Supreme Court New South Wales Medium Neutral Citation: Surf Life Saving New South Wales v Hanks [2016] NSWSC 1284 Hearing dates: 8 September 2016 Decision date: 08 September 2016 Jurisdiction: Equity - Duty List Before: Stevenson J Decision: Freezing order varied Catchwords: PRACTICE AND PROCEDURE – freezing order – whether freezing order should be varied – where defendant wishes to sell asset and transfer funds to discharge liability to third party – where defendant's net assets not affected – where defendant seeks access to credit card on terms to meet unexpected expenses Cases Cited: Break Fast Investments Pty Ltd v Gravity Ventures Pty Ltd [2013] VSC 89 Category: Procedural and other rulings Parties: Surf Life Saving New South Wales (Plaintiff/Respondent) Matthew Gordon Hanks (First Defendant/Applicant) Arruball Pty Ltd (Second Defendant) Representation: Counsel: A J Abadee with S Jayasuriya (Plaintiff/Respondent) J Knackstredt (Defendant/Applicant) Solicitors: Judd Commercial Lawyers (Plaintiff/Respondent) Armstrong Legal (First Defendant/Applicant) File Number(s): SC 2016/225871 EX TEMPORE Judgment (REVISED) 1. Between May 2005 and 13 July 2016 the first defendant, Mr Hanks, was a Human Resources Manager and then the General Manager of the plaintiff. 2. On 13 July 2016, Mr Hanks resigned by a letter in which he admitted that he had defrauded the plaintiff. The plaintiff is still investigating the amount that Mr Hanks has misappropriated. Its current estimate is that the amount misappropriated exceeds $3 million. 3. I am informed that Mr Hanks has offered to consent to a judgment on liability in favour of the plaintiff. I infer that in due course he proposes to consent to judgment for such amount as is proven to have been misappropriated. 4. On 26 July 2016, White J, on the application of the plaintiff, made an ex parte freezing order against the plaintiff and against Arruball Pty Ltd. 5. Arruball is a "Home Unit Proprietary Company" which owns two adjacent properties in Newport. Mr Hanks claims to be the beneficial owner of all of the shares in Arruball. 6. There is in evidence a current market opinion which suggests that each of the Newport properties is worth something in the range of $1.35 million to $1.4 million. 7. Westpac Banking Corporation has security (I assume in the form of a charge) over the shares in Arruball to secure loans it has made to Mr Hanks being some $1.32 million in respect of the shares referable to one of the properties and some $600,000 in respect of the shares referable to the other. 8. On 29 July 2016, the freezing order was extended, by consent, to 29 October 2016. 9. Mr Hanks now applies to vary the freezing orders to allow him to do four things: 1. sell a boat that he owns to a third party for $490,000; 2. pay the net proceeds of sale of that boat to Westpac to partially discharge Westpac's security over the shares referable to one of the Newport properties; 3. transfer funds standing to the credit of another account that Mr Hanks has with Westpac to fully discharge that security; and 4. operate his MasterCard (which has a credit balance of a little under $19,000 and is currently frozen) up to $2,000 per month. 1. It is common ground that $490,000 is a reasonable sale price for the boat. 2. Mr Abadee, who appeared with Mr Jayasuriya for the plaintiff, also accepted that if Mr Hanks is in truth the beneficial owner of the shares in Arruball then the effect of the proposed transaction set out in pars (a), (b) and (c) in [9] above would, in effect, preserve the status quo. An asset of Mr Hanks would be sold and its net proceeds of sale used to discharge one of his liabilities; with the added benefit that Mr Hanks would no longer be liable for interest payments under the relevant Westpac loan. 3. I am satisfied that Mr Hanks is the beneficial owner of the shares in Arruball. It is true that an ASIC search annexed to Mr Hanks affidavit sworn today gives the answer "no" adjacent to the words "beneficially owned". It is also true that the only share certificate that Mr Hanks has annexed to that affidavit shows that the shares are owned by a Mr Guy Williams. It is clear enough, however, from the ASIC search that Mr Williams was the vendor of the shares to Mr Hanks. 4. Furthermore, Westpac's loan offer documents specify that the security to be taken by Westpac was to be "over company title shares representing [the Newport properties]". 5. Westpac has advanced some $1.9 million to Mr Hanks. I would infer from that that Westpac has taken the security sought, namely, share certificates in Arruball which show Mr Hanks as the owner. 6. Accordingly, I propose to make orders to the effect sought in (a), (b) and (c). They will allow Mr Hanks to take advantage of the current offer for the boat (an offer which was not available in writing when the freezing orders were made) and to retire part of his debt to Westpac. This state of affairs will not disadvantage the plaintiff and will not, I think, conflict with the purpose for which the freezing order was made (for example, see Vickery J in Break Fast Investments Pty Ltd v Gravity Ventures Pty Ltd [2013] VSC 89 at [43]), namely, preservation of Mr Hanks' net assets in order that the judgment that the plaintiff will, it seems, inevitably obtain against him, be satisfied. 7. As to the proposed order concerning the MasterCard account, the freezing order permits Mr Hanks to meet his reasonable living expenses. Mr Hanks describes his current situation as follows: "Westpac are otherwise dealing with the freezing orders by requiring me to attend a branch and obtain a bank cheque to pay bills as and when they come in, and if I do not have sufficient cash to pay the bill. This is time consuming and expensive as they are charging $10 per cheque. I am no longer permitted by Westpac to use a credit card, with the consequence that I have no way to pay for many items that require a credit card. As an example, I can no longer drive on toll-roads as an E-Tag requires a credit card to operate. The arrangements are also impractical for other reasons. For example, when I attend medical appointments with my partner, payment is required either in cash or by credit card at the time of the consultation. It is not possible for these expenses to be paid on a deferred basis by bank cheque. I have had my home internet disconnected due to my inability to pay on time. I am particularly concerned about my partner and her medical care. She is 7 months pregnant, and unexpected medical expenses may arise. As I am unable to use a credit card, I cannot pay for unexpected expenses, and I am terrified that she may be refused particular care or [be] unable to have urgent tests as a result. This is causing me significant stress and worry. My partner works one day a week because of the impending birth of our child. It is not possible to survive only on her income, which is approximately $600 per week." 1. Mr Abadee cross-examined Mr Hanks for some time, but I did not understand the effect of that cross-examination to impact in any significant way on that evidence. 2. Thus, the current weekly amount available to Mr Hanks and his partner is the $600 per week that his partner can contribute, the $1,000 per week that Westpac will allow to be withdrawn from his accounts, together with such expenses as Westpac is prepared to fund by a bank cheque (and, I would infer, such expenses that the plaintiff, on request, may approve). 3. I am not greatly troubled by any inconvenience Westpac's requirements might cause Mr Hanks. As Mr Abadee submitted, some inconvenience is an inevitable consequence of the making of a freezing order and only Mr Hanks is responsible for the circumstances that have brought about the making of that order. 4. However, I accept that it is reasonable for Mr Hanks to seek to have a mechanism available for the payment of unexpected and urgent expenses, particularly in light of the pregnancy of his partner. Mr Hanks has adduced no evidence as to what precisely he anticipates such expenses may be although, as he has set out in his affidavit, in his experience medical appointments are required to be met either in cash or by credit card. 5. The proposed figure of $2000 per month amounts to some $460 per week. Mr Knackstredt, who appeared for Mr Hanks, submitted that it was a matter of "common sense" that this sort of figure was a reasonable estimate of what would be required. I see no basis upon which I could be so confident. 6. In my opinion, the amount of $1000 per month, that is some $230 per week, seems to be more in the range and, subject to what I say next, I am prepared to make an order as sought in that amount. 7. Any such order would be conditional upon Mr Hanks agreeing to a regime where he causes his solicitors to inform the plaintiff's solicitors, on a fortnightly basis, on the extent to which his MasterCard has been so utilised. 8. I make the following orders (which include agreed directions for the future conduct of the matter): 1. Pursuant to the liberty granted by Order 3 of the Orders made on 26 July 2016 (as extended by further Order on 29 July 2016), an Order varying Order 8 of the Orders made on 26 July 2016 (as extended by further Order on 29 July 2016) by including the following additional subparagraphs after subparagraph (c): "(d) selling the boat identified as "Matadore", XXX to a third party for the sum of $490,000 (gross of agent's commission), subject to (e) below; (e) applying the proceeds of the said sale in full against the first defendant's Westpac loan account numbered XXX, such proceeds (less the said commission) to be paid directly by EFT by the purchaser into that account; (f) effecting a transfer of so much of the balance of the first defendant's Westpac account numbered XXX to his Westpac loan account numbered XXX as is required to fully repay the outstanding balance of that loan and obtain a discharge of the mortgage securing it; (g) without limiting (a) or (b), continuing to use and transact upon your Westpac account numbered XXX and your Westpac MasterCard account ending with XXX, with the MasterCard account being limited to debit transactions up to an aggregate amount of $1000 per month." 1. Every fortnight, the first defendant is to provide the plaintiff with a copy of an up-to-date bank statement in respect of his Westpac MasterCard account ending with XXX displaying the transactions that have taken place during that fortnight, with the first such statement to be provided on 23 September 2016. 2. Costs of today's application are to be the plaintiff's costs in the cause. 3. Order 3 made on 22 August 2016 be vacated. 4. Order 5 made on 22 August 2016 be varied so that the date for service of Mr Evett's report be extended to 14 October 2016. 5. The plaintiff is to serve any proposed amended statement of claim and application for joinder of other parties by 28 October 2016. 6. On the basis that there is no objection, the amended statement of claim is to be filed by 4 November 2016. 7. The defendants are to file and serve any defence by 25 November 2016. 8. Upon the applicant giving the undertakings in Schedule A of the Orders made on 26 July 2016, Orders 3 to 10 and 12 to 17 of the Orders (as amended by Order 1 hereof) be continued until 9 December 2016. 9. Order 7 made on 22 August 2016 be vacated and the matter is relisted before the Equity Registrar on 5 December 2016. 10. The parties have liberty to apply generally on two days' 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: 13 September 2016