Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Jingalong Pty Ltd v Todd (No 2) [2014] NSWCA 347 Hearing dates: 9 October 2014 Decision date: 09 October 2014 Before: Gleeson JA Decision: See paragraph [16] and Schedule [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: PROCEDURE - Mareva orders - Application for freezing order pending hearing and outcome of appeal where there is an unpaid costs order of the judgment below - Application made on urgent ex parte basis - Whether to make interim freezing order, pending return of the motion, to restrain respondent from dealing with the proceeds of sale of property where likely that net proceeds of sale will be dissipated Legislation Cited: Real Property Act 1900 (NSW) s 42 Cases Cited: Jingalong Pty Ltd v Todd [2014] NSWCA 330 Todd v Jingalong Pty Ltd [No 2] [2014] NSWSC 440 Category: Interlocutory applications Parties: Gregory George Todd (Applicant) Jingalong Pty Ltd (First respondent) Brett Pernice (Second respondent) Representation: Counsel: D Brezniak (Applicant) Solicitors: Johnston Tobin (Applicant) File Number(s): 2014/137752 Decision under appeal Jurisdiction: 9111 Citation: Todd v Jingalong Pty Ltd [2014] NSWSC 362 Date of Decision: 2014-03-31 00:00:00 Before: Kunc J File Number(s): 2012/344643 Judgment 1HIS HONOUR: This is an application for urgent relief on an ex parte basis for orders in the nature of freezing orders against Jingalong Pty Ltd (Jingalong). Jingalong is the appellant in the proceedings in this Court against Mr Todd and Mr Pernice. The applicant for relief is Gregory George Todd, the first respondent in the appeal. 2The appeal is in respect of a dispute concerning a property described as "Lot 1" Gannet's Road, Nowra. On 10 April 2014 Kunc J made orders giving effect to his finding that Jingalong held Lot 1 on constructive trust for Mr Todd: Todd v Jingalong Pty Ltd [No 2] [2014] NSWSC 440. An order was also made that Jingalong pay Mr Todd's costs of the proceedings (other than in respect of the first cross-claim by Jingalong). 3Subsequently on 19 September 2014, McColl JA made orders staying the orders made by Kunc J pending the hearing and determination of the appeal: Jingalong Pty Ltd v Todd [2014] NSWCA 330. 4The present application relates to a different property owned by Jingalong, described as "Lot 5" in deposited plan 1181699. Mr Todd lodged a caveat against Lot 5 supported by a statutory declaration sworn on 31 July 2014 claiming an estate or interest in that land based on the costs order made in his favour against Jingalong in the Court below. Those costs have not been assessed, but have been quantified by Mr Todd's solicitors at approximately $130,000. The caveat is obviously bad in form because the costs order in favour of Mr Todd does not give rise to any equitable interest in Lot 5 owned by Jingalong. 5Following lodgement of the caveat, the solicitors for Jingalong informed the solicitors for Mr Todd that Lot 5 was the subject of a contract for sale exchanged on 2 July 2014 with completion due on 11 August 2014. The solicitors for Mr Todd requested that an amount of $130,000 be retained from the proceeds of sale of Lot 5 before Mr Todd would agree to withdraw the caveat. No response was received to that request until 17 September 2014, when the solicitors for Mr Todd were served with a notice to caveator of proposed lapsing of caveat relating to Lot 5. 6Mr Brezniak of Counsel who appeared for Mr Todd informed the Court that the caveat will lapse today, being 9 October 2014. His explanation from the bar table for the delay in applying for relief was that the solicitors for Mr Todd were under the (obviously) mistaken impression that they would be able to obtain an extension of the caveat. This is not the case. As already mentioned, the caveat is bad as Mr Todd has no equitable interest in Lot 5. Mr Brezniak also informed the Court that on his instructions Mr Todd's solicitor had been informed that the mortgagee of Lot 5 required two days notice after the lapsing of the caveat to attend settlement of the sale of Lot 5. Nonetheless it was submitted that there was a real basis for a concern that the settlement of the sale of Lot 5 would occur within a shorter timeframe. 7In these circumstances Mr Todd has sought relief on an urgent basis for orders in the nature of freezing orders to preserve a minimum amount of $130,000 from the proceeds of sale of Lot 5 pending the determination of the appeal. 8Counsel for Mr Todd accepted that his client is not entitled to security in respect of the costs order obtained below. This is undoubtedly correct. 9Mr Tobin, a solicitor for the applicant, swore an affidavit in support of the application dated 8 October 2014 deposing on information and belief that he had been informed by Mr Todd that the sole remaining asset of Jingalong is Lot 5 and that upon the sale of that property any proceeds of sale will be disbursed through related entities of Mr Cameron (the director of Jingalong) and Jingalong, following which Jingalong may promptly attempt to go into liquidation. 10Mr Tobin also deposed to what he said were adverse credit findings made against Mr Cameron by Kunc J in the proceedings below, which he said resulted in the conclusion by his Honour that "Jingalong's acquisition of the land in Lot 1 was either tainted by fraud within the meaning of that term in s 42 of the Act (the Real Property Act 1900 (NSW)) or gave rise to a personal equity in Mr Todd against Jingalong in relation to Lot 1". 11Mr Brezniak submitted that although the costs order had been stayed pending the outcome of the appeal, there was a prima facie claim for a money amount subject to the outcome of the cost assessment process against Jingalong. He further submitted that there was a danger that, by reason of assets of Jingalong in particular the net proceeds of sale of Lot 5 being disposed of or otherwise dealt with in some fashion, that Mr Todd, if he succeeds in defending the appeal, will not be able to have his costs judgment satisfied. 12It was submitted that the Court should draw an inference to this effect from the adverse credit findings made against Mr Cameron in the proceedings below and the evidence of the financial position of Jingalong contained in affidavits sworn by Mr Cameron in the proceedings below. Those affidavits referred to the difficult financial position of Jingalong and the fact that it had borrowed substantial funds for the development of various properties, including Lot 5. Mr Brezniak properly drew to the Court's attention that the financial information concerning Jingalong was to some extent out of date, the latest affidavit being one sworn by Mr Cameron on 16 September 2013. He submitted nonetheless that an inference should be drawn that Jingalong's financial position had not substantially changed for the better since that date. 13I am prepared to draw the inference that Jingalong will most likely complete the sale of Lot 5 immediately or shortly after the lapsing of the caveat on 9 October 2014, and unless restrained, any net proceeds of sale will be disbursed by it. Mr Brezniak informed the Court that there was a mortgagee which held security over the Lot 5, but the quantum of the secured debt was presently unknown. Whether there will in fact be any net proceeds of sale remains to be seen. This however is not a sufficient reason to refuse an order in the nature of freezing orders for a short period of time, as the proposed orders will not prevent Jingalong discharging any mortgage or paying any reasonable costs and expenses incidental to the sale of Lot 5. 14I am satisfied that it is appropriate to make a form of freezing order for a limited period of time. The appropriate form of order is not that sought in paragraph 4 of the notice of motion filed in Court. Mr Brezniak acknowledged that the form of order should follow the example form of order in practice note SC Gen 14. 15As the order sought is on an ex parte basis, it should be made only for a short period of time, sufficient to enable service of the order and relevant documents on Jingalong, and for the matter to be returnable before the Court next Monday 13 October 2014. At that time if the parties are unable to agree on an appropriate interim regime pending the hearing and determination of the appeal, Mr Todd will need to renew his application for continuation of the freezing orders. Orders 16The order of the Court will be in terms of the draft which I have signed and initialled today and will be placed with the papers, a copy of which appears in the Schedule below. SCHEDULE TO: JINGALONG Pty Limited 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: Jingalong Pty Limited This is a 'freezing order' made against you on 9th October 2014 by Justice Gleeson 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 9th October, 2014. 2. Subject to the next paragraph, this order has effect up to and including 4.15pm 13th October, 2014 ('the return day'). On the return day 13th October 2104 at 9.30am 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; and if you are ordered to do or not to do something you must do it or 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. 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$130,000.00 ('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. 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: (i) if the property known as Lot 5 in Deposited Plan 1181699 has been sold, the net proceeds of that sale after the payment of expenses including legal and agents fees, necessarily incidental to the sale of Lot 5 DP1181699 and the payment to any mortgagee of the amount secured upon Lot 5 DP1181699; and (ii) any money in any account in the name of Jingalong Pty Limited at any bank, building society or other financial institution. (d)But for the avoidance of doubt this order does not prevent you from disposing of the property Lot 5 DP1181699 in the ordinary course of business nor does it prevent the sale of that property. (2) the value of your assets is the value of the interest you have individually in your assets. EXCEPTIONS TO THIS ORDER 10. This order does not prohibit you from: (a)n/a (b)paying $5,000.00 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 $130,000.00 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. Further order that the Notice of Motion dated 8 October 2014 which was returnable instanter today will be stood over before the Registrar at 9.30 am on 13 October 2014. 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); Mark Tobin sworn 8 October 2014 (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 Name of Deponent Date affidavit made (1) Mark Tobin sworn 8 October 2014 ********** Amendments 13 October 2014 - Case Title change Amended paragraphs: Coversheet 13 October 2014 - Amended paragraphs: Coversheet 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: 13 October 2014