Axis Medical & Rehabilitation Pty Ltd as trustee for Axis Trust trading as Astir Australia v Tuantab

This matter came before me as Equity Duty Judge on 4 May 2020 in the following circumstances.

The plaintiff’s solicitor sent an email to my Associate at 7.30pm on 3 May 2020 attaching a Summons together with a supporting affidavit of Daniel Donald affirmed on 3 May 2020 (but without Exhibit DD-1 to that affidavit) and written submissions. The email requested that I consider the material in chambers and indicated that Exhibit DD-1 could be provided if requested and a hearing could be facilitated at short notice if required.

The Summons sought an order that it be returnable instanter and heard on an ex parte basis, interlocutory relief in the form of freezing orders against the first and second defendants and orders for short service of the Summons, supporting affidavit and freezing orders on the first and second defendants with the matter to be then relisted before the Duty Judge on an unspecified date.

Under the heading “Final relief”, the Summons simply stated:

The plaintiff’s solicitor’s email stated:

I commenced considering the material in chambers on the morning of 4 May 2020, requested a copy of Exhibit DD-1 to Mr Donald’s affidavit and then listed the matter for hearing ex parte at 11.15am on 4 May 2020.

At that hearing, I made orders granting leave to the plaintiff to file in Court the Summons and the affidavit of Mr Donald, on the undertaking of the plaintiff’s solicitor to pay the applicable filing fees. I made orders that the claims in the Summons for interim relief be returnable instanter and heard on and ex parte basis. Mr Mack of counsel, who appeared for the plaintiff, read the affidavit of Mr Donald and tendered Exhibit DD-1 to that affidavit.

Mr Mack made oral submissions at the hearing in support of the plaintiff’s application for interim relief and I made directions at the conclusion of the hearing at approximately 12pm on 4 May 2020 adjourning the plaintiff’s application for interim relief for further consideration on the papers following receipt of further written submissions about certain matters raised during the hearing, and any further revised Penal Notices setting out the terms of the freezing orders sought against the first and second defendants that the plaintiff wished to submit for consideration. Mr Mack accepted that I should complete my consideration of the ex parte application on the papers after receipt of those materials.

By email sent to my Associate at approximately 6.35pm on 4 May 2020, the plaintiff’s counsel provided supplementary written submissions in support of the application for ex parte interim relief together with a revised form of Penal Notice addressed to each of the first and second defendants.

It is well established that an applicant for a freezing order is required to demonstrate:

Assuming that these matters are established, discretionary considerations must also be taken into account, including whether the plaintiff has proceeded diligently and expeditiously in applying for the freezing order: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [53] per Gaudron, McHugh, Gummow and Callinan JJ; see also Samimi v Seyedabadi [2013] NSWCA 279 at [75] per McColl JA.

As the Court of Appeal said in Frigo v Culhaci [1998] NSWCA 88 at page 6 per Mason P, Sheller JA, Sheppard AJA, in a passage subsequently approved in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [51] per Gaudron, McHugh, Gummow and Callinan JJ, a freezing order:

In this matter, it was necessary to hear the plaintiff’s ex parte interim application for freezing orders in the staged manner that I have described above because the Summons was not accompanied by any pleading of the good arguable case that the plaintiff relied upon in support of the application. Nor was the nature of the cause of action relied on by the plaintiff articulated in the written submissions sent to my Associate on 3 May 2020. Rather, Exhibit DD-1 to Mr Donald’s affidavit (which was tendered as Exhibit 1 on the hearing of the ex parte application on 4 May 2020) set out correspondence between the parties giving rise to the Summons. Mr Donald, a product specialist employed by the plaintiff, deposed in paragraph 66 of his affidavit that:

In effect, the plaintiff sought to have the Court interrogate the correspondence and other documents in Exhibit 1 to determine whether the plaintiff has any of the good arguable claims that its product specialist understands it may have, unaided by a pleading of those claims or any written submissions directed to the causes of action. This is an entirely unsatisfactory way for an applicant for a freezing order to proceed. Ordinarily, the failure by a plaintiff to present the good arguable case relied on in the form of a verified pleading is likely to cast serious doubt on whether the plaintiff in fact has a good arguable case.

The plaintiff’s supplementary written submissions annexed “a draft version in pleading form” of the plaintiffs’ claims in contract against the first and second defendants. The plaintiff submitted that the strength of its prima facie case in contract alone is sufficient to justify the freezing order. It was also submitted that the plaintiff was “likely” to bring a claim for damages under s 236 of the Australian Consumer Law (the ACL) in respect of alleged breach of s 18 of the ACL. The plaintiff’s supplementary submissions did not address the other kinds of claim referred to in paragraph [66] of Mr Donald’s affidavit, save for the statement that: “Time has prevented a full elucidation of other claims”.

In circumstances where it is clear from its supplementary written submissions that the plaintiff has not yet determined whether to make a claim for damages for breach of s 18 of the ACL, and has not directed submissions to claims for inducement of breach of contract or money had and received, consideration in these reasons of whether the plaintiff has demonstrated a good arguable case is limited to the claim in contract set out in the annexure to the plaintiff’s supplementary written submissions.

For the reasons set out below, I have decided to grant the freezing orders set out in the amended penal notices accompanying the plaintiff’s supplementary submissions for a short period after which the matter will be re-listed and the first and second defendants will have an opportunity to be heard. The plaintiff gives the usual undertaking as to damages, as recorded in prayer 2 of the Summons and in Annexure A to each of the penal notices.

I have considered Mr Donald’s affidavit and Exhibit 1, which includes evidence to the following effect:

In my opinion, the evidence that I have summarised above discloses a good arguable claim by the plaintiff that:

That is not to say that I formed a view that the plaintiff’s claim in contract would succeed, or would be likely to succeed, at trial against the first defendant and/or the second defendant. As the plaintiff’s submissions properly acknowledge, there are potential defences to those claims that the first and second defendants may rely on, including defences as to the identity of the contracting supplier under both contracts, a defence to the effect that the date of delivery was not an essential term of the contracts and that there has therefore been no repudiation of the contracts, which remain on foot.

Nevertheless, I am satisfied that, on this ex parte application, the plaintiff has established a good arguable claim sufficient to warrant the making of freezing orders on an interim basis for a very short period pending an inter partes hearing. The question will need to be revisited on the first return date of the Summons, when it will fall to the plaintiff at that inter partes hearing to justify the continuation of the freezing order (unless the defendants consent to its continuation) and any evidence adduced and submissions made on behalf of the defendants will need to be considered.

Another very important factor for the court to consider will be whether or not the plaintiff has, by the time of the inter partes hearing, formulated its claims in contract and/or any other claims in a verified Statement of Claim. In circumstances where the plaintiff is invoking the Court’s process to seek the drastic remedy of a freezing order on an urgent basis, it is incumbent on the plaintiff to act with urgency to comply with the Court’s process requiring claims to be properly pleaded. A defendant resisting an application for a freezing order without having the benefit of a properly pleaded claim against it is placed in a very difficult position.

In relation to the danger that any judgment obtained by the plaintiff against the first and/or second defendants will be wholly or partly unsatisfied, the plaintiff’s submissions referred to evidence suggesting that neither the first defendant nor the second defendant have any assets with any material unencumbered value, other than the payments made by the plaintiff (to the extent that those payments remain in bank accounts of the first or second defendant). The plaintiff submitted that there was therefore a risk that the funds totalling $786,508.80 recently transferred by the plaintiff would be dissipated with the result that, without a freezing order, there would be “nothing worth litigating over”.

I was initially troubled that this submission appeared to suggest that the freezing order should be granted merely in order to provide the plaintiff with a form of security for any judgment that it may obtain against the first and/or second defendants, contrary to the authorities referred to above. However, I note that the form of freezing order sought by the plaintiff does not prohibit the first or second defendant from dealing with or disposing of assets in the ordinary and proper course of business.

What, then, is the risk of frustration or inhibition of the court’s processes of execution of any judgment in favour of the plaintiff that justifies a freezing order in the circumstances of this case? In my opinion, the evidence adduced by the plaintiff on this ex parte application calls into question the probity of the first and second defendants, to adopt the language of Mustill J in Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co KG 'The Niedersachsen' [1984] 1 All ER 398 at 406, cited by McColl JA in Samimi v Seyedabadi [2013] NSWCA 279 at [73], and this points to a sufficient risk to warrant the granting of an ex parte freezing order for a short time pending an inter partes hearing. I refer to the evidence of the statements made by the first defendant (a director and secretary of the second defendant) to the plaintiff in the email of 6 April 2020 referred to above to the effect that the second defendant was a “direct subsidiary” of a “huge international company” named “Global Brands”. It appears from the contents of that email as a whole that those statements were made as part of an endeavour by the first defendant to elicit further orders, and payments, from the plaintiff. As referred to above, the ASIC extract for the second defendant included in Exhibit 1 shows that the second defendant is not a subsidiary of any entity named “Global Brands”. Rather, the second defendant is a two dollar company owned by the first defendant’s two dollar company Victorian Sports Podiatry Pty Limited and one other individual.

I accept, of course, that at the inter partes hearing at which the plaintiff will bear the onus of satisfying the Court that the freezing orders should continue, the defendants may adduce evidence explaining the statements in the email of 6 April 2020 and/or other evidence relevant to the question whether there is a risk of frustration of the courts processes in this case. That evidence may alter the assessment above.

In relation to discretionary considerations, I do not consider that there has been any delay by the plaintiff in approaching the Court that would warrant refusal of interim ex parte freezing orders for a short period pending an inter partes hearing.

As I have noted above the plaintiff gives the usual undertaking as to damages in respect of the freezing orders sought against both the first and second defendants.

The terms of the freezing orders sought in the proposed penal notices addressed to the first and second defendants (being the revised versions accompanying the plaintiffs’ supplementary written submissions):

Paragraph 10(a) of the terms of the proposed order in the penal notice addressed to the second defendant will be deleted, as it is inconsistent with paragraph 10(c).

The time for service of the plaintiff’s application, the supporting affidavits and originating process in order 1(b) of each of the penal notices will be completed as 5pm on 6 May 2020. The return day will be completed as 2pm on 8 May 2020.

Prayer 3 of the Summons sought an order for substituted service of the Summons and other materials on the first and second defendants by email. However, there was no evidence that personal service was not practicable (see UCPR, r 10.14) and the order made will therefore simply abridge the time for service to 5pm on 6 May 2020 without derogating from the requirement for personal service under UCPR r 10.20.

The materials required to be served will also include Mr Donald’s affidavit, Exhibit 1, the plaintiff’s written submissions and supplementary written submissions, the transcript of the hearing on 4 May 2020, the orders made on 4 May 2020, these reasons for judgment and the orders made in accordance with these reasons.