The Owners - Strata Plan 82413 v Hinderry

[2016] NSWSC 433

Supreme Court

New South Wales

Medium Neutral Citation:

The Owners – Strata Plan 82413 v Hinderry [2016] NSWSC 433

Hearing dates:

6 April 2016

Date of orders:

06 April 2016

Decision date:

06 April 2016

Jurisdiction:

Equity - Probate List

Before:

Kunc J

Decision:

Asset preservation order continued until further order

Catchwords:

INJUNCTIONS – Continuation of asset preservation order first made ex parte – No issue of principle

Legislation Cited:

Home Building Act 1989 (NSW)

Category:

Procedural and other rulings

Parties:

The Owners – Strata Plan 82413 (Plaintiff)
Tony Steven Hinderry (Defendant)

Representation:

Counsel:

 

S.S. Ahmed (Plaintiff)
M.J. Dawson (Defendant)

  Solicitors:
Mills Oakley (Plaintiff)
Maguire & McInerney (Defendant)

File Number(s):

2016/91679

Publication restriction:

No

ex tempore Judgment

1. HIS HONOUR: This is an application by the plaintiffs for a continuation until further order of an asset preservation order made by Justice White sitting in the Duty List on 24 March 2016. On that occasion his Honour made the order ex parte. It has returned to me on a contested basis in the Duty List today.

2. The underlying proceedings are a claim for breach of warranties under s 18B of the Home Building Act1989 (NSW) which may be enforceable against the defendant pursuant to s 3A and s 18C of that Act. Justice White (see his Honour's judgment of 24 March 2016 at paragraph 1) was satisfied that the plaintiff had a sufficiently strong prima facie case. The defendant, today represented by Mr M J Dawson of Counsel, does not take issue with that conclusion.

3. Justice White summarised the reasons which satisfied him as to why an asset preservation order should be made:

2.   From the combination of the circumstances that the defendant has not responded to the plaintiff’s solicitors correspondence and from his having listed the two units in the subject development for sale and from the evidence as to the lack of other obvious assets of the defendant, there is a reason to apprehend that unless restrained, the defendant might so deal with those assets in a way that could have the purpose or effect of defeating a judgment.

4. The plaintiffs, represented today by Mr S S Ahmed of Counsel, have supplemented the evidence that was before Justice White. The defendant relies on an affidavit sworn by the defendant's solicitor, Mr Barnes. I shall return to the subject matter of that affidavit in a moment.

5. The plaintiffs bear the onus of satisfying the Court that the order made by Justice White should now continue until further order. At the heart of that obligation rests the necessity to prove that there is a risk that the defendant has embarked or may embark upon a course which might have the purpose or effect of frustrating any judgment to which the plaintiffs might become entitled. The plaintiffs have provided an evidentiary basis from which the Court can, and does, draw an inference of such risk.

6. These proceedings concern the development of a block of units where the defendant was one of the developers. He continues to own at least two units in that block. As both parties acknowledge, the policy of insurance which now drives these proceedings, issued by CGU, is a policy of last resort. In relation to defects it can only be called upon if the original builder is deceased, disappeared or insolvent. The builder was a company called Australian Coastal Development Group Pty Ltd (“ACD”).

7. The evidence discloses that ACD was subject to a deed of company arrangement which was terminated in 2011. ACD was subsequently wound up in 2015.

8. By letter dated 30 June 2010, CGU wrote to the plaintiffs informing them that the combined effect of certain sections of the relevant legislation meant that the developers were liable for breaches of statutory warranties in respect of work undertaken by themselves or by the builder contracted by them. There is no dispute that the defendant is one of those developers. While the CGU letter of 30 June 2010 was addressed to another owner in the strata plan, I am satisfied on the balance of probabilities that letter would have come to the attention of the defendant given his role as one of the developers in circumstances where he was also an owner.

9. There is evidence adduced by the plaintiffs of several occasions where the defendant has sought to dissuade CGU from taking any action or where the defendant appears to have had some role in seeking to resuscitate ACD with a view to ensuring that CGU would not be in a position to pursue the developers. There is evidence of a factional fight amongst the proprietors between those who were developers (and therefore potentially at risk of any action by CGU) and those who were not. For example, the plaintiffs relied on a business record of CGU which refers to a telephone conversation between the defendant and a representative of CGU :

Email from Mark Brassell

Sent: Monday, 4 March 2013 3:37pm

To Tim Kendall

CC: Christine Martin

Subject: RE: Request to re-initiate Home insurance claim on behalf of the Owners Corporation – Strata Number 82413

…

Today’s development is that I took a call from Tony Hinderry this morning (he is mentioned in the note from Keith Grala). Tony stated that he believes he is still Chair of the Owners Corp and that the majority of the owners do not want to pursue a claim against CGU. He also said it was possible that he was voted out of the Chair role at the last AGM (which he did not attend). However, be believes the number of people in attendance at that meeting did not constitute a quorum and anything agreed on that occasion would therefore not be valid.

More significantly, Tony Hinderry indicated that the builder (ACD Group Pty Ltd) is currently being re-registered with ASIC and that it will then comply with the recent CTTT Order. He stated that he will write in to us to confirm this is the case. He was clearly under the impression that this would be enough for us to keep our file closed.

…

10. Also in 2013 there is evidence of the defendant being part of a group of majority proprietors in the strata plan who were resisting the continuation of the CGU home owners warranty claim that had apparently been brought and supported by what were described as minority owners in the strata plan.

11. In 2013 the CTTT compulsory appointed Illawarra Strata Management as the strata manager for the plaintiffs. Two years later, in September 2015, ACD was wound up and the plaintiffs lodged a claim with CGU. On 23 March 2016 liability for that claim was accepted. Significantly for present purposes, only three weeks after the plaintiffs lodged a claim with CGU the defendant put his two units on the market for sale.

12. Mr Dawson for the defendant has sought to persuade the Court on the basis of Mr Barnes's evidence that there is nothing unusual in the fact that the two units have been put on the market. Mr Barnes's evidence, which is on information and belief, does no more than set out the defendant’s several attempts to sell his units over a period of years. In relation to unit 6 there was only one previous attempt to sell it, in March 2010. Unit 10 has been put on the market by the defendant three times prior to October 2015. Be that as it may, what is significant for present purposes is the proximity of the latest offering of the units on the market and the winding up of ACD and the plaintiffs’ lodging of their claim with CGU.

13. I am unable to accept the defendant's submission that the attempts to sell the units in the context of all the other circumstances does not justify an inference of some risk that the defendant is taking or will take steps, the effect of which will be to frustrate any future judgment which the plaintiffs may obtain. It is true that the authorities make clear that an inference of risk of dissipation of assets may more easily be drawn where the underlying conduct of the defendant is dishonest or unscrupulous. However, Mr Dawson conceded that it was not necessary for that more serious characterisation to be reached for the Court to be able to infer the relevant risk. It is sufficient for there to be a course of conduct established from which the Court can infer that the consequence will be the possible frustration of any judgment.

14. In the present case the defendant has consistently engaged in a course of conduct designed to ensure that he does not become personally liable in the case of any proceedings being brought by CGU on behalf of the plaintiffs. In making that observation, I am not to be taken as imputing any dishonest or unlawful motive to the defendant. The evidence does not enable me to do so, but it is not necessary for me to make a finding about any subjective intention. His subjective intentions are not, in and of themselves, necessarily relevant. His objective conduct and its possible effect is relevant. As an owner in the block of units I can see no rational reason why the defendant resisted a claim being made to CGU or being prosecuted by CGU if the defendant's only interest was to ensure that the owners’ corporation was compensated for the relevant building defects. I accept Mr Ahmed's submission that the Court should infer that what has motivated the defendant in that regard is to ensure that he is not personally liable.

15. On the basis of that conduct in those circumstances, I am satisfied that the placing of the two properties for sale most recently and the defendant's history in relation to any claim being prosecuted by CGU are a proper basis from which the Court should infer, as it does, that there is a relevant risk of dissipation of assets. The asset preservation order will therefore be continued until further order.

16. I note that in making the asset preservation order on 24 March 2016 Justice White built in a degree of protection for the defendant in relation to the possible sale of the two units. The order provides that it does not prevent the defendant exchanging contracts for sale in relation to either of those units. The obvious intention of the order is to give the plaintiffs an opportunity to come to some arrangement with the defendant should either or both of those units actually become the subject of exchanged contracts for sale.

17. Mr Dawson submitted on behalf of the defendant that even that arrangement left the defendant at some risk and relevantly prejudiced. The Court does not accept that submission. If it happens that either or both of the units are sold and the parties are unable to come to some sensible arrangement in relation to the proceeds of sale, it will be open to the defendant to approach the Court to have the orders varied. The orders will be continued in the form made by Justice White.

**********

Decision last updated: 14 April 2016