Supreme Court New South Wales Medium Neutral Citation: In the matter of Elsmore Resources Limited (No 2) [2014] NSWSC 1884 Hearing dates: 18 July 2014 Date of orders: 18 July 2014 Decision date: 18 July 2014 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Freezing order dissolved Catchwords: EQUITY – equitable remedies – freezing orders – whether freezing order should be dissolved – whether strength of plaintiff's claim against third defendant of itself sufficient to warrant continuation of order where no evidence of risk of dissipation Category: Procedural and other rulings Parties: Elsmore Resources Ltd (plaintiff) Ashley Grant Howard (first defendant) Periwinkle Investments Pty Ltd (second defendant) Harry Fung (third defendant) HF Global Financial Solutions Pty Ltd (fourth defendant) Representation: Counsel: T Brennan (plaintiff) P Caillard (defendant) Solicitors: Norton White (plaintiff/respondent) Rockwell Olivier, Melbourne (third defendant/applicant) File Number(s): 2014/57738 Judgment (ex tempore) 1. HIS HONOUR: On 12 May 2014, upon the plaintiff by its counsel giving to the Court the usual undertakings as to damages, the Court ordered that the third and fourth defendants be restrained until 2 June by themselves, their servants or agents from alienating or encumbering or further encumbering any of their assets up to the unencumbered value of $1,875,567, provided that that order did not prohibit the third defendant from paying his ordinary living expenses and up to $10,000 on reasonable legal expenses. That order was made ex parte. On 2 June 2014, following the examination of Mr Fung before the Court, the Court ordered that the injunction of 12 May 2014 restraining the third and fourth defendants from alienating or encumbering or further encumbering any of their assets up to the unencumbered value of $1,875,568 be extended to 23 June 2014, provided that that order did not prohibit the third defendant from paying his ordinary living expenses and up to $10,000 on reasonable legal expenses. On 23 June 2014, the Court ordered that the order made on 12 May 2014 against the third and fourth defendants, as extended on 2 June, be extended until further order of the Court. 2. This morning I have dismissed an application for summary judgment against the third defendant, but it will be evident from the reasons for judgment, that while I have considered that the (NSW) Contracts Review Act 1981 defence is not unarguable to the extent necessary to survive a summary judgment application, prima facie the plaintiff has a very strong case against the third defendant. 3. The third defendant now applies for the dissolution of the freezing order to which I have referred. Some notice of the intention to make that application was given by letter of 15 July 2014, although there is no notice of motion seeking the dissolution of that order. An order having been made continuing the freezing order until further order after there were a number of opportunities to resist it, it seems to me that there is at least some evidential onus on the defendant to show why the order should be disturbed. That said, it is appropriate to bear in mind the fundamental basis for a freezing order, including that the plaintiff establish that it have a good arguable case for final relief and that there is a substantial risk that the defendant may frustrate any judgment by adversely dealing with its assets in the meantime. 4. In this case, the application for summary judgment has given the Court a better than usual opportunity to examine the relative strengths of the plaintiff's case and of the defence. The plaintiff sues on a guarantee about which there is no dispute as to execution or as to its effect unless it be set aside under the Contracts Review Act or on similar grounds. The defendants' sole viable defence is one under the Contracts Review Act and as I have recorded in the judgment delivered this morning, it faces significant, though not insuperable obstacles. Accordingly, there is a very substantial prospect that the third defendant will be held liable to the plaintiff for some $2.2 million or thereabouts. 5. In the course of the months preceding his joinder to these proceedings, the third defendant has, on a number of occasions, acted at least imprudently in connection with the subject matter of these proceedings. There is some evidence that implicates him in a dealing with the investors' funds at the heart of the claim, at a time when there was also evidence that suggests that he knew or ought to have known that they were investors' funds and not funds at the disposal of Mr Howard, on whose direction he apparently acted. It is also the case that he alienated some $350,000 of his own funds at the direction of Mr Howard, but it must be said that it ill behoves the plaintiff to rely on that, since those $350,000 were paid into a trust account and ultimately released to the plaintiff for the plaintiff's benefit. 6. There is also evidence that Mr Fung has had some further contact with Mr Howard, and delayed in seeking legal advice in connection with these proceedings upon the suggestion of Mr Howard. Since then, of course, Mr Fung has pressed in these proceedings the view that he was "conned" and threatened by Mr Howard to give the relevant guarantee. I do not think that the fact that Mr Fung effectively paid $350,000 to the plaintiff can be legitimately prayed in aid of a submission that there is a risk that he will dissipate his assets adversely to the plaintiff. The circumstance that he may have acted on Mr Howard's direction to effect a dealing with the investment funds does not really suggest that he would adversely deal with his own assets. 7. One the one hand, it seems to me that the hardship that the present form of injunction imposes on Mr Fung is very slight, given that it exempts ordinary living expenses and makes provision for legal expenses, and would readily be varied to accommodate further legal expenses on appropriate evidence. On the other hand, it seems to me that really the plaintiff has, in support of the Mareva injunction, nothing more than a very strong case for final relief. That of itself is not sufficient to support a Mareva injunction. 8. Accordingly, it seems to me that the injunction should be dissolved. The Court orders that the freezing order made on 12 May 2014 against the third defendant, as extended on 2 June and 14 July 2014, be dissolved. ********** 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: 20 January 2015