Fitz Jersey Pty Limited v Atlas Construction Group Pty Limited (In Liquidation) (No 3)

On 6 January 2017, the defendant, Atlas Constructions Pty Ltd (In Liq), obtained an adjudication determination under the Building and Construction Industry Security of Payment Act 1999 (NSW) which together with interest and the adjudicator’s fees totalled $11,023,799. The determination was obtained in respect of a payment claim made under a construction contract dated 17 December 2010 by which Atlas agreed to construct for the plaintiff, Fitz Jersey Pty Limited, a substantial mixed residential and commercial development in Mascot for a total price of $180 million (plus GST) together with the reimbursement of certain other expenses. Atlas recovered the amount of the adjudication determination on 3 February 2017 after obtaining a garnishee order from the Court on 27 January 2017.

On 5 February 2017, Fitz Jersey’s solicitors informed Atlas’s solicitors that its client would be seeking an order that Atlas repay the amount of the adjudication determination, although the letter gave no explanation for the basis of that claim. The next day (6 February 2017) the directors of Atlas, one of whom was Mr Yazbek (the second defendant), resolved to pay a dividend to Atlas’s shareholders of $6,781,559 and to pay $3,957,795 to the Australian Taxation Office. Those amounts were paid on 8 February 2017 and included a payment of $6,103,403 to Kebzay Pty Ltd, one of Atlas’s two shareholders. Kebzay’s sole shareholder and director is Mr Yazbek’s wife (the seventh defendant). It received the dividend as trustee of the Kebzay Family Trust, a discretionary trust the beneficiaries of which include Mr and Mrs Yazbek and their children. Mrs Yazbek is named as the appointor under the relevant trust deed and in her various capacities controlled the trust.

Following those payments, it is alleged by the plaintiff, and appears to be accepted by the defendants, that Atlas had assets totalling $400,000 and no contracts to undertake building work in the future.

Atlas was placed into administration on 4 April 2018 and liquidation on 18 May 2018. Subsequently, the liquidator admitted a proof of debt lodged by Fitz Jersey in the sum of $12,579,152, which included the amount that had been the subject of the adjudication determination in Atlas’s favour.

The liquidator of Atlas conducted public examinations in relation to the affairs of Atlas in the course of which substantial information was obtained in relation to the payment of the dividend. On 17 December 2019, the liquidator and Atlas assigned to Fitz Jersey all causes of action they had against any person in any way connected with that payment.

It is plain from relevant financial records that approximately $6.1 million of the dividend (the precise amount depends on the treatment of small pre-existing balances in the relevant accounts) was paid by Kebzay to Kebzay Investments Pty Ltd (KIPL), a company controlled by Mr Yazbek. From there, through a complicated series of transactions, the purpose of which was not explained by Mr Yazbek or anyone else on behalf of the defendants and is not apparent on the face of the transactions, the amount of the dividend or most of it was paid to Kebzay Custodian No 2 Pty Ltd as trustee for Kebzay Superannuation Fund No 2, Mr Yazbek’s superannuation fund (the Eighth Defendant). From there it was paid towards the purchase of a property at Avalon Beach (the Property) in the name of Mr Yazbek and his wife as tenants in common in shares of 1/100 and 99/100 respectively. The total purchase price of the Property was $12,995,000.

Relevantly, in these proceedings, Fitz Jersey, as the assignee of Atlas’s rights, seeks to recover the amount of the dividend paid by Atlas to Kebzay from Mr and Mrs Yazbek. By a notice of motion filed 17 April 2020, Fitz Jersey seeks pending determination of the proceedings a freezing order preventing Mr and Mrs Yazbek from dealing with their interests in the Property except to the extent that the value of their interests exceed $8,103,973, which is the amount that is now said to be owing to Atlas in respect of the dividend. Mr and Mrs Yazbek gave undertakings in relation to the disposition of their interests in the Property pending the determination of the motion. It is with that motion that this judgment is concerned.

Fitz Jersey’s claim in the proceedings insofar as it is relevant to the orders sought in the motion is complicated and not altogether easy to follow. In substance, however, it has four elements.

First, Fitz Jersey alleges that the declaration of the dividend contravened s 254T of the Corporations Act 2001 (Cth), which prohibits a company from paying a dividend unless (1) the company’s assets exceed its liabilities immediately before the dividend is declared and the excess is sufficient for the payment of the dividend; (2) the payment of the dividend is fair and reasonable to the company’s shareholders; and (3) the payment of the dividend does not materially prejudice the company’s ability to pay its creditors. According to Fitz Jersey, the dividend contravened the third of these requirements because, following the declaration of the dividend, Atlas’s ability to repay the amount the subject of the adjudication determination, and to pay other amounts claimed by Fitz Jersey, was materially prejudiced. It is pleaded in para 84 of Fitz Jersey’s Second Further Amended List Statement that, as a result, the dividends “were not lawfully authorised by Atlas and were not paid as validly authorised dividends”, with the consequence (pleaded in para 85) that the dividend comprised “monies had and received by Kebzay PL … to the use of Atlas”.

In its written submissions, Fitz Jersey submitted that a further consequence of that conclusion was that Mrs Yazbek was liable to account for the money. It explained that conclusion by reference to the following passage from the judgment of Allsop P (with whom Campbell JA and Handley AJA agreed) in Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252 at [127]:

After quoting this passage, Fitz Jersey says somewhat confusingly that it “has a good arguable case against Ms Yazbek on account of her voluntary receipt of the proceeds of Mr Yazbek’s breach of fiduciary duty”.

Second, Fitz Jersey claims that in declaring the dividend and in causing it to be paid, Mr Yazbek, and the other director of Atlas, Mr Sweeney, breached their duties, including their fiduciary duties, as directors of Atlas. That is said to follow from the fact that the payment of the dividend involved a breach of s 254T of the Corporations Act. Fitz Jersey also submitted that there was an arguable case that the directors, in causing the dividend to be paid, breached their duties even if the dividend did not contravene s 254T. Quite how that could be so was not explained. The wording of s 254T suggests that the declaration and payment of a dividend by a company is permitted unless it has one of the consequences set out in the section. If the payment of a dividend is permitted by s 254T, it is difficult to see how the directors could still be in breach of their duties by doing no more than authorising what the section permits.

Attached to the claim that Mr Yazbek breached his duties as a director is a claim that the proceeds of that breach (the dividend) can be traced to the Property and that each of the entities that benefitted from the payment were knowingly concerned in Mr Yazbek’s breach with the result that they held the benefit they received as a constructive trustee. Presumably in the case of the Property, it is said that Atlas (and Fitz Jersey through it) is entitled to an equitable lien securing the amount it is entitled to recover in respect of the dividend.

Third, Fitz Jersey claims that the payment of the dividend was a voidable transaction under s 588FE of the Corporations Act. Various reasons are given, but it appears from Fitz Jersey’s written submissions that it relies principally on the contention that the payment of the dividend was an unreasonable director-related transaction, and therefore voidable under s 588FE(6A) of the Corporations Act. An “unreasonable director-related transaction” is defined in these terms in s 588FDA:

The result is that Fitz Jersey is said to be entitled to an order under s 588FF(1)(c) or (d), which give the Court power to make:

It is contended that an order under either paragraph could be made against both Mr and Mrs Yazbek.

Fourth, it is alleged that the payment of the dividend was an alienation of property for the purposes of s 37A of the Conveyancing Act 1919 (NSW). That section provides:

In the present case, Fitz Jersey contends that Atlas paid the dividend with the intention of defrauding its creditors and that it (Fitz Jersey), as a person prejudiced by the payment, is entitled to avoid it. How that claim could succeed if the claim based on s 254T of the Corporations Act fails is not apparent. Nor is it apparent how a claim based on s 37A could give rise to a liability on the part of Mrs Yazbek. The claim does not appear to be relied on in support of the application for a freezing order. For that reason, nothing further needs to be said about it in the present context.

In order to succeed in its claim for a freezing order, Fitz Jersey must establish that (1) it has a good arguable case for final relief; (2) there is a danger that a judgment or a prospective judgment of the Court will be wholly or partly unsatisfied if the order is not made; (3) the balance of convenience favours making the order: see Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 25.11(1); Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18. The test of “good arguable case” is a low one. It simply requires that the case be more than barely arguable: see Ninemia Maritime Corp v Trave Schiffahrts GmbH & Co KG (The Niedersachsen) [1984] 1 All ER 398 at 404 per Mustill J; Bhushan Steel Ltd v Severstal Export GmbH [2012] NSWSC 583 at [102] per Sackar J, and the cases cited there.

Although the claim is described as one for a freezing order, that is not entirely accurate. To the extent that Fitz Jersey asserts some proprietary interest in the Property, the order it seeks is really an order preserving property in which it claims an interest. In that case, it must establish that there is a prima facie case or serious question to be tried that it has a claim to a proprietary interest in the Property and that the balance of convenience favours the granting of an interim injunction to protect the interest it claims. It does not, however, have to establish the second of the requirements referred to above, although the risk that Mr and Mrs Yazbek will seek to dispose of or encumber the property is relevant to the balance of convenience. It is doubtful that there is any practical difference between the test applicable in respect of UCPR r 25.11(1) of “good arguable case” (see UCPR r 25.14(1)(b)) and the tests applied more generally to the grant of interlocutory injunctions of “prima facie case” and “serious question to be tried” as those tests are now understood: see, for example, Australian Broadcasting Corp v O’Neill (2006) 227 CLR 57; [2006] HCA 46 at [70] per Gummow and Hayne JJ. Certainly, it was not suggested that their application might produce different results in this case. For that reason, it will be convenient to use the expressions “good arguable case” or “reasonably arguable” in this judgment to cover the tests applicable in both types of claim.

It is apparent from what has been said so far that it is alleged that Mrs Yazbek is liable for the amount of the dividend on three bases. First, it is said that she is liable in accordance with the principles accepted by the Court of Appeal in Heperu Pty Ltd v Belle (2009) NSWLR 230; [2009] NSWCA 252 at [127]. Second, it is said that she is liable as a knowing recipient of a dividend that was paid in breach of fiduciary duties. Third, it is alleged that she is a person against whom a claim can be made under s 588FF(1)(c) or (d) of the Corporations Act. Each of those claims depends on an existing claim against Mrs Yazbek. However, in addition to those, Fitz Jersey also submits that it is entitled to a freezing order against Mrs Yazbek in accordance with the principle stated by the High Court in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18 at [57]. That principle was explained in these terms by the High Court in PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36 at [47]:

In the present case, it is said that Fitz Jersey has a good claim against Mr Yazbek. If that claim succeeds, Mr Yazbek is likely to be made bankrupt. If he is, his trustee in bankruptcy is likely to have a good claim against Mrs Yazbek under ss 120 or 121 of the Bankruptcy Act 1966 (Cth) in respect of her share of the Property on the basis that her share of the property was bought with money belonging to Mr Yazbek which was transferred to her at an undervalue (s 120) or which was transferred to her for the main purpose of preventing the transferred property from becoming divisible among Mr Yazbek’s creditors (s 121).

The question whether Fitz Jersey has a good arguable case raises two issues. One is whether it has a good arguable case that the payment of the dividend involved a breach of obligation. The other is whether it has a good arguable case that Mrs Yazbek is liable in respect of that breach. The defendants contend that Fitz Jersey has failed to make out a good arguable case on both these issues.

The defendants’ argument focussed on s 254T of the Corporations Act. On that issue, Fitz Jersey submitted that it was arguable that at the time the dividend was paid its payment materially prejudiced Atlas’s ability to pay its creditors because it materially prejudiced its ability to repay the amount the subject of the adjudication determination. I accept that submission. In Re Centro Property Trust [2011] NSWSC 1171, Barrett J left open the question whether the reference to “creditor” in s 254T included a contingent creditor. There is no other decision on the point. Absent any other decision, it is at least arguable that it does.

The defendants submitted that, even if “creditor” included contingent creditors of some types, it could not include Fitz Jersey’s claim under the relevant construction contract. A fortiori, it could not be the case that the directors of Atlas ought to have appreciated that s 254T barred them from paying the dividend. As Fitz Jersey’s claim is now put, it contends that Atlas owes it a total of $26,080,600 (plus GST). Over half that claim relates to matters that had not been raised with Atlas before the dividend was paid, such as a claim that Fitz Jersey is entitled to recover liquidated damages from Atlas as a consequence of delays in completing the project.

Moreover, the case that Fitz Jersey was entitled to recover the amount that was the subject of the adjudication determination turns on a contention (rejected by the adjudicator) that Mr Yazbek and Mr Wong, the sole active director of Fitz Jersey, had reached an oral agreement in 2013 the effect of which was that Fitz Jersey would pay Atlas an additional $10 million in full satisfaction of all or some of Atlas’s claims which were later the subject of the adjudication application. According to the defendants, it was highly improbable that, in a large construction project that was governed by a detailed building contract which itself stated any variations had to be in writing, the relevant principals would agree in a casual conversation to the payment of $10 million in settlement of all outstanding claims the builder had under the contract. That was made all the more improbable by the fact that various alternatives of the oral agreement are pleaded. And, insofar as there is a claim against the directors, it is made all the more improbable by the fact that, according to Mr Yazbek, he received legal and accounting advice on whether the dividend could be paid. The defendants submitted that the directors could not be expected to wait for some indefinite period of time to see whether an arguable claim was formulated and brought before paying a dividend, when all they had at the time the dividend was paid was a three line letter putting them on notice of a possible claim without identifying any credible basis for that claim.

I do not accept the defendants’ submissions on this issue. Fitz Jersey’s claim depends on an arguable point of law (that s 254T applies to contingent liabilities) and factual questions that appear to me to be reasonably arguable, at least insofar as the claim is to recover the amount the subject of the adjudication determination. The claim to recover the amount of the adjudication determination depends on acceptance by the Court of one of the versions of the oral agreement pleaded by Fitz Jersey. Mr Yazbek and Mr Wong had worked together on construction projects over an extended period of time. It is, therefore, not altogether surprising that they might have reached an oral settlement of outstanding claims. Mr Wong’s account of the conversation is vague. But there is evidence that, following the conversation, the contract price was increased to $190 million and it is accepted that the additional $10 million was paid.

Moreover, on 7 November 2014, following completion of the project, Fitz Jersey signed a management agreement with Serendipity Property Group Pty Ltd, a company in which the Yazbek family had a 70 percent interest. The management agreement gave Serendipity the exclusive right to act as the rental agent for 315 of the units that were constructed as part of the project. Fitz Jersey later terminated that agreement. Following that termination, Serendipity sent a lengthy letter dated 11 October 2016, which was signed by Mr Yazbek among others, to Mr Wong explaining why the termination was unreasonable. The letter relevantly said:

It is equally apparent from the letter that Mr Yazbek was aware that there was a dispute between him and Mr Wong concerning whether an agreement had been reached in 2013 and the nature of that agreement, if there was one. Given his experience, Mr Yazbek must have understood that the adjudicator’s determination was only an interim one and that Atlas could be ordered to repay the amount of the determination in court proceedings. He was on notice that Fitz Jersey intended to bring those proceedings; and he must have understood that an issue in those proceedings was whether he and Mr Wong had reached an enforceable agreement in 2013. Despite that, he caused Atlas to pay the dividend almost as soon as it had received the amount of the adjudication determination. No explanation was offered for why the amount of the dividend was paid in the complicated way it was. It might be inferred from that fact that Mr Yazbek appreciated that Fitz Jersey had an arguable case that it was entitled to recover the amount of the adjudication determination and that he sought to place the amount of the payment outside Fitz Jersey’s reach.

There is also a factual issue concerning whether Mr Yazbek received legal advice concerning the payment of the dividend, which is likely to be relevant to the question whether he breached his duties as a director in authorising the dividend. According to evidence he gave at the public examinations conducted by the liquidator, he did. But according to evidence given by his solicitor, Mr Mort, he (Mr Mort) did not give that advice. Faced with that evidence, Mr Yazbek gave evidence that the advice was given by Mr White, an accountant with Ernst & Young who was also a lawyer.

In summary, then, there appears to be a good arguable case that the payment of the dividend was a breach of s 254T of the Corporations Act and that Mr Yazbek breached his duties as a director of Atlas by authorising the payment because he did so without legal advice and in circumstances where he must have appreciated that there was a real risk that Atlas could be ordered to refund the payment.

There is also a good arguable case that the payment of the dividend was an unreasonable director-related transaction within the meaning of s 588FDA of the Corporations Act. There is at least a good arguable case that the payment was made to a person on behalf of, or for the benefit of, Mr Yazbek or his wife because it was made to a trust controlled by Mrs Yazbek and of which she and her husband were beneficiaries. There is also a good arguable case that a reasonable person in Atlas’s position would not have made the payment because it put the company in a position where it would not be able to repay the amount of the adjudication determination in circumstances where there was a real risk that Atlas could be ordered to repay that amount.

The case against Mrs Yazbek is more complicated. As I have explained, it appears to be put on four bases. One is that Mrs Yazbek is liable to account for the payment in accordance with the principle accepted in Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252. A second is that Mrs Yazbek is liable to account for the dividend as a constructive trustee who was knowingly concerned in her husband’s breach of fiduciary duty. A third is that an order could be made against her under s 588FF(1)(c) or (d) of the Corporations Act. Lastly, it is said that a freezing order could be made against Mrs Yazbek in accordance with the principle accepted in PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1; [2015] HCA 36 at [47].

The first of these bases must depend on a submission that a dividend paid in breach of s 254T of the Corporations Act is void. Unless the payment of the dividend was void, Atlas would have no basis for an action for money had and received as the true owner of the amount of the dividend and there would be no basis for the application of the principle accepted in Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252. Fitz Jersey’s suggestion in its written submissions that it is sufficient if the money was paid in breach of Mr Yazbek’s duties as a director confuses an action for money had and received with an action based on the principles stated in Barnes v Addy (1874) LR 9 Ch App 244 (as to which, see below).

In my opinion, the contention that a dividend paid in breach of s 254T is void is not reasonably arguable. Although there is no case directly on point, there is nothing in s 254T, or any other provisions of the Corporations Act, that suggests that a dividend paid in contravention of s 254T is void. The current version of s 254T was introduced by the Corporations Amendment (Corporate Reporting Reform) Act 2010 (Cth). Prior to its amendment, s 254T (and a long line of its predecessors) provided that “A dividend may only be paid out of profits of the company”. A dividend paid in breach of that section was not void, although a dividend could be recovered from a shareholder who knew that it had been paid out of capital. The relevant principle was stated in these terms in Halsbury's Laws of England, 4th ed, vol 7, par 607:

In Segenhoe Ltd v Akins (1990) 29 NSWLR 569 at 583ff, Giles J cast some doubt on this statement of principle and suggested that a dividend paid in breach of s 254T (as it then was) may be able to be recovered from an innocent shareholder. However, his Honour acknowledged that that conclusion was contrary to the accepted position and the views he expressed on the issue were obiter. Section 254T was amended to overcome uncertainty over the meaning of the word “profits”: see Explanatory Memorandum to the Corporations Amendment (Corporate Reporting Reform) Act 2010 (Cth), para 3.2. There is no suggestion that the amendment was also intended to alter the consequences of a breach of the section.

The second way in which Fitz Jersey puts its case against Mrs Yazbek involves tracing the dividend paid by Atlas ultimately to the purchase of the Property and an allegation that each entity in the chain of payments that ended with the purchase of the Property received the payment it did with knowledge that it was made in breach of Mr Yazbek’s duties as a director. It appears to be accepted that the dividend can be traced to the purchase price of the Property. In any event, the evidence that it can be is strong.

It is accepted that a person who receives trust property knowing that it was paid or transferred in breach of trust is liable as a constructive trustee to account for the amount or property received. Liability of that type is commonly referred to as liability under the first limb of Barnes v Addy (1874) LR 9 Ch App 244. It is generally assumed that liability of that type extends to at least some cases where the amount paid was paid in breach of a fiduciary duty: see Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [113], referring to DPC Estates Pty Ltd v Grey and Consul Development Pty Ltd [1974] 1 NSWLR 443 at 459–460 per Jacobs P. Consequently, it is at least reasonably arguable that if the dividend was paid by Atlas in breach of Mr Yazbek’s duties as a director, then Atlas is entitled to recover as a constructive trustee the amount of the payment from anyone who received it with knowledge of the breach.

There may be a question whether it is necessary for Fitz Jersey to prove that each entity in the chain of payments (including Mrs Yazbek) had knowledge of Mr Yazbek’s breach of duty (assuming there was one). Each of the entities which received the payment was either controlled by Mr Yazbek or Mrs Yazbek. There is some evidence to suggest that Mrs Yazbek acted on her husband’s directions. She gave evidence in the public examinations that she acted on the advice of her accountants and lawyers. But if she did, it might be inferred that that advice reflected instructions given by her husband. And if that is so, it might be inferred that the complicated series of payments was part of a scheme devised by Mr Yazbek (with or without the assistance of professional advisors) to make it difficult for Atlas to trace or to recover the dividend.

Even if Fitz Jersey must prove that each entity in the chain of payments knew of Mr Yazbek’s breach (again assuming that there was one), it seems to me that Fitz Jersey has a reasonably arguable case that that is so. Plainly, it is true of the entities controlled by Mr Yazbek. Whether it is true of Mrs Yazbek and entities controlled by her is a more difficult question. However, on the evidence currently before the Court, there appears to be a reasonable argument that it is, either on the basis that Mrs Yazbek was simply Mr Yazbek’s cipher for the transactions or on the basis that she at least had constructive knowledge of her husband’s breach of duty, which appears to be sufficient for a case based on knowing receipt: see Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 at [263]ff.

Mrs Yazbek did not give evidence on the current application. A company that she controlled was the recipient of a large dividend. For reasons that were unexplained that company paid the dividend or most of it to a company controlled by her husband (KIPL). Subsequently, a company controlled by her husband contributed an amount approximating the amount of the dividend towards the acquisition of the Property, which, apart from a 1/100th share, was acquired in her name. Absent some explanation, it might reasonably be concluded that those events were sufficient to put Mrs Yazbek on enquiry concerning the circumstances in which the dividend was paid.

As to the third way in which Fitz Jersey puts its claim, if it is correct that there is a reasonable argument that the payment of the dividend falls within s 588FDA of the Corporations Act, then there appears to be a good argument that the plaintiff is entitled to an order under s 588FF(1)(c) against Mrs Yazbek, since the evidence indicates that she is the primary beneficiary of the dividend. It is less clear how an order could be obtained against Mrs Yazbek under s 588FF(1)(d) requiring her to transfer her interest in the Property to Fitz Jersey. On any view, only a portion of the purchase price of the Property came from the dividend. It follows that, to the extent that Fitz Jersey has a claim for relief under s 588FF(1) of the Corporations Act, its claim appears to be a monetary one and the order it seeks to protect that claim is a true freezing order.

As to the fourth way in which Fitz Jersey puts its claim, for the reasons already given, Fitz Jersey has a reasonably arguable case that Mr Yazbek breached his duties as a director in authorising the payment of the dividend. If that case succeeds, Mr Yazbek would be liable for the amount of the dividend. There is no evidence before the Court concerning Mr Yazbek’s current financial position, although there is some evidence that Mr Yazbek conceded in the liquidator’s examinations that he had no significant assets in his name. Mr Yazbek’s financial position is something peculiarly within his knowledge. Despite that, he did not lead any evidence concerning it. There is, therefore, a reasonable basis for inferring that if a judgment is obtained against him, he will not be able to meet it and will be made bankrupt. Fitz Jersey also has a reasonably arguable case that, in that event, Mr Yazbek’s trustee in bankruptcy would be entitled to recover the amount that Kebzay Custodian No. 2 Pty Ltd contributed towards the purchase of the Property on the basis that it held those funds as a trustee for Mr Yazbek and that by paying those funds towards the purchase of the Property it paid the funds to Mrs Yazbek at an undervalue or in order to defeat Mr Yazbek’s creditors. Accordingly, the claim falls within the principle accepted by the High Court in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18.

As I have explained this requirement is only directly relevant to the personal claims brought by Fitz Jersey, although it is also relevant to the balance of convenience in relation to the proprietary claims.

I accept that this condition is satisfied. The defendants submitted that there was no real danger because the Property was Mr and Mrs Yazbek’s home. Mr Yazbek is unwell and the Property has been renovated in anticipation that he and his wife would continue to reside there for the foreseeable future. The Property was bought some time ago and these proceedings have been on foot for some time. Despite that, Mr and Mrs Yazbek have made no attempt to deal with the Property. However, in my opinion, those factors do not outweigh the fact that Mr and Mrs Yazbek engaged in a series of transactions which, absent some explanation, appear to have been designed to put the amount of the dividend out of the reach of Atlas or anyone claiming through it. As a result of this judgment, and absent any order, there is a danger that Mr and Mrs Yazbek will conclude that their efforts have not been wholly successful and that further steps should be taken to make it more difficult for the amount of any judgment obtained by Fitz Jersey to be recovered from the value of the Property. That does not necessarily involve a sale of the Property. It could involve encumbering the Property and taking steps to insulate any amount raised from a judgment.

In my opinion, the balance of convenience favours the granting of an injunction. Fitz Jersey does not seek to injunct Mr and Mrs Yazbek from dealing with their property generally. It only seeks to injunct them from dealing with a property in respect of which it claims a proprietary interest; and then only to the extent that the effect of the dealing is to reduce their unencumbered interest in the Property below $8,103,973. Moreover, there is no suggestion that Mr and Mrs Yazbek wish to sell the Property or to provide it as security for a loan. Consequently, an injunction will have little practical effect on them. If circumstances change, there is nothing to prevent them from making an application to vary the terms of the injunction to accommodate the changed circumstances. On the other hand, if an injunction is not granted and Mr and Mrs Yazbek take steps to alienate or to encumber the Property so that its unencumbered value is less than $8,103,973, it may not be possible to unravel the relevant transactions, with the result that Fitz Jersey may lose the only means it may have for recovering any judgment in its favour and may be deprived of a proprietary interest to which it is entitled.

The precise form of the order sought by Fitz Jersey is set out in Annexure 1 to its notice of motion filed on 17 April 2020. As I have said, that order is in the form of a freezing order. It follows from what I have said that Fitz Jersey is entitled to an order in those terms. It also follows from what I have said that Fitz Jersey is entitled to an injunction in the same form to protect the proprietary interest it claims

Fitz Jersey has been successful on its notice of motion. There is no apparent reason why it should not have its costs of the motion if it ultimately succeeds in the case. On the other hand, if it fails, it seems more appropriate that there be no order for costs. In that event, the freezing order should never have been granted. In seems unreasonable to require the defendants to pay the costs of resisting something to which Fitz Jersey is ultimately held not to be entitled.

The parties, however, were not given an opportunity to make submissions on the appropriate costs order. They should be given that opportunity if they want it.

Accordingly, the Court makes the following orders: