The Owners - Strata Plan No. 102081 v Aqualand Construction Pty Ltd

[2025] NSWSC 31

Supreme Court

New South Wales

Medium Neutral Citation:

The Owners – Strata Plan No. 102081 v Aqualand Construction Pty Ltd [2025] NSWSC 31

Hearing dates:

6 February 2025

Date of orders:

6 February 2025

Decision date:

06 February 2025

Jurisdiction:

Equity - Technology and Construction List

Before:

Stevenson J

Decision:

Plaintiff’s application for freezing order granted

Catchwords:

CIVIL PROCEDURE – interim preservation – freezing orders – where plaintiff owners corporation seeks freezing order against defendant developer – where reasonable to infer defendant developer will sell remaining four residential units and not retain the proceeds of sale – whether a danger that prospective judgment will be unsatisfied – meaning of “danger”

Legislation Cited:

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Cardile v LED Builders (1999) 198 CLR 380; [1999] HCA 18

Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319

Skyworks v 32 Drummoyne Road [2017] NSWSC 343

Category:

Procedural rulings

Parties:

The Owners – Strata Plan No. 102081 (Plaintiff/Applicant)
Aqualand Construction Pty Ltd (First Defendant)
Aqualand North Sydney Lavender Development Pty Ltd (Second Defendant/Respondent)

Representation:

Counsel:
D Weinberger (Plaintiff/Applicant)
F P Hicks SC (Second Defendant/Respondent)

Solicitors:
J S Mueller & Co (Plaintiff/Applicant)
Keystone Lawyers Pty Limited (Defendants/Respondent)

File Number(s):

2023/201402

EX TEMPORE JUDGMENT (REVISED)

1. The plaintiff is the Owners Corporation of a mixed commercial and residential development in Milsons Point, comprising 125 residential and 2 commercial lots.

2. The second defendant, Aqualand North Sydney Lavender Development Pty Limited, is the respondent to the motion before me and was the developer. I will refer to it as "the Developer". The first defendant, Aqualand Construction Pty Limited, was the builder and is not involved in this application.

3. The Owners Corporation alleges that there are defects in the building.

4. It commenced these proceedings in June 2023. The proceedings have reached a stage where the Owners Corporation has served all of its evidence, including its expert evidence. That evidence was served by October 2024.

5. Included in that evidence is the Owners Corporation's quantity surveying evidence which is to the effect that the overall quantum of The Owners Corporation's claim is in the order of $10.6 million.

6. Directions have now been made for the Developer and the builder to serve their evidence. That is due next month.

7. By notice of motion filed on 4 November 2024, the Owners Corporation seeks a freezing order that the Developer not dispose of its assets up to the unencumbered value of $10.6 million, being the amount of the Owner's Corporation's claim.

8. The Owners Corporation must show that it has a good arguable case on, relevantly here, an accrued cause of action. ^[1] There is no dispute that the Owners Corporation has such a good arguable case.

   1. Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), r 25.14(1)(b).

9. The Owners Corporation must also show, relevantly to the matters in dispute before me today, a danger that any judgment it obtains will be wholly or partly unsatisfied because the Developer will or may dispose of its assets. Thus, UCPR r 25.11 confers a power on a court to making a freezing order to prevent the frustration or inhibition of the court's processes “by seeking to meet a danger that a judgment or prospective judgment of the court will be wholly or partly unsatisfied”.

10. There is no shortage of verbal formulations as to the test to be applied when considering there is such a “danger”. Any attempt to derive a bright-line test from those formulations will only add to what has been described as a "sea of semantics". ^[2] What is clear is that a freezing order is to be regarded as an extraordinary remedy which requires a high degree of caution on the part of the Court invited to make the order. ^[3] It is for the applicant to show, from the evidence before the Court, that there is the requisite "danger". The test is then applied in various ways, such as whether there is a "sufficiently serious risk" of dissipation of assets,^[4] or a "real risk of the dissipation of assets", ^[5] or whether the danger is "sufficiently substantial to warrant the injunction". ^[6] The applicant does not need to establish that the dissipation of assets is "more likely than not" or that the dissipation would occur on the balance of probabilities. ^[7]

    2. Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 327 (Meagher JA).

    3. Cardile v LED Builders (1999) 198 CLR 380; [1999] HCA 18 at [50] (Gaudron, McHugh, Gummow and Callinan JJ).

    4. Skyworks v 32 Drummoyne Road [2017] NSWSC 343 at [24] (McDougall J).

    5. Patterson v BTR Engineering (Aust) Ltd at 327 (Meagher JA).

    6. Ibid at 325 (Gleeson CJ).

    7. Ibid at 325 (Gleeson CJ, Meagher JA and Rogers AJA agreeing).

11. Turning to the facts here, the works were completed in July 2021. Since August 2021, the Developer has been selling the residential units in the ordinary course. It has sold 121 of the 125 residential units, most recently in August 2024.

12. Four units remain unsold and they, of course, remain in the name of the Developer. Those units are valued in total at some $23.8 million. There was an unsuccessful auction in November last year for one of those units. They each remain listed for sale on the Domain.com and the Aqualand websites but none is currently placed with an agent for sale.

13. There is, however, no reason to think the Developer has lost interest in selling those units and every reason to think that, in due course and very likely before the finalisation of these proceedings, it will sell them. The Developer has adduced no evidence to suggest otherwise.

14. The Developer has retained the two commercial lots. They are subject to leases with third parties expiring in 2031. They are together valued at some $5.3 million. That sum would be insufficient to meet the Owners Corporation as currently formulated if that claim is successful.

15. The Developer is a special purpose vehicle whose only function was to develop the subject site. Its financial records show that as it has sold the 121 units in the building it has not retained the proceeds of sale of those units. I would infer that, as might be expected of a special purpose vehicle within a large development group such as Aqualand, it has either distributed the profit by way of dividend or, as its financial records suggest, from time to time, loaned some part of the proceeds to other members of the group.

16. It appears to me reasonable to infer that, absent restraint, the Developer will act in the same way in relation to the remaining four units once they are sold. That would be the normal and commercially rational course for the Developer to follow.

17. A factor pointing in this direction, albeit perhaps faintly, is that on 16 September 2024 the solicitors for the Owners Corporation wrote to the solicitors for the Developer requesting an undertaking from the Developer that it not dispose of the proceeds of sale of remaining lots below the amount needed to meet the plaintiff's claim. The Developer refused to give that undertaking. The Developer was, of course, not obliged to give such an undertaking, but its failure to do so is at least consistent with the inference that I have drawn that, absent restraint, it would continue to deal with proceeds of sale as it has in the past.

18. The Developer does not point to any prejudice it would suffer were it obliged to, in effect, retain from any proceeds of sale of the four residential units the figure the subject of the plaintiff's claim.

19. In all those circumstances, I am persuaded that the requisite “danger” exists and to make the order that the Owners Corporation seeks.

20. I invite the parties to confer and agree on the orders needed to give effect to that conclusion, which would include, of course, the giving of the usual undertaking to damages.

21. The Developer will pay the Owners Corporation's costs of this application.

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Endnotes

Decision last updated: 07 February 2025