Supreme Court New South Wales Medium Neutral Citation: Luo v Windy Hills Australian Game Meats Pty Ltd (in liq) (No 4) [2019] NSWSC 1405 Hearing dates: 15 October 2019 Decision date: 16 October 2019 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Third defendant released from undertaking given to the Court; limited freezing order made against third defendant Catchwords: CIVIL PROCEDURE – interim preservation – detention, custody or preservation of property – freezing order – whether danger of abuse of process – whether danger of dissipation of assets with a view to avoiding judgment debt Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Finn v Carelli [2007] NSWSC 261 Frigo v Culhaci [1998] NSWCA 88 Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 Luo v Windy Hills Australian Game Meats Pty Ltd (No 3) [2019] NSWSC 862 Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co K G (The Niedersachsen) [1984] 1 All ER 398 Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 Category: Consequential orders (other than Costs) Parties: Aimin Luo (First Plaintiff) AusChina Procurement Centre Pty Ltd (Second Plaintiff) Windy Hills Australian Game Meats Pty Ltd (in liquidation) (First Defendant) Eric Yingcai Zhang (Second Defendant) Ivan Lawrenze Coulter (Third Defendant) Representation: Counsel: G P Gee (Plaintiffs) Solicitors: Sunfield Chambers Solicitors & Associates (Plaintiffs) Bennelong Legal (First and Third Defendants) File Number(s): SC 2018/42759 Judgment 1. I published reasons for judgment in this matter on 10 July 2019: Luo v Windy Hills Australian Game Meats Pty Ltd (No 3) [2019] NSWSC 862. 2. On 18 July 2019, I entered judgment against each of the defendants in favour of the first plaintiff, Mr Luo, in the sum of $4,315,828.76 plus interest, and in favour of the second plaintiff in the sum of $2,535,774.70 plus interest. 3. Shortly after the proceedings were commenced, and in the face of a threatened application for a freezing order, the defendants gave undertakings to the Court. 4. Thus, on 16 March 2018, the defendants undertook, subject to a number of exceptions, not to remove from Australia or in any way dispose of, deal with or diminish the value of any of their assets in Australia up to an unencumbered value of US$1,455,581. 5. On 21 March 2018, the defendants repeated that undertaking. 6. On that day, the third defendant, Mr Coulter, also undertook until further order: 1. not to deal with his interest in three nominated properties in South Australia, and not to further encumber or use his interest in those properties in any way to borrow any further amount greater than $10,000 over the amount then secured in favour of the Commonwealth Bank of Australia, stated to be $774,835; and 2. to inform the plaintiffs' solicitors in writing within 48 hours of becoming aware of any intention on the part of the other registered proprietor to deal with the said properties or to further encumber or use the properties to borrow any further amount that stated in (a). 1. The "other registered proprietor" referred to is Mr Coulter's wife. Each of the South Australian properties is held by Mr Coulter and his wife as joint tenants. 2. Mr and Mrs Coulter had mortgaged their interest in the South Australian properties to the CBA to secure their obligations as guarantors to CBA of the indebtedness of the first defendant, Windy Hills Australian Game Meats Pty Ltd (now in liquidation), to the CBA. 3. By Notice of Motion filed on 16 September 2019, Mr Coulter sought to be released by the undertakings given to the Court on 16 March 2018. In the alternative, Mr Coulter sought an order that the 16 March 2018 undertaking be varied to permit him to sell his interest in one of the South Australian properties and to pay the net proceeds of sale to the CBA. 4. In support of that application, Mr Coulter swore an affidavit on 13 September 2019 in which he stated: "13 I have been advised by a local real estate agent (Christine Morris of S'avance Real Estate Pty Ltd) that the Property is likely to receive around $450,000 if sold at market. 14 My wife and I desire to sell the Property, rather than have the Bank do so under a mortgagee sale, so that we can maximise the sale price (by avoiding a fire sale by the Bank) and to avoid the additional costs associated with the Bank selling the Property as mortgagee in possession. 15 If the Undertaking is varied to permit me to sell my interest in the Property, I undertake to: a. take all reasonable steps to ensure the Property is sold at market for its best price; and b. that all the net proceeds of sale of the Property be paid to the Bank in satisfaction of its secured debt." 1. On 20 September 2019, and without substantial opposition from the plaintiffs, I released Mr Coulter from the 16 March 2018 undertaking. 2. Since then, it has come to the attention of Mr Coulter's legal representative that Mr Coulter also gave to the Court the undertaking of 21 March 2018. 3. On 15 October 2019, I heard an application made on behalf of Mr Coulter to be released from those undertakings. 4. For that purpose, I treated Mr Coulter's Notice of Motion of 16 September 2019 as also seeking release of the 21 March 2018 undertaking. 5. Mr Gee, who appeared for the plaintiffs to oppose the release of those undertakings, read an affidavit from Mr Luo which explained that he had not been able to give effective instructions in relation to Mr Coulter's application to release the 16 March 2018 undertaking because of his admission to hospital in China. 6. Mr Gee's submissions in opposition to the release of the 21 March 2018 undertaking amounted, in effect, to a submission that a freezing order should be made substantially in the terms of the undertaking given by Mr Coulter to the Court on 21 March 2018 as set out at [6] above. 7. Mr Gee sought leave to file a Notice of Motion seeking relief to that effect and argument proceeded upon that basis. 8. The matters that must be demonstrated to justify a freezing have been stated in many cases. A convenient summary is that of McColl JA in Samimi v Seyedabadi; Seyedabadi v Samimi [2013] NSWCA 279 at [72] to [75]: "72 The question whether there is a danger that any judgment obtained…, or that already obtained, will be wholly or partly unsatisfied because the owner's assets might be disposed of, dealt with or diminished in value (UCPR 25.11; 25.14(4)(b)) reflects the general law concepts again developed in accordance with Mareva injunctions, that the applicant must demonstrate 'a danger that by reason of the defendant's…assets being…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': Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 (at 321 - 322) per Gleeson CJ. 73 In Ninemia Maritime [Corporation v Trave Schiffahrtsgesellschaft mbH & Co K G (The Niedersachsen) [1984] 1 All ER 398] (at 406), in a passage effectively approved in Frigo v Culhaci [[1998] NSWCA 88] (at p 8), Mustill J discussed the nature of the evidence the applicant for a freezing order should adduce as follows: 'It is not enough for the plaintiff to assert a risk that the assets will be dissipated. He must demonstrate this by solid evidence. This evidence may take a number of different forms. It may consist of direct evidence that the defendant has previously acted in a way which shows that his probity is not to be relied on. ... Or...the plaintiff may be able to found his case on the fact that inquiries about the characteristics of the defendant have led to a blank wall. Precisely what form the evidence may take will depend on the particular circumstances of the case. But the evidence must always be there...' … 74 It is not necessary for an applicant to show that the respondent has a positive intention of evading a judgment, and it is sufficient to show that the course on which the respondent proposes to embark is, objectively speaking, calculated to have that effect: Finn v Carelli [[2007] NSWSC 261] (at [4]). As Brereton J added: 'It is important to bear in mind that the jurisdiction to make orders of this type was never intended simply to enable a plaintiff or judgment debtor [sic: creditor] to obtain security for its judgment in advance of execution, but was firmly founded on the jurisdiction of the Court to prevent abuses of its process by preventing a defendant or judgment debtor from embarking on a course of conduct which would have the effect of defeating the Court's jurisdiction. It also needs to be borne in mind that the mere fact that a judgment may not be satisfied for reasons of impecuniosity does not mean that there is an abuse of process. Indeed, it has been pointed out on several occasions that the prospect of impending insolvency is not a reason to grant a Mareva injunction [Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 at 558].' … 75 Finally, in determining whether a freezing order should be made, the Court must take into account any discretionary considerations, including the balance of convenience." 1. The plaintiffs have taken steps to enforce the 18 July 2019 judgments. They: 1. have caused a bankruptcy notice to be served on Mr Coulter; 2. have caused the 18 July 2019 judgment to be registered in the Supreme Court of South Australia; and 3. have applied to have writs of execution registered on the title of the three properties. 1. However, as the above authorities make clear, freezing orders are not intended simply to enable a judgment creditor to obtain security for a judgment in advance of execution. Rather, freezing orders are made when the Court's process is being abused by a defendant or judgment debtor. 2. To support his submission that there was a risk that Mr Coulter would dissipate his assets with a view to defeating the plaintiffs' prospects of enforcing the 18 July 2019 judgment, Mr Gee pointed to four matters. 3. The first was that, although Mr Coulter disclosed in his 13 September 2019 affidavit that he had received advice that the South Australian property in question was likely to sell for around $450,000, considerably less than the amount then owing to the CBA (some $570,000), a document produced on the Domain website showed that Mr Coulter had listed the same property for sale at $615,000. 4. Thus Mr Gee submitted: "Mr Coulter failed to disclose on this application that the asking price for the property at Lot 9 Sugar Loaf Hill Road, Angaston is $615,000. A sale in the order of $615,000 is more than sufficient to discharge the purported quantum of the outstanding balance said to be owed to Bankwest and secured against that property, of $536,664.33. Mr Coulter's failure to disclose the possibility of this surplus demonstrates a lack of probity on the application and, in turn, a risk of dissipation of assets, including that surplus." 1. I do not see this factor as weighing heavily in the balance. 2. The evidence does not reveal when the property was listed for sale at $615,000. In any event, a listing at that price is consistent with the undertaking that Mr Coulter gave in his 13 September 2019 affidavit to achieve the best sale price that he could. 3. Second, Mr Gee submitted that the findings that I made in the 10 July 2019 judgment bespeak a lack of probity on Mr Coulter's part. 4. Mr Gee submitted: "The plaintiffs rely on the findings in the Court's judgment dated 10 July 2019 as establishing a lack of probity on the part of Mr Coulter and, in turn, the risk of dissipation of assets that follows from such a lack of probity: a) Mr Coulter altered Bankwest documents to suit his commercial purpose (J[62], J[145]-[149], J[178]); b) Mr Coulter defended the case on a basis that he must have known to be false (J[69]); and c) Mr Coulter was found to be dishonest in his dealings with the defendants (J[150])." 1. I accept the submission that these findings are relevant to what conclusion I should draw as to the likelihood of Mr Coulter dissipating his assets to defeat the judgments the plaintiffs have obtained. 2. Third, Mr Gee pointed to the fact that on 16 July 2019, less than a week after I published my judgment on 10 July 2019, Mr Coulter caused the first defendant to be placed into voluntary liquidation. 3. In an email that Mr Coulter sent an officer at CBA on 24 July 2019, Mr Coulter explained that: "…this was set up to call the urgency of the plaintiff lawyers into making a deal to save me all this future embarrassment". 1. Thus, as Mr Gee submitted: "By his own admission, Mr Coulter forced Windy Hills Australian Game Meats Pty Ltd into insolvency to pressure the plaintiffs into making a deal to reduce the judgment debt." 1. Finally, there is evidence to suggest that Mr Coulter is now causing the business formerly operated by Windy Hills Australian Game Meats Pty Ltd to be operated by another company, Windy Hills Export Meats Pty Ltd, using the same webpage. 2. Windy Hills Export Meats Pty Ltd was incorporated on 6 February 2019, evidently in anticipation of the possible entry of a substantial judgment against Windy Hills Australian Game Meats Pty Ltd. 3. Each of those factors has persuaded me that, although Mr Coulter should be released from the undertakings he gave to the Court on 21 March 2018, freezing orders in the form of the undertakings referred to at [6] should be made. 4. Mr Gee accepted that as the plaintiffs are taking steps to enforce the 18 July 2019 judgments, and as a freezing order is not intended to provide security for what would otherwise be unsecured debt, the order should be made for a limited period only. 5. For those reasons I make the following orders: 1. The third defendant is released from the undertakings he gave to the Court on 21 March 2018. 2. The plaintiffs having given to the Court the usual undertaking as to damages, order pursuant to rr 25.11, 25.12 and 25.14 of the Uniform Civil Procedure Rules 2005 (NSW) that until 5pm on 12 November 2019 the third defendant not deal with his interest in the properties set out below, and not to further encumber or use his interest in those properties in any way to borrow any further amount greater than $10,000 over and above the amount of $764,875 (such that the aggregate indebtedness secured by the properties will not exceed $774,875): 1. the land situated at Volume 5477 Folio 186 (title reference CT5477/186 and known as 516 Brownes Road, Flaxman Valley, South Australia); 2. the land situated at Volume 5692 Folio 235 (title reference CT5692/235 and known as Lot 9 Sugar Loaf Hill Road, Angaston, South Australia); and 3. the land situated at Volume 5836 Folio 397 (title reference CT5836/397 and known as C Rogers Road, Flaxman Valley, South Australia), (jointly referred to as the Properties). 1. Order pursuant to r 25.12 of the UCPR that until 5pm on 12 November 2019 the third defendant inform the plaintiffs' solicitors in writing within 24 hours of becoming aware of any intention on the part of the other registered proprietor to deal with the Properties or to further encumber or use the Properties to borrow any further amount than the amount stated in Order 1 above. 2. Order that the third defendant pay the plaintiffs' costs of the argument before me on 15 October 2019. ********** 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: 16 October 2019