Supreme Court New South Wales Medium Neutral Citation: Hurford Hardwood Kempsey Pty Ltd ACN 622 595 957 v Julia Maree Cole [2024] NSWSC 500 Hearing dates: 29 April 2024 Date of orders: 29 April 2024 Decision date: 01 May 2024 Jurisdiction: Equity - Duty List Before: Pike J Decision: Ex parte freezing order made against the defendant. Catchwords: PRACTICE AND PROCEDURE – interim preservation – ex parte application for freezing order – where Court satisfied of prima face case or good arguable case so as to grant a freezing order Legislation Cited: Nil Cases Cited: MaxRelief USA Inc v 365 Health Australia Pty Limited ACN 151 146 997 [2024] NSWSC 491 Patterson v BTR Engineering (Aust) Limited (1989) 18 NSWLR 319 Texts Cited: Nil Category: Procedural rulings Parties: Hurford Hardwood Kempsey Pty Ltd ACN 622 595 957 (Plaintiff) Julia Maree Cole (Defendant) Representation: Counsel: P. McDonald (Plaintiff) Solicitors: McInnes Legal (Plaintiff) File Number(s): 2024/153793 Publication restriction: Nil JUDGMENT 1. By summons filed 25 April 2024, the plaintiff (Hurford Kempsey) sought an urgent ex parte freezing order against the defendant (Ms Cole). 2. On 29 April 2024, as Duty Judge, I made an urgent ex parte freezing order. A copy of the orders made is annexed to these reasons. These are my reasons for making those orders. 3. Hurford Kempsey relied upon an affidavit of Jacob Elridge sworn 25 April 2024. In addition, oral submissions were made by counsel on 29 April 2024. Overview of the Facts 1. The facts relevant to the ex parte freezing order that I made may be summarised briefly as follows. 2. Hurford Kempsey is a wholly owned subsidiary of Hurford Hardwood Australia Pty Limited (Hurford). Hurford's business is Australian hardwood. It covers the entire supply chain from the management and harvesting of forest resources, processing, manufacturing, sales and distribution of products in Australia and around the world. 3. Hurford Kempsey operates a sawmill and processing facility at Kempsey in northern New South Wales (Kempsey facility). 4. Mr Eldridge gave evidence that Hurford Kempsey is a profitable company in its own right with both a yearly turnover and assets in the millions of dollars. 5. Ms Cole began employment at the Kempsey sawmill in or about 2016 with the previous operator of the facility. She became an employee of Hurford Kempsey upon the facility's acquisition in 2017. Her title was that of Inventory & Accounts Payable Officer for the Kempsey facility. 6. Hurford Kempsey's business involves entering into agreements with various landowners by which the landowners allow Hurford Kempsey to enter their land and selectively log trees from the land. The landowners are paid on a scale depending on the size and condition of the trees logged. The physical logging operations are undertaken by contractors and the logs are taken to the Kempsey facility. 7. Ms Cole was employed by Hurford Kempsey until December 2023. As part of her employment, her responsibilities included: 1. Maintaining custody of logbooks and records for Hurford Kempsey, including a copy of each agreement entered into with each landowner and approval documents for logging from the EPA; 2. Keying data into Hurford Kempsey's computer system for every individual log that was obtained from landowners as it arrived at the Kempsey facility. This data was used to calculate payments made to landowners; and 3. Generating recipient created tax invoices in favour of landowners and submitting those invoices for payment. 1. Ms Cole resigned from her employment with Hurford Kempsey in December 2023. The reason she gave at the time was that she was going to live with her mother. There was no suggestion at this time that Ms Cole had mis-appropriated any funds from Hurford Kempsey, and nor did Mr Eldridge suspect that anything was untoward at the time. 2. In February 2024, Mr Eldridge was involved in a routine review of the financial performance of the quarter ending December 2023, and it became apparent to him that the financial performance was not as expected so he began further investigations. 3. In the course of those investigations, it became apparent that approximately $138,000 had been paid from Hurford Kempsey's bank account to "Kay Coler" which appeared to be a supplier of logs during that quarter. Mr Eldridge gave evidence that he had never heard of Kay Coler and he made enquiries of those people in the Kempsey office and, similarly, no one else had heard of Kay Coler. 4. Further investigations revealed that in total an amount of $500,052.42 was paid to Kay Coler in 2023. Mr Eldridge gave evidence that it was rare for logging activities in the course of Hurford Kempsey's ordinary business to generate purchase amounts which were that large. 5. The payments ended shortly before Ms Cole ceased her employment with Hurford Kempsey in December 2023 and no further payments to Kay Coler have been made after that time. 6. The details for Kay Coler in Hurford Kempsey's computer system are lacking a number of details which Mr Eldridge would ordinarily expect to exist for any customer, let alone one of the apparent size of Kay Coler. For example, no ABN and phone number are provided. 7. The physical address for Kay Coler in the Hurford Kempsey computer system was 11 Greenfield Street, West Kempsey. Mr Eldridge gives evidence that he has been unable to find any such address existing. The closest that he could identify was 11 Greenfields Avenue in West Kempsey but when he attended that location, he observed that there was no number 11 but only house numbers 9 and 13 with the lot between 9 and 13 being a vacant lot. Enquiries made at the time of the surrounding residents did not reveal anyone being aware of Kay Coler. 8. Further enquiries reveal that the account for Kay Coler is an account at the ANZ Bank with the same BSB number as Ms Cole's personal bank account details. 9. Further, Mr Eldridge has recently made enquiries with the NSW Police and has been informed that Ms Cole was the account holder of the Kay Coler ANZ account, and that she has made certain admissions to the NSW Police of setting up a fictitious account in Hurford Kempsey's account system in relation to Kay Coler. Further, on 17 April 2024, Ms Cole was charged with 17 counts of dishonestly obtaining financial advantage by deception and one count of knowingly dealing with proceeds of crime relating to payments made to the Kay Coler accounts from Hurford Kempsey. 10. Ms Cole has apparently purchased a motor vehicle with money paid to the Kay Coler account, which has since been seized by NSW Police. Further, there is "significantly more" than $60,000 in one or other or both of the ANZ accounts maintained by Ms Cole. 11. Further enquiries made by Hurford Kempsey have not revealed any agreements, supplier details, physical files, digital files, or log documents of the kind legally required and ordinarily kept for Hurford Kempsey logging operations. There are also no logs in the log yard for Kay Coler and no logs have been keyed into Hurford Kempsey's system for Kay Coler. There are also no tax invoices for Kay Coler in Hurford Kempsey's books and records. 12. Ms Cole has also indicated in response to a text message from a former employee of Hurford Kempsey, that she could not recall, off the top of her head, anything to do with Kay Coler. Mr Eldridge gives evidence that it is unusual that Ms Cole, given her role and responsibilities when she was employed, would not be able to recall the identity of a customer such as Kay Coler if they were a legitimate customer of the size indicated by the monies apparently paid to them. 13. Further, it appears that a residential property which is registered in the name of Ms Cole is currently listed for sale for $550,000. A title search of that property reveals that a mortgage is currently recorded on the title although Hurford Kempsey does not have any information as to what equity, if any, Ms Cole has in the property. 14. It is against this background that Hurford Kempsey sought a freezing order in the sum of $550,000, being calculated to include the amount which Hurford Kempsey alleges Ms Cole misappropriated together with interest and costs. 15. The summons seeks final relief associated with the misappropriation including a declaration that Ms Cole holds the amount of $500,052.42 transferred to the Kay Coler ANZ bank account operated by Ms Cole on trust for Hurford Kempsey. Relevant Legal Principles 1. The principles relevant to the making of a freezing order are not in dispute. I recently summarised those principles in MaxRelief USA Inc v 365 Health Australia Pty Limited ACN 151 146 997 [2024] NSWSC 491 and I do not repeat those principles in these reasons. I simply add to what I said there, that on the second important issue, namely the risk of dissipation, the Court is entitled to take into account, where appropriate, the conduct which the defendant has allegedly engaged in which goes to the first principal issue, namely whether there exists a prima facie or good arguable case: see for example Patterson v BTR Engineering (Aust) Limited (1989) 18 NSWLR 319 at 325-6 per Gleeson CJ. As there observed, this will especially be so where the prima facie case that is made out against the defendant is one of serious dishonesty involving the diversion of money from its proper channels. Consideration 1. Having regard to the facts summarised above, and the legal principles relevant to the making of the freezing order, I was satisfied that this was an appropriate case to make an urgent ex parte freezing order. 2. On the material placed before me, there is a prima facie or good arguable case that Ms Cole has misappropriated approximately half a million dollars from Hurford Kempsey. The very nature of that conduct gives rise to a real risk that, unless a freezing order is made, Ms Cole will dissipate those assets and thus any judgment which will ultimately be obtained by Hurford Kempsey against Ms Cole will not be able to be satisfied. There is evidence that Ms Cole has apparently purchased a motor vehicle with the misappropriated funds. In addition, there is evidence that a residential property in the name of Ms Cole is currently for sale. 3. Hurford Kempsey has moved promptly once becoming aware of the misappropriation. 4. For these reasons, I determined to make an urgent ex parte freezing order against Ms Cole on 29 April 2024. The proceedings are returnable before me on 2 May 2024. ********** Annexure –orderS made 29 april 2024 1. The Court makes a freezing order against the defendant in the form annexed to these orders and marked "A". 2. Service of the summons, affidavit and these orders be effected by 5pm Monday 29 April 2024 either by: a. personal service; or b. both: i. sending them by email to XXXXXXX@bigpond.com; and ii. leaving a copy at XXX XXXXX XXXXXXX XXXXX West Kempsey NSW 2440. 3. If service is effected pursuant to order 2(b), order that promptly after service a message be sent by mobile phone to XXXX XXX XXX to the following effect: ATTENTION: Julia Maree Cole Proceedings have been commenced against you in the Supreme Court of NSW. On 29 April 2024, freezing orders were made against your assets without notice to you. Copies of the originating process, affidavit in support and the orders have been left for you at XXX XXXXX XXXXXXX XXXXX West Kempsey NSW 2440 and emailed to XXXXXXX@bigpond.com. Accordingly by order of the Court, service has been taken to be effected upon you. 4. Order the summons is returnable before the Duty Judge at 10am on 2 May 2024. 5. Costs be reserved. 6. These orders be entered forthwith. FREEZING ORDER COURT DETAILS Court Supreme Court of NSW Division Equity Division List General List Registry Sydney Case number 2024 / 153793 TITLE OF PROCEEDINGS Plaintiff Hurford Hardwood Kempsey Pty Ltd ACN 622 595 957 Defendant Julia Maree Cole FREEZING ORDER PENAL NOTICE TO: Julia Maree Cole IF YOU: (A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR (B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING, YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT. ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED. TO: Julia Maree Cole This is a 'freezing order' made against you on 29 April 2024 by Justice Pike at a hearing without notice to you after the Court was given the undertakings set out in Schedule A to this order and after the Court read the affidavits listed in Schedule B to this order. THE COURT ORDERS: INTRODUCTION 1.(a) The application for this order is made returnable immediately. (b) The time for service of the application, supporting affidavits and originating process is abridged and service is to be effected by 5pm Monday 29 April 2024. 2. Subject to the next paragraph, this order has effect up to and including 2 May 2024 ('the return day'). On the return day at 10am there will be a further hearing in respect of this order before the Court. 3. Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified. 4. In this order: 'applicant', if there is more than one applicant, includes all the applicants; 'you', where there is more than one of you, includes all of you and includes you if you are a corporation; 'third party' means a person other than you and the applicant; 'unencumbered value' means value free of mortgages, charges, liens or other encumbrances. 5.(a) If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions. (b) If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way. FREEZING OF ASSETS 6.(a) You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia ('Australian assets') up to the unencumbered value of AUD$550,000 ('the Relevant Amount'). (b) If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount. (c) If the unencumbered value of your Australian assets is less than the Relevant Amount, and you have assets outside Australia ('ex-Australian assets'): (i) You must not dispose of, deal with or diminish the value of any of your Australian assets and exAustralian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and (ii) You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount. 7. For the purposes of this order, (1) your assets include: (a) all your assets, whether or not they are in your name and whether they are solely or co-owned; (b) any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and (c) the following assets in particular: the property known as XXX XXXXX XXXXXXX XXXXX West Kempsey NSW 2440 or, if it has been sold, the net proceeds of the sale; and any money in account XXX-XXX XXXX 72687 in your name at ANZ Bank Port Macquarie; and any money in account XXX-XXX XXXX 65894 in your name, or in the name of KM Coler or Kay Coler, at ANZ Bank South Melbourne. (2) the value of your assets is the value of the interest you have individually in your assets. PROVISION OF INFORMATION 8. Subject to paragraph 9, you must: (a) at or before the further hearing on the return day (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing of all your assets world wide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets; (b) within 3 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information. 9.(a) This paragraph (9) applies if you are not a corporation and you wish to object to complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that you: (i) have committed an offence against or arising under an Australian law or a law of a foreign country; or (ii) are liable to a civil penalty. (b) This paragraph (9) also applies if you are a corporation and all of the persons who are able to comply with paragraph 8 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively: (i) have committed an offence against or arising under an Australian law or a law of a foreign country; or (ii) are liable to a civil penalty. (c) You must: (i) disclose so much of the information required to be disclosed to which no objection is taken; and (ii) prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and (iii) file and serve on each other party a separate affidavit setting out the basis of the objection. EXCEPTIONS TO THIS ORDER 10. This order does not prohibit you from: (a) paying up to $500 a week on your ordinary living expenses; (b) paying $10,000 on your reasonable legal expenses; (c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and (d) in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation. 11. You and the applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and you, and the Court may order that the exceptions are varied accordingly. 12.(a) This order will cease to have effect if you: (i) pay the sum of $550,000 into Court; or (ii) pay that sum into a joint bank account in the name of your solicitor and the solicitor for the applicant as agreed in writing between them; or (iii) provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court. (b) Any such payment and any such security will not provide the applicant with any priority over your other creditors in the event of your insolvency. (c) If this order ceases to have effect pursuant (a), you must as soon as practicable file with the Court and serve on the applicant notice of that fact. COSTS 13. The costs of this application are reserved to the judge hearing the application on the return day. PERSONS OTHER THAN THE APPLICANT AND RESPONDENT 14. Set off by banks This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order. 15. Bank withdrawals by the respondent No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order. 16. Persons outside Australia (a) Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia. (b) The terms of this order will affect the following persons outside Australia: (i) you and your directors, officers, employees and agents (except banks and financial institutions); (ii) any person (including a bank or financial institution) who: (A) is subject to the jurisdiction of this Court; and (B) has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and (C) is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience breach of the terms of this order; and (iii) any other person (including a bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person's assets. 17. Assets located outside Australia Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party's application, reasonable written notice of the making of the application is given to the applicant. SCHEDULE A UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT (1) The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order. (2) As soon as practicable, the applicant will file and serve upon the respondent copies of: (a) this order; (b) the summons or notice of motion to be relied on at the hearing on the return day; (c) the following material in so far as it was relied on by the applicant at the hearing when the order was made: (i) affidavits (or draft affidavits); (ii) exhibits capable of being copied; (iii) any written submission; and (iv) any other document that was provided to the Court. (d) a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court; (e) the originating process, or, if none was filed, any draft originating process produced to the Court. (3) As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it. (4) The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent's assets. (5) If this order ceases to have effect the applicant will promptly take all reasonable steps to inform in writing anyone who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect. (6) The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding. (7) The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent's assets. SCHEDULE B AFFIDAVITS RELIED ON Affidavit of Jacob Eldridge sworn 25 April 2024. NAME AND ADDRESS OF APPLICANT'S LEGAL REPRESENTATIVES The applicant's legal representatives are: Name Andrew McInnes Firm McInnes Legal Suite 5 / 1st Floor Address Corner River & Martin Streets Ballina NSW 2478 Telephone (02) 66 814 814 Fax (02) 66 814 813 Email office@mcinneslegal.com.au 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: 01 May 2024