Sydneywide Pipecleaning Pty Ltd v McGee

[2016] NSWSC 424

Supreme Court

New South Wales

Medium Neutral Citation:	Sydneywide Pipecleaning Pty Ltd v McGee [2016] NSWSC 424
Hearing dates:	1 April 2016
Date of orders:	01 April 2016
Decision date:	01 April 2016
Jurisdiction:	Equity - Duty List
Before:	Kunc J
Decision:	Notice of Motion dismissed
Catchwords:	INJUNCTIONS – Interlocutory – Asset preservation order – No issue of principle
Legislation Cited:	Evidence Act 1995 (NSW) Civil Procedure Act 2005 (NSW)
Category:	Procedural and other rulings
Parties:	Sydneywide Pipecleaning Pty Ltd (Plaintiff) Anthony McGee (First Defendant) Your Elite Sewerage Services Pty Ltd ABN 50 603 760 (Second Defendant)
Representation:	Counsel: P. Doyle-Gray (Plaintiff) N. Kirby (Defendants)   Solicitors: G&B Lawyers (Plaintiff) Fortis Law Group (Defendants)
File Number(s):	2015/233396
Publication restriction:	No

EX TEMPORE Judgment

1. By motion filed in Court today, the plaintiff seeks asset freezing orders against the first defendant, Mr McGee, and the second defendant, Your Elite Sewerage Services Pty Ltd (“YESS”). In the alternative to freezing orders, other relief is sought, which is, in the events which have happened, not pressed and to which I need make no further reference.

2. This application is brought against the background of an earlier application by the plaintiff for asset freezing orders against the defendants. That was determined by Justice Black, sitting as Duty Judge, on 11 March 2016. I have had the advantage of reading his Honour's ex tempore judgment on that occasion. His Honour concluded that, on the evidence then before him, there was not a proper case for a freezing order. However, his Honour went on to say:

12. It seems to me that the matters to which I have referred in this judgment provide a compelling case for asset disclosure, by Mr McGee and YESS, not as an incident of any freezing order, but because a real question arises as to whether the just, quick and cheap resolution of these proceedings is likely to be promoted by the parties having a common understanding of the assets that will be available to meet any judgment against Mr McGee and YESS. Plainly, it will be difficult for both parties to reach a sensible commercial position, as Mr Doyle-Gray points out, if there is uncertainty in SPPL’s mind as to whether it has full understanding of the assets of Mr McGee and YESS. Equally, if the evidence that has been led today is accurate, then there is every reason for Mr McGee and YESS to disclose those assets, because the limit to them raise a real question as to the commercial utility of these proceedings in their present form. For that reason, I propose to make an order under s 56 of the Civil Procedure Act for disclosure of assets by Mr McGee and YESS. I note that that order is not opposed by Mr McGee and YESS..

3. To give effect to that paragraph of his reasons, his Honour made this order:

Order pursuant to s. 56 of the Civil Procedure Act that the Defendants serve an affidavit setting out the value and location of their assets and liabilities by 22 March 2016.

4. The present application arises out of events related to the service of an affidavit sworn by Mr McGee on 22 March 2016 (the “Affidavit”), in purported compliance with his Honour's order.

5. The Affidavit lists Mr McGee's own assets and liabilities. It also refers to the impending sale of his residential property, a sale which formed part of the basis of the plaintiff's earlier application for a freezing order. That sale is to settle next Monday, 4 April. Mr McGee will receive just under $80,000 from the proceeds of that sale. I will return to those proceeds later in these reasons.

6. The disclosure in relation to YESS in purported compliance with Justice Black's order consists of financial reports and other documents prepared on Mr McGee's instructions by YESS’s accountant. One of the assets of YESS is a truck described in the financial documents as a "Hino truck" (the “Truck") with a value after depreciation of $113,977.

7. The evidence in relation to the Truck and the Affidavit may be summarised as follows. Mr McGee gave evidence by telephone link in the present application. I accept his evidence because it was inherently plausible and consistent with what little contemporaneous documentary evidence the Court had before it.

8. Mr McGee told the Court that he swore the Affidavit at approximately 2.30pm on the afternoon of 22 March 2016. He had some days earlier agreed with a Mr Luke Moore, of IC Pipes Pty Ltd in Queensland (“IC Pipes”), to sell Mr Moore the Truck for $128,000. Mr McGee's evidence is that the sale was subject to IC Pipes obtaining finance. At the time he swore the Affidavit, Mr McGee did not have any expectation that the conclusion of the sale of the Truck was imminent.

9. Other evidence tendered before me shows that, at 2.58pm that same afternoon, a security interest in the Truck was registered by an entity of the Bank of Queensland, with the grantor of that security interest listed as IC Pipes. Other evidence shows that, on 22 March 2016, that same Bank of Queensland entity paid $68,144.02 to Esanda and $59,855.98 to YESS. The evidence does not disclose exactly when on 22 March 2016 (or, possibly, on 21 March) that payment was made. I accept Mr McGee's evidence that, at the time he swore the Affidavit, he was not aware that those payments had been made.

10. Other evidence demonstrates the receipt of $59,855.98 into YESS’s bank account on 22 March 2016. Most, if not all, of those funds remained in the company's bank account as at the date of these reasons. Mr McGee gave evidence that he intended to apply what was left in YESS's account to the liabilities of YESS and the costs of the present proceedings.

11. Part of the plaintiff's case today was that there was some evidence which suggested that Mr McGee had received a deposit for the Truck from Mr Moore, which deposit had not been disclosed in the Affidavit. There was hearsay evidence from a private investigator retained by the plaintiff that he (the private investigator) had earlier had a conversation with Mr McGee in which the private investigator had represented himself as an interested purchaser of the Truck. The private investigator's evidence was that Mr McGee had said he had taken a deposit and had already sold the Truck.

12. When this evidence was put to Mr McGee in cross-examination, Mr McGee said that what he had told the private investigator was that it had been sold subject to finance. The private investigator’s affidavit was sworn two weeks after the alleged conversation and was unsupported by any contemporaneous file note. Given the importance of the transaction to Mr McGee I think his recollection is more likely to be accurate and I prefer the evidence of Mr McGee on this point.

13. The sale of the Truck and the fact that no reference was made to the impending sale in the Affidavit was at the heart of the application made today by the plaintiff. The plaintiff, properly, did not suggest that it was necessary for me to find that the Affidavit was false in so far as it did not disclose the impending sale of the Truck. Rather, the case was put on the basis that Mr McGee should have disclosed the impending sale of the Truck to avoid giving an incomplete picture. It was submitted that his failure to do so was an important element in the Court inferring that Mr McGee's evidence about the assets and liabilities of the defendants was unreliable and that the Court should also infer a risk of dissipation of assets by the defendants with the intention of defeating any future judgment.

14. The Court does not accept that submission for, at least, two reasons. First, on the facts as I have found them, there was no obligation to disclose the impending sale in order to comply with Justice Black's order (see paragraph [3] above). The Affidavit does set out "the value and location of [the defendants'] assets and liabilities".

15. It was submitted on behalf of the plaintiff that the prefatory words in his Honour's order, "Order pursuant to s 56 of the Civil Procedure Act", somehow enlarged the operation of the order so that the impending sale of the Truck should have been disclosed. I disagree with that submission.

16. The reason that I disagree with it is that the operative provision of his Honour's order is that the defendants serve an affidavit doing what the order specifies. Given the possibility of being charged with contempt, a party is entitled to know exactly what it must do to comply with an order. In my respectful opinion, his Honour's order satisfies that requirement of clarity. To interpret the prefatory words as having an effect on the content, rather than doing nothing more than identifying the source of the power being exercised, would be inconsistent with the need for the order to be clear in its terms.

17. Section 56 of the Civil Procedure Act2005 (NSW) has a wide ranging influence and impact on the conduct of litigation. If those words were to have operative effect for the purposes of the order, then it would be impossible for a party to know what exactly it had to do so as to comply with the essential, but nonetheless very broad, injunction in s 56 to facilitate the overriding purpose, namely the just, quick and cheap determination of the real issues in question.

18. The second reason why the Court does not accept the plaintiff's submission is a factual one. As at the time Mr McGee swore the Affidavit, the Truck and whatever money was owing on it was properly disclosed in the Affidavit as an asset and liability, respectively, of YESS. It was put with eloquent force for the plaintiff that the Court should regard it as an improbable coincidence that only 28 minutes after the Affidavit was sworn that the sale of the Truck was completed, as is evidenced by the electronic lodgement of the security interest (see paragraph [9] above).

19. The Court does not accept that submission. The Court is satisfied that Mr McGee did not know that the sale of the Truck was about to be completed at any time that day or, indeed, at any specific time in the future. Mr McGee's state of mind appears to have been that the sale would go through when IC Pipes had obtained finance.

20. In reaching the conclusions concerning Mr McGee's evidence and dealing with the allegations made by the plaintiff, I have approached the matter by reference to the statutory enactment of the Briginshaw standard in s 142 of the Evidence Act1995 (NSW):

142 Admissibility of evidence: standard of proof

(1) Except as otherwise provided by this Act, in any proceeding the court is to find that the facts necessary for deciding:

(a) a question whether evidence should be admitted or not admitted, whether in the exercise of a discretion or not, or

(b) any other question arising under this Act,

have been proved if it is satisfied that they have been proved on the balance of probabilities.

(2) In determining whether it is so satisfied, the matters that the court must take into account include:

(a) the importance of the evidence in the proceeding, and

(b) the gravity of the matters alleged in relation to the question.

21. The essence of the allegation made against Mr McGee by the plaintiff was a serious one. I was not satisfied, on the balance of probabilities, taking into account the seriousness of the allegation, of the version of the facts pressed upon the Court by the plaintiff.

22. It is necessary then to return to the well-known principles which apply in the case of asset freezing orders. The seriousness of the ultimate issue to be tried was not in issue. The plaintiff, fairly, did not depart from the orthodox approach that it was necessary for the plaintiff to demonstrate that there was a risk of dissipation of assets with the intention of frustrating any future judgment. The findings which the Court has made in the preceding paragraphs eliminate the essential building block in the plaintiff's case (the impending sale of the Truck and its non-disclosure in the Affidavit) that the Court should infer that there is such a risk in this case.

23. There is a further reason why the Court is not satisfied of such a risk in these proceedings. Mr McGee gave evidence that he intended to use the proceeds of the sale of his home (approximately $80,000) for the purpose, amongst other things, of paying his and YESS’s legal fees in these proceedings. That is entirely plausible and understandable and the Court accepts it. Even the form of asset freezing order proposed by the plaintiff allowed for legal expenditure of up to $100,000 for both defendants.

24. Similarly, the fact that most of the proceeds of the Truck remain in YESS’s bank account does not support an inference of a likely dissipation of assets with the intention to frustrate any ultimate judgment. Again, the explanation given in evidence by Mr McGee as to what that money is going to be used for (debts and legal fees) is entirely plausible and is accepted by the Court.

25. For these reasons the Court declines to make an asset freezing order. The intention underlying Justice Black's order was to assist the parties to come to a view, consistently with their obligations under s 56 of the Civil Procedure Act, as to the ultimate utility of these proceedings. The Affidavit suggests that is a question to which the parties should give their most earnest attention.

26. Justice Black left open to the parties the option of returning to his Honour, both to deal with the costs of the last application and for further directions in the proceedings, including the question of possible mediation. In order to give the parties an opportunity to consider those matters, I will stand the matter over for two weeks before Justice Black, but on the basis that the parties should approach his Honour's Associate for confirmation that the date I propose is convenient to his Honour.

27. The plaintiff has failed in its motion today. The defendants seek their costs. No reason has been advanced, nor could there have been, as to why costs should not follow the event.

28. The Court's orders are:

1. The plaintiff's notice of motion filed 1 April 2016 is dismissed.

2. The plaintiff is to pay the defendants' costs of that notice of motion.

3. The proceedings are stood over to Friday, 15 April 2016 at 9.30am before Black J.

4. The parties are directed to communicate with the Associate to Black J to confirm that the date in order 3 is convenient to his Honour.

5. The exhibits may be returned.

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Decision last updated: 13 April 2016