Victorian WorkCover Authority v Baldwin
[2021] VSC 667
•27 October 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2021 00763
| VICTORIAN WORKCOVER AUTHORITY Trading as WorkSafe Victoria (ABN 90 296 467 627) | Plaintiff |
| v | |
| CHRISTOPHER JAMES BALDWIN | First Defendant |
| -and- | |
| DANBOL PTY LTD (ACN 147 432 399) | Second Defendant |
| -and- | |
| DELACOR PTY LTD (ACN 615 956 341) | Third Party |
| -and- | |
| BEVERLEY KAYE BALDWIN | Third Party Respondent |
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JUDGE: | Sloss J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1 October 2021 |
DATE OF JUDGMENT: | 27 October 2021 |
CASE MAY BE CITED AS: | Victorian WorkCover Authority v Baldwin & Ors |
MEDIUM NEUTRAL CITATION: | [2021] VSC 667 |
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PRACTICE AND PROCEDURE – Application for freezing orders and ancillary orders – Where first defendant (who is sole director & shareholder of second defendant) transferred his joint interest in three Mooroopna properties to his wife without payment of monetary consideration – Where freezing order is now in place over those three properties – Where first defendant has proffered an extended undertaking (in substitution for earlier undertaking) to not dispose of, deal with or diminish the value of his assets and to hold the proceeds of sale of the Kialla properties in solicitor’s trust account – Where following plaintiff expressing concern that second defendant had granted mortgages to related entities of first defendant that were registered over its (sole) property asset, an undertaking was given by first defendant as director of second defendant to not dispose of, deal with or diminish the value of its assets – Whether the plaintiff has a ‘good arguable case’ – Whether there is a risk that any prospective judgment against the defendants might be unsatisfied and thereby frustrate the process of the Court – Whether risk of dissipation of assets is attenuated by extended undertaking proffered by first defendant and freezing order in place over the three Mooroopna properties–Supreme Court (General Civil Procedure) Rules 2015, Order 37A – Dangerous Goods Act 1985 (Vic), s 17K.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms E Bennett and Mr A Purton of counsel | MinterEllison |
| For the Defendants and Mrs Beverley Kaye Baldwin | Mr C Young QC and Mr T Jeffrie of counsel | Davis Advisory |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
The plaintiff commenced a proceeding for recovery of the clean-up costs pursuant to section 17K(6) of the Dangerous Goods Act 1985............................................................................ 2
The plaintiff’s summons seeking freezing orders and ancillary orders............................... 2
A suite of interim relief was ordered on 26 August 2021........................................................ 3
The defendants filed a summons seeking a summary determination of the proceeding — listed for ‘directions only’ on 1 October 2021............................................................................. 4
Factual chronology re the plaintiff’s application for freezing orders..................................... 6
Applicable legal principles............................................................................................................ 19
Consideration and disposition...................................................................................................... 23
Does the plaintiff have a ‘good arguable case’?..................................................................... 23
The danger that the prospective judgment might be unsatisfied as a result of the defendants’ actions.................................................................................................................................. 31
Undertakings proffered by Mr Baldwin do not eliminate the risk of dissipation of assets 37
The amount the subject of the freezing order(s)..................................................................... 38
The balance of convenience....................................................................................................... 39
No delay in seeking the freezing orders.................................................................................. 40
Summary of orders to be made..................................................................................................... 41
HER HONOUR:
Introduction
The plaintiff, a Statutory Authority established by section 18 of the Accident Compensation Act 1985 (Vic), trades under the name WorkSafe Victoria (WorkSafe). WorkSafe is, among other things, the relevant regulator for the purposes of the Dangerous Goods Act 1985 (Vic).
The second defendant, Danbol Pty Ltd (Danbol) is the sole registered proprietor of the property situate at 420 Somerville Road, Tottenham, Victoria, 3012 (the Somerville Road site), being the property described in certificate of title volume 10466 folio 519. The first defendant, Christopher Baldwin (Mr Baldwin), is the sole director and secretary of Danbol. He is also registered as the sole shareholder, beneficially holding the two issued shares in the company.[1]
[1]Exhibit PC-1 to the Considine 19.08.2021 affidavit.
In or around early June 2018, Danbol entered into an agreement with Delacor Pty Ltd (Delacor) whereby Danbol agreed to lease the land and premises at 420 Somerville Road to Delacor, and Delacor agreed to take a lease of the land and premises for an initial term of three years commencing on 1 June 2018.[2]
[2]Exhibit SD-3 to the Davis 20.09.2021 affidavit.
On 30 August 2018, there was a large industrial fire at the Somerville Road site. The plaintiff says[3] the fire was burning actively for 10 days, and consumed a large volume of dangerous goods that had been illegally stored at the site, leading to the most significant structural fire response in Australia since a fire at Coode Island in 1991. Following the fire, dangerous goods (contained within drums, intermediate bulk containers, acetylene cylinders and other waste) remained at the Somerville Road site. In those circumstances, the plaintiff took steps to investigate and exercise its statutory powers under the Dangerous Goods Act 1985 in relation to the dangerous goods present at the Somerville Road site, which it believed continued to pose a significant risk of re-ignition, environmental hazard, and a danger to persons or property.
[3]Considine 19.08.2021 affidavit, at [6].
In the course of exercising its powers under section 17K of the Dangerous Goods Act 1985, the plaintiff has incurred significant costs in relation to the clean-up works conducted at the site, which it now seeks to recover from the defendants.
The plaintiff commenced a proceeding for recovery of the clean-up costs pursuant to section 17K(6) of the Dangerous Goods Act 1985
The plaintiff commenced this proceeding by Writ on 18 March 2021. In the proceeding, the plaintiff seeks inter alia to recover from Mr Baldwin and Danbol pursuant to section 17K(6) of the Dangerous Goods Act 1985 the costs expended upon the clean-up of the site, which amounted to $7,178,945.86 as at 18 March 2021. Costs associated with the clean-up of dangerous goods at the Somerville Road site continue to be incurred by the plaintiff.
Delacor, the tenant who was occupying the Somerville Road site from early June 2018, is not named as a defendant to the proceeding, nor is Mr Graham White, its sole director. However, on 14 July 2021, the defendants filed a Third Party Notice directed to Delacor seeking relief in the form of a declaration that Danbol and/or Mr Baldwin ‘is entitled to be indemnified by the third party [Delacor] against any judgment which the plaintiff may obtain in this proceeding, alternatively.. [sic]’.[4] To date, no appearance has been filed by Delacor.[5]
[4]See the prayer for relief set out in the statement of claim in the third party notice.
[5]No affidavit of service in respect of the third party notice has been filed by the defendants.
The plaintiff’s summons seeking freezing orders and ancillary orders
By summons filed on 20 August 2021, the plaintiff sought freezing orders and ancillary orders, pursuant to Order 37A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules), against each of Mr Baldwin (substantially in the form attached to the summons as Annexure A) and Danbol (substantially in the form attached to the summons as Annexure B), and against Mr Baldwin’s wife, Beverley Kaye Baldwin (Mrs Baldwin) (substantially in the form attached to the summons as Annexure C).
The plaintiff filed an affidavit of Patrick Timmons Considine affirmed on 19 August 2021 (Considine 19.08.2021 affidavit) and written submissions dated 23 August 2021 in support of its application. In his affidavit, Mr Considine, who is an employed solicitor with MinterEllison, the solicitor for the plaintiff, deposes to the background to the proceeding, and correspondence passing between the solicitors for the parties concerning (what he describes as) ‘Asset dealings by the Defendants’ and the ‘Transfer of the Mooroopna Properties’ in August 2021.
The plaintiff’s application for freezing orders was made on notice to each of the defendants and Mrs Baldwin. In essence, the plaintiff contended that the course of conduct engaged in by or on behalf of Mr Baldwin, suggests that he is seeking to divest himself of assets prior to the conclusion of the instant proceeding, in particular by transferring to Mrs Baldwin three parcels of land at Mooroopna of which he was registered as a joint proprietor with her, in each case for no consideration. As Mrs Baldwin is now registered as the sole proprietor of the Mooroopna properties, the plaintiff also sought a ‘third party’ freezing order against her.
A suite of interim relief was ordered on 26 August 2021
The plaintiff’s summons was listed for an urgent hearing on 26 August 2021. However, late on 25 August 2021, the plaintiff’s solicitors informed the Court that following discussions, the parties had agreed an interim position in relation to this matter, in order to allow them further time to confer in relation to the ultimate disposition of the plaintiff’s application. Accordingly, on 26 August 2021, the matter proceeded as a ‘mention only’.
In essence, the parties sought that orders be made by consent of the parties and Mrs Baldwin,[6] to the following effect:
[6]At the mention on 26 August 2021, the Court was informed that the solicitors for the defendants, Davis Advisory, also act as the solicitors for Mrs Baldwin in relation to the summons.
(a) in relation to the plaintiff’s application in respect of Mr Baldwin and Danbol —upon the undertakings provided by each of Mr Baldwin and Danbol, the plaintiff’s application for freezing orders be adjourned;
(b) in relation to the plaintiff’s application in respect of Mrs Baldwin — a freezing order be made, by consent, until further order, in the form proposed[7],
(the suite of interim relief).
[7]See Annexure B to the Orders made on 26 August 2021.
At the mention on 26 August 2021, undertakings (in the form set out in Schedule A to the freezing order against Mrs Baldwin) were given by the plaintiff by its counsel, and counsel for Mr Baldwin and Danbol gave undertakings to the Court on their clients’ behalf (in the respective forms set out in Annexure A to the Order). In those circumstances, the Court informed the parties that, having read the Considine 19.08.2021 affidavit and the written submissions filed on behalf of the plaintiff, and after having heard from their respective counsel, the Court was satisfied that it was appropriate to make the suite of interim relief they proposed, for the confined purpose of preserving the assets of Mr Baldwin and Danbol (pursuant to the undertakings given) and the three Mooroopna properties now registered in the sole name of Mrs Baldwin (by way of a freezing order pursuant to Order 37A of the Rules), so as to prevent frustration of the process of the Court. Orders were made accordingly, including an order listing the plaintiff’s summons for a further hearing on Friday, 1 October 2021 and a timetable to facilitate the filing of affidavit material or submissions by each party in advance.
The defendants filed a summons seeking a summary determination of the proceeding — listed for ‘directions only’ on 1 October 2021
As matters transpired, the defendants did not file material in response in accordance with the timetable ordered by the Court. Rather, they sought to bring on a summons seeking summary judgment on the plaintiff’s claim, alternatively, to strike out the plaintiff’s amended statement of claim. That summons, the filing of which was initially rejected by the Commercial Court Registry on 20 September 2021 but later accepted on 29 September 2021, was listed for ‘directions only’ on 1 October 2021. In conjunction with that summons, the defendants also filed:
(a) an affidavit of Stephen Davis, of Davis Advisory, solicitor for the defendants, sworn on 20 September 2021 (and exhibits thereto) (Davis 20.09.2021 affidavit);
(b) the defendants’ submissions dated 28 September 2021; and
(c) a further affidavit of Stephen Davis sworn on 28 September 2021 (and exhibits thereto) (Davis 28.09.2021 affidavit).
The defendants’ submissions for the directions hearing on 1 October 2021 addressed three matters:
(a) the plaintiff’s concerns about the sale of the Kialla property owned by Mr Baldwin;
(b) the timing of the hearings of:
(i) the plaintiff’s summons seeking freezing orders against Mr Baldwin and Danbol;
(ii) the defendants’ summons for summary judgment; and
(c) other ancillary matters.
In essence, the defendants submitted that the Court should adjourn the further hearing of the plaintiff’s summons for freezing orders, replace Mr Baldwin’s original undertaking (dated 25 August 2021) with his substituted undertaking dated 28 September 2021, and proceed to fix a timetable for completion of the procedural steps necessary to facilitate the hearing of the defendants’ application for a summary determination of the proceeding in accordance with the agreed timetable set out in the minute of proposed consent orders provided by the parties.
In accordance with the orders made on 26 August 2021, the plaintiff filed its supplementary submissions on 23 September 2021, together with a further affidavit of Patrick Considine affirmed 23 September 2021 (and exhibits thereto) (Considine 23.09.2021 affidavit). In its submissions, the plaintiff opposed any adjournment of the further hearing of its summons seeking freezing orders. and noted that the defendants had filed no material in respect of that application. Further, they observed that the defendants’ summary judgment application ‘is premised on a number of grounds which are not pleaded, and have not otherwise been the subject of correspondence.’[8]
[8]Plaintiff's supplementary submissions filed on 23 September 2021, at [20].
Factual chronology re the plaintiff’s application for freezing orders
For the purposes of considering the plaintiff’s application for freezing orders against Mr Baldwin and Danbol, the relevant facts relied on by the plaintiff are as follows.
On 31 January 2007, Mr Baldwin and his wife, Beverley, became registered as the joint proprietors of an estate in fee simple of the land situate at 6 Mooredge Place, Mooroopna.[9] A mortgage in favour of the National Australia Bank Ltd dated 12 September 2007 was registered on the title as dealing AF333118D.
[9]See exhibit PC-13 to the Considine 19.08.2021 affidavit, bundle at 52: search of Certificate of Title vol 10984 folio 635 produced on 18 March 2021.
On 22 June 2011, Danbol became registered as the sole proprietor of an estate in fee simple of the land at 420 Somerville Road. (It appears that shortly prior to Danbol becoming the registered proprietor, Danbol had granted a mortgage in favour of Balmoor Pty Ltd (ACN 005924032) dated 4 May 2011 but the mortgage was not registered on the title.[10])
[10]See exhibit PC-2 to the Considine 19.08.2021 affidavit, bundle at 13–15: search of Certificate of Title vol 10466 folio 519 produced on 17 August 2021.
On 3 October 2014, Mr and Mrs Baldwin became registered as the joint proprietors of an estate in fee simple of the land situate at 5 Darcy Court, Mooroopna.[11] A mortgage in favour of the National Australia Bank Ltd dated 29 August 2014 was registered on the title as dealing AL325351Q.
[11]See exhibit PC-13 to the Considine 19.08.2021 affidavit, bundle at 51: search of Certificate of Title vol 11523 folio 914 produced on 18 March 2021.
On 3 October 2014, Mr and Mrs Baldwin also became registered as the joint proprietors of an estate in fee simple of the land situate at 5 Mooredge Place, Mooroopna.[12] The property was encumbered by two registered mortgages in favour of the National Australia Bank Ltd, the first being dated 12 September 2007 and registered on the title as dealing AF333118D,[13] and the second being dated 29 August 2014 and registered on the title as dealing AL325351Q.[14]
[12]See exhibit PC-13 to the Considine 19.08.2021 affidavit, bundle at 53: search of Certificate of Title vol 11523 folio 915 produced on 18 March 2021.
[13]This is the same dealing number as the mortgage registered over 6 Mooredge Place.
[14]This is the same dealing number as the mortgage registered over 5 Darcy Court.
Following the fire at the site on 30 August 2018, a caveat was lodged on the title to the Somerville Road property by Balmoor Pty Ltd (ACN 005924032) on 27 September 2018, notifying a claimed interest as mortgagee pursuant to an agreement with Danbol dated 4 May 2011.[15] (There is no material before the Court as to the ownership of Balmoor Pty Ltd).
[15]See exhibit PC-2 to the Considine 19.08.2021 affidavit, bundle at 14–15: search of Certificate of Title vol 10466 folio 519 produced on 17 August 2021.
On or about 9 October 2019, WorkSafe, through its inspectors, issued directions pursuant to s 17K(2) of the Dangerous Goods Act 1985 addressed to Danbol and to Mr Baldwin, directing Danbol to:[16]
· immediately implement 24 hour security at the [Somerville Road] premises;
· render harmless the dangerous goods or dangerous goods containers at the Premises by safe means on or before 20 August 2020;
· dispose of or remove the spilled dangerous goods at the Premises by safe means on or before 20 August 2020; and
· render harmless anything contaminated by dangerous goods at the Premises by safe means on or before 20 August 2020.
[16]See Davis 20.09.2021 affidavit, exhibit SD-4, bundle at 50–52.
On or about 9 October 2019, WorkSafe, through its inspectors, also issued a direction to Delacor, pursuant to s 17K(2) of the Dangerous Goods Act 1985. The direction, which was addressed to Mr White, stated:[17]
[17]See Davis 20.09.2021 affidavit, exhibit SD-5, bundle at 53–55.
You are the sole director of Delacor, being the person who last had possession or control of dangerous goods or dangerous goods containers situate at 420 Somerville Road Tottenham, Victoria (Premises) for the purposes of section 17K(2) of the DG Act.
. . .
Accordingly, pursuant to section 17K(2) of the DG Act, I hereby direct Delacor to:
· immediately implement 24 hour security at the [Somerville Road] premises;
· render harmless the dangerous goods or dangerous goods containers at the Premises by safe means on or before 20 August 2020;
· dispose of or remove the spilled dangerous goods at the Premises by safe means on or before 20 August 2020; and
· render harmless anything contaminated by dangerous goods at the Premises by safe means on or before 20 August 2020.
On or about 4 November 2019, WorkSafe, through its inspectors, issued notice(s) of action it intended to take pursuant to s 17K(5)(a) of the Dangerous Goods Act 1985, addressed to Danbol (via Davis Advisory) in its capacity as ‘the owner of 420 Somerville Road Tottenham, Victoria’ and to Mr Baldwin as ‘the sole director of Danbol, which is the owner’. Each notice of action notified the recipient that the Inspector is exercising power under s 17K(5)(a) in relation to the Premises to take any action that the Inspector considers necessary for:[18]
[18]See Davis 20.09.2021 affidavit, exhibits SD-10 and SD-11, bundle at 259–262, 263–266. See also exhibit PC-3 to the Considine 19.08.2021 affidavit, bundle at 16–19.
•The destruction, rendering harmless, disposal or removal of the dangerous goods or containers; and/or
•the destruction or rendering harmless of anything contaminated by spilled dangerous goods.
The notice of action also stated that:[19]
[The Inspector] will seek to recover the costs of the above action pursuant to section 17K(6) of the DG Act.
[19]Ibid.
As before, at or about the same time, a similar notice of action intended to be taken pursuant to s 17K(5)(a) of the Dangerous Goods Act 1985 was also issued to Delacor, addressed to Mr White, the sole director of Delacor.[20]
[20]See Davis 20.09.2021 affidavit, exhibit SD-12, bundle at 267–269.
At some point after the fire, the Commonwealth Bank of Australia, which held a registered mortgage over the Somerville Road property,[21] wrote to Danbol indicating that it no longer wished to finance the property and was withdrawing all banking services to Danbol. Its mortgage was later discharged.[22]
[21]See exhibit SD-3 to the Davis 20.09.2021 affidavit, exhibit bundle at 46, which records that a mortgage granted in favour of the Commonwealth Bank of Australia was registered on 22 June 2011 as dealing AJ022519J.
[22]See exhibit PC-12 to the Considine 19.08.2021 affidavit, bundle at 46–49: letter from Davis Advisory to MinterEllison dated 25 January 2021.
On 19 November 2019, a mortgage granted by Danbol in favour of Dellock Pty Ltd (Dellock) was registered on the title to the Somerville Road property. On 28 November 2019, a mortgage granted by Danbol in favour of Rocsange Pty Ltd (Rocsange) was registered on the title to the Somerville Road property. Each of Dellock[23] and Rocsange are related entities of Mr Baldwin[24].[25] (There is no evidence before the Court as to the amount advanced to Danbol to date pursuant to each of those mortgages.)
[23]The historical company extract in respect of Dellock records that Mr Baldwin is currently the director and secretary of the company and he holds beneficially the two issued ordinary shares: see exhibit PC‑5, bundle at 23–25.
[24]Mr Considine deposes that Mr Baldwin is the sole director, secretary and shareholder of BTA Consultants Pty Ltd (ACN 609 136 692) (formerly known as Baldwin’s Taxation and Advisory Pty Ltd) which is the registered office of Rocsange: see Considine 19.08.2021 affidavit at [13] and exhibits PC-7 and PC-8, bundle at 29–32, 33–35.
[25]When counsel for the defendants was asked about this, Mr Young QC responded by saying ‘I believe they both are’: Transcript, 1.10.2021, at 98.
Thereafter, the plaintiff sought assurances from the defendants that they would not seek to divest assets. Some of this correspondence was exchanged prior to the proceeding being commenced. For example, the following exchanges took place:
(a) On 24 March 2020, the plaintiff wrote to the legal representative for the defendants (Davis Advisory) stating, amongst other things, that:[26]
[26]Exhibit PC-9 to the Considine 19.08.2021 affidavit, bundle at 36–38.
[W]e note that shortly after receiving WorkSafe’s correspondence of 4 November 2019, your client registered two mortgages over the Premises. The first was registered in favour of Dellock Pty Ltd and a second in favour of Rocsange Pty Ltd. These entities are related to your client insofar as they share registered offices and have past or present office holders in common. WorkSafe is concerned that your client has registered these interests in an attempt to defeat the cost recovery foreshadowed in its 4 November letter. We invite your client to provide an explanation of why the mortgages were obtained.
(b) On 23 December 2020, the plaintiff wrote to Davis Advisory stating, amongst other things, that:[27]
[27]Exhibit PC-10 to the Considine 19.08.2021 affidavit, bundle at 39–41.
[A]s you know WorkSafe has, on multiple occasions, sought an explanation from your client as to why it registered two mortgages in favour of Dellock Pty Ltd and Rocsange Pty Ltd over the Site. On 31 August 2020 (in response to WorkSafe’s letter of the same day), you responded by email stating that you would seek instructions on this issue and revert. As at the time of writing this letter, no such response has been received.
Your client is well aware of WorkSafe’s concerns that the registration of the mortgages is an attempt to defeat WorkSafe’s recovery of the clean-up costs. These concerns are only heightened by your client’s repeated failure to respond to its requests for an explanation. If no substantive response is received by Friday, 22 January 2020 (having regard to the holiday period), WorkSafe will assume that its concerns are warranted.
(c) On 22 January 2021, Davis Advisory provided a response to the 23 December 2020 letter in which Danbol denied that there was anything improper relating to the mortgages.[28]
[28]Exhibit PC-11 to the Considine 19.08.2021 affidavit, bundle at 42–45.
(d) On 25 January 2021, Davis Advisory provided an updated response to the plaintiff after receiving additional instructions from Danbol.[29] In essence, Davis Advisory said the post-fire response had given rise to significant losses and expenses for Danbol. While those costs and expenses would normally be covered by insurance, Danbol’s insurer has denied cover, with the result that Danbol has had to carry all of the ‘Post Fire Expenses’ (set out in the letter) itself, which has been a significant burden. Further, Davis Advisory stated:[30]
[29]Exhibit PC-12 to the Considine 19.08.2021 affidavit, bundle at 46–49.
[30]Ibid, bundle at 48–49.
6.In addition, the Commonwealth Bank of Australia (CBA), which held a mortgage over the Tottenham Site wrote to Danbol indicating that it no longer wished to finance the property and was withdrawing all banking services to Danbol.
We believe that this was in response to newspaper allegations after the fire that Danbol was involved somehow in illegal activity etc. That was all untrue and was not pursued by the newspapers following their further investigation. However, it appeared to have already spooked the CBA who wanted to withdraw their financing arrangements to Danbol including the mortgage they held over the Tottenham site.
7.In light of the significant Post Fire Expenses and to pay out the CBA for the mortgage it held over the Tottenham Site, we are instructed that Danbol was forced to:
· Sell an adjoining warehouse over the road from the Tottenham Site; and
· Obtain finance from two third parties, Dellock Pty Ltd and Rocsange Pty Ltd.
8.Those two lenders secured their loans with registered mortgages over the Tottenham Site, as described at the beginning of this letter.
…
In light of the above, we conclude as follows:
· First, we deny on behalf of our client [Danbol] that there is anything improper relating to the mortgages with Dellock Pty Ltd and Rocsange Pty Ltd.
…
· Sixth, nor is it unusual, illegal or unexpected for the lenders providing Danbol with those funds (Dellock Pty Ltd and Rocsange Pty Ltd) to secure their loans with a mortgage over real property.
· Lastly, in particular, there was not any attempt by Danbol to defeat any future claim by Worksafe for recovery of your clean-up costs.
At the hearing on 1 October 2021, counsel for the defendants clarified that the above reference to Dellock and Rocsange being ‘third parties’ was not intended to convey the impression that they were ‘arms-length’ third parties.[31] Counsel acknowledged that they were entities associated with Mr Baldwin.[32]
[31]Transcript, 1.10.2021, 99 (Mr Young QC).
[32]Transcript, 1.10.2021, 98 (Mr Young QC).
On or about 28 January 2021, WorkSafe demanded payment from Mr Baldwin and Danbol of the costs associated with the clean-up of the Somerville Road site.[33]
[33]The correspondence from the plaintiff to Mr Baldwin and Danbol is not included in the bundles of documents exhibited to the affidavits filed by or on behalf of the parties on this application.
On 18 March 2021, WorkSafe issued this proceeding against Mr Baldwin and Danbol, claiming to recover the costs of the clean-up pursuant to s 17K(6) of the Dangerous Goods Act 1985.
On 3 June 2021:
(a) the mortgage in favour of the National Australia Bank Ltd, dated 12 September 2007 that was registered on the titles for the parcels of land at 5 and 6 Mooredge Place, Mooroopna as dealing AF333118D, was discharged;[34] and
(b) the mortgage in favour of the National Australia Bank Ltd, dated 29 August 2014 that was registered on the titles for the parcels of land at 5 Darcy Court, Mooroopna and 5 Mooredge Place, Mooroopna as dealing AL325351Q, was discharged.[35]
[34]Exhibit PC-14 to the Considine 19.08.2021 affidavit, bundle at 55–56.
[35]Exhibit PC-14 to the Considine 19.08.2021 affidavit, bundle at 57–58.
Upon the plaintiff’s solicitors becoming aware, on 3 June 2021, that the mortgages held by the National Australia Bank over the three Mooroopna properties of which Mr Baldwin was registered as a joint proprietor had been discharged, they wrote to the defendants’ solicitors on 16 June 2021, and invited their client(s) to provide an explanation for the discharge of the mortgage and sought an undertaking that they would not remove or dispose of relevant assets or otherwise deal with them.[36]
[36]Exhibit PC-15 to the Considine 19.08.2021 affidavit, bundle at 59–61.
By letter dated 2 July 2021, Davis Advisory responded to the plaintiff’s solicitors noting that the mortgages held over the Mooroopna properties have been discharged, and stated:[37]
…There is no mortgage over those properties and Mr Baldwin does not currently intend to grant security over them.
As the relevant ‘dealing’ involving the properties does not represent a danger that any prospective judgment will be wholly or partly unsatisfied, there is no basis for an application for a freezing order against Mr Baldwin under Order 37A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
[37]Exhibit PC-16 to the Considine 19.08.2021 affidavit, bundle at 62–63.
The plaintiff’s solicitors responded, by letter dated 8 July 2021, referring to their letters of 16 June 2021 and 2 July 2021, and stating:[38]
2.Having regard to the 16 June Letter, we take your response to mean that your clients will not, pending resolution of our client’s claim, remove or dispose of any relevant assets, or otherwise deal with them so as to diminish their value, and will otherwise provide WorkSafe with reasonable notice and explanation in respect of any further proposed dealings, including with respect to the Site and Relevant properties, as defined.
[38]Exhibit PC-17 to the Considine 19.08.2021 affidavit, bundle at 64–66.
3. Please urgently let us know if this is not correct.
Unannounced attendance at the [Somerville Road] Site
4.Similarly, we understand based on recent correspondence between our client and your offices that a commercial property agent, who attended at the Site, identified himself as acting on behalf of Mr Baldwin, and expressed interest in purchasing the Site.
5.With the content of our 16 June Letter in mind, we reiterate our request that you ensure that your clients notify us prior to making, engaging in, commencing and/or finalising any such arrangements, discussions or dealings, as well as with respect to other properties of which they are a registered proprietor, in light of the adverse impact this may have on our client’s interests in this matter.
6.Should your clients engage in any dealings or attempted dealings with relevant assets without notifying us, we confirm we would rely upon those matters, as well as this letter and the 16 June Letter, in support of an application pursuant to Order 37A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).
There was no response to the letter from the plaintiff’s solicitors dated 8 July 2021.
On 16 August 2021, the plaintiff’s solicitors became aware that in the case of the three Mooroopna properties, Mr Baldwin was no longer registered as a joint proprietor,[39] he having transferred his interest in each property to Mrs Baldwin as ‘sole proprietor’ for ‘Non-Monetary’ consideration by a Transfer registered on 16 August 2021.[40] Later that day, the plaintiff’s solicitors wrote to the solicitors for Mr Baldwin, seeking an urgent explanation for the transactions.[41] Further, by email sent on 18 August 2021, they requested that Davis Advisory ‘please urgently confirm that there will be no further dealing with any of your clients’ assets or properties pending provision of the first defendants’ response to our 16 August 2021 letter?’[42]
[39]Being Certificates of Title vol 10984 folio 635, vol 11523 folio 914 and vol 11523 folio 915.
[40]Exhibit PC-23 to the Considine 19.08.2021 affidavit, bundle at 97–99.
[41]Exhibit PC-24 to the Considine 19.08.2021 affidavit, bundle at 100–102.
[42]Exhibit PC-25 to the Considine 19.08.2021 affidavit, bundle at 105.
By letter dated 19 August 2021, Davis Advisory responded to the correspondence from the plaintiff’s solicitors dated 16 August 2021 (letter) and 18 August 2021 (email), in which they:[43]
(a) rejected the assertion made in Minter Ellison’s letter of 16 August 2021 that ‘our firm [Davis Advisory] or Mr Baldwin gave an undertaking or entered into any agreement to inform your client of any dealings with regards to the Mooroopna Properties’; and
(b) stated that ‘Mr Baldwin is prepared to offer an undertaking to Worksafe that going forward (and pending the resolution of Worksafe’s claim, the subject of this proceeding) he will give notice to Worksafe in relation to any future dealings or disposition of assets, or dealings with those assets that would diminish their value, other than in the ordinary course of his affairs.’
[43]Exhibit PC-25 to the Considine 19.08.2021 affidavit, bundle at 108.
Against that background, the plaintiff filed its summons on 20 August 2021, seeking that freezing orders and ancillary orders be made against each of Mr Baldwin, Danbol and Mrs Baldwin pursuant to Order 37A of the Rules. In the Considine 19.08.2021 affidavit filed in support of that application, the plaintiff’s solicitor deposed as to (what appeared to be) the assets of the defendants based on publicly available searches, as follows:[44]
[44]Considine 19.08.2021 affidavit, at [31] and exhibit PC-26, bundle at 109–114.
Assets of the first and second defendants
31.Based on publicly available searches, I believe that as at the date of this affidavit:
a.the first defendant has the following interests in land:
i.an estate in fee simple, as sole proprietor, in the property described in certificate of title volume 11565 folio 216 (87 Sanctuary Drive, Kialla), subject to a registered mortgage in favour of National Australia Bank Limited;
ii.an estate in fee simple, as sole proprietor, in the property described in certificate of title volume 03736 folio 010 (93 The Avenue, Kyabram), not subject to any encumbrances or caveats; and
iii.an estate in fee simple, as sole proprietor, in the property described in certificate of title volume 11301 folio 885 (Unit 508B 2 Dennis Street, Footscray), subject to the interest of a registered mortgage in favour of Australia and New Zealand Banking Group Ltd;
b.the second defendant has an interest in fee simple in the [420 Somerville Road] Land as sole proprietor, subject to two caveats, and two registered mortgages that were registered on 19 and 28 November 2019 respectively.
Mr Considine deposes[45] that based on publicly available searches conducted of the real estate listings platform Realestate.com.au, and adopting the price for which the real property held by Mr Baldwin and Danbol referred to above and the Mooroopna properties (prior to Mr Baldwin transferring his interest in them to his wife) was last sold, the combined value is estimated to be in excess of $3,480,000. He noted however that this estimate does not include the value of 5 Darcy Court, Mooroopna, for which there is no publicly available sale history.
[45]Considine 19.08.2021 affidavit, at [31] and [34].
Following the mention on 26 August 2021, the plaintiff’s solicitors engaged Sovereign Valuations to prepare desktop market valuations for the three Mooroopna properties. By valuations dated 13 September 2021, Sovereign Valuations valued each of the Mooroopna properties as follows:[46]
[46]Considine 23.09.2021 affidavit, at [13] and exhibit PC-35, bundle at 261–379.
(a) 5 Mooredge Place, Mooroopna: $130,000;
(b) 6 Mooredge Place, Mooroopna: $110,000;
(c) 5 Darcy Court, Mooroopna: $680,000,
resulting in a total value of $920,000.
Prior to the hearing on 1 October 2021, the plaintiff’s solicitors became aware that on 28 August 2021, a nomination to paper instrument was registered with Land Use Victoria in respect of the property situated at 87 Sanctuary Drive, Kialla (Kialla Property). As noted above, the Kialla Property is a property that was known to be owned by Mr Baldwin at the time the freezing order was sought.
In his second affidavit affirmed on 23 September 2021 (Considine 23.09.2021 affidavit), Mr Considine deposes that:[47]
[47]Considine 23.09.2021 affidavit, at [6]–[7].
6.On Monday, 30 August 2021, MinterEllison wrote to Davis Advisory, amongst other things:
a.noting that the Kialla Property is the subject of the defendants' undertaking provided to the Court on 26 August 2021; and
b.requesting an explanation of the purpose of the nomination.
Now produced and shown to me and marked PC-29 is a true copy of the email correspondence from MinterEllison to Davis Advisory dated 30 August 2021.
7.By letter dated 2 September 2021, Davis Advisory wrote to MinterEllison disclosing that, amongst other things:
a.the Kialla Property is comprised of 10 lots which were the subject of 10 separate sale of land contracts entered into between March and April 2021, each of which were attached to the Davis Advisory letter;
b.the sale contracts for each lot required the registration of a plan of subdivision for each lot;
c.settlement is to occur either 60 or 120 days after notice is given to the purchasers in writing of the registration of the plan of subdivision in respect of each lot;
d.arrangements were being made by Cameron's Lawyers, who we understand is the first defendant's conveyancer;
e.the first defendant's position is that the dealings fall within the exception set out in clause (b)(iv) of his undertaking to the Court.
Now produced and shown to me and marked PC-30 is a true copy of the letter from Davis Advisory dated 2 September 2021 and the enclosed contracts of sale in respect of the 10 lots comprising the Kialla Property.
Until its solicitors received this correspondence from Davis Advisory, the plaintiff was unaware of these dealings with respect to the Kialla Property, including that it (and the adjoining property owned by HOVT Developments Pty Ltd) had been the subject of a plan of subdivision.[48]
[48]Plaintiff’s supplementary submissions dated 23.09.2021, at [11].
In the defendants’ submissions for the directions hearing on 1 October 2021, counsel for the defendants elaborated upon the ‘Sale of the Kialla Property’ as follows:[49]
[49]Defendants’ submissions for the directions hearing on 1 October 2021 (Defendants’ submissions), at [7]–[12].
7.The Kialla Property Mr Baldwin and a company he controls, HOVT Developments Pty Ltd (HOVT Developments) became the registered proprietors of lots that constitute the Kialla Property in October 2017.[50] Mr Baldwin and HOVT purchased the property with an intent to subdivide the property into ten lots and sell the lots once planning approval was obtained.[51]
8.Mr Baldwin signed contracts of sale for the 10 lots in December 2020.[52] The contracts were executed by the counter parties between March and April 2021. The reason for the delay is set out in correspondence from Davis Advisory.[53]
9.Each contract of sale is subject to the registration of a plan of subdivision. Under the contract of sale, settlement is to occur 60 or 120 days following notice being given of the registration of the plan of subdivision.[54]
10.On 28 August 2021, a nomination to paper instrument was registered with Land Use Victoria in relation to the Kialla Property.[55] A nomination to paper instrument allows the transfer of property to occur via a transfer of paper instruments as opposed to a transfer done using an electronic certificate of title. As conceded by the plaintiff, a nomination of this type is not a dealing of land for the purpose of Mr Baldwin’s undertaking.[56]
11.On around 10 September 2021, the plan of subdivision for the Kialla Property was approved by the Greater Shepparton City Council.[57]
12.On 13 September 2021, Davis Advisory wrote to MinterEllison informing them of the registration of subdivision and setting out when the sale of each lot was to be completed, with lots having varying settlement dates, the earliest being 4 October 2021.[58]
[50]Davis 28.09.2021 affidavit, at [7]–[8]; see also exhibits SD-2 and SD-3 of the Davis 28.09.2021 affidavit.
[51]Davis 28.09.2021 affidavit, at [9].
[52]The contracts for the sale of the lots were signed by Mr Baldwin on 23 December 2021, except for one lot where Mr Baldwin signed the contract on 10 December 2020 (see exhibit PC-30 to the Considine 23.09.2021 affidavit).
[53]Exhibit PC-32 to the Considine 23.09.2021 affidavit.
[54]Davis 28.09.2021 affidavit, at [13].
[55]Exhibit PC-32 to the Considine 23.09.2021 affidavit.
[56]Plaintiff’s supplementary submissions dated 23.09.2021, at [8]; exhibit PC-29 to the Considine 23.09.2021 affidavit.
[57]Davis 28.09.2021 affidavit, at [16]; see also exhibit SD-9.
[58]Exhibit PC-33 to the Considine 23.09.2021 affidavit.
Against that background, counsel for the defendants contend that ‘Mr Baldwin entered into these arrangements prior to both the letter of demand that was issued to Mr Baldwin by the plaintiff on 28 January 2021 and the initiation of proceedings.’[59] Further, they submit he ‘was under no obligation to inform the plaintiff regarding the lodgment of the nomination to paper instrument as it did not represent any dealing or disposal of an asset,’[60] nor is he obliged to provide the plaintiff ‘with information about any other contractual arrangement he has in place regarding any potential transfer or disposal of his assets.’[61]
[59]Defendants’ submissions, at [17].
[60]Ibid, at [19].
[61]Ibid, at [20].
Further correspondence ensued between the solicitors for the respective parties, including as to whether the dealings in relation to the Kialla Property fell within an exception to the undertaking given by Mr Baldwin. On 10 September 2021, Davis Advisory wrote to Minter Ellison, stating that Mr Baldwin was willing to offer an extended undertaking that the proceeds of the sale of the Kialla Properties would be held by Mr Baldwin until the conclusion of the proceeding. (Based upon the purchase price set out in the contracts of sale, the combined value of the 10 lots comprising the Kialla Property is $1,270,000.)
By letter dated 13 September 2021, Davis Advisory wrote to MinterEllison stating, amongst other things, that:[62]
[62]Exhibit PC-33 to the Considine 23.09.2021 affidavit.
(a) the subdivision of the Kialla Property had been registered;
(b) the sale of the 10 lots comprising the Kialla Property have varying settlement dates, the earliest of which is 4 October 2021;
(c) all mortgages are to be paid out and discharged at settlement, with the balance of the proceeds to then be held by the first defendant until the conclusion of the proceeding.
Later in the piece, but in advance of the hearing, Mr Baldwin proffered an executed undertaking dated 28 September 2021 which he proposed be substituted for the undertaking he proffered on 10 September 2021. In that later undertaking, which goes further than the 10 September 2021 undertaking, Mr Baldwin undertakes that the net proceeds of sale of the Kialla Properties will be held in the trust account of Davis Advisory and only be distributed to pay reasonable legal expenses.[63]
[63]The substituted undertaking was annexed to the Defendants’ submissions.
By letter dated 10 September 2021,[64] MinterEllison wrote to Davis Advisory making demand for payment on behalf of the plaintiff in the amount of $15,813,366.28, and enclosing underlying invoices, in respect of the plaintiff's remediation work conducted at the Somerville Road site. This sum may be compared with the amount of $7,178,945.86 the plaintiff claimed in the original statement of claim and in the proposed form of freezing orders set out in Annexures A, B and C of the plaintiff’s summons.
[64]Exhibit PC-36 to the Considine 23.09.2021 affidavit, bundle at 254.
Applicable legal principles
As Hargrave J observed in Choice Planning Pty Ltd & Anor v Mider @ Franklin Street Pty Ltd & Ors:[65]
The circumstances in which the Court may exercise its inherent power to make a freezing order is the subject of harmonised court rules, which apply in all superior courts in Australia. The harmonised rules reflect, and are informed by, the numerous reported cases dealing with the Court’s extraordinary power to freeze the assets of a judgment debtor, prospective judgment debtor or a third party in circumstances where there is a risk that they may act to frustrate or inhibit the Court’s process by taking steps which will or may result in a judgment or prospective judgment of the Court being wholly or partly unsatisfied. In Victoria, O 37A of the Supreme Court (General Procedure) Rules 2005[66] applies to applications for a freezing order.
[65][2015] VSC 59, at [4] (Choice Planning).
[66]Nowadays, O 37A of the Supreme Court (General Procedure) Rules 2015.
Generally speaking, r 37A.05 sets out the minimum requirements for the making of a freezing order.[67] Rule 37A.05(1) states that r 37A.05 applies, among other things, if an applicant has a ‘good arguable case on an accrued or prospective cause of action that is justiciable’ in the Court.
[67]Rule 37A.06 makes clear that the Court also retains its inherent jurisdiction to make a freezing order or an ancillary order.
Where the freezing order or ancillary order is sought against a third party, r 37A.05(5) goes further and requires that the Court must be 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.
The legal principles to be applied by the Court in deciding whether or not to grant a freezing order are well-established. They are conveniently set out in the plaintiff’s submissions that were filed on 23 August 2021, and are not disputed by the defendants.
In Zhen v Mo,[68] J Forrest J summarised the relevant legal principles to be applied by the Court in deciding whether or not to grant a freezing order,[69] as follows:[70]
[68][2008] VSC 300.
[69]These principles were cited with approval in Distinctive FX Pty Ltd v Wright [2015] VSC 299 (Elliott J), [38]; Rail Plus Pty Ltd v Hee-Meng Ng & Anor [2013] VSC 429 (Ginnane J); Deputy Commissioner of Taxation v Haritos & Ors [2013] VSC 12, [11] (Ferguson J); Choice Planning Pty Ltd v Mider @ Franklin Street Pty Ltd [2015] VSC 59 (Hargrave J); Koulouris v Haidaris [2019] VSC 392 (Connock J).
[70][2008] VSC 300, [22]–[30].
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.[71]
[71]Cardile v LED Builders Pty Limited (1998) 198 CLR 380, [51] (Cardile); Practice Note 3 of 2006.
Second, the order is not designed to provide security for the applicant’s claim.[72] It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.[73]
[72]Jackson v Sterling Industries (1987) 162 CLR 612, 621, 625.
[73]Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 3) (1998) 195 CLR 1, [73].
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.[74]
[74]Hartwell Trent (Aust) Pty Ltd v Tefal Societe Anonyme [1968] VR 3, 13.
Fifth, that before such an order can be made it is necessary that the applicant establish –
(a) an arguable case against the defendant;[75] 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.[76]
Sixth, the balance of convenience must favour the granting of the freezing order.[77]
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.[78]
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.[79]
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.[80]
[75]Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49, 49.
[76]R. 37A.02(1) Under the general law the plaintiff must establish that there is a real risk of assets being disposed of: Cardile, [122].
[77]Consolidated Constructions Pty Ltd v Bellenville Pty Ltd [2002] FCA 1513.
[78]Jackson v Sterling Industries (1987) 162 CLR 612, 621.
[79]Cardile, [124].
[80]Cardile, [58].
More recently, in Rozenblit v Vainer,[81] the Court of Appeal considered the principles governing freezing orders pending an appeal, noting that by virtue of r 64.36(1), the Court of Appeal ‘has the same powers as the judge in the Trial Division had, which extends to the making of a freezing order pending the hearing and determination of the application for leave to appeal and any appeal.[82]’[83] Their Honours observed that ‘[t]he freezing order’s purpose of preventing frustration or abuse of the process of the Court applies equally pending trial or pending appeal’[84] and they proceeded to summarise the relevant principles as follows:[85]
[81][2019] VSCA 164.
[82]See Ketchum International plc v Group Public Relations Holdings Ltd [1996] 4 All ER 374, 381 (Stuart‑Smith LJ, with Peter Gibson and Ward LJJ agreeing); Tomasetti v Brailey [2012] NSWCA 6; Aspermont Ltd v Lechmere Financial Corporation (2002) 27 WAR 1; Sopov v Kane Constructions Pty Ltd [2009] VSCA 216.
[83][2019] VSCA 164, [10] (McLeish and Niall JJA).
[84][2019] VSCA 164, [18] (McLeish and Niall JJA).
[85][2019] VSCA 164, [19] (McLeish and Niall JJA).
19In summary then, the principles governing an application for a freezing order pending appeal are as follows:
(1)The purpose of granting a freezing order is to prevent the frustration or inhibition of the Court’s process by seeking to meet a danger that a prospective judgment of the Court will be wholly or partly unsatisfied. Its purpose is not to provide security in respect of a prospective judgment or order.
(2)A freezing order is to be viewed as an extraordinary interim remedy. The order is a drastic remedy which calls for a high degree of caution on the part of the Court before an order is made.
(3)An applicant for a freezing order pending appeal will be required to establish that there is a good arguable case that the appeal will succeed. This means that it can be seen from the available material that the appeal has a real prospect of success.
(4)It must be shown that there is a reasonable possibility, not necessarily more than a 50 per cent chance, that assets may be disposed of or dealt with or diminished in value if an order is not made.
(5)In the case of an order against a third party, it must be shown that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the third party’s ability to exercise power in respect of the relevant assets, or that a court process may be available to the applicant as a result of a prospective judgment, under which the third party may be obliged to disgorge assets or contribute to satisfying the prospective judgment.
(6)The value of the assets covered by a freezing order should not exceed the likely maximum amount of the applicant’s claim, including interest and costs.
(7)As a condition of making a freezing order it will normally be appropriate to require the applicant to give undertakings to the Court, including the usual undertaking as to damages, supported if necessary by the provision of security.
(8)The order being discretionary,[86] other considerations including the balance of convenience may bear upon the Court’s ultimate decision, but it is not a distinct requirement that the balance of convenience favours the making of the order.
(9)The inherent jurisdiction of the Court is preserved and r 37A.05 simply addresses the minimum requirements that ordinarily need to be satisfied in an application.
[86]Cardile (1999) 198 CLR 380, 404 [53] (Gaudron, McHugh, Gummow and Callinan JJ).
Consideration and disposition
Does the plaintiff have a ‘good arguable case’?
The threshold requirement embodied in r 37A.05(1), that the applicant for a freezing order have a ‘good arguable case’, is generally regarded as ‘one which is more than barely capable of serious argument, and yet not necessarily one which the judge considers would have better than a 50 per cent chance of success’.[87]
[87]Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft, mbH & Co KG (‘The Niedersaschen’) [1983] 2 Lloyd’s Rep 600, 605; [1984] 1 All ER 398, 404 (Mustill J).
Here, the plaintiff relies upon the cause of action pleaded in its amended statement of claim for recovery of the costs expended upon the clean-up of the Somerville Road site following the fire, pursuant to s 17K(6) of the Dangerous Goods Act 1985. It contends that ‘[t]he central purpose of s 17K(6) is to provide a broad power of cost recovery, in circumstances where the remediated Site will otherwise be transferred back to the possession of Danbol after significant expense being incurred by the Plaintiff to safely remediate it.’[88]
[88]Plaintiff’s submissions dated 23.08.2021, at [24].
In its amended statement of claim, the plaintiff pleads its claim for recovery of the clean-up costs from the defendants under s 17K(6) by two routes. In essence, the first route relies on the direction that was issued by an Inspector to Danbol pursuant to s 17K(2) on 9 October 2019 and the subsequent notice of action that was issued by an Inspector under s 17K(5)(a) dated 4 November 2019, delivered to each of Mr Baldwin and Danbol, notifying them that the plaintiff would seek to recover the costs of action taken, pursuant to s 17K(6) of the Act.
Sections 17K relevantly provides as follows (emphasis in bold added):
17KInspector may issue direction concerning damaged or spilled dangerous goods
(1)This section applies if an inspector believes on reasonable grounds that danger to any person or property exists, or may arise, from any dangerous goods—
(a)that are damaged or spilled; or
(b)that are in a container that is damaged; or
(c)that are in a container that is dislodged from a vehicle, ship or boat.
(2)An inspector may issue a direction to the owner, or the person in possession or control, or who last had possession or control, of the dangerous goods or container—
(a)to render harmless the dangerous goods or container; or
(b)to dispose of, or remove, the spilled dangerous goods and render harmless anything contaminated by them—
by safe means within the period of time specified in the direction.
…
(4)If the inspector believes on reasonable grounds that there is an immediate danger to any person or property, the inspector may take any action that he or she considers necessary for—
(a)the destruction, rendering harmless, disposal or removal of the dangerous goods or container; or
(b)the destruction or rendering harmless of anything contaminated by the spilled dangerous goods.
(5)The inspector may also take any action described in subsection (4) if—
(a)the inspector has issued a direction under subsection (2) in relation to the dangerous goods or container, or any thing contaminated by the dangerous goods, and he or she believes on reasonable grounds that the person to whom the direction was issued—
(i)has failed to comply with the direction; or
(ii)is likely to use unsafe means to render harmless, dispose of or remove the dangerous goods, container or thing—
within the period of time specified in the direction; or
(b)the inspector believes on reasonable grounds that a direction under subsection (2)—
(i)cannot be served on the owner or any other person to whom the direction may be issued; or
(ii)cannot be served on the owner or such a person without a delay which may increase the danger to any person or property that exists or that may arise from the dangerous goods, container or thing; or
(c)the owner of the dangerous goods, container or thing authorises the inspector in writing to destroy, render harmless, dispose of or remove the dangerous goods, container or thing.
(6)If an inspector takes any action under subsection (4) or (5), the Authority may recover the costs of that action—
(a)if the dangerous goods, container or thing was or were present at a place other than a vehicle, ship or boat—from any occupier of the place; or
…
The expression ‘occupier’ and the related expressions ‘place’ and ‘premises’ are defined in s 3(1), as follows (emphasis in bold added):
3 Definitions
(1)In this Act, unless inconsistent with the context or subject matter—
…
occupier, in relation to any premises (other than licensed premises that are a vehicle or boat) includes a person who—
(a)is the owner of the premises;
(b)exercises control at the premises under a mortgage, lease or franchise; or
(c)is normally or occasionally in charge of or exercising control or supervision at the premises as a manager or employee or in any other capacity—
…
place includes a vehicle, ship or boat;
premises includes—
(a) a building or part of a building;
(b)a tent, stall or other structure, whether permanent or temporary;
(c) land, whether or not appurtenant to a building; and
(d) any other place.
As will be apparent, in the context of damaged or spilled dangerous goods, the legislative scheme appears to draw a distinction between the person to whom a direction may be given —for example, under s 17K(2): ‘the owner, or the person in possession or control, or who last had possession or control, of the dangerous goods or container’ on the one hand — and on the other, any ‘occupier of the place’ where the dangerous goods, container or thing was present, who may be liable for the costs of action taken to render harmless or remove the dangerous goods, container or thing under s 17K(6).
Relevantly, the plaintiff contends that each of Danbol and Mr Baldwin is an ‘occupier’ within the meaning of the Act from whom recovery may be sought because:
(a) in the case of Danbol, it ‘is and was at all material times the owner of the [Somerville Road] site’;[89] and
(b) in the case of Mr Baldwin, they plead ‘[a]t all material times prior to around 4 November 2019, [he] was normally or occasionally in charge of or exercising control or supervision at the [Somerville Road] site as a manager of the site, or as the sole director, secretary and guiding mind of [Danbol].’[90] (In response to a request from Davis Advisory, the plaintiff’s solicitors provided further and better particulars of the allegation by letter dated 16 August 2021.[91])
[89]Amended statement of claim, at [5].
[90]Amended statement of claim, at [6]–[7].
[91]See exhibit SD-21 of the Davis 20.09.2021 affidavit, bundle at 340–343.
The second route is pleaded ‘further or alternatively’ to the first route. It is pleaded on the basis that Delacor, who was the tenant of the Somerville Road site at the time of the fire, was relevantly the person in possession or control, or who last had possession or control, of the containers and dangerous goods present at the site, within the meaning of s 17K(2) of the Act. The plaintiff relies upon the direction that was issued by an Inspector to Delacor pursuant to s 17K(2) on 9 October 2019[92] and Delacor’s failure to comply with or take any actions in response to that direction, and the belief of an Inspector on reasonable grounds that Delacor had failed to comply with the 9 October 2019 direction and ‘was likely to use unsafe means to render harmless, dispose or remove the dangerous goods, containers or things within the period of time specified in that direction.’ Against that background, the plaintiff seeks to recover the costs of action taken under s 17K(5) by way of clean-up, from Mr Baldwin and Danbol (but not Delacor) as ‘occupiers’ pursuant to s 17K(6) of the Act.
[92]The s 17K(2) direction issued to Delacor and addressed to Mr White as director was framed in terms of:
You are the sole director of Delacor, being the person who last had possession or control of dangerous goods or dangerous goods containers situate at 420 Somerville Road Tottenham, Victoria (“Premises”) for the purposes of section 17K(2) of the DG Act.
Counsel for the plaintiffs submit that ‘[s]ection 17K ‘is a provision of significant strength and breadth’.[93] On the other hand, at the first directions hearing in the matter, counsel for the defendants described the legislative scheme created by s 17K as ‘draconian’[94] and informed the Court that they were ‘giving consideration to a summary judgment application in respect of Mr Baldwin, but we need to know these particulars in order to know the way in which the case is going to be put against him to ascertain that [sic.] position on that.’[95]
[93]Plaintiff’s submissions dated 23.08.2021, at [24].
[94]Transcript 23.07.2021, at 25 (Mr Young QC). In their submissions filed in support of the timing of the hearing of their application for a summary determination of the proceeding, counsel for the defendants go further and describe the legislative scheme created by s 17K as ‘extraordinary and draconian’: see Defendants’ submissions, at [27].
[95]Transcript 23.07.2021, at 30 (Mr Young QC).
As matters transpired, and notwithstanding that further and better particulars of Mr Baldwin’s status as an ‘occupier’ were delivered by the plaintiff on 16 August 2021, the defendants elected not to file any submissions in relation to the plaintiff’s application for freezing orders. Instead, they filed a summons seeking a summary determination of the proceeding together with an affidavit in support and submissions seeking to have the further hearing of the plaintiff’s application adjourned until after the determination of their application.
In essence, counsel for the defendants submitted that having regard to the Civil Procedure Act 2010 and the overarching purpose in particular, the course they proposed was the preferable and expedient course, because:
(a) no prejudice arises because of the undertakings Mr Baldwin has offered to the plaintiff ; and
(b) if the defendants’ application for a summary determination of the proceeding is successful, then the basis for the freezing orders disappears.
In their summons, the defendants raise several grounds as to the validity of what was done, including whether the direction issued to Danbol on 9 October 2019 pursuant to s 17K(2) was invalid, and whether the s 17K(5) notices (as defined in paragraph 13 of the amended statement of claim) are and were invalid. The summons also contends in ground 3 that s 17K(6) ‘is invalid as it impairs the institutional integrity of the Supreme Court of Victoria.’ As this ground raises or involves a matter arising under the Constitution or involving its interpretation, it will be necessary for notices pursuant to s 78B of the Judiciary Act 1903 (Cth) to be given to the Attorneys-General of the Commonwealth and of the states.
Counsel for the plaintiff submitted that the defendants’ application for a summary determination of the proceeding ‘is premised on a number of grounds that are not pleaded, and have not otherwise been the subject of correspondence.’[96] They also rely upon the fact that the ‘the entitlement of the plaintiff to recovery of funds is effectively accepted by Danbol in the related broker proceeding, where the obligation to pay funds is particularised as part of the loss and damage arising from the fire at the Site.[97]’[98]
[96]Plaintiff’s supplementary submissions dated 23.09.2021, at [20].
[97]Statement of claim in proceeding S ECI 2020 04677, at [10].
[98]Plaintiff’s submissions dated 23.08.2021, at [25].
At the hearing on 1 October 2021, counsel for the defendants sought to identify a number of issues with the plaintiff’s case, most of which are not raised on the face of the pleadings as they stand but some of which are foreshadowed in the parties’ draft list of issues. For example, in their amended defence, the defendants’ pleaded response to the plaintiff’s allegation in paragraphs 6 and 7 concerning Mr Baldwin’s status as an occupier is one of bare denial, as indicated in the side-by-side comparison below.
Amended statement of claim
Amended defence
6. At all material times prior to around 4 November 2019, the First Defendant was normally or occasionally in charge of or exercising control or supervision at the Site as a manager of the Site, or as the sole director, secretary and guiding mind of the Second Defendant.
6. They deny paragraph 6.
7. By reason of the matters set out in [6], the First Defendant is an Occupier in relation to the Site within the meaning of the DG Act.
7. They deny paragraph 7.
At the hearing on 1 October 2021, however, counsel for the defendants contended that for a person to be regarded as an ‘occupier’ from whom there could be recovery under s 17K(6), the person must be shown to have been an ‘occupier’ as at the time of the fire. Accordingly, in the case of Mr Baldwin, they submit that for the plaintiff to succeed, it must be shown that on 30 August 2018, Mr Baldwin was the occupier exercising control over the dangerous goods at the Somerville Road site. The plaintiff’s further and better particulars indicate that the plaintiff takes a different view of what is required to be shown.
At the hearing, counsel for the defendants also sought to raise a ‘danger’ issue in respect of s 17K(1) of the Act and an issue about ‘the Inspector’/’an Inspector’. Mr Young QC submitted that s 17K(1) requires an Inspector to believe on reasonable grounds that danger of a certain kind exists, and that the requirement of ‘reasonable grounds’ imports judicial review of the stated belief. Further, he submitted, there must be an objective basis for the Inspector’s belief, but here the direction of 9 October 2019 simply recites the statutory language and does not state what in fact comprises the relevant dangerous goods on the site, beyond asbestos, nor does it state what steps need to be taken.
In relation to the Inspector point, counsel for the defendants submitted that the ‘extraordinary and draconian scheme created by s 17K means the test must be construed literally and strictly.’[99] They contend that the legislation draws a distinction between ‘an Inspector’ and ‘the Inspector’, and that the text of s 17K(5)(a) makes clear that the only person who can take action under that section is the Inspector who gave the s 17K(2) direction. They submit that did not happen here, as it was Michael Eather that gave the s 17K(2) direction and Nikos Likouresis that purported to take the s 17K(5) action.
[99]Defendants’ submissions, at [27].
Here again, however, neither the ‘danger’ issue in respect of s 17K(1) nor the issue about ‘the Inspector’/’an Inspector’ is expressly pleaded by the defendants. To the extent that the defendants do seek to raise issues of this kind that do not currently have a patent foothold or foundation in their defence, they will need to be pleaded lest they might take the other side by surprise: r 13.07(1)(b).
Even though, as the Court of Appeal observed in Rozenblit v Vainer,[100] ‘the merits of the case will only be argued in a broad brush way at the hearing of an application for a freezing order’ it is clear from the submissions (written and oral) made thus far, and the draft list of issues filed by the parties, that the legislative scheme established by s 17K is complex, many questions will arise as to the application of those provisions in this case, and the financial consequences imposed by s 17K(6) on each of Danbol and Mr Baldwin as an ‘occupier’ are likely to be significant if the steps or action taken by WorkSafe as the Authority satisfy the relevant provisions.
[100][2019] VSCA 164, [18].
Insofar as the task of construction of the legislative scheme is concerned, there is little or no assistance to be gleaned from any decided cases. Counsel for the respective parties are not aware of any decisions on these sections of the Dangerous Goods Act 1985 that would provide any real assistance as to the proper construction of the provisions under consideration in this case.[101]
[101]There is a recent decision of Connock J in Victorian WorkCover Authority v White [2021] VSC 458 which dealt with an application by WorkSafe for leave to enter judgment in default of appearance, in respect of a claim made under s 17K(6) for recovery of the costs of action taken under s 17K(4) of the Act. In his reasons for judgment, his Honour expressly noted ([2021] VSC 458, [17] fn 15) that s 17K(5) was ‘not substantively relevant’ as the Inspector Action alleged to have been undertaken in that case was alleged to have been taken under s 17K(4) of the Act and not s 17K(5), as is the case here.
In the circumstances, on the face of the pleadings as they stand, I am satisfied that the case advanced by the plaintiff satisfies the threshold requirement of a reasonably arguable case.
At the hearing on 1 October 2021, the Court indicated that if the defendants wish to pursue their application for a summary determination, it will first be necessary for them to plead a proper basis for each of the grounds sought to be agitated in their summons, and in respect of the third ground (that s 17K(6) ‘impairs the institutional integrity’ of the Court), they must ensure that all necessary or proper parties are joined in order to seek declaratory or other relief.
The danger that the prospective judgment might be unsatisfied as a result of the defendants’ actions
The factual background that has given rise to the plaintiff’s concern that Mr Baldwin appears to be in the process of divesting himself of assets, such that any prospective judgment against the defendants might be unsatisfied and thereby frustrate the process of the Court, has been set out in some detail above. As counsel for the plaintiff observed in their outline:[102]
It is well recognised that in cases where freezing orders are made there will ‘…rarely be direct evidence of conduct deliberately designed to frustrate the processes of the Court.’[103] The Court will often be asked to draw inferences from surrounding circumstances to identify the relevant risk.[104]
[102]Plaintiff’s submissions dated 23.08.2021, at [26].
[103]Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd (2009) 77 ATR 414, [35]–[38] (J Forrest J).
[104]Ibid.
In the present case, the ‘trigger’ for the plaintiff’s application for freezing orders was the transfer of the three Mooroopna properties from the joint ownership of Mr and Mrs Baldwin to the sole ownership of Mrs Baldwin.
Based on the material before the Court, the position is that at all relevant times prior to the commencement of this proceeding, the title to each of the Mooroopna properties was registered in the joint names of Mr and Mrs Baldwin and each of the properties was encumbered by mortgage(s) to the National Australia Bank. On 3 June 2021, each of the mortgages was discharged. On 16 June 2021, the plaintiff’s solicitor wrote to Davis Advisory seeking an explanation for, amongst other things, the discharge of those mortgages. The response from Davis Advisory was to the effect that:[105]
As the relevant ‘dealing’ involving the properties does not represent a danger that any prospective judgment will be wholly or partly unsatisfied, there is no basis for an application for a freezing order…
[105]Exhibit PC-16 to the Considine 19.08.2021 affidavit, bundle at 62–63.
That response was given against the background of the earlier correspondence from Davis Advisory in late January 2021 concerning the grant of mortgages by Danbol to Dellock and Rocsange in November 2019 following the discharge of the Commonwealth Bank’s registered mortgage over the title to the Somerville Road property. In their letter of 25 January 2021, the tenor of the explanation given by Davis Advisory ‘on instructions’ was that Danbol was rendered short of funds as a consequence of the fire. They stated that the ‘post-fire response has given rise to significant losses and expenses for Danbol’ which are not covered by insurance,[106] and with the Commonwealth Bank ‘withdrawing all banking services to Danbol’, Danbol was ‘forced to sell an adjoining warehouse over the road from the Tottenham Site; and obtain finance from two third parties, Dellock Pty Ltd and Rocsange Pty Ltd.’[107]
[106]The Court of Appeal gave judgment in proceeding S EAPCI 2020 0025 on 5 November 2020 in which the Court upheld the decision of Riordan J that Danbol is not entitled to be indemnified by its insurer for the costs of conducting the clean-up of the Somerville Road site: Danbol Pty Ltd v Swisse Re International Se [2021] VSCA 274 (McLeish, Niall and Sifris JJA).
[107]Exhibit PC-12 to the Considine 19.08.2021 affidavit, bundle at 46–49.
On 16 August 2021, the plaintiff became aware for the first time that Mr Baldwin had transferred his ‘joint’ interest in each of the Mooroopna properties to his wife for ‘Non-Monetary’ consideration, and the transfer had been registered that day, with the result that Mrs Baldwin was now registered as the sole proprietor of each property.[108] Later that day, the plaintiff’s solicitor wrote to Davis Advisory, urgently seeking an explanation for the transfer.
[108]Exhibit PC-23 to the Considine 19.08.2021 affidavit, bundle at 97–99.
In the chain of correspondence that ensued, Davis Advisory informed MinterEllison that Mr Baldwin was prepared to offer an undertaking to WorkSafe, but they gave no explanation on instructions, or otherwise, for those transfers. That is to say, none of the affidavit material filed by the principal of Davis Advisory for the purposes of the directions hearing on 1 October 2021 addressed that issue nor was any affidavit from Mr Baldwin filed to explain the transfers. Indeed the only ‘explanation’ given thus far is that proffered at the hearing by counsel for the defendants, as follows (emphasis in bold added):[109]
[109]Transcript, 01.10.2021, at 99–100 (defendants’ submissions).
MR YOUNG: . . . If we then turn separately to look against Mr Baldwin, there's two sets of transactions if you like, that are pointed to. The first concerns the Mooroopna properties, the issue there doesn't seem to be the discharge of mortgages that happened but more what we heard a number of times being called the gratuitous transfer between husband and wife.
There are two things to say about that, the first is it was hardly surreptitious or if one was looking at disposing of an asset in a way that did not catch the attention of anybody, this is not the way that you would do it. It's a registered transfer in respect of a property that WorkSafe had written to Mr Baldwin about two months before the transfer, that's PC16 in the affidavit of Mr Considine, is that letter where they express concerns about the discharge of the mortgages over the property. So, the transfer that happens is as we say, hardly surreptitious, and in any event, the question that needs to be asked is about risk and we say when you ask the question about risk, it's dealt with by two things. Primarily, the freezing orders as they exist concerning Mrs Baldwin, but also the undertakings offered by Mr Baldwin in respect of his assets.
HER HONOUR: Well, just let me ask the question, put the freezing order to one side, is the Mooroopna property, does that fit within the description of assets [in the undertakings offered by Mr Baldwin] whether or not they're in Mr Baldwin's name and whether or not they're not solely or co-owned or assets where Mr Baldwin has the power directly or indirectly to dispose of or deal with as if it were his own?
MR YOUNG: No.
HER HONOUR: They're not within that - - -
MR YOUNG: They're not Mr Baldwin's assets on either of those definitions.
The relevant enquiry for the Court is not whether the transaction is ‘surreptitious’. Under O37A, in considering whether or not to grant a freezing order or an ancillary order or both, r 37A.05(4) the Court’s focus is directed to whether (emphasis in bold added)—
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) …; or
(b)the assets of the judgment debtor, prospective judgment debtor or another person are—
(i)…; or
(ii)disposed of, dealt with or diminished in value.
The word ‘might’ in r 37A.05(4) has been held to mean ‘a reasonable possibility, not fanciful or unreal, but not necessarily more than 50 per cent’.[110]
[110]Deputy Commissioner of Taxation v Gashi (2010) 27 VR 127, 131 [14] (Bell J).
In addition to the ‘trigger’ event, the plaintiff also relies on conduct of the defendants that took place in the period preceding the issue of its claim. Counsel for the plaintiff submitted:[111]
[111]Transcript, 01.10.2021, at 51–53 (plaintiff’s submissions).
[MS BENNETT:] . . . The transfer of those [Mooroopna] properties was the trigger for this application. The background against which that can be seen is that shortly after these notices were received the site the subject of the clean‑up was encumbered by companies with a relationship to Mr Baldwin with mortgages to a value that we're not aware of. So shortly after these notices were received.
Now, Danbol encumbered the site. Danbol, controlled by Mr Baldwin, encumbered the site and we don't know how much, but enough to register two mortgages on the title. And in at least one case that encumbrance is directly to his own advantage, to his own benefit, Mr Baldwin's benefit, because it was a closely held proprietary limited company. So there are two separate things. I'm grateful to Your Honour to point out the need to disaggregate these concepts because we think that the notices under 17K(5) – and I don't think it's necessary to argue the point to its conclusion at the moment, but we think those are reasonably clearly directed, one at the individual and one at the company.
But to accept for the moment that Mr Baldwin was not aware and that he believed that only Danbol was on the hook, as it were, he very shortly after proceeded to cause Danbol to encumber that property and in that we see a pattern of conduct and there is a limit to which we - we say that's part of the relevant context within which this application must be seen, but it is not the triggering conduct.
It is relevant background and part of the relevance, Your Honour, is that it caused enquiries to be made by WorkSafe, because it looked like Mr Danbol [sic.] was seeking to dissipate assets via his company, and to his own benefit, by encumbering them in favour of a closely held company of his own. So the transfers or the encumbrances that follow the 4 November notices are in one category and they are the attempt by Danbol to encumber those in favour of Mr Baldwin.
In a second and different category upon which this freezing order came before the court was the gratuitous transfer of the Mooroopna properties which followed the institution of proceedings which were plainly premised on recovery from Mr Baldwin. And in order for this court to be - and again I do place substantial reliance on Mr Baldwin's failure or inability to explain a purpose for that transfer, that gratuitous transfer, that is not what we had inferred and put forward before the court.
And I hasten to add that an opportunity was given in correspondence. We asked for the reason and no reason was given, and to this date the inferences identified at paragraph 18 of our first outline are not rebutted and the conclusion - not even cavilled with - and the conclusion that there is a risk of dissipation is likewise not quibbled with. And we say that inference arises because of the transfer that actually took place that was subsequent to the institution of proceedings when there could have been no doubt about where we were seeking to recover.
So in the sense that there are various hurdles that I need to get through to satisfy Your Honour it's appropriate to make this order, the first is that there's a risk of dissipation and we rely on the disposition of the Mooroopna properties that occurred and the inference of the circumstances in which that took place, which I've outlined, including the failure to explain, and that give rise to that risk we say. The encumbrance of the Tottenham site is relevant background but not what triggered the application. But I note we are seeking a freezing order against both the first and second defendant. And so in that sense the encumbrance of the - of Danbol Pty Ltd has some relevance.
In my view, once the proceeding was commenced and served, it was clear, and the defendants should have been aware, that the plaintiff was seeking to recover the costs of the clean-up action from each of them (and not just from Danbol) pursuant to s 17K(6). Since then, each of the mortgages over the Mooroopna properties has been discharged — but there is no evidence as to what, if any, payment the National Australia Bank required Mr and/or Mrs Baldwin to make before it would discharge the mortgages —and shortly after they were discharged, Mr Baldwin transferred his joint interest in each of those properties to his wife without payment of any monetary consideration.
The position is that no explanation has been advanced for the transactions concerning the Mooroopna properties. Those transactions took place after the proceeding was commenced and against a background where the defendants’ solicitors had informed the plaintiff’s solicitors on 2 July 2021 to the effect that the relevant ‘dealing’, being the discharge of the mortgages, ‘does not represent a danger that any prospective judgment will be wholly or partly unsatisfied’.[112] With the discharge of the National Australia Bank’s mortgages, however, and the subsequent transfer of Mr Baldwin’s (joint) interest in the unencumbered titles to Mrs Baldwin as sole proprietor for no monetary consideration some six weeks later, it seems clear that Mr Baldwin’s pool of assets that would otherwise have been available to satisfy any prospective judgment has been ‘disposed of, dealt with or diminished in value’. Nevertheless, Mr Baldwin has not seen fit to provide any explanation for those events.
[112]Exhibit PC-16 to the Considine 19.08.2021 affidavit, bundle at 62–63.
In the absence of any explanation from Mr Baldwin, I am satisfied on the material before the Court that there is ‘a reasonable possibility, not fanciful or unreal’ that assets of Mr Baldwin, ‘might’ be ‘disposed of, dealt with or diminished in value’. In the case of Danbol, of which Mr Baldwin is the sole director, secretary and shareholder, the only remaining real estate asset in Victoria is the Somerville Road site, the other real estate asset (‘the adjoining warehouse over the road’[113]) having been sold post-fire and prior to January 2021. There is no evidence as to the amounts secured by the three mortgages granted over the Somerville Road property or Danbol’s equity in it, nor is there any evidence as to what, if any, other non-real estate assets Danbol owns or has an interest in. Here again, in the absence of any explanation from Mr Baldwin, I am satisfied on the material before the Court that there is ‘a reasonable possibility, not fanciful or unreal’ that Mr Baldwin ‘might’ seek to dispose of, deal with or diminish the value of any assets of Danbol.
[113]Exhibit PC-12 to the Considine 19.08.2021 affidavit, bundle at 46–49.
I have formed the above views conscious of the fact, and notwithstanding, that on 26 August 2021 Mrs Baldwin consented to the Court making a freezing order over the three Mooroopna properties. At the hearing on 1 October 2021 there was no suggestion that the freezing order made over those properties on 26 August 2021 should be altered or varied. That freezing order will remain in force and be effective to prevent Mrs Baldwin from dealing with or disposing of those properties.[114]
[114]By email dated 23 September 2021, sent to the Court and to the defendants and their representatives, the solicitors for the plaintiff confirmed that ‘the plaintiff does not seek to amend’ the freezing order made against Mrs Baldwin dated 26 August 2021.
Undertakings proffered by Mr Baldwin do not eliminate the risk of dissipation of assets
Counsel for the defendants submitted to the effect that with the freezing order in place over the Mooroopna properties, and with the extended form of undertaking given by Mr Baldwin, any risk of dissipation of assets had been dealt with or addressed. I do not agree that the freezing order that is in place over the Mooroopna properties operates to attenuate the risk identified in the case of Mr Baldwin. Nor is the extended undertaking that Mr Baldwin gave on 1 October 2021 likely to be effective to address the risk of dissipation of assets.
The definition of ‘assets’ for the purpose of the undertakings is modelled on the definition of ‘assets’ in the standard Form 37AA form of freezing order. However, in the absence of a clear articulation of what comprise the respective assets of each of Mr Baldwin and Danbol, including the real property assets that have been identified by the plaintiff, it would be difficult for the Court to enforce the undertakings or monitor compliance with them. Counsel for the defendants acknowledged as much in the course of oral submissions.[115] This difficulty is exacerbated in circumstances where:
(a) Mr Baldwin’s solicitor, Mr Davis, deposes on information and belief that Mr Baldwin has been engaged in property investment ventures and developments for over 20 years. Counsel for the plaintiff submitted that this information, which was revealed for the first time on 28 September 2021, raises the prospect that there could be other assets of Mr Baldwin of which the plaintiff is unaware that might be the subject of further dealings by him[116]; and
(b) the material before the Court does not provide any information about the moneys secured by, or level of indebtedness of Danbol under, the mortgages granted by it to Balmoor Pty Ltd, and to each of Dellock and Rocsange, over the Somerville Road property.
[115]Transcript, 01.10.2021, at 95 (Mr Young QC).
[116]Transcript, 01.10.2021, at 65 (Ms Bennett).
There is also evidence before the Court that a commercial property agent recently (at some point prior to 8 July 2021) attended at the Somerville Road site purportedly acting on behalf of Mr Baldwin, and expressed an interest in purchasing the site.[117] Neither Mr Baldwin nor Danbol, or their solicitors, has made any response or provided any explanation for the commercial property agent’s attendance at the site.
[117]PC-17 to the 19.08.2021 Considine affidavit, bundle at 65.
In the case of the Kialla properties, the indebtedness of Mr Baldwin pursuant to the National Australia Bank Ltd’s mortgage in respect of lots 1 and 2 of the subdivision (as at 6 September 2021) was $83,503.08 and in the case of lots 3 to 10 of the subdivision, the indebtedness of Mr Baldwin’s company, HOVT Developments Pty Ltd, pursuant to the ANZ Banking Group Ltd’s mortgage (as at 28 September 2021) was $361,750.77. As the orders made on 1 October 2021 record, Mr Baldwin has undertaken to the Court that the net proceeds of sale of Lots 1 to 10, being the amount remaining following the discharge of those two mortgages and payment of fees and charges incurred on the sale, ‘will be held in the trust account of Davis Advisory and can only be distributed for the purposes of paying [his] or Danbol’s reasonable legal expenses in this proceeding or in the proceeding between Danbol Pty Ltd and ACN 007 198 343 Pty Ltd (S ECI 2020 14677) (sic)’.[118] In those circumstances, the plaintiff does not seek to prevent the settlement of the transfer of the individual lots that comprise the Kialla properties.
[118]See the undertaking given by the first defendant on 1 October 2021 which appears as annexure A to the orders made on 1 October 2021. Note that the reference to Proceeding S ECI 2020 14677 should be to Proceeding S ECI 2020 04677.
The amount the subject of the freezing order(s)
In its summons, the plaintiff seeks freezing orders referable to the amount of $7,178,945.86 specified in its amended statement of claim.[119] Following the mention on 26 August 2021, MinterEllison wrote to Davis Advisory on 10 September 2021 to inform the defendants that the alleged sum of the remediation works is $15,813,366.28 and enclosed copies of supporting invoices.[120] However, no increase in the amount of the freezing order(s) has been proposed or sought.
[119]Amended statement of claim, at [23].
[120]Exhibit PC-36, bundle at 380–382. This higher sum is close to the amount that Danbol has identified in its proceeding against its former insurance broker as being the likely quantum of damage, being loss said to have been sustained by it, comprised predominantly of the clean-up costs incurred by the plaintiff: see the particulars subjoined to the statement of claim in Proceeding S ECI 2020 04677.
The balance of convenience
Following the decision of the Court of Appeal in Rozenblit v Vainer,[121] it is clear that the balance of convenience may bear upon the Court’s ultimate decision, but it is not a distinct requirement that the balance of convenience favours the making of the order. The plaintiff submits that in the present case, the balance of convenience favours the order being made, primarily because the order sought will operate to restrain Mr Baldwin from disposing of further assets, including his interest in further real property, until determination of the proceeding or further order.[122]
[121][2019] VSCA 164.
[122]Plaintiff’s submissions dated 23.08.2021, at [29]–[30].
In this regard, the plaintiff observes that if Mr Baldwin is permitted to continue to dissipate his assets, then the process of the Court is likely to be frustrated. That is because the plaintiff has expended in excess of $15million in actions directed to a clean-up of the Somerville Road site, and if the site is returned to Danbol without the costs of those works being recovered, then Mr Baldwin as the sole shareholder and director of Danbol will effectively take the benefit of the clean-up work without bearing the financial burden of undertaking it and in circumstances where the clean-up work was required to be performed in order to render harmless the place at which the dangerous goods, container or thing was or were present, and Danbol and/or Mr Baldwin failed to perform the necessary work when directed to do so.
Similarly, in the case of Danbol, unless a freezing order is granted to ensure that the Somerville Road site is not disposed of or further encumbered by the grant of further securities (to related entities or otherwise), there is a real risk that any judgment for recovery of the clean-up costs may go unsatisfied.
In my view, the balance of convenience supports the making of the freezing orders against Mr Baldwin and Danbol, and the plaintiff has proffered the usual undertaking in support of each application.
In the case of the freezing order that was sought (and obtained on 26 August 2021) against Mrs Baldwin, pursuant to r 37A.05(5):
(a) the terms of the freezing order that was granted are limited, and relate only to the Mooroopna properties of which she is now registered as sole proprietor, following the recent transfer from Mr Baldwin;
(b) while counsel for Mr Baldwin informed the Court that Mr Baldwin has no retained interest in those properties, the plaintiff has nevertheless foreshadowed that if the plaintiff is ultimately successful in the proceeding but the (prospective) judgment obtained against Mr Baldwin is not satisfied, it will contend that by reason of the gratuitous transfer to Mrs Baldwin, the Mooroopna properties are assets which she may be obliged ultimately to disgorge to help satisfy the (prospective) judgment (e.g., on grounds that the transfers are voidable pursuant to s 120(1) of the Bankruptcy Act1966 (Cth)); and
(c) the plaintiff does not, at present, seek to restrain all of the personal bank accounts of Mrs Baldwin and does not prevent expenditure on day to day living expenses. Nor, at this stage, has the plaintiff pursued its application for an ancillary order for disclosure of Mrs Baldwin’s other assets.
No delay in seeking the freezing orders
The factual chronology set out above demonstrates that the plaintiff moved promptly to seek the freezing orders against each of Danbol and Mr and Mrs Baldwin shortly after it became aware that Mr Baldwin had transferred his interest in the Mooroopna properties to his wife for no monetary consideration. An explanation was sought urgently, and when no, or no satisfactory explanation was forthcoming, the plaintiff’s solicitors moved to have freezing orders granted on an urgent basis.
Summary of orders to be made
For the reasons set out above, a freezing order and ancillary order will be made against each of Mr Baldwin and Danbol.
Counsel for the defendants submitted that if, contrary to their submissions, the Court were minded to make freezing orders, then the defendants should be released from the undertakings given so that there is clarity about the obligations required to be complied with.[123] Counsel for the plaintiff were content with that arrangement.[124] In my view, that is an appropriate course.
[123]Transcript, 01.10.2021, at 102 (defendants’ submissions).
[124]Transcript, 01.10.2021, at 115 (plaintiff’s reply submissions).
In the case of the freezing order against Mr Baldwin, the terms in which the freezing order is expressed (in Annexure A to the plaintiff’s summons) will need to be adapted to ensure that it does not operate to prevent the settlement of the transfer of any of the individual lots that comprise the Kialla properties, and that the net proceeds of sale (as described above) continue to be held in the trust account of Davis Advisory on the terms recorded in the extended undertaking set out in the orders made on 1 October 2021.
The freezing order against Mrs Baldwin will continue in place essentially on the terms ordered by the Court on 26 August 2021.
I will hear from the parties as to the precise form of the freezing orders and ancillary orders to be made against the defendants, and the orders for the release of their existing undertakings, the timetable for the procedural steps required to be completed with respect to the defendants’ summons, and on the issue of costs.
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