District Court New South Wales Medium Neutral Citation: Mohana-Reslan v Halvajieff [2012] NSWDC 124 Hearing dates: 28 August 2012 Decision date: 28 August 2012 Jurisdiction: Civil Before: Gibson DCJ Decision: Notation: (1) The defendant called outside Court 13D three times at 2:06pm - no response. Orders: (1) Until 5:00pm Friday 31 August 2012, upon the plaintiff, by its legal representatives, giving the usual undertaking as to damages, the defendant, by himself, his servants and agents, be restrained pursuant to r 25.11(1) Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") from selling or disposing of his assets, namely the real property in folio identifiers A/328633 and 9/16788, known as and situated at 7 Bestic Street, Rockdale and 36 Stuart Street, Blakehurst in the State of New South Wales respectively, or dealing with the said assets by way of mortgage, charge, encumbrance or in any other manner adverse or prejudicial to the rights of the plaintiff as a judgment creditor or prospective judgment creditor, pending the final resolution of these proceedings. (2) The auction scheduled on 29 August 2012 for the property at 7 Bestic Street, Rockdale be immediately cancelled by the defendant or his servants or agents. (3) These proceedings stood over for further mention to Friday 31 August 2012 at 10:00am before Gibson DCJ. (4) Service of these orders is to be effected by 5:00pm today as follows: (a) upon Nick Sinclair of CBRE at nick.sinclair@cbre.com.au; (b) upon Daniel O'Brien of CBRE at daniel.obrien@cbre.com.au; and (c) upon the defendant by service upon his solicitors by email. (5) Costs reserved. (6) Liberty to restore on one day's notice. Catchwords: INJUNCTION - plaintiff seeks undertaking from defendant not to dispose of assets pending the hearing - defendant lists property for sale by auction without notifying plaintiff - application for interim preservation order granted Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), rr 25.11 and 25.14 Cases Cited: TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196 Texts Cited: Ritchie Uniform Civil Procedure (LexisNexis) Category: Interlocutory applications Parties: Plaintiff: Linda Mohana-Reslan Defendant: Nikola Halvajieff Representation: Plaintiff: Mr Z Mandoh (solicitor) Defendant: No appearance Plaintiff: Mandoh & Associates Lawyers Defendant: No appearance File Number(s): 2011/299121 Publication restriction: None Judgment 1The plaintiff by notice of motion filed on 27 August 2012 seeks orders as follows: (1)Upon the plaintiff, by its legal representatives, giving the usual undertaking as to damages, the defendant, by himself, his servants and agents, be restrained pursuant to r 25.11(1) Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") from selling or disposing of his assets, namely the real property in folio identifiers A/328633 and 9/16788, known as and situated at 7 Bestic Street, Rockdale and 36 Stuart Street, Blakehurst in the State of New South Wales respectively, or dealing with the said assets by way of mortgage, charge, encumbrance or in any other manner adverse or prejudicial to the rights of the plaintiff as a judgment creditor or prospective judgment creditor, pending the final resolution of these proceedings. (2)In the alternative, pursuant to r 25.11(1) UCPR an order freezing the net proceeds of sale of any of the real property referred to in (1) above, after payment of mortgagees and secured creditors, outstanding council and water rates, and reasonable legal and agency costs of the sale, which net proceeds of sale shall be paid into Court by the defendant or on his behalf by his legal representative on completion of such sale to be held pending determination of these proceedings and/or further order of this Court. (3)The defendant or his legal representative in respect of the sale of any of the real properties referred to in (1) above, shall within seven (7) days after completion of such sale: (a)pay the net proceeds of sale into Court; and (b)forward to the plaintiff's legal representative copies of: (i)the Court's receipt in respect of the monies so paid; and (ii)the Settlement Statement. (4)That the defendant forthwith cease any attempts to sell the property referred to in (1) above. (5)The auction scheduled on 29 August 2012 for the property at 7 Bestic Street, Rockdale be immediately cancelled. (6)Orders (4) and (5) are made in the interim on an urgent ex parte basis. (7)Further or other orders as the Court thinks fit. (8)Costs. 2The plaintiff relies upon the affidavit of Mahmoud Zac Mandoh sworn 27 August 2012 ("affidavit of Mr Mandoh"). 3The basis upon which the orders are sought are as follows. The plaintiff by statement of claim dated 16 September 2011 commenced proceedings against the defendant, a dental prosthetist, for negligence for the performance of work as a dental professional. It is pleaded that the work in question fell outside the scope of the defendant's registration as a dental prosthetist and, according to the affidavit of Mr Mandoh, the defendant has no professional indemnity insurance in relation to the claim. 4When the statement of claim was served, the solicitors for the plaintiff, in their covering letter of 16 September 2011, sought an undertaking for the preservation of assets from the defendant (annexure B to the affidavit of Mr Mandoh). This was reiterated in the plaintiff's solicitors' letter of 4 October 2011 and 21 October 2011. On 25 October 2011, F C Bryant Thomas & Co, the solicitors for the defendant advised the solicitors for the plaintiff that they were seeking instructions and, referring to their long association with the defendant and his family, adding: "We are confident that if [the defendant] were [sic] intending to do anything of this nature, we would be consulted about that." 5A defence was filed on 15 December 2011 and orders made for the service of evidence up until 14 April 2012. A return date was given for subpoenae and the plaintiff was directed to respond to the defendant's request for further and better particulars by 4 July 2012. 6On 14 August 2012, the solicitors for the plaintiff wrote to the solicitors for the defendant, reminding them of earlier correspondence concerning the sale of any property by the defendant, and advising that the plaintiff had just discovered that real property owned by the defendant at 7 Bestic Street, Rockdale was being advertised for sale by auction. A photograph of the property (the defendant's place of work) and a copy of information about the auction on the Domain website http://www.domain.com.au/Property/For-Sale/House/NSW/Rockdale/?adid=2009947462 (to take place on Wednesday 29 August 2012 at 10:30am) are attached to the affidavit of Mr Mandoh. 7When no reply was received to this letter, Mr Mandoh wrote again on 27 August 2012 setting out that as he has now learned that the auction was to take place on 29 August 2012 at 10:30am, he proposed to seek orders in accordance with the notice of motion filed in these proceedings. 8Mr Mandouh has told me today that after the Notice of Motion and affidavit were served, the solicitor for the defendant, Mr Gordon of F C Bryant and Co, telephoned him this morning and said "I can't make it [to court] today at 2 p.m." He went on to say "The auction will be postponed and will not take place on Wednesday." However, the property was still being advertised on the internet while this judgment was being prepared, as the live link in paragraph 6 of the judgment shows. 9I shall first briefly note the relevant legal principles. The power to make interim orders for asset preservation 10As Ritchie Uniform Civil Procedure (LexisNexis) notes at [25.11.10]: "The general power conferred by the present rule is complemented by the more specific provisions in r 25.14 of the UCPR, although those provisions do not limit the other powers a court has to make asset preservation orders: rr 25.14(6) and 25.15 of the UCPR. The basis of both the present rules, and the inherent or implied powers, is the necessity of ensuring the effective exercise of the court's jurisdiction, by authorising orders restraining an asset disposal that involves a real risk any judgment in the proceedings may not be satisfied" 11Rule 25.11 UCPR provides: "25.11 Freezing order (1) The court may make an order (a "freezing order"), upon or without notice to a respondent, 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 of the court will be wholly or partly unsatisfied. (2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets." 12Rule 25.14 UCPR provides: "25.14 Order against judgment debtor or prospective judgment debtor or third party (1) This rule applies if: (a) judgment has been given in favour of an applicant by: (i) the court, or (ii) in the case of a judgment to which subrule (2) applies-another court, or (b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in: (i) the court, or (ii) in the case of a cause of action to which subrule (3) applies-another court. (2) This subrule applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the court. (3) This subrule applies to a cause of action if: (a) there is a sufficient prospect that the other court will give judgment in favour of the applicant, and (b) there is a sufficient prospect that the judgment will be registered in or enforced by the court. (4) The court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur: (a) the judgment debtor, prospective judgment debtor or another person absconds, (b) the assets of the judgment debtor, prospective judgment debtor or another person are: (i) removed from Australia or from a place inside or outside Australia, or (ii) disposed of, dealt with or diminished in value. (5) The court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a "third party") if the court is satisfied, having regard to all the circumstances, that: (a) there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because: (i) the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or (ii) the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor, or (b) a process in the court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment. (6) Nothing in this rule affects the power of the court to make a freezing order or ancillary order if the court considers it is in the interests of justice to do so." 13In TZ Ltd v ZMS Investments Pty Ltd [2010] NSWSC 196 these principles were explained as follows: "[23] Two important points are made here: first, that, at a stage such as the present, the court is working with limited material and cannot be expected to make more than a preliminary appraisal of the viability of the plaintiff's case; and, second, that the threshold represented by the "good arguable case" test is not a particularly exacting one and is satisfied if the case put forward is "more than barely capable of serious argument" - with "more than barely" indicating a degree of substance that is real rather than imagined and appreciable even though falling short (and perhaps markedly short) of a 50% probability of success. [24] At this stage of the proceedings, the claims of TZL I have outlined must be accepted as amounting to a "good arguable case". I say this because each has been shown to be based on a factual foundation sufficiently articulated and explained to be plausible and with the justifications, explanations or rationalisations offered by ZMS in response appearing very much less plausible. I would add that, even on the limited evidence now available, aspects (b) and (c) of the mandate agreement claim can be said to present particular prospects of success for TZL, based, as they are, on relatively straightforward legal arguments and arguments of construction. [25] Because I am thus satisfied that the condition upon which rule 25.14 is predicated is satisfied, I turn to the second question posed by the rule, that is, whether there is a danger that any judgment obtained by TZL against ZMS will be wholly or partly unsatisfied because assets of ZMS might be disposed of, dealt with or diminished in value. This is, in essence, a reflection of the general law concepts recognised in decided cases. In Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, Gleeson CJ described the relevant inquiry as whether there is "a danger that by reason of the defendants 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". [26] A general law freezing order is warranted only if, in the words of Bryson J in Acquasun Pty Ltd v Coverdale Ram Pty Ltd [2000] NSWSC 1146, there has been "conduct on the part of the defendants which can reasonably be interpreted as potentially having the effect of frustrating the ordinary processes of the court and the enforcement of its judgments or of being intended to do so or of being in any way evasive indicating dishonesty or otherwise indicating actually or potentially that the assets of the company have been or will be dealt with in an irregular way"." The plaintiff's application 14The circumstances surrounding the listing of the property for auction, including the failure to respond to the 14 August 2012 letter or to advise that the property was to be auctioned on 29 August 2012 are indicators that the defendant is dealing with his assets either in an irregular way or with the intention of frustrating the orders of the court in a hearing of this claim. 15I have made the orders on an interim basis, with a return date of Friday 31 August 2012, when the defendant may be heard as to whether the orders should continue. I have also granted liberty to restore, given the urgency of the situation. Orders 16I make orders and notation as follows: Notation: (1)The defendant called outside Court 13D three times at 2:06pm - no response. Orders: (1)Until 5:00pm Friday 31 August 2012, upon the plaintiff, by its legal representatives, giving the usual undertaking as to damages, the defendant, by himself, his servants and agents, be restrained pursuant to r 25.11(1) Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") from selling or disposing of his assets, namely the real property in folio identifiers A/328633 and 9/16788, known as and situated at 7 Bestic Street, Rockdale and 36 Stuart Street, Blakehurst in the State of New South Wales respectively, or dealing with the said assets by way of mortgage, charge, encumbrance or in any other manner adverse or prejudicial to the rights of the plaintiff as a judgment creditor or prospective judgment creditor, pending the final resolution of these proceedings. (2)The auction scheduled on 29 August 2012 for the property at 7 Bestic Street, Rockdale be immediately cancelled by the defendant or his servants or agents. (3)These proceedings stood over for further mention to Friday 31 August 2012 at 10:00am before Gibson DCJ. (4)Service of these orders is to be effected by 5:00pm today as follows: (a)upon Nick Sinclair of CBRE at nick.sinclair@cbre.com.au; (b)upon Daniel O'Brien of CBRE at daniel.obrien@cbre.com.au; and (c)upon the defendant by service upon his solicitors by email. (5)Costs reserved. (6)Liberty to restore on one day's notice. ****** 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: 28 August 2012