submitted it can be inferred that the transfer and re-transfer of shares in Suzhou Bolun Co, in circumstances where there is no explanation for the transaction given by the defendant, was done to defeat creditors. In particular it was submitted that an objective commercial bystander would have the following concerns regarding these transactions and the changes to office holders in the company:
(a) the shares in Suzhou Bolun Co were ‘worth little or nothing’ by April 2014 and ‘their re-transfer for substantial consideration is likely to have been at a vast over value, as a means to defeat creditors’; or
(b) if the son’s assertion that he did not receive the consideration said to have been paid for the re-transfer is accepted, this indicates he and the defendant were ‘prepared to allow a false position to be represented to the company authorities – in the hope that they or anyone searching this document might be discouraged from pursuing the mother’;
(c) the defendant was the real controller of the company throughout this period;
(d) the first respondent ‘was prepared to allow himself to be used by the Defendant as an instrument in arranging her affairs to the disadvantage of creditors’; and
(e) ‘the shares were really always the Defendant’s’ and the transfer in June 2013 was ‘either a sham or was made on secret terms that they were really to be held by him for her benefit’.
This inference, of an intention to defeat creditors, is not reasonably open. Other explanations of the transactions are available. In particular, it soon became apparent that Suzhou Bolun Co was in financial difficulty and it is probable (at least on the information such as it presently is) that there was no equity for shareholders in April 2014. The sham suggested by the plaintiff is, in the present context, of no relevance. The shares were unlikely to be an asset of any value when disposed of by the defendant and the inflated consideration noted on the retransfer of them was never paid. The transaction was not likely to have had the effect of defeating the interests of any creditor of the defendant.
An inference that does appear to be available is that the plaintiff took as security for the loan to the defendant a guarantee from Suzhou Bolun Co that was worthless, such that the loan was always effectively unsecured.
On 26 April 2014, Ms Xiao again demanded repayment of the plaintiff’s loan alleging that the defendant acknowledged her indebtedness. Subsequently a number of text messages evidenced the demand for repayment of these loans. I note that these text messages could constitute an acknowledgement by the defendant of her indebtedness. The plaintiff contended that the defendant suggested that on 1 May 2014 she would borrow funds to repay the loans but the following day she left China and returned to Australia. The plaintiff contended it can be inferred that the defendant entered into the loan arrangements with the plaintiff without any intention of repaying the loans, being ‘circumstances of serious dishonesty’. Further, it can be inferred the defendant left China to avoid the debt. I am not prepared to draw these inferences.
Then on 7 May 2014, the plaintiff commenced proceedings in China to recover the loans. Suzhou Bolun Co had guaranteed repayment and a representative appeared at the first hearing of the proceeding stating that the defendant suffered from depression and could not appear in person. The Suzhou People’s Court then served notice on the defendant about its requirements for the filing of evidence and the next hearing date.
On 30 September 2014, the defendant signed an exclusive sale authority to sell both the Freshwater Place and Coventry Street properties for $650,000 and $600,000 respectively.
On 10 October 2014, the plaintiff’s proceedings were heard in the Chinese court and judgment was entered in favour of the plaintiff.
On 8 November 2014, Ms Xiao found the defendant in a restaurant in Melbourne, informed her of the Chinese judgments and demanded repayment of the judgment debts in China.
On 13 November 2014, ZCH Investment Pty Ltd was registered with an issued capital of 100 ordinary shares held equally by the defendant and her son, who were also its directors.
On 13 February 2015, the plaintiff applied to the Suzhou People’s Court for execution of the judgment. Verdicts of execution were returned in October 2015 which stated that all assets of the defendant and Suzhou Bolun Co were sealed up by other courts and that there were no available assets against which the plaintiff could execute the judgment. There were six house properties registered to the defendant, and one house property registered to Suzhou Bolun Co. The Chinese Court process recorded that these house properties had been mortgaged and sealed up by several other courts and were not available for disposal. The Court recorded that no properties were found available for execution and terminated the execution procedures.
On 8 April 2015, Freshwater Place was sold for $648,000, a capital loss of $67,000. The defendant states that approximately $560,000 was paid in discharge of the mortgage and that the expenses of the sale were approximately $13,000.
On 15 April 2015, the plaintiff commenced this proceeding. The chronology of the proceeding has already been noted.
On 3 December 2015, the plaintiff applied to deregister Coffee Kingdom Pty Ltd, which occurred on 8 February 2016. The plaintiff submitted that it can be inferred from the deregistration form lodged with ASIC that prior to deregistration the defendant ‘caused the business and its assets to be sold or disposed of’. Equally compelling is the inference that the registered company had not been used for any purpose and was deregistered to avoid compliance fees and obligations. It was not reasonably open on the evidence to infer that the company had traded or held assets.
On 29 February 2016, Forbes Finance Holding Pty Ltd was incorporated. The son was appointed as one of five directors and he subscribed to 5,250 of 30,000 shares. It is not apparent that the other four directors were related parties to the defendant, and I would infer that this company was an independent commercial entity.
On 27 April 2016, the Coventry Street property was taken off the market. The defendant remains the registered proprietor.
On 17 May 2016, Forbes Financial Holding Pty Ltd was incorporated. The son was appointed as a director of this company and subscribed to 5,250 of 30,000 shares.
On 5 July 2016, First Capital Corporation Pty Ltd was registered, the son was appointed a director, and subscribed to 157,500 of 1,000,000 shares. It was not apparent that the other shareholders in this company were related to the defendant.
Soon after, the defendant was appointed as a director of both Forbes Financial Holding Pty Ltd and Forbes Finance Holding Pty Ltd and became the beneficial owner of the son’s shares. These transactions suggest that any equity in these companies that may have been granted by the defendant to her son on incorporation, which is an inference that the plaintiff invites, was returned to the defendant. The plaintiff submitted that such an inference should be drawn from the defendant’s description of herself as an investor, her possession of the proceeds of sale of Freshwater Place, the incorporation of ZCH Investment Pty Ltd and her involvement in the acquisition of two properties at Blackburn. Further, the son had no business experience, almost no education, and described himself as a ‘tour guide’ by occupation. I am not disposed to draw that inference.
On 10 August 2016, the proceeding was dismissed. No further step was taken in the proceeding until a notice of change of solicitor was filed on 29 May 2017 and the applications, referred to above, were filed in November 2017. The proceeding would not be reinstated until 14 March 2018.
During this period there were further transactions. On 9 November 2016, the defendant transferred her shares in ZCH Investment Pty Ltd to her son and ceased to be a director. On 23 January 2017, a property at 8 Cluney Court, Blackburn South was registered in the name of the son. It had been purchased for $1.3 million in October 2016. On 2 February 2017, ZCH Investment Pty Ltd became registered as proprietor of 1 Ottawa Avenue, Blackburn which had been purchased in October 2016 for $1.73 million. The contracts for the purchase of both Cluney Court and Ottawa Avenue were entered into on the same day. The plaintiff submits it can be inferred that the real purpose of ZCH Investment Pty Ltd is to enrich the defendant’s son. However, there is no basis to infer that the defendant provided any equity in each purchase. The documents in evidence do not include the contracts of sale, but there did not appear to be a directing party nominating the son or ZCH Investment Pty Ltd as purchaser. Each property was bought with a mortgage secured loan and there is no evidence that the defendant participated in the financing transactions.
On 9 February 2017, First Capital Corporation Pty Ltd was deregistered.
The plaintiff contended that on 27 April 2017, Dong Ying Zhao was registered as proprietor of 1 Davey Road, Montmorency which had been purchased on 27 February 2017 for $665,000. Dong Ying Zhao was not shown to be related to the defendant/respondents.
It was reasonable for the defendant to proceed, at least until November 2017, on the basis that the plaintiff had abandoned its attempts to register the Chinese judgment. There have been no further dealings alleged since November 2017.
Conclusion
I will deal firstly with the issue of a prima facie cause of action against the defendant. I accept the plaintiff’s submission that for present purposes its claim for registration of the Chinese judgment is strong and that the underlying cause of action for debt due on default under a loan agreement is based on documentary evidence and supported by the defendant’s acknowledgement of indebtedness after default. The defendant’s bald statements that there was a denial of substantial or natural justice in the Chinese court and that she was not indebted to the plaintiff were not developed. In any event, the plaintiff has added claims based on the underlying loan contracts. The defendant conceded that on the material before the court the plaintiff has a strong case.
The second issue is whether the plaintiff has shown a good arguable case that the respondents hold, are using, or are controlling, assets of the defendant or that the respondents may be obliged to disgorge assets or contribute towards satisfying the judgment or prospective judgment. I accept the defendant’s submission that there is no evidence that either respondent holds any assets on trust for the defendant, or otherwise is empowered to use or control assets on behalf of the defendant. Without more, I would not draw that inference from the facts (assuming them to be so) that the son has no business experience, almost no education, and described himself as a ‘tour guide’ by occupation.
Although the plaintiff concentrated its submission on the issue of the defendant’s intention to defraud creditors, the defendant submitted that the plaintiff failed to identify an alienation of property to which that intention might be affixed. Despite being confronted with this submission, the plaintiff did not, in reply, identify a substantive alienation about which the plaintiff has a good arguable case that the respondents may be obliged to disgorge or contribute assets. Rather, the plaintiff submitted that alienation is an ‘extremely broad concept’, and may be established by ‘a series of steps’ one can regard ‘as a single disposition’ when one looks at the substance, not merely the form of the steps as a whole.
On the evidence the possible transactions that might constitute an alienation are:
(a) the transfer of all issued shares in Suzhou Bolun Co to the son;
(b) the subscription by the son to shares in ZCH Investment Pty Ltd;
(c) the subscription by the son to shares in Forbes Finance Holding Pty Ltd;
(d) the subscription by the son to shares in Forbes Financial Holding Pty Ltd;
(e) the transfer of the defendant’s 50 shares in ZCH Investment Pty Ltd to the son;
(f) ZCH Investment Pty Ltd’s purchase of Ottowa Avenue; and
(g) the son’s purchase of Cluney Court.
I do not accept that any of the following transactions was relevantly an alienation of property:
(a) the shares in Suzhou Bolun Co were re-transferred to the defendant before the plaintiff commenced the debt recovery proceeding in China;
(b) as to the subscription to shares in ZCH Investment Pty Ltd, Forbes Finance Holding Pty Ltd and Forbes Financial Holding Pty Ltd, there is no evidence that there was any equity in these companies at the time of issue, let alone that it was paid for by the defendant;
(c) there is no evidence that the defendant contributed financially to the subscription by the son in shares in ZCH Investment Pty Ltd, Forbes Finance Holding Pty Ltd, or Forbes Financial Holding Pty Ltd; and
(d) there is no evidence that the defendant had any involvement in, or made any contribution towards the purchase of the Cluney Court property or to the registration of the son as the proprietor of it.
However, the transfer by the defendant of her shares ZCH Investment Pty Ltd on 9 November 2016 to her son and that company’s acquisition of the Ottawa Avenue property warrants close consideration. The plaintiff submitted that the transfer of her shares was for no consideration but the documents on which the plaintiff relies for this contention do not support it. Further, the plaintiff’s affidavits did not allege that the transfer was for no consideration raising an evidentiary issue to which the defendant might have responded.
It appears that ZCH Investment Pty Ltd was a shelf company until it was used to purchase Ottawa Avenue, which, it appears from the realestate.com website was last sold on 22 October 2017 for $1.73 million. That ZCH Investment Pty Ltd was the purchaser is to be inferred from its registration as proprietor of that property on 2 February 2017. The contract of sale was not in evidence. The property was purchased with mortgage secured finance. The value of ZCH Investment Pty Ltd’s equity in the property is not known. There was no evidence of any involvement of the defendant in this transaction other than as a shareholder in ZCH Investment Pty Ltd from the date of the sale identified from the website until the transfer of the shares, a period of 18 days. However, when the shares were transferred, the company was no longer a shelf company and held an asset in the form of an uncompleted contract of sale.
The plaintiff contended that this transfer of shares was an alienation of property that evidenced an intention on the part of the defendant to ‘enrich the son’. The defendant, it submitted, would have it that she has no interest in that property or the company that owns it. The plaintiff contended that the defendant resided at Ottawa Avenue as her home. I accept this contention and infer that the defendant does reside there and it is her home for the following reasons.
The defendant by her affidavits (affirmed 2 November 2017 and 29 March 2018) stated her address as the Coventry Street property but this assertion is contradicted by other evidence. I am satisfied that the statement is false.
First, the defendant listed that property for sale as subject to a tenancy agreement and secondly, the affidavits of the process server depose to the presence of tenants at the property on 30 November 2017 who described the defendant and her son as previous tenants for whom mail had occasionally arrived. I am satisfied on the material (there was no cross-examination of deponents) that the defendant gave the address of her rental investment property as her address when affirming those affidavits and probably did so to avoid being connected with Ottawa Avenue.
Secondly, there was uncontradicted evidence from a process server about his attendance at Ottawa Avenue while attempting to serve the defendant. On 30 November 2017, the defendant’s son identified the person on whom service was being attempted as his mother, stating that she was not in and not responding to the question whether she lived there. On 4 December 2017, the process server returned. Neighbours informed him that a Chinese woman and her son lived in the property and identified the defendant from a photograph as that woman. The process server again spoke to the son, who confirmed that the person to be served was his mother, stating that she was not present, that he was unaware of when she would be returning, and that she did not permanently reside with him.
The plaintiff’s material plainly raises questions about the circumstances surrounding the share transfer and the acquisition of Ottawa Avenue. Both the defendant and her son have filed affidavits in the proceeding. Each of them chose to respond some of the plaintiff’s evidence, but neither of them has explained the circumstances of these particular dealings. In this context, the age, occupation, and business experience of the son is relevant. Given that it is improbable that the whole of the purchase price and the expenses of the purchase were advanced by Westpac on mortgage security, how ZCH Investment Pty Ltd completed the purchase without financial assistance is unexplained. In the absence of any explanation from the defendant/respondents, a court would be more readily able to infer that the defendant intended to defeat or delay her creditors by investing some of her equity into the purchase of this property on behalf of ZCH Investment Pty Ltd.
I am satisfied that the defendant’s transfer of her shares in ZCH Investment Pty Ltd was arguably an alienation of property to which the relevant intention might be affixed and that the plaintiff has a good arguable case that ZCH Investment Pty Ltd may be obliged to disgorge or contribute assets.
The key question is whether the plaintiff has proved that there is a real risk that the defendant/respondents have established, to the requisite standard to warrant the imposition of a freezing order, a danger that assets have been disposed of within the jurisdiction or dealt with in some other fashion such that the plaintiff, if it succeeds in the action, will not be able to have its judgment satisfied.
I was not persuaded that the answer to this question was to be found in the dealings between the parties in China. The inferences for which the plaintiff contended could not be reasonably drawn from the facts presented. It would have been clear to a commercially prudent lender from the purpose of the loan that Suzhou Bolun Co was in significant financial difficulty. It would seem equally open, particularly having regard to the return of execution in the Chinese court, to infer that the defendant’s commercial enterprises in China suffered a financial collapse causing an urgent need for working capital, to avoid what might have been inevitable and which was consumed in that collapse. As the defendant submitted, that view of events in China also answers the plaintiff’s ‘blank wall’ submission.
Ultimately, the plaintiff submitted that a careful examination of the conduct of the defendant in relation to those events in China established that her probity could not be relied on. While I am not prepared to draw that inference, I am satisfied that the defendant’s probity is called into question by the circumstances surrounding the acquisition of the Ottawa Avenue property.
I also accept the defendant’s submission that her dealings in relation to the Freshwater Place property and the Coventry Street property did not support an inference of a danger of dissipation of assets. The properties were on the market for a long time, which is evidence of a vendor seeking the best price rather than seeking to delay or hinder execution by creditors. The capital loss on the sale of the Freshwater Place apartment was typical of the market. Commonly, such sales are characterised by a quick sale at an undervalue or a sale to a related party. Significantly, the Coventry Street property has never been sold.
These circumstances lend some support to the plaintiff’s claim that investigation of the defendant’s financial affairs in Australia was necessary before making application for a freezing order. It appears that the plaintiff was motivated to make the application on discovery of the circumstances surrounding the purchase of Ottawa Avenue.
Delay is a relevant circumstance particularly where there is prejudice to the defendant. The plaintiff had known the material facts that it contended demonstrated a prospect of dissipation of assets prior to obtaining judgment in China on 10 October 2014 so the period of delay to be considered is more than 3 years. The plaintiff sought to execute the judgment in China and in October 2015 learned that there were no assets against which the plaintiff could execute the judgment. I doubt whether this revelation surprised the plaintiff. It had not waited for the return of execution from the Chinese courts having commenced registration of judgment proceedings in Australia in April 2015. I am satisfied that the plaintiff was well aware of the defendant’s connection with Australia from a time prior to the loan advances.
In this initial period, the plaintiff acted promptly, both in taking court proceedings in China following the defendant’s default in repayment of the loans and in seeking to enforce the judgment in Australia. However, the evidence does not establish that the defendant was aware of the Chinese judgment at any time prior to its entry. The defendant did not dispute the plaintiff’s evidence that Mrs Xiao told the defendant of the judgment and demanded payment in Melbourne in November 2014.
Logically, the danger that assets will be dissipated will be acute at times when the defendant understands that she is exposed to the risk of the plaintiff’s successful claim for recovery of the debt. That period had commenced by 8 November 2014 when the plaintiff informed the defendant of the Chinese judgements and demanded repayment. ZCH Investment Pty Ltd was promptly incorporated. The defendant was plainly aware of the risk of execution against her assets from April 2015 when the proceeding was commenced. The defendant’s known assets, Freshwater Place and the Coventry Street property, remained on the market. The defendant has not explained what became of the net proceeds of the sale of Freshwater Place. Those proceeds appear modest. On the other hand, retention of the Coventry Street property as an investment property to the present day, notwithstanding that it has been on the market, is not indicative of a danger of dissipation of assets.
Considered in isolation, I would not have been persuaded by those property dealings that there was at that time a sufficient likelihood of risk of dissipation to justify a freezing order, but circumstances changed.
The defendant/respondents contended that the transactions by which ZCH Investment Pty Ltd acquired the Ottawa Avenue property all occurred after the proceeding for the registration of the Chinese judgment had been dismissed. During the time when the defendant faced a risk of execution against her assets of a judgment the Chinese debt no relevant alienation or attempted alienation of property that might demonstrate a danger of dissipation of assets occurred.
Accepting, as I do, that a freezing order is a drastic remedy requiring that I exercise a high degree of caution before interfering with the capacity to deal with assets, it is pertinent to note that the Ottawa Avenue property functions as the home of the defendant and her son and there is no evidence that it generates any income for ZCH Investment Pty Ltd. The Coventry Street property is held as a passive investment property and is no longer on the market. A freezing order in respect of these assets will not significantly impact on the circumstances of the defendant/respondents.
On the other hand, the plaintiff’s transaction with the defendant in China was, if the financial capacity of Suzhou Bolun Co had been realistically assessed at the time of the loans, in a practical sense unsecured. It is not the function of an asset preservation order to provide security for the plaintiff’s claim to be entitled to register the Chinese judgment or its claim on the underlying loan transactions. It might be thought that the plaintiff was seeking better security than it originally bargained for had it sought a freezing order when the proceeding was issued. The temporal correlation between the transactions surrounding the Ottawa Avenue property purchase and the application for the freezing order support the notion that the order is being sought to preserve assets from being dissipated and the court’s processes from being frustrated.
It cannot be contended that the court’s processes could not then be frustrated because the proceeding had been dismissed and would not be reinstated for a further six months. The defendant/respondents may have believed that the plaintiff was no longer pressing the defendant for its debt. Such a belief is not relevant. The plaintiff’s cause of action on the underlying transactions appears capable of being pursued in the Victorian courts against a defendant resident within the jurisdiction. That process could be frustrated if the defendant dissipates her assets.
I am persuaded that the procedural dismissal of the plaintiff’s claim did not evidence lack of desire on its part to pursue recovery of the debt. It remains able to do so and has in fact reinstated the proceeding, amended to include the underlying transaction. Further, I was informed that a second proceeding has been issued seeking relief arising out of the same circumstances but on different grounds.
There is some evidence that the plaintiff has experienced difficulties with legal representation in Australia and its wish to seek preservation of the defendant’s assets has been encouraged by more recent events. I am satisfied that the delay between the retention of the plaintiff’s current solicitors and the commencement of this application in November 2017 is not disentitling. The defendant/respondents did not and could not submit that they were prejudiced in the organisation of their financial affairs by reason of that delay.
I am persuaded that the circumstances discussed above concerning the Ottawa Avenue property establish a sufficient likelihood of risk of dissipation of assets as justifies an asset preservation order.
I see no reason for a freezing order in relation to the shares in or assets of Forbes Finance Holding Pty Ltd, Forbes Financial Holding Pty Ltd, or the deregistered First Capital Corporation Pty Ltd.[20]
[20]See Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1, 41-42 [65].
The order that I propose to grant will be in significantly more limited terms than was sought by the plaintiff. First, I propose to confine the order to particular identified assets being:
(a) the Ottawa Avenue property;
(b) the Coventry Street property; and,
(c) the shares held in ZCH Investment Pty Ltd.
Secondly, because of that restriction, I see no reason for paragraphs 8 and 9 of the proposed order. I will make the usual ancillary order for disclosure of assets but I will not order a separate disclosure of assets as at 30 November 2017.
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