District Court New South Wales Medium Neutral Citation: S1 by her tutor S2 v T [2013] NSWDC 309 Hearing dates: 12 September 2013 Decision date: 12 September 2013 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: (1) Plaintiff's notice of motion (filed 11 September 2013) granted in part. (2) The defendant is to deposit the sum of $40,000 into a controlled money account held by the defendant's solicitors, Greenfield Lawyers, until these proceedings have been finalised. (3) The defendant is not, in any way, to dispose of, deal with or diminish the value of his funds in the sum of $40,000 except: (a) to met any existing liability to X for legal fees of the defendant paid by X, to a maximum of $24,500; and (b) to meet any legal fees properly incurred in the defence of these proceedings. (4) Costs of the plaintiff's motion be costs in the proceedings. (5) Defendant's notice of motion (filed 12 September 2013) dismissed. Catchwords: FREEZING ORDER - agreement in respect of money held in trust by solicitor - whether plaintiff has a good arguable case - incurred liability - legal expenses Legislation Cited: Uniform Civil Procedure Rules 2005, r 25.14 Cases Cited: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; The Nidersachsen [1984] 1 All ER 398 Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 Category: Interlocutory applications Parties: S1 by her tutor S2 (plaintiff) T (defendant) Representation: Ms M Daniels (plaintiff) Carroll & O'Dea (plaintiff) Greenfield Lawyers Pty Ltd (defendant) File Number(s): 2013/149130 Publication restriction: Names of persons have been anonymised. ex tempore Judgment 1The plaintiff, now an adult, by her tutor commenced proceedings claiming damages for sexual abuse by the defendant, the former de facto partner of her mother. The plaintiff applies for a freezing order in respect to $40,000 currently held by the defendant's solicitor. The $40,000 is the residue of a payment received by the defendant in settlement of Family Court proceedings with the plaintiff's mother. 2The sexual abuse allegations were also ventilated in criminal proceedings. The defendant was held in custody for 13 months until the trial. During the trial, the trial judge gave the jury a Prasad direction whereupon the jury gave a not guilty verdict on one count and elected to proceed with the trial on the other five counts. Ultimately the jury returned a verdict of not guilty on all counts. 3The principal basis for the order sought by the plaintiff is an alleged agreement with the defendant. After the settlement of the Family Court proceedings, the plaintiff's solicitor wrote to the defendant's solicitor. The letter was marked, "Without Prejudice", but was admitted by consent. It relevantly said: "We advise that our client is interested in pursuing settlement discussions with your client and we shall contact you in this regard again shortly. In the meantime, we understand that your client will be entitled to receive monies arising from a Family Court settlement in the sum of $150,000.00, by mid August. We seek an undertaking from your firm that the Family Court settlement monies will be held in a controlled money account pending resolution of the District Court proceedings, as our client is concerned that there is a risk of dissipation of the money and our client is entitled to file an application in the District Court to freeze the funds to ensure there are sufficient assets to satisfy a judgment debt. We look forward to hearing from you in this regard as soon as possible." 4The plaintiff's evidence in respect of this matter continued: "14 Subsequently, correspondence was exchanged between the parties on this issue on a 'without prejudice' basis. The Defendant's solicitors indicated that [the defendant] owed legal fees of more than $150,000 (in respect of related criminal proceedings and family court proceedings) but the Defendant's solicitors had reached an agreement with the Defendant that they would accept the sum of $110,000 in payment of such fees and make the sum of $40,000 available to the Defendant. 15 The Defendant offered to agree to hold the sum of $40,000 in a controlled account of [the defendant's solicitors] pending finalisation of these proceedings. Such an offer was accepted by the Plaintiff. 16 Annexed hereto and marked 'D' is a document signed by the Defendant dated 6 August 2013 which includes an Authority to pay certain legal costs out of the family court settlement funds of $150,000 and his consent to hold the sum of $40,000 in a controlled money account of [the defendant's solicitors] until finalisation of these proceedings. 17 By a letter dated 29 August 2013, the Defendant's lawyers indicated that the Defendant reserves his right to withdraw his undertaking to hold the sum of $40,000 in a controlled account and to use the funds as he so wishes." 5The authority to pay signed by the defendant was in the following terms: "Cheque Directions Authority to Pay Settlement Funds from Family Law Order dated 14/6/13 TO: Mahony Family Lawyers, PO Box ... I, [defendant], Date of Birth ... hereby authorize and direct you to pay from my settlement proceeds of $150,000 as per Family Law Order dated 14/6/13 as follows: - ...barrister $45,100 [Defendant's solicitors] $104,900 I consent to $40,000 of the $104,000 payable to [defendant's lawyers], to be held on my behalf in a controlled money account of [defendant's solicitors], until the finalization of the District Court Civil Damages Claim" 6The document was signed and dated by the defendant. Mahony Family Lawyers were the lawyers for the plaintiff's mother. 7The defendant filed a superfluous motion seeking that the plaintiff's motion for a freezing order be dismissed. 8The defendant's solicitor gave evidence that the defendant's brother had paid legal fees of $24,500 on behalf of the defendant by way of a loan to the defendant and now requires repayment of that loan. 9That evidence was corroborated by a memorandum of fees from the defendant's lawyers dated 11 May 2012 noting various sums paid by the defendant's brother totalling $24,500 and seeking a further payment. The memorandum of fees contained a notation, "(TO BE PAID UPON FAMILY COURT SETTLEMENT)". 10This loan was not mentioned in the defendant's financial statement in the Family Court. The defendant's solicitor gave an explanation that this failure to include the loan was an oversight resulting from a misunderstanding in the translation of the word "liabilities". There was no cross-examination of any witness in this application and I am satisfied with the defendant's explanation. 11In these circumstances, I am satisfied that the defendant's brother is owed $24,500 by the defendant in legal fees and that those fees were intended to be repaid from monies available on the settlement of the Family Court proceedings and that the brother now requires payment. 12The defendant's solicitor also gave evidence of the instructions of the defendant that he needs the balance of the $40,000 of funds to meet continuing legal fees in defending these proceedings and has no savings or income sufficient to meet those fees. 13Rule 25.14 of the Uniform Civil Procedure Rules 2005 relevantly provides: "25.14 Order against judgment debtor or prospective judgment debtor or third party (cf Federal Court Rules Order 25A, rule 5) (1) This rule applies if: ... (b) an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in: (i) the court, or ... ... (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." 14The requirement of a, "good arguable case", has been regarded as capable of being satisfied without either involving or requiring any prediction about the likely ultimate success of the claim. In Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; The Nidersachsen [1984] 1 All ER 398 at 404, Mustill J held that a good arguable case is: "a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success." 15This is passage was approved by the Court of Appeal in Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 and is consistent with the approach taken by the High Court in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 408. 16In determining whether the plaintiff has a good arguable case, I take into account that the plaintiff's account of sexual abuse is set out in her unverified statement of claim, is recounted in a summary fashion in an expert psychiatric report prepared for the proceedings, and has resulted in the proceedings being prosecuted at trial. I also take into account the existence of the Prasad direction and the acquittal of the defendant on all counts. 17In my view, these latter matters cast some doubt upon whether the plaintiff has good prospects of success in the proceedings. However, it is apparent that this case will largely turn on the credit of the plaintiff and the defendant. I do not think that I can or should make any determination of that at this stage. As I suggested above, the determination of what is a good arguable case does not involve or does not necessarily involve any prediction about the likely ultimate success of the claim. 18The word "arguable" focuses on whether the plaintiff's case as maintained can be seriously argued, not whether the plaintiff will be accepted as a witness. I am satisfied for these reasons that the case is a good arguable case even were I not satisfied that it had a better than 50 per cent chance of success. 19Rule 25.14 requires that there be a danger of the defendant absconding or removing assets from Australia or disposing of, dealing with or diminishing the value of those assets. The plaintiff did not press any argument that there was evidence of a danger that the defendant would abscond or remove assets, but submitted that there was a danger that the defendant would deal with and diminish the $40,000 currently held in trust. Perhaps because of the evidence read on behalf of the defendant about the need to pay legal fees, the defendant did not dispute this proposition. 20It must be remembered that freezing orders are exceptional on their nature and there is a need for caution in the exercise of the power to impose them. The purpose of a freezing order is to prevent the improper dissipation of assets that would frustrate satisfaction of any judgment on the applicant's claim. But there is authority for the proposition that the order ought generally to permit the respondent, the defendant in the present case, to resort to their assets for the purpose of meeting ordinary living expenses and properly incurred liabilities including the costs of relevant legal proceedings. 21The defendant's financial statement in the Family Court proceedings, which was part of the evidence before me, shows that the defendant in late May 2013 was earning $1,600 per week before tax and incurring $710 per week expenses (including tax). Thus, it appears the defendant has sufficient funds to meet his ordinary living expenses. However, it must be doubted whether those earnings are sufficient to pay legal fees in respect of these proceedings. 22There is another factor to take into account in the present case. The defendant agreed with his solicitor to place $40,000 in trust pending the conclusion of these proceedings. The direction to that effect was sent to the plaintiff's mother. In my view, it would be significant in this application if an agreement was entered between the plaintiff and the defendant that the defendant agree to hold the $40,000 pending finalisation of these proceedings. 23It might be thought that cl 15 of the plaintiff's solicitor's affidavit quoted earlier established such an agreement. For the reasons below, I am not persuaded that it does. Although cl 15 was not objected to, it is not in a form that would ordinarily be allowed if subject to objection. In that event I do not think I should give it any greater ambit than its terms require. 24It is not apparent what consideration was given for any agreement, whether the relevant agreement was only with the defendant's solicitor, the plaintiff's mother, the plaintiff or some combination thereof, whether the "offer" in cl 15 was to the plaintiff and whether that offer was open to be "accepted", by whatever means, by the plaintiff. 25I should mention that in more recent times, about a fortnight ago, the defendant sent a letter to the plaintiff, which was in evidence before me but redacted to remove a reference to some privileged material by consent of the parties. It provided: "We confirm we are holding the sum of $40,000.00 in a controlled money account as per our client's undertaking... [Redacted material] Should [the plaintiff] decline this offer to settle on a non-admission's basis, we are instructed that our client intends to withdraw his undertaking to keep the funds, referred to herein, in a controlled money account. Our client reserves the right to withdraw his undertaking and use the funds as he so wishes, which may include the payment of our legal fees incurred from proceeding with this court action. Our client's rights remain strictly reserved." 26There is also a question as to whether the reference in this letter to "undertaking" refers to some obligation, contractual in nature. 27In any event, I cannot, on this application, determine the existence of the agreement or otherwise on a final basis. As I have said, on the evidence before me on this application, I am not persuaded to make such a finding. Suffice it to say that there is an arguable basis for an agreement that, if established, would strengthen the plaintiff's entitlement for a freezing order. 28The defendant also argued that the plaintiff's expert report and its reference to damages did not support the allegations in the statement of claim, and that enforcement of an agreement was not sought in the notice of motion. I do not regard either of these arguments as weighty. If the abuse was established, there can be no argument that the plaintiff has suffered damages. As to the second argument, a motion is a document that seeks relief but is not required to plead the bases for that relief sought. 29The defendant also argued that if there was an agreement it should not be enforced. However, the defendant put forward no principle or authority for the proposition that I should not enforce the agreement other than the matters applicable generally to the granting of freezing orders. 30I take into account that the size of the fund is relatively modest, and the continuing expense of legal proceedings. 31In all the circumstances including the arguable basis for an agreement in respect of the money held in trust, I think the appropriate order is that the plaintiff be granted an order in the terms sought but on the condition that the defendant is entitled to diminish the fund by payment of any genuine liability to a maximum of $24,500 to his brother on account of a loan for past legal expenses and to pay any other legal expenses in defending these proceedings. 32Thus, I propose to make orders three and four in the notice of motion, putting them in reverse order, namely, that: (1)The defendant is to deposit the sum of $40,000 in to a controlled money account held by the defendant's solicitors, Greenfield Lawyers, until these proceedings have been finalised. (2)The defendant is not in any way to dispose of, deal with or diminish the value of these funds of $40,000, but then adding the rider, except: (a)to meet any existing liability to X for legal fees of the defendant paid by X to a maximum of $24,500; and (b)to meet any legal fees properly incurred in the defence of these proceedings. 33The notice of motion does not seek an order for costs. 34Accordingly, the orders of the Court are: (1)Plaintiff's notice of motion (filed 11 September 2013) granted in part. (2)The defendant is to deposit the sum of $40,000 into a controlled money account held by the defendant's solicitors, Greenfield Lawyers, until these proceedings have been finalised. (3)The defendant is not, in any way, to dispose of, deal with or diminish the value of his funds in the sum of $40,000 except: (a)to met any existing liability to X for legal fees of the defendant paid by X, to a maximum of $24,500; and (b)to meet any legal fees properly incurred in the defence of these proceedings. (4)Costs of the plaintiff's motion be costs in the proceedings. (5)Defendant's notice of motion (filed 12 September 2013) dismissed. ********** 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: 02 April 2014