Hurford Hardwood Kempsey Pty Ltd ACN 622 595 957 v Julia Maree Cole

1. [1]

   By summons filed 25 April 2024, the plaintiff (Hurford Kempsey) sought an urgent ex parte freezing order against the defendant (Ms Cole).

2. [2]

   On 29 April 2024, as Duty Judge, I made an urgent ex parte freezing order. A copy of the orders made is annexed to these reasons. These are my reasons for making those orders.

3. [3]

   Hurford Kempsey relied upon an affidavit of Jacob Elridge sworn 25 April 2024. In addition, oral submissions were made by counsel on 29 April 2024.

Overview of the Facts

1. [4]

   The facts relevant to the ex parte freezing order that I made may be summarised briefly as follows.

2. [5]

   Hurford Kempsey is a wholly owned subsidiary of Hurford Hardwood Australia Pty Limited (Hurford). Hurford’s business is Australian hardwood. It covers the entire supply chain from the management and harvesting of forest resources, processing, manufacturing, sales and distribution of products in Australia and around the world.

3. [6]

   Hurford Kempsey operates a sawmill and processing facility at Kempsey in northern New South Wales (Kempsey facility).

4. [7]

   Mr Eldridge gave evidence that Hurford Kempsey is a profitable company in its own right with both a yearly turnover and assets in the millions of dollars.

5. [8]

   Ms Cole began employment at the Kempsey sawmill in or about 2016 with the previous operator of the facility. She became an employee of Hurford Kempsey upon the facility’s acquisition in 2017. Her title was that of Inventory & Accounts Payable Officer for the Kempsey facility.

6. [9]

   Hurford Kempsey’s business involves entering into agreements with various landowners by which the landowners allow Hurford Kempsey to enter their land and selectively log trees from the land. The landowners are paid on a scale depending on the size and condition of the trees logged. The physical logging operations are undertaken by contractors and the logs are taken to the Kempsey facility.

7. [10]

   Ms Cole was employed by Hurford Kempsey until December 2023. As part of her employment, her responsibilities included:

8. [11]

   Ms Cole resigned from her employment with Hurford Kempsey in December 2023. The reason she gave at the time was that she was going to live with her mother. There was no suggestion at this time that Ms Cole had mis-appropriated any funds from Hurford Kempsey, and nor did Mr Eldridge suspect that anything was untoward at the time.

9. [12]

   In February 2024, Mr Eldridge was involved in a routine review of the financial performance of the quarter ending December 2023, and it became apparent to him that the financial performance was not as expected so he began further investigations.

10. [13]

    In the course of those investigations, it became apparent that approximately $138,000 had been paid from Hurford Kempsey’s bank account to “Kay Coler” which appeared to be a supplier of logs during that quarter. Mr Eldridge gave evidence that he had never heard of Kay Coler and he made enquiries of those people in the Kempsey office and, similarly, no one else had heard of Kay Coler.

11. [14]

    Further investigations revealed that in total an amount of $500,052.42 was paid to Kay Coler in 2023. Mr Eldridge gave evidence that it was rare for logging activities in the course of Hurford Kempsey’s ordinary business to generate purchase amounts which were that large.

12. [15]

    The payments ended shortly before Ms Cole ceased her employment with Hurford Kempsey in December 2023 and no further payments to Kay Coler have been made after that time.

13. [16]

    The details for Kay Coler in Hurford Kempsey’s computer system are lacking a number of details which Mr Eldridge would ordinarily expect to exist for any customer, let alone one of the apparent size of Kay Coler. For example, no ABN and phone number are provided.

14. [17]

    The physical address for Kay Coler in the Hurford Kempsey computer system was 11 Greenfield Street, West Kempsey. Mr Eldridge gives evidence that he has been unable to find any such address existing. The closest that he could identify was 11 Greenfields Avenue in West Kempsey but when he attended that location, he observed that there was no number 11 but only house numbers 9 and 13 with the lot between 9 and 13 being a vacant lot. Enquiries made at the time of the surrounding residents did not reveal anyone being aware of Kay Coler.

15. [18]

    Further enquiries reveal that the account for Kay Coler is an account at the ANZ Bank with the same BSB number as Ms Cole’s personal bank account details.

16. [19]

    Further, Mr Eldridge has recently made enquiries with the NSW Police and has been informed that Ms Cole was the account holder of the Kay Coler ANZ account, and that she has made certain admissions to the NSW Police of setting up a fictitious account in Hurford Kempsey’s account system in relation to Kay Coler. Further, on 17 April 2024, Ms Cole was charged with 17 counts of dishonestly obtaining financial advantage by deception and one count of knowingly dealing with proceeds of crime relating to payments made to the Kay Coler accounts from Hurford Kempsey.

17. [20]

    Ms Cole has apparently purchased a motor vehicle with money paid to the Kay Coler account, which has since been seized by NSW Police. Further, there is “significantly more” than $60,000 in one or other or both of the ANZ accounts maintained by Ms Cole.

18. [21]

    Further enquiries made by Hurford Kempsey have not revealed any agreements, supplier details, physical files, digital files, or log documents of the kind legally required and ordinarily kept for Hurford Kempsey logging operations. There are also no logs in the log yard for Kay Coler and no logs have been keyed into Hurford Kempsey’s system for Kay Coler. There are also no tax invoices for Kay Coler in Hurford Kempsey’s books and records.

19. [22]

    Ms Cole has also indicated in response to a text message from a former employee of Hurford Kempsey, that she could not recall, off the top of her head, anything to do with Kay Coler. Mr Eldridge gives evidence that it is unusual that Ms Cole, given her role and responsibilities when she was employed, would not be able to recall the identity of a customer such as Kay Coler if they were a legitimate customer of the size indicated by the monies apparently paid to them.

20. [23]

    Further, it appears that a residential property which is registered in the name of Ms Cole is currently listed for sale for $550,000. A title search of that property reveals that a mortgage is currently recorded on the title although Hurford Kempsey does not have any information as to what equity, if any, Ms Cole has in the property.

21. [24]

    It is against this background that Hurford Kempsey sought a freezing order in the sum of $550,000, being calculated to include the amount which Hurford Kempsey alleges Ms Cole misappropriated together with interest and costs.

22. [25]

    The summons seeks final relief associated with the misappropriation including a declaration that Ms Cole holds the amount of $500,052.42 transferred to the Kay Coler ANZ bank account operated by Ms Cole on trust for Hurford Kempsey.

Relevant Legal Principles

1. [26]

   The principles relevant to the making of a freezing order are not in dispute. I recently summarised those principles in MaxRelief USA Inc v 365 Health Australia Pty Limited ACN 151 146 997 [2024] NSWSC 491 and I do not repeat those principles in these reasons. I simply add to what I said there, that on the second important issue, namely the risk of dissipation, the Court is entitled to take into account, where appropriate, the conduct which the defendant has allegedly engaged in which goes to the first principal issue, namely whether there exists a prima facie or good arguable case: see for example Patterson v BTR Engineering (Aust) Limited (1989) 18 NSWLR 319 at 325-6 per Gleeson CJ. As there observed, this will especially be so where the prima facie case that is made out against the defendant is one of serious dishonesty involving the diversion of money from its proper channels.

Consideration

1. [27]

   Having regard to the facts summarised above, and the legal principles relevant to the making of the freezing order, I was satisfied that this was an appropriate case to make an urgent ex parte freezing order.

2. [28]

   On the material placed before me, there is a prima facie or good arguable case that Ms Cole has misappropriated approximately half a million dollars from Hurford Kempsey. The very nature of that conduct gives rise to a real risk that, unless a freezing order is made, Ms Cole will dissipate those assets and thus any judgment which will ultimately be obtained by Hurford Kempsey against Ms Cole will not be able to be satisfied. There is evidence that Ms Cole has apparently purchased a motor vehicle with the misappropriated funds. In addition, there is evidence that a residential property in the name of Ms Cole is currently for sale.

3. [29]

   Hurford Kempsey has moved promptly once becoming aware of the misappropriation.

4. [30]

   For these reasons, I determined to make an urgent ex parte freezing order against Ms Cole on 29 April 2024. The proceedings are returnable before me on 2 May 2024.