SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title: Supabarn Supermarkets Pty Ltd v Cotrell Pty Ltd

Citation: [2016] ACTSC 49

Hearing Date: 18 March 2016

Decision Date: 24 March 2016

Before: Refshauge J

Decision: The parties be heard as to the form of order to be made in

accordance with the reasons published on 24 March 2016.

Catchwords: CIVIL LAW – Jurisdiction, practice and procedure – application

for freezing order – ancillary to other proceedings – awaiting
Judgment in ancillary proceedings – party intending to sell asset
– good arguable case – danger that Judgment will be unsatisfied
– risk of dissipation of assets – risk proceeds of sale will be
transferred overseas – ancillary orders

Legislation Cited: Civil Judgments Enforcement Act 2004 (WA), s 102

Foreign Judgments Act 1991 (Cth), Pt 2
Foreign Judgments Regulations 1992 (Cth)
Transfer of Land Act 1893 (WA), s 133

Court Procedures Rules 2006 (ACT), Sub-Div 2.9.4.2, rr 741,

742, 743, 743(1)(b), 743(4)

Cases Cited: Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd
(in liquidation) (2000) 202 CLR 588
Bank Mellat v Nikpour (1985) FSR 87
Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2012] FCA
746
BCBC Singapore Pte Ltd v PT Bayan Resources TBK (No 3)
(2013) 276 FLR 273
Bhushan Steel Ltd v Severstal Export GmbH [2012] NSWSC
583
Brentwood Village Ltd (in liquidation) v Terrigal Grosvenor
Lodge Pty Ltd [2014] FCA 1203
Cardile v LED Buildings Pty Ltd (1999) 198 CLR 380
Curtis v NID Pty Ltd [2010] FCA 1072
Derby & Co v Weldon (No 6) [1990] 1 WLR 1139
Deutsche Schachtbau-Und Tiefbohrgesellschaft mbH v R’as al-
Khaimah National Oil Co [1987] 3 WLR 1023
Fletcher v Fortress Credit Corp (Australia) 11 Pty Ltd (2011) 82
ACSR 352
Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49
Jackson v Sterling Industries Ltd (1987) 162 CLR 612
Mareva Compania Naviera SA v International Bulkcarriers SA
(The Mareva) [1980] 1 All ER 213
 MRG (Japan) Ltd v Engelhard Metals Japan Ltd [2004] 1 Lloyds
Rep 731
Ninemia Maritime Corporation v Trave Schiffahrtsgeellschaft
mbH & Co KG (the Niedersachsen) [1984] 1 All ER 398
Patrick Stevedores Operations (No 2) Pty Ltd v Maritime Union
of Australia (1998) 195 CLR 1
Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319
Pearce v Waterhouse [1986] VR 603
Robmatjus Pty Ltd v Violet Home Loans Australia Pty Ltd [2007]
VSC 165
Third Chandris Shipping Corporation v Unimarine SA [1979] QB
645
Westpac Banking Corporation v McArthur [2007] NSWSC 1347
Z Ltd v A – Z and AA – LL [1982] QB 558

Texts Cited: Peter Biscoe, Freezing and Search Orders: Mareva and Anton
Piller Orders (LexisNexis Butterworths: Sydney, 2nd edition
2008)

M J Redfern and D I Cassidy, Australian Tenancy Practice and

Precedents (Butterworths: Sydney, 1987) (at November 2015)

Parties: Supabarn Supermarkets Pty Ltd (Plaintiff)

Cotrell Pty Ltd (Defendant)

Representation: Counsel
Mr S Whybrow (Plaintiff)
Mr P Walker SC (Defendant)

Solicitors
Snedden Hall & Gallop (Plaintiff)
Bradley Allen Love Lawyers (Defendant)

File Number: SC 101 of 2016

REFSHAUGE J:

1. These proceedings are somewhat unusual in that they are ancillary to other
proceedings (or, as counsel for the defendant described them, adjectival to the main
proceedings) but are commenced by Originating Application, starting separate
proceedings. I shall deal with that aspect later.

2. The plaintiff, Supabarn Supermarkets Pty Ltd, whom I shall call “Supabarn”, has leased
premises in the shopping centre known as the Kaleen Plaza, from the owner of that
centre, namely the defendant, Cotrell Pty Ltd, whom I shall call “Cotrell”.

3. Supabarn commenced proceedings against Cotrell in 2009 (numbered SC 1030 of

2009) alleging numerous breaches of the lease under which Supabarn occupied the
leased premises. In the proceedings, Supabarn claimed $8,000,000 in damages,

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 together with costs and interest. It is said that, were Supabarn’s claims to be wholly
successful, it would be awarded, inclusive of interest and costs, $16,000,000.

4. These proceedings were heard over 18 days and the final submissions were made on
1 August 2014. Judgment has been reserved.

5. In November 2015, one of the directors of Supabarn was told by an officer of the
managing agent of the Kaleen Plaza that Cotrell was accepting expressions of interest
for the purchase of the Plaza. I shall further describe below what then happened.

6. On 10 March 2016, Supabarn received what it described as a “pro forma letter” (more
accurately described as a circular letter) announcing that the sale of the Plaza “was
expected to close at the end of the month of March”.

7. After some investigations and contact by Supabarn officers and its lawyers, Supabarn
has now commenced these proceedings for a freezing order.

8. Ordinarily, such an application would be heard by the trial judge. In this case, the
application is urgent as the sale is to be completed on 30 March 2016. The trial judge
is currently involved in a significant and long-running trial, which would make it difficult
to deal with the application in a timely fashion and has expressly consented to me
hearing and determining the application. Both counsel for the parties consented to me
hearing and determining the application.

Freezing orders

9. A freezing order is the term used by the rules of superior courts in Australia for what
was known, in the words of Kirby J in Associated Alloys Pty Ltd v ACN 001 452 106 Pty
Ltd (in liquidation) (2000) 202 CLR 588 at 614; [60], “[i]n the eponymous way of our
legal system ... which is still so reliant on legal decisions”, as a “Mareva Injunction”
after the second case in which the English Court of Appeal upheld the validity of this
then new order, the case being Mareva Compania Naviera SA v International
Bulkcarriers SA (The Mareva) [1980] 1 All ER 213. The order is, however, not an
injunction (Cardile v LED Buildings Pty Ltd (1999) 198 CLR 380 at 394-9; [27]-[40]) so
the current terminology of “freezing order” is to be preferred.

10. The rules now regulating the order were promulgated by a Committee on the
Harmonisation of Court Rules established by the Council of Chief Justices and have
been adopted in a generally harmonised form, though not completely uniform, and
incorporated into the court rules of the various States and Territories. See Robmatjus
Pty Ltd v Violet Home Loans Australia Pty Ltd [2007] VSC 165 at [47]. In this Territory,
they are to be found in Sub-Division 2.9.4.2 of the Court Procedures Rules 2006 (ACT).

11. The creation and development of the order has been carefully and most helpfully
outlined by the Honourable Peter Biscoe in his book, Freezing and Search Orders:
Mareva and Anton Piller Orders (LexisNexis Butterworths: Sydney, 2nd edition, 2008)
(Biscoe), Ch 2. It repays careful study by anyone interested in the story of “the law’s
two nuclear weapons” (in the words of Donaldson LJ in Bank Mellat v Nikpour (1985)
FSR 87 at 92), a development in the law described in Deutsche Schachtbau-Und
Tiefbohrgesellschaft mbH v R’as al-Khaimah National Oil Co [1987] 3 WLR 1023 at
1036 as “one of the most imaginative, important and, on the whole, most beneficient of
modern times”.

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12. In brief, the order has the effect, subject to exceptions, of freezing the assets of a
defendant or proposed defendant to ensure that a judgment of the court that a plaintiff
might obtain will not be frustrated.

The facts

13. I have briefly outlined the broad factual background to these proceedings above (at [2]-
[6]) but need to say a little more.

14. Supabarn was, in November 2015, engaged in selling its supermarket at the Kaleen
Plaza to the Coles supermarket company. As a consequence, it sought consent from
Cotrell for the assignment of the lease of the premises, which would be part of the sale.
When responding to that request on 17 November 2015, Cotrell’s lawyers made no
mention of the sale of the Plaza.

15. When James Koundouris, a director of Supabarn, heard “from industry sources” about
the sale, he contacted the managing agent for the Plaza and was “informally” advised
that Cotrell was accepting expressions of interest for its purchase. He then sent an
email to the agents, indicating a possible interest in purchasing it. He was told that an
offer had been received for $12 million and that, to be successful, his offer would need
to exceed that sum. He considered that sum excessive and did not proceed with the
proposal to express interest in the purchase.

16. He heard nothing about his request for consent to the assignment of the lease and, in
mid-February, contacted the State Leasing Manager for Coles to discuss the lack of
progress. He was told that he should not worry “as Cotrell’s won’t be the landlord after
31 March”.

17. On 22 February 2016, the lawyers for Supabarn became aware that contracts had
been exchanged for the sale of the Plaza. These matters caused Supabarn some
concern.

18. On that day, Supabarn’s lawyer sent a letter to Cotrell’s lawyer seeking an undertaking
that Cotrell “will ... retain at least $16m from the proceeds of the sale [of the Kaleen
Plaza] or if [Cotrell’s] equity is less than the whole of the proceeds after discharge of
mortgages and the usual adjustments, then the whole of the net proceeds”. He further
advised that, failing provision of the undertaking, Supabarn would seek a freezing
order.

19. On 25 February 2016, Cotrell’s lawyers advised that the requested undertaking would
not be provided and challenged Supabarn that no material fact could reasonably be
proved that would justify the making of a freezing order.

20. On 7 March 2016, a further letter was sent by Supabarn’s lawyer again seeking the
undertaking earlier requested and assuring Cotrell that the intention was not to interfere
with the sale. That request was also rejected by letter dated 8 March 2016.

21. As a result of these refusals, Supabarn’s lawyers have conducted a search of the asset
position of Cotrell. A search of the records of the Australian Securities and
Investments Commission showed that the company was incorporated in Western
Australia in November 1993 and that there are only two shares in the company, held by
Inbamanay and Deva Dassan Solomon, who are residents of Malaysia. They are also
directors with an Australian resident who owns no shares, which would mean that

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 Dr and Mrs Solomon have a controlling interest in the company and, together, voting
control on the board.

22. Real property searches revealed that, apart from the Kaleen Plaza, Cotrell owns five
properties in Western Australia. The Kaleen Plaza and three of the Western Australian
properties are subject to mortgages to the Commonwealth Bank of Australia. There is,
of course, no information of the amount of indebtedness under these securities. Two
properties also have a caveat lodged against them in favour of King Family Group Pty
Ltd. The interests supporting these caveats are also not disclosed in the evidence.

23. Suggested as significant by Supabarn is the fact that two of the properties have
Property (Seizure and Sale) Orders lodged, presumably as enforcement orders for
money judgments against Cotrell. They were registered on 26 April 2006 and an order
extending the sale period for the orders was registered on 23 October 2006. There is,
however, no indication that any sale eventuated as a result and an annotation on the
search indicates that the registration of these orders “may not appear on the current
edition of the duplicate certificate of title”. I assume that this is because the registration
of such orders is made in the office of the Registrar-General and will not appear on the
duplicate title document which is issued to the registered proprietor and, where
relevant, usually held by any mortgagee.

24. Under s 102 of the Civil Judgments Enforcement Act 2004 (WA), the seizure and sale
orders are valid for 12 months only, unless extended. There is no indication on the
Register that they have been extended. The extension of the sale period arises under
s 133 of the Transfer of Land Act 1893 (WA) which permits the 6 month sale period
under a seizure and sale order and for such a period to be extended but only for
6 months at a time. That clearly happened once here. The combination of these
provisions indicate that the seizure and sale order expired on or about 25 April 2007.

25. In the evidence of Cotrell, there was no explanation given as to how it came about that
a seizure and sale order was registered on these two properties nor was it expressly
stated, as may reasonably be inferred, that the order has ceased to have any effect
whether by payment or otherwise.

26. Supabarn’s lawyers obtained Google Street View photographs of two of the West
Australian properties. They show, in one case, a vacant block, apparently in the
process of being redeveloped. The fencing says “Magic Hand Carwash” but it is not
clear whether that is what the site was used for or what it is to be used for when
developed. The other is a service station which is obviously not operational for, while
the building is still extant, there are no petrol bowsers and grass is growing over the
pavement.

27. The other three properties are units within the Coolbellup Shopping Centre, in a suburb
of Fremantle, WA. One unit is leased as an IGA Supermarket and the other two units
were said to appear to be unleased.

28. Mr Koundouris is, as well as a director of Supabarn, an associate member of the

Australian Property Institute and has obtained an Associate Diploma in Property
Valuation. He could obviously not be an expert witness in this case and has not
agreed to be bound by the Expert Code of Conduct. In unchallenged evidence, to
which no objection was taken, however, he has deposed that he made estimates of the
value of the interest of Cotrell in the Kaleen Plaza.

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29. His estimate is based on his experience in the commercial property market. He took
into account the “usual debt to equity ratios”. He estimated that, after discharge of
mortgages, Cotrell will receive between $4 million and $6 million from the sale.

30. He sought informal valuations of the Western Australian properties but, as at the date
of his affidavit, had not received them. He said, however, that he was aware that, in
the last 12-18 months, there had been a significant downturn in the Western Australia
property market. That, of course, only means that the properties may be worth less
than they were 12 to 18 months ago, but says nothing about their current value.
Clearly, however, they would be likely, in aggregate, to be worth somewhat less than
the Kaleen Plaza which is an operating shopping centre in Canberra.

31. The Sydney solicitor for Cotrell deposes in an affidavit filed and read, that Dr Solomon
has informed him that the two sites of which the photographs from Google Street View
were taken are, indeed, non-operational service station sites and that Dr Solomon is
currently in discussions about the future development of them as operating service
stations.

32. He also deposes that Dr Solomon had informed him that the units in the Coolbellup
Shopping Centre are, in fact, all occupied by the IGA Supermarket, described as the
Centre’s “anchor tenant” (sometimes called a “name” tenant: M J Redfern
and D I Cassidy, Australian Tenancy Practice and Precedents (Butterworths: Sydney,
1987) (at November 2015, [4.025]: 1699.39). Dr Solomon further told him that he was
presently in discussions with a view to investing further in the Centre by buying out the
remaining units and operating the entire centre. Dr Solomon also told him that he was
presently investigating a number of other property development opportunities in
Western Australia.

33. Searches of the Personal Property Security Register were also conducted by
Supabarn’s lawyers. These searches disclosed that certain commercial goods were
listed and shown as being subject to securities to the Commonwealth Bank of Australia
and Royal Wolf Trading Australia Pty Ltd. As with real property mortgages, the
Register shows no information about the amount owing under the security. So far as I
could tell, the nature of this personal property was not able to be identified from the
details provided.

34. Mr Koundouris also deposed that he has had dealings with the director of Cotrell,
Dr Solomon, who is a Malaysian citizen. He stated:
From my knowledge of Cotrell Pty Ltd there would be nothing to stop Dr Solomon
immediately transferring the proceeds of the sale of Kaleen Plaza outside of Australia.

35. Cotrell’s Sydney lawyer deposed that Dr Solomon told him that any freezing order
would constitute a real risk to Cotrell’s plans for further real estate purchases,
developments and investments.

36. Cotrell’s Sydney lawyer also deposed that Dr Solomon, together with his wife and three
children, was a Director of another Australian company, Pickwick Group Pty Ltd
incorporated in 1981 and which provides cleaning, security, construction and “height
access” services in Australia. He further deposed that its website showed it to have
50 management and administration staff and a workforce of over 1000 people. He
deposed that Dr Solomon informed him that it was “a significant operation in Australia
and requires Dr Solomon to be regularly involved in its operations”.

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37. Cotrell’s Sydney lawyer further deposed that Dr Solomon had told him that, while
domiciled in Malaysia, he visits Australia at least four times a year on business.

38. Rather curiously, Dr Solomon also told him that, had he been aware that Supabarn
would take steps to obtain a freezing order, he would not have had the discussions he
had had to date about such purchases, developments and investments.

39. Cotrell’s ACT lawyers also filed an affidavit deposing to the fact they had issued an
invoice for $50,176.90 inclusive of GST for legal services provided and the further
costs to complete the sale of the Kaleen Plaza would cost between $15,000 and
$20,000 in legal fees and that provision should be made for this in the proceedings.

The law

40. As noted above (at [10]), Sub-Div 2.9.4.2 of the Court Procedures Rules regulates the
grant of freezing orders and ancillary orders.

41. Relevantly, r 741 provides:

(1) The Supreme Court may make an order (a freezing order) for the purpose of
preventing the frustration or inhibition of the court’s process by ensuring that an order
or prospective order of the court is not made valueless or diminished in value.
...
(3) A freezing order may be an order restraining a respondent from removing any assets
located in or outside Australia or from disposing of, dealing with, or diminishing the
value of, those assets.

42. Rule 743 then relevantly provides:

(1) This rule applies if—
...
(b) for the Supreme Court - an applicant has a good arguable case on an accrued
or prospective cause of action that is justiciable in—
(i) the court;
...
(4) The court may make a freezing order or ancillary order (or both) against an
enforcement debtor or prospective enforcement debtor if satisfied, having regard to all
the circumstances, that there is a danger that an order or prospective order will be
completely or partly unsatisfied because any of the following might happen:
(a) the enforcement debtor, prospective enforcement debtor or someone else
absconds;
(b) the assets of the enforcement debtor, prospective enforcement debtor or
someone else are—
(i) removed from Australia or from somewhere in or outside Australia; or
(ii) disposed of, dealt with or diminished in value.

43. An ancillary order is defined in r 742 as follows:

(1) The court may make an order (an ancillary order) ancillary to a freezing order or
prospective freezing order as the court considers appropriate.

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 (2) Without limiting subrule (1), an ancillary order may be made for either or both of the
following purposes:
(a) finding out information about assets relevant to the freezing order or
prospective freezing order;
(b) deciding whether the freezing order should be made.
(3) On an application mentioned in rule 729 (3) (Division 2.9.4 order without notice etc),
the court may make an ancillary order if it considers it appropriate.

44. It can be seen from these rules that there are two tests that an applicant for a freezing
order must satisfy: that the applicant has a good arguable case, in this case on an
accrued cause of action, and that there is a danger that any judgement on that cause
of action will be unsatisfied because of one or more of the reasons set out in r 743(4) of
the Court Procedures Rules. The court at all times, however, retains a discretion not to
make such an order.

45. I shall deal with each of these tests in turn.

Good arguable case

46. The first requirement is that there be a good arguable case: r 743(1)(b) of the Court
Procedures Rules.

47. The leading decision on what is meant by a good arguable case is that of Mustill J in
Ninemia Maritime Corporation v Trave Schiffahrtsgeellschaft mbH & Co KG
(the Niedersachsen) [1984] 1 All ER 398 (Ninemia) at 404 where his Honour said:
In these circumstances, I consider that the right course is to adopt the test of a good
arguable case, in the sense of 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.

48. As this makes clear, the test is “a less stringent test than requiring proof on the balance
or probabilities”: MRG (Japan) Ltd v Engelhard Metals Japan Ltd [2004] 1 Lloyds
Rep 731 at [9].

49. The Ninemia test has been applied regularly in Australia in various courts: Curtis
v NID Pty Ltd [2010] FCA 1072 at [6]; Bhushan Steel Ltd v Severstal Export GmbH
[2012] NSWSC 583 at [100]-[103]; BCBC Singapore Pte Ltd v PT Bayan Resources
TBK (No 3) (2013) 276 FLR 273 at 295; [75] (WASC); Fletcher v Fortress Credit Corp
(Australia) 11 Pty Ltd (2011) 82 ACSR 352 at 357; [17] (QSC); Glenwood
Management Group Pty Ltd v Mayo [1991] 2 VR 49 at 49.

50. It is accepted that the test is less demanding than the test of a prima facie case test
(Westpac Banking Corporation v McArthur [2007] NSWSC 1347 at [22]) but more
demanding than the test of “a serious question to be tried” (Biscoe, op cit at 206;
[6.10]).

51. These are the principles I shall apply.

Danger that Judgment will be unsatisfied

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52. This is described by Biscoe as the “heart and soul of the freezing order” (op cit at 206;
[6.15]). It is a requirement that it be proved that there is a danger that a judgment will
be completely or partly unsatisfied in certain circumstances: r 743(4) of the Court
Procedures Rules.

53. The formulation of “a danger” was the test articulated by Gleeson CJ (with whom
Meagher JA broadly agreed) in Patterson v BTR Engineering (Aust) Ltd (1989)
18 NSWLR 319 at 321. Kirby J in Cardile v LED Builders Pty Ltd at 428; [122] used
the term “real risk” as an apparent synonym, a term that had been used in the English
Court of Appeal in Ninemia at 419.

54. In Patterson v BTR Engineering (Aust) Ltd at 325, Gleeson CJ suggested that there
were circumstances
in which justice and equity would require the granting of an injunction to prevent dissipation
of assets pending the hearing of an action even though the risk of such dissipation may be
assessed as being somewhat less probable than not.

55. See also Glenwood Management Group Pty Ltd v Mayo at 54.

56. A number of further considerations have been established by the cases, some of which
are not always easy to apply in practice.

57. Thus, it was said in Cardile v LED Builders Pty Ltd at 394; [26], that it is not necessary
to prove that the defendant had “a positive intention to frustrate any judgment”. On the
other hand, in Ninemia at 406, Mustill J held that it was not enough simply to assert a
risk that the assets will be dissipated, but that it must be proved “by solid evidence”.

58. The relevant danger that must be proved is, of course, usually a matter of inference,
but in Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645 at 652, it
was held that it was not sufficient to show only that the asset is present, it is moveable
and that the defendant is abroad. At 671-2, Lawton LJ said:
The mere fact that a defendant having assets within the jurisdiction of the Commercial
Court is a foreigner or a foreign corporation cannot, in my judgment, by itself justify the
granting of a Mareva injunction. There must be facts from which the Commercial Court,
like a prudent, sensible commercial man, can properly infer a danger of default if assets
are removed from the jurisdiction. For commercial men, when assessing risks, there is no
commercial equivalent of the Criminal Records Office or Ruff’s Guide to the Turf. What
they have to do is to find out all they can about the party with whom they are dealing,
including origins, business domicile, length of time in business, assets and the like; and
they will probably be wary of the appearances of wealth which are not backed up by known
assets. In my judgment the Commercial Court should approve applications for Mareva
injunctions in the same way. Its judges have special experience of commercial cases and
they can be expected to identify likely debt dodgers as well as, probably better than, most
businessmen. They should not expect to be given proof of previous defaults or specific
incidents of commercial malpractice. Further they should remember that affidavits asserting
belief in, or the fear of, likely default have no probative value unless the sources and
grounds thereof are set out ... In my judgment an affidavit in support of a Mareva injunction
should give enough particulars of the plaintiff’s case to enable the court to assess its
strength and should set out what inquiries have been made about the defendant’s business
and what information has been revealed, including that relating to its size, origins, business
domicile, the location of its known assets and the circumstances in which the dispute has
arisen. These facts should enable a commercial judge to infer whether there is likely to be
any real risk of default. Default is most unlikely if the defendant is a long established, well
known foreign corporation or is known to have substantial assets in countries where
English judgments can easily be enforced either under the Foreign Judgments (Reciprocal
Enforcement) Act 1933 or otherwise. But if nothing can be found out about the defendant,
that by itself may be enough to justify a Mareva injunction.

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59. A good summary of the position has been set out by Gleeson J in Brentwood Village
Ltd (in liquidation) v Terrigal Grosvenor Lodge Pty Ltd [2014] FCA 1203 at [25]:
25. As to the requirement of a ‘danger’ that a prospective judgment will be wholly or partly
unsatisfied for one of the reasons set out in rule 7.35 [equivalent to ACT rule 743], in
Curtis, at [9] and [10], Edmonds J said:
... In some cases, judges have employed the phrase ‘real risk’ to identify the
degree to which a plaintiff must demonstrate that a prospective judgment will go
unsatisfied: see, for example, [Cardile v LED Builders Pty Ltd (1999) 198 CLR
380] at [122] per Kirby J; Ninemia [1983] 1 WLR 1412 at 1422 per Kerr LJ. In
others, it has been said that an applicant must establish ‘a sufficient likelihood
of risk which in the circumstances of a particular case justifies an asset
preservation order’: Lifetime Investments Ltd v Commercial (Worldwide)
Financial Services Pty Ltd [2005] FCA 226 at [14] per Kiefel J, approving
Victoria University of Technology v Wilson [2003] VSC 299 at [36] per Redlich J.
There is even a third view, namely, that the plaintiff establishes ‘a sufficient
apprehension of dissipation of the ... assets’: Vaughan v Duncan [2007]
NSWSC 811 at [5] per Hamilton J.
What is settled, however, is that solid evidence of a danger of dissipation or
disposal of assets be produced. The relevant test was enunciated by Brereton J
in Finn v Carelli [2007] NSWSC 261 at [4], where his Honour referred to the
NSW Court of Appeal’s decision in Frigo v Culhaci [1998] NSWCA 88:
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. But as the Court of Appeal made clear in Frigo v Culhaci, an
applicant must establish, by evidence and not mere assertion, that there is a
real danger that by reason of the respondent absconding or otherwise dealing
with assets, the applicant will not be able to have its judgment satisfied. While
acknowledging that there has been much debate as to the precise degree to
which that has to be shown, the Court emphasised that mere assertion that the
defendant was likely to put assets beyond the plaintiff’s reach was inadequate,
for which the Court cited Ninemia Maritime Corp v Trave GmbH & Co Kg (The
Niedersachsen) [1984] 1 All ER 298 as well as Patterson v BTR Engineering.

60. The courts have, of course, referred to the need to prevent an abuse of process or
frustration of its process: Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 617,
623.

61. The courts have also been clear that the order is not intended to provide a security for
the plaintiff, to provide security as a condition of being allowed to defend an action or to
guarantee to a defendant that any judgment obtained will be satisfied: Jackson
v Sterling Industries Ltd at 625.

62. It is clear that the freezing order is not intended – and should not be used – for the
purpose of interfering with the currently established rules in insolvency, especially as to
the priority of creditors of an insolvent entity.

63. The cases also make clear that the remedy is an exceptional one. Kerr LJ pointed out
in Z Ltd v A – Z and AA – LL [1982] QB 558 at 585-6 that the jurisdiction will not be
exercisable against the majority of defendants.

Balance of Convenience

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64. Given its genesis as an injunction, it is not surprising that a freezing order is a
discretionary remedy and the court must consider whether the order should be granted.
Thus, even where the threshold tests have been made out, the balance of its case has
to be weighed in the balance with other factors relevant to the exercise of the
discretion: Ninemia at 402-3.

65. These considerations include the strength of the case for the plaintiff and the strengths
of the defence. Given the fact that the decision on the claim is reserved, I cannot make
an assessment of these matters, but am prepared to find that there is a reasonably
arguable case and a reasonably arguable defence.

66. The position of innocent third parties must be taken into account: Patrick Stevedores
Operations (No 2) Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 at 41-2;
[65]. That, however, is not a prominent matter here.

67. The effect on the business of the subject of a freezing order, including the damage to
its reputation is also a relevant factor: Pearce v Waterhouse [1986] VR 603 at 607-8.

68. A number of the discretionary considerations have been set out in Cardile
v LED Builders Pty Ltd at 404; [53].

69. Such an order, with the possible far reaching consequences it may have, should not be
lightly made.

Submissions

70. Supabarn submitted that I should make the order because there was a danger that the
proceeds of the sale of the Kaleen Plaza would be put beyond its reach were it to
obtain judgment.

71. It submitted that the hearing of the claim in proceedings SC 103 of 2009 was
conducted over 18 days and that judgment had been reserved on 1 August 2014. This
showed, it was submitted, that Supabarn had a good arguable case on an accrued
cause of action.

72. It relied on the following matters to show that the danger of the proceeds being put
beyond its reach and, therefore, any judgment of the court being frustrated:

1. That the two directors of Cotrell were residents of Malaysia and, one of them,
Dr Solomon only visited Australia occasionally.

2. The transfer of funds to Malaysia could happen speedily and without Supabarn’s
knowledge. It seemed to be implied that this would put the funds out of reach of
Supabarn, an inference that, in my view, needs more than mere assertion to be
acceptable.

3. The other Australian assets of Cotrell would fall far short in value from the full
amount of the judgment were Supabarn to be successful in full in its claims.

4. The fact of the registration of seizure and sale orders on the title to two of the
Western Australian properties showed that Cotrell had a history of not paying its
debts and requiring enforcement creditors to seek execution. This inference, it
was submitted, could more confidently be drawn because Cotrell had not, in its
evidence, explained those executions.

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 5. The request from Supabarn’s lawyers to have Cotrell give an undertaking to
preserve the sale proceeds for use in meeting a judgment has been declined.

6. Cotrell had not been frank and forthcoming about the sale of the Kaleen Plaza of
which Supabarn had to learn only indirectly until settlement was nearly to take
place.

73. In answer, Cotrell submitted that Supabarn had not provided evidence that was of
sufficient cogency to satisfy the threshold for a freezing order. In particular, it
submitted that:

1. It was not the law that a mere assertion that funds could be transferred overseas
constituted the danger of putting assets beyond the reach of the court as required
on the authorities.

2. The search and seizure orders were registered a decade ago and could not
reasonably show that Cotrell was not able to pay its debts and did not do so.

3. There was no obligation on Cotrell to give the undertaking sought by the lawyers
of Supabarn. Reliance was placed on the decision of Foster J in Bayley
& Associates Pty Ltd v DBR Australia Pty Ltd [2012] FCA 746 at [17]-[19], where
his Honour pointed to the lack of justification for such demands.

4. Cotrell had other Australian assets and was intending to develop and improve
them not dissipate them.

5. Dr Solomon had, in Pickwick Group Pty Ltd, substantial operational interests in

Australia and this contradicted any inference that the sale of the Kaleen Plaza
would result in the business of Cotrell being dissipated or put outside the
jurisdiction.

Consideration

74. I have given careful thought to the law, the facts and the submissions of the parties.

75. In my view, Supabarn has satisfied me that there is a good arguable case. That does
not mean a case on which a plaintiff will inevitably succeed. Indeed, a plaintiff who
secures a freezing order may, ultimately, not be able to make out its substantive case.

76. Nevertheless, the fact that proceedings have been heard and judgment reserved is, in
these circumstances, sufficient in my view to show that Supabarn has met this
threshold test, that there is a good arguable case.

77. As to the danger of frustrating the judgment, much of the original authority on this area
looked to some impropriety in the risk of dissipation of assets to frustrate any judgment
secured by a plaintiff, but more recently that has not become a necessary, though it is
a sufficient, condition. There is, however, still a need to show that there is some action
by the defendant (a proposed defendant) that is outside the ordinary course of
business and which will have the relevant effect.

78. I am not satisfied that the evidence in this case goes quite that far. While I note that
the residence of the effective controlling persons of Cotrell are resident in Malaysia, the
company is registered in Australia and will be subject to its laws, wherever its assets
may be located.

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79. Dr Solomon and his family have substantial business interests in Australia and Cotrell
has significant assets here, none of which (apart from the proceeds of the sale of the
Kaleen Plaza) are readily moveable outside Australia.

80. Nevertheless, I accept that the sale proceeds are likely to be the largest single asset of
Cotrell. I am not prepared to reject the evidence of Dr Solomon that he proposes to
develop and extent the interests of Cotrell in Western Australia.

81. On the other hand, since the first Mareva Injunction was granted, the movement of
funds globally has increased in volume and ease. It is also relevant that, while Cotrell
is an Australian company, Malaysia is not a jurisdiction that is listed in the Foreign
Judgments Regulations 1992 (Cth) as a country for which under Pt 2 of the Foreign
Judgments Act 1991 (Cth) there is reciprocal enforcement of judgments. This is a
matter of some concern for while an order may be made against an Australian
company, its enforcement in Malaysia may be, at least, problematic.

82. Dr Solomon has expressly shown an interest in the development of his Australian
interests and in the beneficial development of Cotrell’s assets in Australia. This was
not challenged.

83. I am only very slightly concerned at the registration of the seizure and sale orders on
two of Cotrell’s properties. This was, as Cotrell’s counsel properly pointed out, a
decade ago. My hesitation is that there has been no explanation of what that was
about, but that is a very slight hesitation. I should not speculate. In any event, there is
no apparent history of any kind of debt default by Cotrell since then.

84. I am also not concerned at the failure of Cotrell to give the demanded undertaking. It
had no duty to do so. It was, in fact, an undertaking that would have interfered with the
development of Cotrell’s business, which may have increased its asset value and was
to be apparently carried out as the ordinary course of business.

85. Thus, the only concern is the possibility of the proceeds of sale being transferred to
Malaysia and the difficulties in recovery if there. That, however, does not seem to me
to justify the making of a freezing order at this stage.

86. In Derby & Co v Weldon (No 6) [1990] 1 WLR 1139, the English Court of Appeal held
that it could make an ancillary order that required a party to keep property in a
particular country. Biscoe suggests that this power may include an order that a
defendant or prospective defendant be restrained from transferring money out of a
country: op cit 105; [3.66].

87. I am not satisfied that the case justifies going so far. It has been said that an order
should be no further than is required in the circumstances.

88. It seems to me that there is some danger that the proceeds of the sale could be
transferred to Malaysia where there is some risk that they would then be beyond
recovery. This is a not very different situation to that in Glenwood Management Group
Pty Ltd v Mayo.

89. The rules make it clear that the court can make an ancillary order if not satisfied that a
freezing order should be made, but may be prospective.

90. The position is that, on Cotrell’s evidence, there is no reason why the proceeds of the
sale of the Plaza should be transferred to Malaysia in the ordinary course of business.

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91. Were the proceeds of the sale to be transferred to Malaysia, therefore, I consider that,
in the circumstances, Supabarn may be able to make out a case for a freezing order,
given that such a transfer would be inconsistent with the expressed intentions of Cotrell
at present. That constitutes a prospect that a freezing order would be made.

92. I cannot, however, definitely predict whether such a transfer would, in all the
circumstances relevant at the time, reach the threshold.

93. Given the ease with which money can be transferred internationally, I consider that
some response is appropriate. An ancillary order seems to me to be justified. It
should, however, be the least intrusive of Cotrell’s business as can be devised.

Conclusion

94. I propose to order that, until judgment is delivered in proceedings numbered SC 1030
of 2009, upon Supabarn giving the necessary undertaking as to damages, Cotrell be
ordered to give no less than three working days notice of any intention to transfer out of
Australia any of the net proceeds of the sale of the Kaleen Plaza or of any asset into
which such proceeds are converted directly or indirectly, such as by purchase and sale
of an asset with such proceeds and the transfer out of Australia of the proceeds of that
subsequently purchased asset.

95. I note that these proceedings should properly proceed together with proceedings
No SC 1030 of 2009 and I will so order.

96. It seems to me that the proper order for costs is that the costs should be costs in the
cause of SC 1030 of 2009 since neither party has really achieved what it sought and
this is merely a holding process.

97. I will, however, hear the parties as to the precise form of the orders to be made.

I certify that the preceding ninety-seven [97]

numbered paragraphs are a true copy of the
Reasons for Judgment of his Honour Justice
Refshauge.

Associate:

Date: 24 March 2016

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