Supreme Court New South Wales Medium Neutral Citation: In the matter of HPack Investments Pty Ltd [2020] NSWSC 1638 Hearing dates: 6 November 2020 Decision date: 18 November 2020 Jurisdiction: Equity - Corporations List Before: Black J Decision: Current freezing orders to be extended until further order. Plaintiff to bring in short minutes of order to give effect to this judgment within one business day. Catchwords: CIVIL PROCEDURE — Interim preservation — Freezing orders — Against third parties — Jurisdiction to make freezing order — Discretion whether to make freezing order — Winding up application against company that is trustee of self-managed superannuation fund — Where assets had been transferred to beneficiaries and associated entities — Asset transfers occurring without discharging tax liabilities — Where assets now held by beneficiaries and associated entities appear less than quantum transferred — Where evidence led raises risk of continued dissipation of assets without reserving funds to meet judgment — Where liquidator if appointed has prospective claims against beneficiaries and associated entities. Legislation Cited: Corporations Act 2001 (Cth), ss 180, 588FDA, 588FG, 1317S Practice Note SC Gen 14 Superannuation Industry (Supervision) Act 1993 (Cth), ss 120(2)(e), 126K Uniform Civil Procedure Rules 2005 (NSW), rr 25.11, 25.14 Cases Cited: - Beach Petroleum NL v Johnson (1992) 9 ACSR 404 - Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 - Clark Equipment Credit of Aust Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552 - Clout (as trustee in bankruptcy of the Estate of Dexter) v Anscor Pty Ltd [2001] FCA 174 - Crowe-Maxwell v Frost (2016) 91 NSWLR 414; [2016] NSWCA 46 - Deputy Commissioner of Taxation v Bollands [2012] FCA 1050 - Frigo v Culhaci [1998] NSWCA 88 - Goumas v McIntosh [2002] NSWSC 713 - Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; 287 ALR 22; 87 ACSR 260; [2012] FCAFC 6 - Jackson v Stirling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23 - Jaken Properties Australia Pty Ltd v Naaman [2020] NSWSC 1554 - Pages Property Investments Pty Ltd v Boros [2020] NSWSC 1270 - Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 - Re Black Eagle Media Pty Ltd [2014] NSWSC 1778 - Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 - Samimi v Seyedabadi [2013] NSWCA 279 - Smith v Starke; Re Action Paintball Games Pty Ltd (in Liq) (No 2) (2015) 109 ACSR 145; [2015] FCA 1119 - SX Projects Pty Ltd (in liq) v Battaglia [2018] NSWSC 1830 - Vasudevan v Becon Constructions (Aust) Pty Ltd (2014) 97 ACSR 627; [2014] VSCA 14 Category: Procedural and other rulings Parties: Deputy Commissioner of Taxation (Applicant/Plaintiff) Hpack Investments Pty Ltd (First Respondent) CKJJJJ Investments Pty Ltd (Second Respondent) Charlie Cordina (Third Respondent) Katrina Cordina (Fourth Respondent) B & C Produce Pty Ltd (Fifth Respondent) Representation: Counsel: Mr S Golledge SC/Ms S C Woodland (Applicant) Ms J Needham SC/ Mr J Kohn (Respondents) Solicitors: Craddock Murray Neumann (Applicant) Atkinson Vinden (Respondents) File Number(s): 2020/263741 Judgment Nature of the application 1. By Originating Process filed on 10 September 2020, the Plaintiff, the Deputy Commissioner of Taxation ("DCT") applies for an order winding up HPack Investments Pty Ltd ("HPack"), on the basis that HPack is actually insolvent, by reason of a substantial tax debt. By Interlocutory Process filed on the same date, HPack sought interlocutory relief in the nature of a freezing order directed against HPack, an associated entity CKJJJJ Investments Pty Ltd ("CKJJJJ") and against HPack's two directors, Mr and Mrs Cordina and B & C Produce Pty Ltd ("B&CP"). I made that order on that date, and it was continued as against HPack, CKJJJJ and Mr and Mrs Cordina until 6 November 2020. On that date, a full hearing took place as to whether the freezing order should be further continued against CKJJJJ and Mr and Mrs Cordina. HPack does not resist the continuance of that order against it and the DCT does not seek to continue that order against B&CP. On that date, the freezing order was continued by consent until 4 December 2020, in order to allow me to reserve and deliver a judgment on the merits. 2. By way of background, HPack is the trustee of the Cordina Superannuation Fund ("CSF"), its directors are Mr and Mrs Cordina and each of them hold one ordinary share in it. HPack was appointed as trustee of the CSF on 27 January 2015 by a Deed of Amendment and Consolidation and Change of Trustees, then replacing Mr and Mrs Cordina as the trustee of the CSF. CSF holds all of the units in the B&C Unit Trust, of which B&CP is trustee. B&CP has an interest in Hydro Produce (Aust) Pty Ltd which conducts a farming and wholesaling business. 3. CKJJJJ is the trustee of the C Cordina Superannuation Fund ("CCSF") and was incorporated in January 2015, and Mr and Mrs Cordina are its directors and shareholders. It was appointed as trustee of CCSF on 27 January 2015 by a Deed of Change of Trustees, also in place of Mr and Mrs Cordina, and owns a property at Silverwater in New South Wales. Mr Golledge, who appears with Ms Woodland for the DCT, points out, and I accept, that the Respondents lead no evidence to explain the commercial purpose of two superannuation funds or of the large number of transactions between them. Mr Cordina is a director and shareholder of HPack and CKJJJJ and a beneficiary of CSF and CCSF and is also a director or shareholder of other companies. Mrs Cordina is also a director, secretary and shareholder of HPack and CKJJJJ and is also a beneficiary of the CSF and CCSF and a director and shareholder of other companies. 4. I should emphasise that this application is of an interlocutory character, although the parties have led extensive evidence in it. Because of the way in which CKJJJJ and Mr and Mrs Cordina have approached the application, it will be necessary for me to reach some findings in respect of their conduct. I recognise that matters may well present differently at a full hearing on the merits, particularly if Mr and Mrs Cordina lead more detailed evidence or are cross-examined. I do not reach findings as to any matters which are not necessary to determine this interlocutory application. Chronology of events 1. I first set out a chronology of events which emerge from the affidavit evidence and the documents tendered, then refer to that affidavit evidence, and then to the applicable principles and the parties' submissions. 2. Mr Cordina commenced a farming business with a third party in the 1990s and then established the B&C Unit Trust and CSF. Arrangements were made to buy out the third party from the business in about 2009, by purchasing the units held by the third party in the B&C Unit Trust. It appears that CSF commenced making pension payments to Mr Cordina from 1 July 2009, about the same time as the units held by the third party in the B&C Unit Trust were redeemed, leaving Mr and Mrs Cordina in control of that trust. 3. Hancock & Associates began advising the Cordina group of entities ("Cordina Group") including CSF from mid-2013 and, as I note below, Mr Cordina's evidence is that Hancock & Associates obtained further "tax advice" in June 2013 from a specialist SMSF advisor in relation to CSF and the Cordina Group. Advice was sought and a response obtained from Garth McNally of the Knowledge Shop on investments within the Cordina Group that were "of concern" to the accountants. Mr McNally's response to the matters raised by Hancock & Associates takes the form of a two and a half page email, which sets out questions asked by the accountant and answers to them. The question is asked in anonymised form, so that they do not identify the relevant entities, as follows: "We have recently been appointed tax agents for a group of entities which includes a [self-managed superannuation fund] SMSF. The SMSF has the following investments which is of concern to us: SMSF – owns 100% of Units in a Unit Trust (call it ABC Trust) Details of ABC Trust - Owns a large range of plant & equipment, motor vehicles, trucks, computer equipment, machines etc which it hires out to a related company of the SMSF. - ABC Trust has Hire Purchase liabilities on Machines. - ABC Trust has liabilities – unpaid entitlements to the SMSF - ABC Trust owns 50% of ordinary shares in a same related company (other shares in this related company is owned by the members of the SMSF). - ABC Trust in 2012 year received 100% distributions from another Trust (call it DEF Trust) that conducts a primary production – farming business. It uses contractors for farming activities). - ABC Trust owns 100% of units in another trust (call it XYZ trust) which owns a farm (business real property). XYZ Trust receives rental income for DEF Trust for the lease of farm. XYZ trust has loans from a bank and also loans from members of the SMSF. We don't believe these borrowings are 'limited recourse borrowings'. - ABC Trust – was [set up] pre-1999 however it bought the plant and equipment post-1999. - Units in XYZ trust were – issued to ABC Trust in 2011 or thereabouts. Questions Given the above details, what potential issues can be identified for the SMSF." 1. The answer given by Mr McNally of identifies a potential issue in relation to unpaid entitlements to the SMSF; makes an assumption, which may or may not be correct, as to whether the SMSF acquired further units in the ABC Trust after a specified date; notes that the structure described "may not be in breach of the [Superannuation Industry (Supervision) Act 1993 (Cth) ("SIS Act") in house asset provisions", which does not appear to be a strong endorsement of it; advises that "all the transactions that the super fund has with the trust must be on a genuine arm's length basis" and: "The super fund must receive trust distributions in a timely fashion. This we believe is an issue in your client's case …" The advice also refers to other aspects of the SIS Act and indicates the advice records Mr McNally's "initial views" on these matters and then recommends that: "If you have concerns about the overall client position, it may be worth seeking professional advice." 1. As Mr Golledge points out in submissions, the nature of the advice sought from the Knowledge Shop is unclear, and it may be more probable that it relates to issues in respect of compliance with the SIS Act than to tax issues. Mr McNally's advice plainly raised the possibility that the then structure may be in breach of the SIS Act, and the Respondents lead no evidence as to what was done to address that possibility. Mr McNally also drew attention to the requirement that transactions between the superannuation fund and the trust must be on a genuine arm's length basis, and there is no evidence of what was done to determine whether that had been or would be complied with; and Mr McNally had recommended that professional advice be obtained, at least if any concerns remained, and there is no evidence that any further advice was obtained. 2. In reply, Mr Golledge again points out that the Respondents do not explain the investments which were "of concern" to Hancock & Associates, to which reference was made in Mr McNally's email; points to the focus in that email upon compliance with the SIS legislation and that Mr McNally's opinion was only that the relevant structure "may not be in breach of the SIS Act"; and points to Mr McNally's advice that transactions between the trust and CSF should be on a "genuine arm's length basis" and to Mr McNally's recommendation that professional advice be obtained. Mr Golledge also points to the absence of evidence as to Mr McNally's qualifications or experience or whether any further professional advice was in fact obtained. I address Mr Cordina's evidence as to this advice below. 3. There is evidence of very substantial amounts paid by Mr and Mrs Cordina and later HPack as trustee for CSF to Mr and Mrs Cordina over the last several years. Mr and Mrs Cordina as trustees for CSF paid benefits totalling $337,000 to Mr Cordina and CCSF paid member benefits totalling $45,000 to Mrs Cordina in the financial year ending 30 June 2013 (Deng [55]-[56]). Mr and Mrs Cordina as trustees for CSF paid superannuation benefits to Mr Cordina exceeding $2 million in the financial year to 30 June 2014 (Ex A2, 2199). By way of example only, an amount of $1 million was paid on 24 April 2014 and an amount of $1.5 million on 6 June 2014. 4. As I noted above, HPack was appointed as trustee of the CSF on 27 January 2015 by a Deed of Amendment and Consolidation and Change of Trustees, then replacing Mr and Mrs Cordina as the trustee of the CSF. CKJJJJ was incorporated as trustee of CCSF on 27 January 2015 by a Deed of Change of Trustees, also in place of Mr and Mrs Cordina. 5. Mr and Mrs Cordina and then HPack as trustee for CSF made payments to Mr Cordina exceeding $5 million in the 12 months to 30 June 2015. Again by way of example only, an amount of $1 million was paid to Mr and Mrs Cordina on 10 October 2014; further amounts totalling over $1.5 million in November and December 2014; and an amount of $500,000 in January 2015. HPack as trustee for CSF made payments to Mr Cordina in an amount of over $11 million between 1 July 2015 and 30 June 2017 (Deng [60]). 6. After CKJJJJ was incorporated and appointed as trustee of the CCSF in January 2015, substantial funds continued to be transferred by Mr and Mrs Cordina as trustee for CSF to Mr and Mrs Cordina and large payments are also made, on a regular basis, by Mr and Mrs Cordina as trustee for CSF to CKJJJJ as trustee for CCSF. HPack as trustee for CSF paid an amount of nearly $18 million to CKJJJJ in the period to 30 June 2017 (Deng [62]). Those payments continued regularly and in very large amounts to the point at which the ATO commences its review into the affairs of HPack in March 2019. 7. By letter dated 15 March 2019 (Ex A2, 381) the DCT advised that it had started a review of HPack as trustee for CSF's income tax affairs for the 2015, 2016 and 2017 years and requested a substantial number of documents for the purposes of that review. As Mr Golledge points out, that letter did not identify any suspicion on the part of the DCT, at least at that point, that there was specific issue in respect of non-arm's length income ("NALI") in respect of CSF. 8. Several weeks later, the Respondents' solicitor wrote to the DCT providing some of the documents sought and making the following "voluntary" disclosure: "We have now reviewed the documents that have been provided to the Commissioner. We consider that it is open to the Commissioner to conclude that the distributions from the B&C Trust to the CSF for the years under review were non-arm's length income (NALI) of the CSF, for the purposes of s 295-550 of the Income Tax Assessment Act 1997 (Cth) (ITAA 97). If so, the tax returns for the CSF would be incorrect and a shortfall amount would exist for the years under review. The CSF wishes to make, for the purposes of Division 284 of Part 4-25 of Schedule 1 to the TAA, a voluntary disclosure about the shortfall amount and false nature of its tax returns (being statements for the purposes of Division 284). Our client accepts that it is open to the Commissioner to conclude that the distributions from the B&C Trust formed the basis of the shortfall amount." 1. A table then summarises those amounts, disclosing tax unpaid of $3,784,861 for the year ended 30 June 2015; $4,385,301 for the year ended 30 June 2016; and $3,441,093 for the year ended 30 June 2017. 2. The letter then provides a detailed outline of the factual background to those matters and refers to the applicable law in respect of the treatment of NALI in the relevant circumstances. The letter also submits that no penalty should be imposed and refers to the fact that Mr Cordina is an immigrant from Malta and English is his second language and that Mrs Cordina is also a director and shareholder but has "minimal involvement in making decisions for the business". Regrettably, that will be of little assistance to Mrs Cordina in any claim brought by a liquidator of HPack against her, and may indeed take that liquidator a considerable way to establishing a breach of director's duties on her part. That letter also advances the proposition, which was also put in this application that: "Neither [Mr Cordina or Mrs Cordina] are versed in taxation matters and largely for this reason, have always engaged professional advisers to assist in managing in understanding their tax affairs and those of the CSF. The taxation principles discussed above are inherently complex and [Mr and Mrs Cordina] have no awareness of NALI, its operation and consequences. In relation to taxation and accounting matters, they have relied on Hancock & Associates, their accountants and tax agents for the years under review." 1. The DCT also relied on a document, by way of submission (MFI 1) which recorded deposits into a bank account held by HPack for the 24 months before and the 12 months after the DCT's indication in March 2019 that it would conduct a review of HPack's tax affairs. That summary, and the underlying bank records, disclose deposits into HPack's account in an amount of nearly $11 million for the 12 months to March 2018; in an amount of $8,674,697 for the 12 months to March 2019, reducing to $720,394 for the 12 months to March 2020. That evidence supports an inference, which I draw, that a decision was made, by Mr and Mrs Cordina in respect of the trust or HPack or both, at about the time that DCT commenced its review, to cease making payments into HPack in the manner which had previously been undertaken, with the consequence that HPack's assets that might be available to meet a claim by the DCT at any subsequent point would be reduced. 2. Ms Needham, who appears with Mr Kohn for the Respondents, submits that that reduction in payments into HPack was a prudent step where the process of payments into HPack was under review by the DCT. However, Mr and Mrs Cordina do not give evidence that they decided to reduce payments into HPack for that reason. There also appears to have been no suggestion by the DCT that there was any difficulty in the trust making payments into HPack, as long as the tax obligations attaching to such payments were discharged. Ms Needham also submits that HPack had no entitlement to such payments and that may well be the case. However, I would not go so far as treating that matter as indicating that Mr and Mrs Cordina or CKJJJJ have any existing intention to frustrate any judgment that a liquidator may obtain against them. 3. On 26 March 2020, the DCT issued notices of assessment of income tax to HPack for the years ending 30 June 2015 to 30 June 2017, resulting in an additional liability of tax of approximately $11.95 million payable by HPack. 4. The Respondents rely on a letter dated 10 September 2020 from the DCT to their solicitors, which referred to a proposal received on 20 February 2020 to compromise the tax debt owed by HPack and advised that proposal had been refused. That letter recognised a delay by the DCT in responding to that proposal, and remitted general interest charges from 17 February 2020 to 10 September 2020, noting that HPack's outstanding tax liability was then $19,664,953.51. Ms Needham relied on that letter for the proposition that there had been a delay by the DCT in seeking the freezing orders. I address that proposition below. Affidavit evidence 1. The DCT relies on the affidavit dated 9 September 2020 of Yi Deng, who is an Executive Level Officer Grade 1 in the Australian Public Service, employed in the debt and lodgement section of the Australian Taxation Office. That affidavit is primarily directed to the DCT's application to wind up HPack and Mr Deng's evidence is that the DCT is a creditor of HPack in respect of overdue and unpaid tax-related liabilities in the amount of approximately $19,664,953.51 which is now due and payable by HPack, and a further amount which became payable on 11 September 2020. That affidavit notes that HPack's tax-related liabilities relate to assessments of income tax, shortfall interest charges and general interest charge for the years of income ending 30 June 2015 to 30 June 2019, and the affidavit sets out the assessments which gave rise to those debts. The affidavit also addresses the solvency of HPack and draws attention to a substantial deficiency in HPack's assets against its liabilities, including its taxation liability, which had reached approximately $13,635,265 by 30 June 2019. The Respondents did not seek to lead evidence to contest that deficiency in HPack's assets or to suggest that it is able to pay its debts as and when they fell due in this application, and such evidence may or may or may not be led in opposition to the winding up application. 2. By a second affidavit dated 9 September 2020 in support of the application for freezing orders, Yi Deng identified claims that a liquidator appointed to HPack may have against, relevantly, CKJJJJ and Mr and Mrs Cordina. That affidavit also refers to the commencement of a review by the DCT into the affairs of CSF and HPack in mid-March 2019, to which I referred above, and to the fact that, some six weeks later, HPack made voluntary disclosures that its tax returns lodged in previous years were incorrect; that a property had been disposed of and rolled over by the CSF to the CCSF without reporting a capital gain of $920,974; and that there were also other issues in respect of exempt current pension income. That affidavit noted that the amount of unpaid tax disclosed by that voluntary disclosure was $11,611,255 and that the DCT has since assessed the tax payable at a slightly higher amount. 3. That affidavit indicated the DCT's apprehension that judgments obtained by a liquidator against those persons would be wholly or partly unsatisfied on the basis that, inter alia, HPack had evinced an intention not to pay income tax by not declaring NALI in the income years 30 June 2015 to 30 June 2017; Mr and Mrs Cordina had caused HPack to dispose of the majority of its assets by pension payments to themselves, purchases by entities related to them and rollovers of superannuation interests to CKJJJJ for their own benefit; the amount of payments and transactions out of HPack and CSF to CKJJJJ and Mr and Mrs Cordina had rapidly and substantially increased since mid-2013, when HPack's advisers had expressed a concern about regulatory issues, to which I have referred above; the value of assets disclosed by Mr and Mrs Cordina is not commensurate with the value of payments made to them by HPack and CKJJJ, raising a concern that steps have already been taken to frustrate rights of recovery against them; Mr Cordina had demonstrated an ability to transfer large amounts of cash by electronic funds transfers to his relatives, in particular his son, and bank accounts outside Australia; and the assets held in trusts and corporate entities are open to being encumbered or disposed of before a prospective judgment would be obtained. 4. An affidavit dated 28 October 2020 of Mr Craig Smith, a solicitor acting for the DCT refers to a letter from his firm to the solicitors acting for the Respondents. That letter addresses a debate, which it is not necessary to resolve for the purposes of this application, whether the Respondents are able to make payments of HPack's debt owed to the DCT, beyond the assets which remain in HPack. 5. The Respondents rely on Mr Cordina's affidavit dated 14 October 2020 which refers to Mr Cordina's background. Mr Cordina's evidence is that he left school in Malta at age 10 and has had no further formal education and cannot write in English and can read only a little English. I assume the correctness of that evidence, although it has the oddity that his affidavit is in English and is not supported by any evidence of an interpreter having been involved. Mr Cordina's affidavit refers to the commencement of a farming business with a third party in the 1990s, to which I referred above, and to the establishment of, inter alia, CSF on the advice of an accountant. Mr Cordina's evidence is that he and his wife have always engaged and relied on professional advisers to assist in managing and understanding their tax affairs and those of the B&C Unit Trust and CSF (Cordina 14.10.20 [19]). Mr Cordina also refers to the arrangements made to buy out the third party from the business in about 2009 and gives evidence of advice taken for the structure adopted to purchase the units held by the third party in the B&C Unit Trust. 6. Mr Cordina also refers to the retainer of Hancock & Associates to advise the Cordina Group including CSF from mid-2013 (Cordina 14.10.20 [27]) and gives evidence (Cordina 14.10.20 [29]) that: "In June 2013, Hancock & Associates obtained further tax advice in relation to CSF and the Cordina group. Advice was sought and a response obtained from Garth McNally of the Knowledge Shop on investments within the group that were 'of concern' to them." Mr Cordina exhibits a copy of Mr McNally's response to the matters raised by Hancock & Associates to his affidavit and I will address the substance of that response below. I will not address an issue whether that advice is properly characterised as tax advice. 1. Mr Cordina's evidence, by way of conclusory statement, is that "upon reliance on, amongst other things," Mr McNally's advice, HPack was incorporated; he and Mrs Cordina were replaced by HPack as trustees of CSF; CSF made payments to Mrs Cordina and him; and superannuation benefits were rolled out of CSF. His evidence was also that, if he had known that distributions from the B&C Unit Trust to the CSF would have incurred tax liabilities other than those stated in CSF's financial reports for the financial years ended 30 June 2015 – 2017 he would "never have transferred the payments" and would have arranged for (unidentified) liabilities to be paid by CSF. 2. In reply, Mr Golledge points to several matters not addressed by Mr Cordina's evidence, including the content of other professional advice that may or may not have been obtained and the commercial purpose of the structures which were established in respect of CSF, CKJJJJ and CCSF. It seems to me that there are significant difficulties with the form and substance of this evidence, even in an interlocutory application, and I raised the possibility that Mr Cordina may wish to supplement that evidence, by leave, with his Counsel, Ms Needham, in the course of the hearing. He did not take up that opportunity. Those difficulties include the fact that Mr Cordina seeks to rely upon advice attributed to Hancock & Associates from mid-2013, but none of that advice is disclosed; he relies on the advice obtained from Mr McNally, but neither Mr McNally's qualifications nor those of the "Knowledge Shop" are disclosed; he refers to the advice obtained by Hancock & Associates from Knowledge Shop but does not indicate whether he had knowledge of that advice at the time it was obtained or what involvement he had in considering the matters raised by it. I also refer to several issues arising from that advice below. Mr Cordina also asserts reliance on that advice, together with unidentified "other things", to incorporate HPack, replace him and Mrs Cordina with HPack as trustee of CSF, have CSF make payments to him and Mrs Cordina and roll superannuation benefits out of CSF. It is not apparent how that advice provides any support for any of those steps. 3. That evidence might also have had greater force had either Mr Cordina or Mrs Cordina led evidence which disclosed the extent of the efforts they have made to understand the complex structure that had been established; the nature of the advice which they had sought throughout the period; or the inquiries that they had made to satisfy themselves that that structure legitimately had the consequence that they were entitled to derive tax free income from the B&C Unit Trust, where they can scarcely have failed to notice that tax was not being deducted from the substantial income they were receiving, and they do not suggest that they had no understanding that tax is normally imposed upon the receipt of income by members of the Australian community. 4. By a further affidavit dated 28 September 2020, Mr Cordina refers to residential real property assets which he owns with his wife; commercial real property assets in which he has interests; business investments and cash in bank accounts. Mr Cordina's evidence indicates that he has substantial assets. By a third affidavit dated 28 September 2020, Mr Cordina refers to monies held by CSF in a bank account, being the amounts that remain after the transactions to which I have referred above. A fourth affidavit of Mr Cordina dated 28 September 2020 states that B&CP does not own assets or have any bank accounts in is name. A fifth affidavit dated 28 September 2020 of Mr Cordina refers to the assets of CKJJJJ, which include a commercial property of substantial value and to residential units in a holiday destination. A sixth affidavit dated 14 October 2020 of Mr Cordina corrects information provided in his earlier affidavits as to his assets, sets out member balances in respect of superannuation funds and refers to two other properties held in trusts. 5. The Respondents also rely on Mrs Cordina's affidavit dated 28 September 2020, which refers to her interest, together with Mr Cordina in substantial assets. Mrs Cordina's second affidavit dated 14 October 2020 also provides additional information into her asset position. 6. The Respondents also rely on the affidavit dated 14 October 2020 of Mr Bryce Figot, a solicitor acting for HPack. Mr Figot's evidence is that his firm was engaged by HPack as trustee of CSF on 2 April 2019 and was then advised that the DCT had commenced a review of CSF's income tax for the years ended 30 June 2015, 30 June 2016 and 30 June 2017. Mr Figot refers to subsequent correspondence with the DCT, and to the commencement of these proceedings, and Ms Needham relies on this evidence to submit that the Respondents and their legal representatives have cooperated with the DCT's review. I will assume, without deciding, the correctness of that proposition. However, Mr Figot's evidence provides no assistance in explaining events prior to his firm's retainer or rebutting any inferences that may support the making of freezing orders that arise from those events. 7. The Respondents also rely on an affidavit dated 14 October 2020 of Mr Scali, a Chartered Accountant, who indicates that his firm has acted for the Respondents since 15 May 2019. The Respondents tender, and rely on, the financial reports for the CSF for the years ended 30 June 2015 to 30 June 2017 which are exhibited to Mr Scali's affidavit and rely upon the fact that those financial reports were subject to a limited audit. Mr Golledge submits, and I accept, that that matter provides little assistance to the Respondents, where the auditor's report indicates that the relevant financial report has been prepared to assist the CSF meeting the requirements of its governing rules, the SIS Act and the SIS Regulations, rather than disclosing any focus upon tax compliance; and the description of the auditor's responsibilities and the tests performed also focuses on compliance with the SIS requirements rather than with tax obligations. There is nothing in the content of those financial reports, or the audit reports, which could have provided Mr Cordina or Mrs Cordina with any basis to believe that HPack had complied with its tax obligations, had they read those reports. In any event, they give no evidence that they had done so. Applicable principles 1. Rule 25.11 of the UCPR allows a freezing order to be made for the purpose of preventing the frustration or inhibition of the Court's process by seeking to meet a danger that a judgment or prospective judgment will be wholly or partly unsatisfied; and such an order may restrain a respondent from disposing of, dealing with, or diminishing the value of his or her assets. Rule 25.14 in turn allows a freezing order to be made where a plaintiff has a good arguable case and, having regard to all the circumstances, there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied, for example, because the assets of the judgment debtor, prospective judgment debtor or another person are disposed of, dealt with or diminished in value. 2. Ms Needham submits, and I accept, that a freezing order is intended to prevent the abuse or frustration of the processes of the Court by preventing a defendant from disposing of its assets so as to deprive a plaintiff of the fruits of any judgment obtained in the proceeding: Jackson v Stirling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23. Ms Needham also submits, and I also accept, that the purpose of a freezing order is to preserve the status quo, rather than to change it in favour of the plaintiff, and a freezing order should not be directed to prevent expenditures by a defendant, but rather to prevent expenditures that are not legitimate, having regard to the plaintiff's interest in ensuring that there is no dissipation of assets by the person against whom a judgment may be entered. Ms Needham also refers, and I accept, that the High Court has emphasised the high degree of caution that is necessary before making a freezing order: Cardile v LED Builders Pty Ltd (1999) CLR 380; [1999] 198 HCA 18 at [50]. 3. In Jackson v Stirling Industries Ltd above, Deane J (with whom Mason CJ, Brennan, Wilson and Dawson JJ agreed) observed (at 625) that the purpose of a freezing order: "is not to create security for the plaintiff or to require a defendant to provide security as a condition of being allowed to defend the action against him … . It is to prevent a defendant from disposing of his actual assets …so as to frustrate the process of the Court by depriving the plaintiff of the fruits of any judgment obtained in the action." 1. In Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321–322, Gleeson CJ observed that: "The remedy [of a freezing order] is discretionary, but it has been held that, in addition to any other considerations that may be relevant in the circumstances of a particular case, as a general rule a plaintiff will need to establish, first, a prima facie cause of action against the defendant, and secondly, a danger that, by reason of the defendant's absconding, or of assets being removed out of the jurisdiction or disposed of within the jurisdiction or otherwise dealt with in some fashion, the plaintiff, if he succeeds, will not be able to have his judgment satisfied." 1. Gleeson CJ also there observed (at 325–326) that, where a defendant was there alleged to have fraudulently misappropriated a large amount of money, comprising the bulk of his or her assets, and the evidence was consistent with such an allegation, then it may be reasonable for the court to infer that "he is not the sort of person who would, unless restrained, preserve his assets intact so that they might be available to his judgment creditor". In Beach Petroleum NL v Johnson (1992) 9 ACSR 404 at 405–406, von Doussa J referred to Patterson v BTR Engineering above and observed that it was enough to support a freezing order that the applicants establish that "in the absence of relief, there is a danger that assets will be dealt with in a way which will prevent the applicants recovering the judgment". 2. In Clout (as trustee in bankruptcy of the Estate of Dexter) v Anscor Pty Ltd [2001] FCA 174 at [19], Drummond J similarly noted that a freezing order: "…cannot be used to give the applicant security in respect of an as yet unliquidated claim, … its sole legitimate object is to prevent a respondent, pending final adjudication, from disposing of assets where the respondent's object in doing that is to abuse the process of the Court by ensuring that, if the applicant is successful in the litigation, its judgment will be an empty one." 1. His Honour also observed that: "Even in a case in which a [freezing order] is justified it can never extend to prevent a respondent from having access to its own assets to the extent necessary to meet legitimate expenses such as ordinary living and business and legal expenses." 1. In Goumas v McIntosh [2002] NSWSC 713, Barrett J also observed (at [23]) that the sole concern with such relief is: "with reasonable measures to ensure that the processes of the Court are not frustrated by removal from the jurisdiction, dissipation or misapplication of assets which will be available to meet any eventual judgment. The aim is not to stop people spending their money. It is to stop them spending it in ways which are not legitimate, having regard to the interest of the claimant in ensuring that there is no untoward removal of assets from the ownership of the person against whom a judgment may in due course be entered." 1. His Honour also observed (at [27]) that: "It has been said repeatedly by the courts that a [freezing] order must not operate as a form of de facto security for the applicants' claims and that the sole purpose is to prevent illegitimate dissipation of assets that will otherwise be available to meet any judgment. I say illegitimate dissipation to emphasise that to deny access to funds needed for ordinary living purposes or to fund the conduct of the very litigation the integrity of which the order is designed to protect goes beyond the proper protective province of the jurisdiction and causes the order sought to be a means of exerting pressure foreign to the underlying purpose." 1. In Jaken Properties Australia Pty Ltd v Naaman [2020] NSWSC 1554 at [41]-[44], Rees J referred to several of these cases and helpfully summarised the applicable principles as follows: In relation to freezing orders, an applicant is required to demonstrate that the defendant, by attempting to put their assets out of reach, is seeking to frustrate the court's power to grant an effective remedy: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 331 per Rogers AJA. As the Court of Appeal explained in Frigo v Culhaci [1998] NSWCA 88 at [16] : "A plaintiff must establish, by evidence and not assertion, that there is a real danger that, by reason of the defendant absconding or removing assets out of the jurisdiction or disposing of assets within the jurisdiction, the plaintiff will not be able to have the judgment satisfied if successful in the proceedings. There has been much debate as to the precise degree of risk which must be shown … What is clear is that mere assertions that the defendant is likely to put assets beyond the plaintiffs reach will not be enough: Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG [1984] 1 All ER 398; Patterson. The risk of dissipation of assets does not need to be demonstrated on the balance of probabilities; nor is it necessary that there be evidence of such intention: Deputy Cmr of Taxation v Hua Wang Bank Berhad (No 3) [2012] FCA 594 at [8] –[10] ; Deputy Cmr of Taxation v Chemical Trustee Ltd (No 4) (2012) 90 ATR 711; [2012] FCA 1064 at [23] to [24]. It is necessary for the applicant for such an order to "show a reasonably arguable case on legal as well as factual matters": Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [67] . The Court must also weigh discretionary considerations, as outlined in Cardile v LED Builders at [53]: Discretionary considerations generally also should carefully be weighed before an order is made. Has the applicant proceeded diligently and expeditiously? Has a money judgment been recovered in the proceedings? Are proceedings (for example civil conspiracy proceedings) available against the third party? Why, if some proceedings are available, have they not been taken? Why, if proceedings are available against the third party and have not been taken and the court is still minded to make a Mareva order, should not the grant of the relief be conditioned upon an undertaking by the applicant to commence, and ensure so far as is possible the expedition of, such proceedings? It is difficult to conceive of cases where such an undertaking would not be required. Questions of this kind may be just as relevant to the decision to grant Mareva relief as they are to a decision to dissolve it. These are matters to which courts should be alive. As will appear, they are matters which should have been considered by the Full Court in this case. Having considered these matters, it may be appropriate to make an order requiring a party or third party to hold and to keep unencumbered assets up to a value which is at least reasonable in all of the circumstances, noting that the Court should generally grant the minimum relief necessary to do justice between the parties and also specify the circumstances in which the order will cease to operate: Cardile v LED Builders at [70]. The draconian nature of freezing orders was made plain in Cardile v LED Builders Pty Ltd at [50]: "…Nevertheless, those statements should not obscure the reality that the granting of a Mareva order is bound to have a significant impact on the property of the person against whom it is made: in a practical sense it operates as a very tight "negative pledge" species of security over property, to which the contempt sanction is attached. It requires a high degree of caution on the part of a court invited to make an order of that kind."" Whether the Court lacks jurisdiction to make or continue the freezing order 1. In written submissions, Ms Needham submitted that the Court has no jurisdiction to make or continue a freezing order against Mr and Mrs Cordina and CKJJJJ, because the DCT is not pursuing a cause of action for a money judgment against them so that a freezing order could not preserve a fund to meet its enforcement. Ms Needham also submits that the freezing order sought "constitutes a broad extension [to] the limited jurisdiction to make a freezing order against third parties". It was not clear whether Ms Needham pressed this submission in oral submissions. Mr Golledge responds, in reply, that the Court has jurisdiction to make freezing orders against CKJJJJ and Mr and Mrs Cordina, and that the DCT need not advance an allegation of fraud in order to maintain the freezing orders against them nor have the capacity to bring proceedings in its own right against them for the Court to make such an order. 2. I recognise that this application differs from many applications under UCPR r 25.11, because the existing proceedings brought by the DCT are winding up proceedings, which cannot themselves lead to a judgment in the DCT's favour; and the Court's process and the prospective judgment that are sought to be protected are proceedings which could only be brought by a liquidator appointed to HPack if the winding up order is made. There are therefore contingencies in whether such a judgment will be made beyond those which ordinarily exist, including whether the winding up order is made; whether a liquidator appointed to HPack chooses to bring such proceedings; and whether they have sufficient prospects of success. 3. Nonetheless, it seems to me that the Court does have the requisite jurisdiction to make, on the DCT's application, a freezing order that will preserve the claims that may be brought by a liquidator appointed to HPack on the DCT's application. That order is, in my view, directed to preventing the frustration or inhibition of the Court's winding up process by seeking to meet a danger that a prospective judgment that could be obtained by a liquidator consequent on that process will be wholly or partly unsatisfied, for the purposes of UCPR r 25.11. That jurisdiction is analogous to, although not identical to, the extended jurisdiction contemplated by the observations of the plurality of the High Court in Cardile v LED Builders Pty Ltd above at [57] that: "What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasise the word "may", be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which … some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise, the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor." [emphasis added] 1. It does not seem to me that that jurisdiction is excluded because the relevant judgment requires a two step process, involving first the winding up of HPack and then the liquidator's claim. In determining whether to make such an order, the Court would, of course, have to assess the likelihood that a winding up order will be made and that a liquidator would obtain such a judgment, and I do so below. Absent a resolution of the issues with the Respondents, there is here no reason to think that a liquidator would choose not to bring the proceedings if funded to do so, given the apparent prospects of the claims (which I address below) and the amount of the potential recoveries. If he or she could not fund those proceedings from CSF's existing resources, relying on any right of indemnity or exoneration against trust assets (as to which I note a dispute below), and if the DCT did not fund them, then there is no reason to think that he or she could not readily obtain any necessary third party funding to bring the relevant claims, given their apparent prospects and the potential recoveries. The Court may of course need to reconsider that position and potentially discharge a freezing order made on that basis, if a winding up order was not promptly made or a liquidator did not promptly commence and expeditiously carry on the contemplated proceedings. Whether the DCT has a good arguable case for a winding up and a liquidator would have a good arguable case for recoveries against the Respondents 1. Mr Golledge and Ms Woodland submitted that a freezing order is appropriate so as to prevent the frustration or inhibition of the Court's processes and that each of CKJJJJ and Mr and Mrs Cordina may be the subject of a claim by a liquidator appointed to HPack which will result in each of them being obliged to disgorge assets or contribute towards satisfying HPack's debts and a freezing order is necessary and appropriate to preserve the integrity of those claims. 2. As I noted above, UCPR r 25.14 allows a freezing order to be made where a plaintiff has a good arguable case. Mr Golledge submits that a good arguable case to support a freezing order exists because HPack owes a debt to the DCT in the amount of $19,644,953.51 and does not have the resources from which it could meet that debt so that it will be wound up in insolvency; and that a liquidator of HPack would be entitled to seek to recover monies paid to CKJJJJ and Mr and Mrs Cordina by a claim under s 588FDA of the Corporations Act, in respect of unreasonable director-related transactions, or by proceedings against Mr and Mrs Cordina for breach of directors' duties. 3. It seems to me that the DCT has a good arguable case for the winding up of HPack on the basis of actual insolvency and the Respondents did not seek to lead evidence in this application which would raise any arguable defence that HPack was solvent. 4. Section 588FDA of the Corporations Act applies in respect of, inter alia, a payment made by a company (s 588FDA(1)(a)) to a director of the company or a person on behalf of or "for the benefit of" a director (s 588FDA(1)(b)). Although earlier authority took a narrower view of the scope of the section, a wider view was taken in Vasudevan v Becon Constructions (Aust) Pty Ltd (2014) 97 ACSR 627; [2014] VSCA 14, where the Court of Appeal of the Supreme Court of Victoria observed (at [26]) that a disposition may be "for the benefit of" a director where it "legally or financially advantages the director in question regardless of whether it is paid or directed to a close associate of the director" and (at [28]) that the purpose of the section is "to catch director-related transactions of kinds not otherwise liable to avoidance as unfair preferences, uncommercial transactions or unfair loans". Whether a reasonable person in the company's circumstances would not have entered into a transaction, for the purposes of s 588FDA, is determined having regard to any benefits to the company of entering into it; the detriment to the company of entering into it; the respective benefits to other parties to the transaction of entering into it; and any other relevant matter: s 588FDA(1)(c). The test whether such a transaction is unreasonable is objective in character, directed to what a reasonable person in the company's circumstances may be expected not to do: Smith v Starke; Re Action Paintball Games Pty Ltd (in liq) (No 2) (2015) 109 ACSR 145; [2015] FCA 1119; and see also the Court of Appeal's summary of the elements of a claim under s 588FDA of the Act in Crowe-Maxwell v Frost (2016) 91 NSWLR 414; [2016] NSWCA 46 at [59]–[88] and SX Projects Pty Ltd (In Liq) v Battaglia [2018] NSWSC 1830 at [57]ff. It seems to me that a liquidator appointed to HPack would have a good arguable case against each of Mr and Mrs Cordina under s 588FDA of the Corporations Act in respect of the payments to which I have referred above, at least so far as they were arguably made without retaining sufficient funds to meet HPack's tax liabilities and arguably exposed HPack to the detriment of a winding up; arguably conferred financial benefits on Mr and Mrs Cordina and the CCSF without any apparent benefit to HPack; and were arguably made without adequate attention having been given to HPack's tax affairs or an assessment of its tax liabilities. 5. Section 180 of the Corporations Act requires a director or other officer of a corporation to exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they were a director or officer of a corporation in the corporation's circumstances and occupied the office held by, and had the same responsibilities within the corporation as, the director or officer. The statutory duty of care and diligence under that section overlaps with directors' duty of care arising at general law, and I summarised the applicable principles in Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 at [408] and in Pages Property Investments Pty Ltd v Boros [2020] NSWSC 1270 at [36]ff. It seems to me that a liquidator appointed to HPack would also have a good arguable case against each of Mr and Mrs Cordina for breach of directors' duties, including at least a breach of s 180 of the Corporations Act, on the basis of an arguable failure by HPack's directors to take adequate steps to establish tax compliance mechanisms within HPack or adequately attend to its tax affairs, and an arguable or admitted lack of involvement by Mrs Cordina with HPack's affairs, which together arguably exposed HPack to the risk that it would be wound up on the basis of unpaid tax liabilities. Whether there is a danger of disposal of assets such that a liquidator, if it succeeds in claims against the Respondents, may not be able to have its judgment satisfied 1. I recognise that the DCT has the burden of demonstrating that the circumstances of the case warrant the continuance of the freezing order that was previously made on an ex parte basis and then continued. In opening submissions, Mr Golledge relies on the fact that Mr and Mrs Cordina have previously caused HPack to dispose of the majority of its assets by pension payments to themselves, purchases by entities related to them and rollovers of superannuation interests to CKJJJJ for their own benefit; the fact that the assets now held by Mr and Mrs Cordina seem to be less than the amount of the funds transferred to them; and their failure to declare income in the years ending 30 June 2015 – 30 June 2017 as establishing a risk of further dissipation of assets so as to frustrate a judgment against them or CKJJJJ. Mr Golledge also draws attention to the size of the liabilities to which CKJJJJ and Mr and Mrs Cordina are potentially exposed and the existence of dealings that are not at arm's length between the relevant parties as matters that support the continuance of the freezing orders. 2. Ms Needham, with whom Mr Kohn appears, submits there are no allegations of fraud against the Respondents, and no allegations that the DCT has any direct claim against CKJJJJ or Mr and Mrs Cordina. I accept that submission, but it is not necessary for the DCT to allege fraud in order to support the making of a freezing order, nor is it necessary for the DCT to have a direct claim against the Respondents in order to obtain a freezing to preserve a claim by a liquidator appointed to HPack, on its application, against the Respondents. Ms Needham also points out that the Corporations Act contains a statutory regime for the appointment of a provisional liquidator. Mr Golledge responds that the possibility that a provisional liquidator might be appointed is no answer to the case for the making of freezing orders. It seems to me that the possibility that a provisional liquidator could be appointed to HPack is not to the point, where that would not preserve the Court's ability to enforce a judgment against Mr and Mrs Cordina or CKJJJJ, in respect of claims that a liquidator of HPack may have against them, against an ongoing dissipation of assets without regard to their potential liabilities. 3. Ms Needham submits that there is no evidence of any risk that CKJJJJ or Mr or Mrs Cordina will dissipate their assets so as to frustrate the enforcement of a judgment against them by a liquidator or that they have exercised or intend to exercise a power of disposition over assets of HPack or CKJJJJ. Mr Golledge submits, in reply, the evidence that the Respondents hold significant amounts of cash; that they have demonstrated a capacity to move large sums of money between entities and outside Australia; and that they have not explained the difference between the funds and benefits they received and the identified value of their current assets. In submissions in reply, Mr Golledge also points to the absence of evidence explaining the movements of significant sums of money between HPack, CKJJJJ and Mr and Mrs Cordina before the period under review by the DCT, during that period and after that period. 4. I do not find that CKJJJJ or Mr and Mrs Cordina have any present formulated intention to take steps to dissipate their assets so as to frustrate the enforcement of a judgment against them by a liquidator. However, I have pointed above to the fact that Mr and Mrs Cordina have a history of dealing with HPack's assets in a way that does not recognise the public liabilities that attach to them, and it seems to me that there is no reason to think that they would give greater weight to a prospective judgment in favour of a liquidator of HPack than they have given to a prospective liability for income tax. I bear in mind that Mr and Mrs Cordina contend that they were not aware of a prospective liability for income tax. It seems to me that that proposition is not established by the evidence, where they have not disclosed the advice which they had received over the relevant period or the qualifications to it. There is no reason to think that they would not also take the view that they are not aware of a prospective liability to a liquidator of Hpack until it is established. 5. Ms Needham also submits that, if a liquidator were appointed to HPack then, by the operation of s 120(2)(e) of the SIS Act, HPack would become a "disqualified person" and prohibited from performing the functions of trustee of a small managed superannuation fund which would include dealing with the assets of CSF and that this "means that the liquidator would be prohibited from issuing the proceedings". Mr Golledge responds that the removal of HPack as trustee of CSF would not immunise it from claims by a liquidator appointed to HPack, and that the Court would have jurisdiction to appoint that liquidator as a receiver to deal with the property of a superannuation fund in a proper case. 6. I am not persuaded by Ms Needham's submission. The short answer to it seems to me to be that, if a liquidator is appointed to HPack, he or she will have all the powers of a liquidator appointed to a company under the Corporations Act including the power to pursue claims available to a liquidator under the Act. A claim for breach of director's duties is available to HPack under its liquidator's control and a claim for an unreasonable director-related transaction is available to the liquidator of the company, and neither depends on any dealing with the assets of CSF. It also seems to me that there is no reasonable prospect that the Court would restrain, or strike out, proceedings that a liquidator might commence for breach of director's duties or in respect of unreasonable director-related transactions undertaken by a company that was the trustee of a SMSF, by reason of s 120 of the SIS Act, where those proceedings are brought in the performance of the liquidator's statutory duties under the Corporations Act. To do so would hardly promote the objectives of the SIS Act, which include preserving the assets of superannuation funds, rather than immunising persons who may have dissipated their assets from liability. 7. Ms Needham also submits that, if HPack were wound up, it would be prohibited from enforcing its right of exoneration by reason of s 126K of the SIS Act. It is not necessary to address that submission, since its consequence would be to increase the potential liability of Mr and Mrs Cordina, and possibly CKJJJJ, in any claims that a liquidator might bring against them. If it were correct, that proposition would strengthen, rather than undermine, the basis for a freezing order. 8. Ms Needham also points to exoneration provisions under the CSF Trust Deed, but they do not assist Mr and Mrs Cordina or CKJJJJ when any claims brought against them would be for breach of general law and statutory duties under the Corporations Act rather than for breach of trust. Ms Needham points to Mr Cordina's evidence that he would not have taken particular steps, had he known that a distribution from the CSF would have incurred additional tax liabilities. It seems to me that that proposition also does not assist Mr Cordina, because it emphasises the extent to which any loss suffered by HPack arises from any failure by Mr Cordina to adequately inform himself as to HPack's potential tax liabilities so as to take those steps. Ms Needham submits that there is no evidence that Mr and Mrs Cordina made the relevant payments with an intention to defeat, hinder or delay creditors of CSF, but such evidence is not necessary to establish liability for breach of director's duties or unreasonable director-related transactions or to support a freezing order. She submits that Mr and Mrs Cordina relied on professional advice from accountants, tax advisers and auditors, but I have explained above why the evidence presently led by Mr and Mrs Cordina falls well short of supporting such a finding. 9. Ms Needham also submits that Mr and Mrs Cordina would have a "valid defence" to a voidable transaction claim or breach of director's duty claim under s 588FG(1)(b) or s 1317S of the Corporations Act. Mr Golledge submits, in reply, that the evidence led in support of asserted defences and relief under s 1317S of the Act is insufficient for the Court to reach any view as to the prospects of the Respondents establishing those defences. I am also not persuaded by Ms Needham's submission in this respect, given the evidentiary issues that I have noted above and the matters necessary to establish a case for relief under s 1317S of the Corporations Act, which I reviewed in Re Pages Property Pty Ltd above and need not repeat. 10. Ms Needham also submits that the Respondents have engaged in good faith with the DCT and I will assume the correctness of that proposition, at least from the point at which the DCT advised HPack's advisers that its affairs were under review. The correctness of that proposition prior to that point is not established by evidence to which I referred above. Ms Needham also points to a right of indemnity available to directors of HPack under the CSF Trust Deed. That proposition was not sufficiently pursued, in the evidence or in submissions, to displace the basis for any freezing order that would otherwise be made. Ms Needham also submits the Respondents have emphasised that they wish to resolve the payment of outstanding tax liabilities. 11. I give little weight to Ms Needham's submission as to the Respondents' wish to resolve the matter, where the suggested resolution has presently been limited to the amounts that remain within HPack. As I noted above, I do not consider it necessary to determine the dispute as to whether additional contributions by Mr and Mrs Cordina and CKJJJJ would or would or would not be permitted in an SMSF environment at this stage. 12. Mr Golledge also points out that the only offer made by the Respondents to resolve their tax liability is to pay an amount of approximately $3.9 million, against a debt of more than $20 million, being the amount of assets that remain accessible within Hpack in July 2020. Mr Golledge contends that there is no legal impediment to the Respondents restoring funds to HPack to pay its debt, referring to the correspondence from the DCT's solicitors to the Respondents' solicitors in that respect, although it is not necessary to decide that matter. 13. Ms Needham also submits that a liquidator appointed to HPack could not seek to recover payments made in the financial year ended 30 June 2015 or 30 June 2016 as unreasonable director-related transactions, because the payments were made more than four years before the relation-back date, being 10 September 2020. It does not seem to me that that proposition assists Mr and Mrs Cordina or CKJJJJ, where any claims that would be available on that basis could also likely be available as a claim for breach of director's duties or for knowing receipt or against CKJJJJ under the alternative forms of third party liability identified in Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; 287 ALR 22; 87 ACSR 260; [2012] FCAFC 6. 14. In summary, I recognise that, as I noted above, the purpose of freezing orders is not to provide a security for judgment in favour of the DCT or a liquidator but only to prevent the Court's processes from being frustrated in the circumstances set out in the relevant rules and, in particular, is not intended to prefer the DCT or a liquidator over other creditors in the event of the Respondents' impecuniosity. I also recognise that there is no evidence that the Respondents in fact intend to remove or otherwise deal with their assets for the purpose of frustrating or inhibiting the Court's process. However, the Court may draw inferences from the Respondents' earlier conduct in respect of the dissipation of their assets, in the manner to which Gleeson CJ referred in Patterson v BTR Engineering (Aust) Ltd above; see also Samimi v Seyedabadi [2013] NSWCA 279 at [74]; Re Black Eagle Media Pty Ltd [2014] NSWSC 1778 at [21]. The DCT did not submit that, and I do not find that, the Respondents have an actual present subjective intention to defeat a judgment. However, I do find that the pattern of their conduct over a significant period indicates a propensity for transactions between related parties and for payments out of HPack without regard to public liabilities such as income tax, and that raises a real risk that they would not act differently in respect of a potential future liability to a judgment in favour of a liquidator of HPack. It seems to me that that is sufficient to support the making of a freezing order, in respect of claims that have good arguable prospects and are of significant size, in these circumstances. Other relevant matters 1. Practice Note SC Gen 14, paragraph [11] also recognises, consistent with the case law, that "[t]he 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". Mr and Mrs Cordina and CKJJJJ also contend that if, contrary to their primary position, freezing orders are to be made, they should be limited to the amounts received by each of them from CSF and they advance a quantification of that amount. Mr Golledge takes issue with the basis of that quantification. It is not necessary to address that issue in respect of Mr and Mrs Cordina, since the claims for breach of director's duties against each of Mr and Mrs Cordina would potentially extend to the entirety of HPack's loss, and would not be limited to the amount that either of them had received from HPack. I will reserve liberty to the parties to apply, on two business days' notice, to make further submissions as to the amount received by CKJJJJ, if they cannot agree that matter between themselves. 2. The form of a freezing order should generally permit a defendant to make provision for ordinary living expenses and liabilities properly incurred: Frigo v Culhaci [1998] NSWCA 88. The usual practice of including such exceptions in freezing orders is recognised in Practice Note SC General 14, para 12 and in later case law: Clark Equipment Credit of Aust Ltd v Como Factors Pty Ltd (1988) 14 NSWLR 552 at 569; Cardile v LED Builders Pty Ltd above; Deputy Commissioner of Taxation v Bollands [2012] FCA 1050 at [22]. The orders sought by the DCT contain exceptions to permit such expenditures. 3. Mr Golledge also points out that CKJJJJ appears to act as trustee of a self-managed superannuation fund and not to undertake any other trading or other activity and that a freezing order would be subject to the usual exceptions in respect of Mr and Mrs Cordina. It does not seem to me that there is any evidence of prejudice to Mr and Mrs Cordina, beyond that which can be addressed by the usual exceptions to a freezing order, from the making of such an order. That order would not need to last for a long period, since the winding up application in respect of HPack is due to be heard in December 2020 and, if a liquidator is then appointed to HPack, it seems to me that the claims that he or she might bring for breach of s 180 of the Corporations Act and under s 588FDA of the Act are not complex and, if Mr and Mrs Cordina and CKJJJJ wish to have them determined in an expedited way, they could well be determined by mid-2021. 4. As I noted above, Ms Needham relied on the letter dated 10 September 2020 from the DCT to their solicitors for the proposition that there had been a delay by the DCT in seeking the freezing orders, which would be a discretionary factor relevant to the making of such orders. I do not accept that submission. It seems to me that there would have been no occasion to seek such orders while the compromise proposal was under consideration and no proceedings had been commenced, and they were sought promptly when that compromise proposal was rejected, and the DCT brought a winding up application in respect of HPack, raising the prospect that a liquidator would be appointed to HPack and would bring proceedings against the other Respondents. I also note, for completeness, that these matters were fairly brought to the Court's attention when that freezing order was initially sought on an ex parte basis. Orders 1. I am satisfied, in these circumstances, that a freezing order should be made. Where this issue has now been fully canvassed in a hearing on the merits, and where the winding up application and any claim by a liquidator that may be appointed to HPack could be resolved promptly, as I have noted above, it seems to me that that freezing order should now continue, with the usual exceptions, until further order. I will make orders in the form previously made against Mr and Mrs Cordina and CKJJJJ with that amendment. I also reserve liberty to the parties to apply, on two business days' notice, in respect of the matter noted in paragraph 69 above. I direct the Plaintiff to submit orders to give effect to this judgment within one business day. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 November 2020