New South Wales Supreme Court CITATION : Aymban Pty Ltd v Grove Park Pty Ltd & Ors [2007] NSWSC 1089 HEARING DATE(S) : 14 and 21 September 2007 JUDGMENT DATE : 21 September 2007 JURISDICTION : Equity Division JUDGMENT OF : Palmer J EX TEMPORE JUDGMENT DATE : 21 September 2007 DECISION : Asset freezing order made. CATCHWORDS : ASSET FREEZING ORDER – Whether danger of dissipation or concealment of assets made out. Aymban Pty Ltd – Plaintiff PARTIES : Grove Park Pty Ltd – First Defendant Martin Comer – Second Defendant Palicade Pty Ltd – Third Defendant FILE NUMBER(S) : SC 2150/07 S.J. Burchett – Plaintiff COUNSEL : N.J. Allan – First Defendant D.R. Pritchard – Third Defendant Spencer Whitby – Plaintiff SOLICITORS : Roderick B. Harris & Co – First Defendant Cosoff Cudmore Knox – Third Defendant 2150/07 Aymban Pty Ltd v Grove Park Pty Ltd & Ors JUDGMENT – Ex tempore 21 September, 2007 1 The Plaintiff applies by Notice of Motion for a general asset freezing order. The circumstances have been recounted already in two judgments of mine but for the sake of convenience I will repeat the facts very briefly here. 2 The Plaintiff was the second mortgagee of property owned by the First Defendant. The Second Defendant, Mr Comer, was a director of the First Defendant. The First Defendant mortgaged the property to a first mortgagee and then subsequently to the Plaintiff. 3 Very briefly, when the mortgage was in default Mr Comer procured an assignment to him of the first mortgagee's mortgage and then exercised a power of sale as first mortgagee to sell the subject property to his sons. The proceeds of sale were not sufficient to pay the second mortgagee, the Plaintiff, any part of its secured debt. The Plaintiff says that the transaction brought about by Mr Comer, whereby he acquired the power of sale of the first mortgagee and sold it to his sons, was a dishonest transaction designed to defeat the secured interest of the Plaintiff in the property. It says that the property was sold at an under-value and the transaction was a secret one and designed in such a way as to remove any prospect of the Plaintiff preventing the sale or getting its hands on the proceeds of sale before it was too late and the rights of the third party intervened. That is alleged in affidavits in effect filed by the Plaintiff. 4 Defences have not yet been filed by the First Defendant or Mr Comer, the Second Defendant. I do not think it worthwhile at present to explore the reasons why a Defence has not been filed because the Defendants say that they were induced not to file Defences by representations of the Plaintiff's legal advisers. That allegation is contested but I do not need to resolve it for the purposes of this application. 5 The Plaintiff says that a general assets freezing order ought to be made to because there is a real basis for believing that, unless restrained, Mr Comer would dissipate assets or remove assets in such a way as to deprive the Plaintiff of the fruits of any judgment it may recover against him. 6 In considering such an application, of course, the Court first assesses whether or not the plaintiff has a cause of action and its relative prima facie strength and, secondly, what is the likelihood of the defendant dealing with its or his assets in such a way as to defeat the plaintiff's successful recovery of the fruits of the proceedings. 7 In the present case there has not been any real contest that the Plaintiff has demonstrated a prima facie cause of action. The authorities to which Mr Burchett of Counsel, who appears for the Plaintiff, has referred in his written submissions demonstrate that if the facts alleged by the Plaintiff are made out the First and Second Defendants will certainly be liable to make compensation to the Plaintiff for loss of its security interest in the subject property. What has been debated is whether there is any sufficient risk of dissipation of assets by the Defendants such as to warrant the imposition of an injunction. 8 In many cases the nature of the transaction which gives rise to the proceedings provides some evidence of a propensity, at the very least, for dishonesty on the part of a defendant which warrants the Court's protecting a plaintiff's position by an asset freezing order. In other cases there is evidence of some actual endeavour or attempt by a defendant to abstract assets from the jurisdiction or to deal with assets in such a way as to deprive a plaintiff of the fruits of victory. Other cases involve a combination of these circumstances. 9 In the present case, the Plaintiff says that there is reason to apprehend that Mr Comer will dishonestly either conceal or remove or dissipate his assets in an attempt to avoid the Plaintiff's recovery of fruits of victory. First, the Plaintiff points to the very transaction which gives rise to its claim against Mr Comer, that is, the assignment of the mortgage of the first mortgagee to him and his sale, pursuant to an exercise of power of sale, to his sons. It must be said that the circumstances of that transaction are highly unusual and excite suspicion, particularly when it is said by Mr Comer that now there are no proceeds of sale remaining. Why the transaction was structured in the unusual way in which it was has not been explained by Mr Comer in an affidavit which he filed on 20 September 2007. In that affidavit he has indignantly denied any wrongdoing but he has not given any evidence as to the question calling out for evidence and explanation, that is, why it was that the transaction came to be structured in the way it was. 10 The absence of an explanation as to the reasons for this unusual transaction, particularly when the result was to defeat the Plaintiff's interest, is a matter of concern and in itself raises some suspicion that the transaction was designed to defeat the Plaintiff's interests. 11 The second matter to which the Plaintiff points is that, in Mr Comer's Statement of Affairs, which he was compelled to complete when he was declared bankrupt in 2001, there is no reference to his beneficial ownership of shares in the First Defendant. The evidence shows that, as at the date of his bankruptcy, Mr Comer was, in fact, registered as the beneficial owner of shares in the First Defendant. Apparently he has retained those shares because the bankruptcy trustee was unaware of their existence and did not take any steps to realise them for the benefit of creditors. That, at least, is the inference which may be drawn from the evidence so far in the absence of any explanation by Mr Comer as to what happened with the shares and why they were not disposed of by the bankruptcy trustee on his bankruptcy. That circumstance in itself is a matter for concern and raises a suspicion of dishonesty. 12 The third matter to which the Plaintiff points is the statement by Mr Comer in his affidavit that he has no assets or property or interest in property whatsoever. If that fact is true, that in itself is some cause for suspicion and concern. Mr Comer describes himself in his affidavit of 20 September 2007 as a "businessperson". It appears that some time ago his company, the First Defendant, which owns the matrimonial home, entered into a long-term lease with Mrs Comer for a period of some ten years. The lease is unregistered. Those circumstances seem to indicate a propensity on the part of Mr Comer to conduct his business affairs so that no assets of his, at least insofar as they can be detected, will be available to answer claims which may be made against him. This is a circumstance which causes some disquiet and suspicion. 13 In my view, all the factors to which I have referred combine to warrant some sort of protection being afforded to the Plaintiff to prevent Mr Comer from dealing with whatever assets or interests in assets he may have, disclosed or undisclosed, in such a way to defeat the Plaintiff's ability to realise the fruits of any judgment against him. (Short Minutes of Order to be agreed and orders made in chambers.) – oOo – 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.