FEDERAL COURT OF AUSTRALIA

RRG Nominees Pty Ltd v Visible Temporary Fencing Australia Pty Ltd [2017] FCA 1352

ORDERS

PENAL NOTICE

TO: Milorad Nestorovic and Dragana Pinneri

If you (being the person bound by this order):

a.    Refuse or neglect to do any act within the time specified in this order for the doing of the act; or

b.    Disobey the Order by doing an act which the order requires you not to do,

You will be liable to imprisonment, sequestration of property or other punishment.

Any other person who knows of this order and does anything which helps or permits you to breach the terms of this order may be similarly punished.

TO: MILORAD NESTOROVIC AND DRAGANA PINNERI

This is a ‘freezing order’ made against you on 15 November 2017 by the Honourable Justice White at a hearing without notice to you after the applicants gave undertakings as set out in Schedule A to this order and after the Court read the affidavits listed in Schedule B to this order.

THE COURT ORDERS THAT:

Introduction

1.    The application for this order is made returnable immediately.

2.    The time for the service of the application and supporting affidavits is abridged and service is to be effected by 16 November 2017.

3.    Subject to the paragraph 4, this order has effect up to and including 5.00 pm on 21 November 2017 (the Return Date). On the Return Date at 2.15 pm there will be a further hearing in respect of this order before Justice White.

4.    Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified.

5.    In this order:

5.1    ‘applicants’, means RRG Nominees Pty Ltd, Schnik Nominees Pty Ltd and Frank Schirripa Nominees Pty Ltd;

5.2    ‘you’, where there is more than one of you, includes all of you and includes you if you are a corporation;

5.3    ‘third party’ means a person other than you and the applicants; and

5.4    ‘unencumbered value’ means value free of mortgages, charges, liens or other encumbrances.

6.    If you are order to do something, you must do it by yourself or through directors, officers, partners, employees, agents or other acting on your behalf or on your instructions.

7.    If you are order not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.

Freezing of assets

8.    You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia (Australian Assets) up to the unencumbered value of $3,500,000 (the Relevant Amount).

9.    If the unencumbered value of your Australian Assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian Assets still exceeds the relevant amount.

10.    For the purposes of this order:

10.1    Your assets include:

10.1.1    all your assets, whether or not they are in your name and whether they are owned solely or co-owned;

10.1.2    any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and

10.1.3    The following assets in particular:

10.1.3.1    the property known as 937 Heaslip Road, Penfield Gardens (Certificate of Title Register Book Volume 6005 folio 948), or if it has been sold, the net proceeds of sale;

10.1.3.2    the property known as 228-232 Burton Road, Paralowie (Certificate of Title Register Book Volume 6005 folio 949), or if it has been sold, the net proceeds of sale;

10.1.3.3    the property known as 33 Balfour Street, Nailsworth (Certificate of Title Register Book Volume 5509 folio 712), or if it has been sold, the net proceeds of sale; and

10.2    The value of your assets is the value of the interest you have individually in your assets.

Provision of information

11.    You must:

11.1    At or before the further hearing on the Return Date (or within such further time as the Court may allow) to the best of your ability inform the applicants in writing of all your assets world-wide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets; and

11.2    Within five working days after being served with this order, swear and serve on the applicants an affidavit setting out the above information.

Exceptions to this order

12.    This order does not prohibit you from:

12.1    Paying up to $1,000 a week on your ordinary living expenses;

12.2    Paying your reasonable legal expenses;

12.3    Dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and

12.4    In relation to matters not falling within paragraphs 12.1, 12.2 or 12.3, dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicants, if possible, at least two working days written notice of the particulars of the obligations.

13.    You and the applicants may agree in writing that the exceptions in the paragraph 12 are to be varied. In that case the applicants or you must as soon as practicable file with the Court and serve on the other a minute of a propose consent order recording the variation signed by or on behalf of the applicants and you, and the Court may order that the exceptions are varied accordingly.

14.    This order will cease to have effect if you:

14.1    Pay the sum of $3,500,000 into Court; or

14.2    Pay that sum into a joint bank account in the name of your lawyer and the lawyer for the applicants as agreed in writing between them; or

14.3    Provide security in that sum by a method agreed in writing with the applicants to be held subject to the order of the Court.

15.    Any such payment and any such security under paragraph 14 will not provide the applicants with any priority over your other creditors in the event of your insolvency.

16.    If this order ceases to have effect pursuant to paragraph 14, you must as soon as practicable file with the Court and serve on the applicants notice of that fact.

Persons other than the applicants and respondent

17.    This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order.

18.    No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order.

General

19.    The costs of this application are reserved to the Court hearing the application on the Return Date.

20.    These orders be entered forthwith.

21.    The parties and any interested person have liberty to apply on 24 hours’ notice.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

SCHEDULE A

Undertakings given to the Court by the applicants

1.    The applicants undertake to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order.

2.    As soon as practicable, the applicant will file and serve upon the respondent copies of:

2.1.    This order;

2.2.    The Application for this order for hearing on the return date;

2.3.    The following material in so far as it was relied on by the applicants at the hearing when the order was made:

2.3.1.    Affidavits (or draft affidavits);

2.3.2.    Exhibits capable of being copied;

2.3.3.    Any written submissions; and

2.3.4.    Any other document that was provided to the Court;

3.    As soon as practicable, the applicants will cause anyone notified of this order to be given a copy of it.

4.    The applicants will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent’s assets.

5.    If this order ceases to have effect, the applicants will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that is has ceased to have effect.

6.    The applicants will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside of Australia, other than this proceeding.

7.    The applicants will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent’s assets.

SCHEDULE B

Affidavits Relied On

1.    Affidavit of Andrew John Craven filed on 14 November 2017

2.    Affidavit of Rocama Paul Schirripa filed on 25 October 2017

3.    The affidavit of Mark Antoni Dimech filed on 2 June 2017;

4.    The affidavit of Robert John Falzon filed on 2 June 2017; and

5.    The affidavit of Glen James Stephens filed on 2 June 2017.

EX TEMPORE REASONS FOR JUDGMENT

WHITE J:

1    The three Applicants in these proceedings have applied, ex parte, for freezing orders against the Second and Third Respondents pursuant to r 7.32 of the Federal Court Rules 2011 (Cth).

2    I am satisfied that it is appropriate to proceed ex parte, having regard to the nature of the application. I am also satisfied that it is appropriate to make the orders sought by the Applicants.

3    Because the proceedings have proceeded ex parte, and there is likely to be a hearing at which the Respondents will be heard on the continuance of the orders, I will provide some brief reasons so that the Respondents may have an understanding of the matters upon which I have relied.

4    I have reached my decision having regard to the principles concerning applications of the present kind, most of which were summarised by Kenny J in Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014; (2010) 273 ALR 194. The principles are as follows:

(a)    a freezing order made ex parte is an extraordinary interim remedy because of its restraining effect on the property of those to whom it applies, without them having had the opportunity to be heard on that question;

(b)    the purpose of a freezing order is to prevent frustration of the process of the Court and not to provide security to an applicant;

(c)    an applicant must show a prima facie cause of action against the respondent, as well as a real risk that a judgment debt will go unsatisfied if assets are removed from the jurisdiction, or disposed of in some way;

(d)    a freezing order may be granted even though the risk of dissipation of assets is less probable than not;

(e)    a freezing order may be granted even when there is no evidence that the respondent has a positive intention to frustrate the execution of a judgment; and

(f)    the Court must be satisfied that it is in the interests of justice, in all the circumstances of the case, for the freezing order to be made.

5    Amongst other things, the last principle requires consideration of the potential detriment to the Applicants if the order is not made and the Court’s process frustrated and the hardship that the order, if made, may cause to the Respondents.

6    I am satisfied that it is appropriate to proceed today on the basis that the Applicants do have a prima facie cause of action, being a claim of misleading or deceptive conduct against the Second and Third Respondents. It is reasonable to proceed on that basis, because the allegations of the Applicants are set out in the Fifth Amended Statement of Claim and the underlying proceedings are listed for a 10 day trial in March 2018. I have taken into account that the threshold for establishing a prima facie cause of action has been said to be low: Curtis v NID Pty Ltd [2010] FCA 1072 at [6].

7    It is neither necessary, nor appropriate, for today’s purposes to make any assessment of the strength of the Applicants’ case or of their prospects of successfully prosecuting it and I refrain from doing so.

8    As to the prospects of any judgment obtained by the Applicants going unsatisfied, the Applicants pointed to a number of matters. The first was that each of the corporate Respondents in the proceedings is now being wound up or, at least, resolutions for their winding up have been made by their creditors. Administrators had been appointed to each of the corporate Respondents on 5 July 2017 and shortly afterwards, the further conduct of the proceedings against them were stayed.

9    Secondly, the Applicants pointed to the withdrawal of a substantial sum (over $444,000) from the bank account of the 11th Respondent (over which it seems that the Second and Third Respondents had control) only a few days before the administrators were appointed. The purpose of that withdrawal is not known, nor is the use to which the withdrawn monies were put. The Applicants drew attention to the fact that the withdrawal of that substantial sum took the account of the 11th Respondent to its overdraft limit. That withdrawal warrants, the Applicants submit, some unease about whether the Respondents had been seeking to put money beyond the reach of the creditors of the 11th Respondent.

10    Thirdly, the Applicants pointed to evidence that the Second and Third Respondents appear, at least in some respects, to have paid little regard to the distinction between the funds of the 11th Respondent, on the one hand, and their personal funds, on the other. In particular, they referred to the circumstance that a number of debits on a credit card account of the 11th Respondent which was apparently used by the Third Respondent appear to have been directed to personal expenses, rather than to the kind of expenses one would have expected the 11th Respondent to have incurred in the conduct of its business.

11    I have declined to attach much weight to this circumstance, because the source of the funds deposited into the credit card account is not known and, at least insofar as the evidence presently shows, may well have been provided personally by either the Second or Third Respondents.

12    Fourthly, the Applicants pointed to the circumstance that their allegation against the Respondents is of misleading or deceptive conduct of a non-innocent kind. Counsel characterised it as a claim in effect of a fraud. I express no view about whether that claim has substance, as I have indicated, but it is appropriate to take into account the proposition emerging from cases such as Patterson v BTR Engineering Australia Limited (1989) 18 NSWLR 319 at 322-3 to the effect that an inference that a respondent may wish to frustrate execution of a court’s process may more readily be drawn when the underlying allegation is that the respondent had sought by improper means to obtain funds from an applicant.

13    Fifthly, the Applicants pointed to evidence that the Respondents have connections with Serbia and with China with an implication that this should add to the unease. In respect of China they pointed to evidence that the 11th Respondent in the past has claimed to own a factory in China in respect of which it may have had some financial responsibility. I was disinclined to attach much weight for present purposes to that circumstance. The mere fact that the Respondents have some international connections without more does not, to my mind, seem a particularly persuasive factor.

14    Lastly, the Applicant has pointed to the fact that they have had no substantive response to a request made on 6 June 2017 for an undertaking by the Respondents that their assets would not be moved out of the jurisdiction other than in the normal course of business or disposed of. The Applicants’ solicitor has deposed to receiving an email from the Respondents’ solicitors on 27 June 2017 indicating that they planned to respond shortly but that thereafter no response has been received.

15    There is evidence that the Respondents have assets in the nature of real estate. The extent to which that real estate is presently encumbered is not known.

16    I have taken into account, however, that there is no evidence of recent attempts by the Respondents to dispose of that property or to further encumber it in a way which might frustrate execution.

17    As to prejudice to the Respondents, one starts with the prima facie presumption that the Respondents would be prejudiced by such a freezing order. However, in that respect it is appropriate to take into account that the proposed freezing orders do make provision for payment of the Respondents’ legal fees and living expenses and that the Applicants in addition have provided the usual undertaking on such applications. The freezing orders will operate only until 22 November 2017. The principal assets which will be subject to the freezing orders are, as I have said, real estate which appears to be of at least a reasonably stable kind.

18    Having regard to all those matters I am not satisfied that the prejudice to the Respondents indicated that the orders sought by the Applicants should not be made. In addition, I will fix a hearing for the question of whether the freezing order should continue at a relatively short date.

19    These are my reasons for making the orders sought by the three Applicants.

Associate:

Dated:    17 November 2017

SCHEDULE OF PARTIES