FEDERAL COURT OF AUSTRALIA

Spotlight Pty Ltd v Mehta [2019] FCA 1796

ORDERS

THE COURT ORDERS THAT:

1.    The application for interlocutory relief be returnable immediately.

2.    A freezing order be made against the first and second respondents in the terms specified in Annexure ‘A’ up to 4 pm on 8 November 2019.

3.    A freezing order be made against the third and fourth respondents in the terms specified in Annexure ‘B’ up to 4 pm on 8 November 2019.

4.    The proceeding be adjourned to 8 November 2019.

5.    Costs be reserved.

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

Annexure A

PENAL NOTICE

TO:     The first and second respondents

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:    The first and second respondents

This is a ‘freezing order’ made against you on 1 November 2019 by Justice Anderson at a hearing without notice to you after the Court was given the undertakings 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:

INTRODUCTION

(1)    (a)    The application for this order is made returnable immediately.

(b)    The time for service of the application, supporting affidavits and originating process is abridged and service is to be effected by 4 November 2019.

(2)    Subject to the next paragraph, this order has effect up to 4pm on 8 November 2019 (the Return Date). On the Return Date there will be a further hearing in respect of this order.

(3)    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 such of it as affects the person served or notified.

(4)    In this order:

(a)    ‘applicant’, if there is more than one applicant, includes all the applicants;

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

(c)    ‘third party’ means a person other than you and the applicant;

(d)    ‘unencumbered value’ means value free of mortgages, charges, liens or other encumbrances.

(5)    (a)    If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions.

(b)    if you are ordered 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

(6)     (a)     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 AUD$3m (‘the Relevant Amount’).

(b)    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.

(c)    If the unencumbered value of your Australian assets is less than the Relevant Amount:

(i)    You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and

(ii)    You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount.

(7)     For the purposes of this order,

(1)    your assets include:

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

(ii)    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

(iii)     in respect of the first respondent, the following assets in particular:

(A)    the land described as Volume 11358 Folio 237 with the street address 29 Eynesbury View, Wollert VIC 3750 or, if it has been sold, the net proceeds of the sale;

(B)    the land described as Volume 11237 Folio 227 with the street address 11 Springleaf Road, Tarneit VIC 3029 or, if it has been sold, the net proceeds of the sale;

(C)    the land described as Volume 11608 Folio 914 with the street address 356 Davis Road, Tarneit VIC 3029 or, if it has been sold, the net proceeds of the sale;

(D)    the land described as Volume 11929 Folio 260 with the street address 12 Fergus Street, Thornhill Park VIC 3335 or, if it has been sold, the net proceeds of the sale;

(E)    the land described as Volume 12150 Folio 393 with the street address 23 Croxden Avenue, Thornhill Park VIC 3335 or, if it has been sold, the net proceeds of the sale;

(F)    the land described as Volume 12058 Folio 356 with the street address 65A O’Reilly Road, Tarneit VIC 3029 or, if it has been sold, the net proceeds of the sale;

(G)    any money in account number 10195695 with BSB 063 023 in the name Anuj Mehta at Commonwealth Bank.

(iv)    in respect of the second respondent, the following assets in particular:

(A)    the land described as Volume 09897 Folio 109 with the street address 1 Darbyshire Place, Hoppers Crossing VIC 3029 or, if it has been sold, the net proceeds of the sale;

(B)    the land described as Volume 11608 folio 917 with the street address 350 Davis Road, Tarneit VIC 3029 or, if it has been sold, the net proceeds of the sale;

(C)    the land described as Volume 11865 folio 522 with the street address 4 Mesa Street, Tarneit VIC 3029 or, if it has been sold, the net proceeds of the sale;

(D)    the land described as Volume 12034 folio 622 with the street address 7 Ness Street, Thornhill Park VIC 3335 or, if it has been sold, the net proceeds of the sale;

(E)    the land described as Volume 12058 folio 355 with the street address 65B O’Reilly Road, Tarneit VIC 3029 or, if it has been sold, the net proceeds of the sale;

(F)    any money in account number 10501349 with BSB 063 541 in the name Vivian D’Lima at Commonwealth Bank.

(2)    the value of your assets is the value of the interest you have individually in your assets.

PROVISION OF INFORMATION

(8)    Subject to paragraph 9, you must:

(a)     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 applicant 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;

(b)     by 12 noon on Thursday 7 November 2019, swear and serve on the applicant an affidavit setting out the above information.

(9)     (a)     This paragraph (9) applies if you are not a corporation and you wish to object to complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that you:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(b)    This paragraph (9) also applies if you are a corporation and all of the persons who are able to comply with paragraph 8 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(c)    You must:

(i)    disclose so much of the information required to be disclosed to which no objection is taken; and

(ii)    prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the court in a sealed envelope; and

(iii)    file and serve on each other party a separate affidavit setting out the basis of the objection.

EXCEPTIONS TO THIS ORDER

(10)    This order does not prohibit you form:

(a)    in respect of each respondent, paying up to $1,000 a week on your ordinary living expenses;

(b)    in respect of each respondent, paying $20,000 on your reasonable legal expenses;

(c)    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

(d)    in relation to matters not falling within (a), (b) or (c), 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 applicant, if possible, at least two working days written notice of the particulars of the obligation.

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

(12)     (a)     This order will cease to have effect if you:

(i)    pay the sum of $3m into Court; or

(ii)    pay that sum into a joint bank account in the name of your lawyer and the lawyer for the applicant as agreed in writing between them; or

(iii)    provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court.

(b)     Any such payment and any such security will not provide the applicant with any priority over your other creditors in the event of your insolvency.

(c)    If this order ceases to have effect pursuant 12(a) above, you must as soon as practicable file with the Court and serve on the applicant notice of that fact.

COSTS

(13)    The costs of this application are reserved to the Court hearing the application on the Return Date.

PERSONS OTHER THAN THE APPLICANT AND RESPONDENT

(14)     Set off by banks

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.

(15)    Bank withdrawals by the respondent

    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.

(16)     Persons outside Australia

(a)    Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia.

(b)    The terms of this order will affect the following persons outside Australia:

(i)    you and your directors, officers, employees and agents (except banks and financial institutions);

(ii)    any person (including a bank or financial institution) who:

(A)    is subject to the jurisdiction of this Court; and

(B)    has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and

(C)    is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and

(iii)    any other person (including a bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person’s assets.

(17)     Assets located outside Australia

Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party’s application, reasonable written notice of the making of the application is given to the applicant.

SCHEDULE A

UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT

(1)    The applicant undertakes 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:

(a)    this order;

(b)    the application for this order for hearing on the return date;

(c)    the following material in so far as was relied on by the applicant at the hearing when the order was made:

(i)    affidavits (or draft affidavits);

(ii)    exhibits capable of being copied;

(iii)    any written submission; and

(iv)    any other document that was provided to the Court.

(d)    a transcript, or, if more is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court;

(e)    the reasons for judgment;

(f)    the originating process, or, if none was filed, any draft originating process produced.

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

(4)    The applicant 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 applicant 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 it has ceased to have effect.

(6)    The applicant 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 Australia, other than this proceeding.

(7)    The applicant 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

NAME AND ADDRESS OF APPLICANT’S LAWYER

The applicant’s lawyers are:

Name: SBA Law

Address: Level 15, 607 Bourke Street, Melbourne VIC 3000

Telephone: (03) 9614 7000

Fax: (03) 9614 7100

Out of office hours mobile: 0400 962 884

Email: sbond@sbalaw.com; athomas@sbalaw.com

SCHEDULE C

Applicants:

Applicant:                 Spotlight Pty Ltd ACN 005 180 861

Respondents

First Respondent:         Anuj Mehta

Second Respondent:         Vivian D’Lima

Third Respondent:         Duncan Vincent

Fourth Respondent:             The Vincent Group Pty Ltd (ACN 609 818 126)

Annexure B

PENAL NOTICE

TO:     The third and fourth respondents

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:    The third and fourth respondents

This is a ‘freezing order’ made against you on 1 November 2019 by Justice Anderson at a hearing without notice to you after the Court was given the undertakings 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:

INTRODUCTION

(1)    (a)    The application for this order is made returnable immediately.

(b)    The time for service of the application, supporting affidavits and originating process is abridged and service is to be effected by 4 November 2019.

(2)    Subject to the next paragraph, this order has effect up to 4pm on 8 November 2019 (the Return Date). On the Return Date there will be a further hearing in respect of this order.

(3)    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 such of it as affects the person served or notified.

(4)    In this order:

(a)    ‘applicant’, if there is more than one applicant, includes all the applicants;

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

(c)    ‘third party’ means a person other than you and the applicant;

(d)    ‘unencumbered value’ means value free of mortgages, charges, liens or other encumbrances.

(5)    (a)    If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions.

(b)    If you are ordered 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

(6)     (a)     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 AUD$6m (‘the Relevant Amount’).

(b)    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.

(c)    If the unencumbered value of your Australian assets is less than the Relevant Amount:

(i)    You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and

(ii)    You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount.

(7)     For the purposes of this order,

    (1)    your assets include:

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

(ii)    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);

(iii)    in respect of the third respondent, the following assets in particular:

(A)    the land described as Volume 10472 Folio 294 with the street address 27 Tracey Street, Werribee VIC 3030 or, if it has been sold, the net proceeds of the sale;

(B)    the land described as Volume 11880 Folio 891 with the street address 20 Saxby Street, Tarneit VIC 3029 or, if it has been sold, the net proceeds of the sale.

(iv)    in respect of the fourth respondent, the following assets in particular:

(A)    the assets of the businesses known as Vincon, Spearhead Studios, MyBase Melbourne, Vincent Property Group and The Print & Courier Co, carried on at 51 Sunline Drive Truganina VIC 3029 or, if any or all of the assets have been sold, the net proceeds of the sale;

(2)    the value of your assets is the value of the interest you have individually in your assets.

PROVISION OF INFORMATION

(8)    Subject to paragraph 9, you must:

(a)     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 applicant 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;

(b)     by 12 noon on Thursday 7 November 2019, swear and serve on the applicant an affidavit setting out the above information.

(9)     (a)     This paragraph (9) applies if you are not a corporation and you wish to object to complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that you:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(b)    This paragraph (9) also applies if you are a corporation and all of the persons who are able to comply with paragraph 8 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 8 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(c)    You must:

(i)    disclose so much of the information required to be disclosed to which no objection is taken; and

(ii)    prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the court in a sealed envelope; and

(iii)    file and serve on each other party a separate affidavit setting out the basis of the objection.

EXCEPTIONS TO THIS ORDER

(10)    This order does not prohibit you form:

(a)    in respect of the third respondent, paying up to $1,000 a week on your ordinary living expenses;

(b)    in respect of each respondent, paying $20,000 on your reasonable legal expenses;

(c)    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

(d)    in relation to matters not falling within (a), (b) or (c), 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 applicant, if possible, at least two working days written notice of the particulars of the obligation.

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

(12)     (a)     This order will cease to have effect if you:

(i)    pay the sum of $6m into Court; or

(ii)    pay that sum into a joint bank account in the name of your lawyer and the lawyer for the applicant as agreed in writing between them; or

(iii)    provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court.

   (b)     Any such payment and any such security will not provide the applicant with any priority over your other creditors in the event of your insolvency.

      (c)    If this order ceases to have effect pursuant 12(a) above, you must as soon as practicable file with the Court and serve on the applicant notice of that fact.

COSTS

(13)    The costs of this application are reserved to the Court hearing the application on the Return Date.

PERSONS OTHER THAN THE APPLICANT AND RESPONDENT

(14)     Set off by banks

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.

(15)    Bank withdrawals by the respondent

    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.

(16)     Persons outside Australia

(a)    Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia.

(b)    The terms of this order will affect the following persons outside Australia:

(i)    you and your directors, officers, employees and agents (except banks and financial institutions);

you and your directors, officers, employees and agents (except banks and financial institutions) is subject to the jurisdiction of this Court;

(ii)    any person (including a bank or financial institution) who:

(A)    is subject to the jurisdiction of this Court; and

(B)    has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and

(C)    is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and

(iii)    any other person (including a bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person’s assets.

(17)     Assets located outside Australia

Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party’s application, reasonable written notice of the making of the application is given to the applicant.

SCHEDULE A

UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT

(1)    The applicant undertakes 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:

(a)    this order;

(b)    the application for this order for hearing on the return date;

      (c)    the following material in so far as was relied on by the applicant at the hearing when the order was made:

(i)    affidavits (or draft affidavits);

(ii)    exhibits capable of being copied;

(iii)    any written submission; and

(iv)    any other document that was provided to the Court.

(d)    a transcript, or, if more is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court;

(e)    the reasons for judgment;

(f)    the originating process, or, if none was filed, any draft originating process produced.

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

(4)    The applicant 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 applicant 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 it has ceased to have effect.

(6)    The applicant 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 Australia, other than this proceeding.

(7)    The applicant 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

NAME AND ADDRESS OF APPLICANT’S LAWYER

The applicant’s lawyers are:

Name: SBA Law

Address: Level 15, 607 Bourke Street, Melbourne VIC 3000

Telephone: (03) 9614 7000

Fax: (03) 9614 7100

Out of office hours mobile: 0400 962 884

Email: sbond@sbalaw.com; athomas@sbalaw.com

SCHEDULE C

Applicants:

Applicant:                 Spotlight Pty Ltd ACN 005 180 861

Respondents

First Respondent:         Anuj Mehta

Second Respondent:         Vivian D’Lima

Third Respondent:         Duncan Vincent

Fourth Respondent:         The Vincent Group Pty Ltd (ACN 609 818 126)

REASONS FOR JUDGMENT

ANDERSON J:

Introduction

1    This is an ex parte application by the applicant (Spotlight) for freezing orders and related ancillary relief against each of the respondents under Division 7.4 of the Federal Court Rules 2011 (Cth) (Rules). Spotlight seeks interim freezing orders pending the return of the matter inter partes.

2    Today, on 1 November 2019, I made orders substantially in the form sought by Spotlight. As a result, the respondents will, with exceptions and subject to the particular terms of my orders, be prohibited from disposing of, dealing with, or diminishing the value of their Australian assets up to the unencumbered value specified in my orders.

3    These orders have effect up to 4 pm on 8 November 2019. Unless the Court otherwise orders or directs, there will be a further hearing between the parties on that date.

4    These are my reasons for making the interim freezing orders.

Summary of allegations

5    The respondents to Spotlight’s application are:

(a)    Mr Anuj Mehta, a former Spotlight employee at its distribution centre in Laverton North (a western suburb of Melbourne), whose employment was terminated on 11 October 2019 for serious misconduct;

(b)    Mr Vivian D’Lima, a former Spotlight employee at the distribution centre whose employment was terminated on 11 October 2019 for serious misconduct;

(c)    Mr Duncan Vincent, since 21 October 2019, the sole director and shareholder of the Vincent Group Pty Ltd (Vincent Group) and the apparent brother-in-law of Mr D’Lima; and

(d)    Vincent Group, a company that operates a printing, courier, and storage business under the business name “Print & Courier Co”.

6    Spotlight relies upon affidavit evidence, each sworn on 29 October 2019, deposed to by:

(a)    Clinton Dean May, the Group Chief Financial Officer at Spotlight Group Holdings Pty Ltd;

(b)    Linda Hunt, the Workplace Relations and WorkCover Manager at the Spotlight Retail Group (Group), which includes Spotlight;

(c)    Mark Andrew Furey, Retail Protection Manager for Victoria at the Group;

(d)    Marius Muller, Retail Protection Manager for Queensland, New Zealand and Asia at the Group; and

(e)    Robert Cockerell, forensic investigator at KordaMentha.

7    In summary, the freezing order application arises out of an allegedly fraudulent scheme that, according to the affidavit evidence filed on its behalf, Spotlight has recently discovered at its distribution centre. Whilst Spotlight’s investigation remains ongoing, the evidence filed by Spotlight suggests that:

(a)    the respondents were involved in scheme whereby Mr Mehta and Mr D’Lima engaged the Vincent Group to provide courier, storage and other services in return for unauthorised payments from the Vincent Group and/or Mr Duncan to Messrs Mehta and D’Lima; and

(b)    Mr D’Lima has been selling pallets that are the property of Spotlight for cash and retaining those payments.

8    Other alleged misconduct involving Mr Mehta and Mr D’Lima has also been uncovered according to the affidavits, including that Mr Mehta was conducting his own private business from the distribution centre and that neither Mr Mehta nor Mr D’Lima were working their contracted working hours.

Applicable principles

9    The Court has power to make a freezing order generally under s 23 of the Federal Court of Australia Act 1976 (Cth) and Division 7.4 (rr 7.31-7.38) of the Rules.

10    Rule 7.32 of the Rules provides as follows:

(1)    The Court may make an order (a freezing order), with or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the Court’s process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.

(2)    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.

11    Rule 7.35 of the Rules sets out the circumstances in which this power may be enlivened. It provides as follows:

(1)    This rule applies if:

(a)    judgment has been given in favour of an applicant by:

(i)    the Court; or

(ii)    for a judgment to which subrule (2) applies – another court; or

(b)    an applicant has a good arguable case on an accrued or prospective cause of action that is justiciable in:

    (i)    the Court; or

(ii)    for a cause of action to which subrule (3) applies – another court.

(2)    This subrule applies to a judgment if there is a sufficient prospect that the judgment will be registered in or enforced by the Court.

 (3)    This subrule applies to a cause of action if:

(a)    there is a sufficient prospect that the other court will give judgment in favour of the applicant; and

(b)    there is a sufficient prospect that the judgment will be registered in or enforced by the Court.

(4)    The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:

(a)    the judgment debtor, prospective judgment debtor or another person absconds;

(b)    the assets of the judgment debtor, prospective judgment debtor or another person are:

(i)    removed from Australia or from a place inside or outside Australia; or

    (ii)    disposed of, dealt with or diminished in value.

(5)    The Court may make a freezing order or an ancillary order or both against a person other than a judgment debtor or prospective judgment debtor (a third party) if the Court is satisfied, having regard to all the circumstances, that:

(a)    there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because:

(i)    the third party holds or is using, or has exercised or is exercising, a power of disposition over assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or

(ii)    the third party is in possession of, or in a position of control or influence concerning, assets (including claims and expectancies) of the judgment debtor or prospective judgment debtor; or

(b)    a process in the Court is or may ultimately be available to the applicant as a result of a judgment or prospective judgment, under which process the third party may be obliged to disgorge assets or contribute toward satisfying the judgment or prospective judgment.

(6)    Nothing in this rule affects the power of the Court to make a freezing order or ancillary order if the Court considers it is in the interests of justice to do so.

12    The principles governing the grant of freezing orders were summarised by Wigney J in Basi v Namitha Nakul Pty Ltd [2019] FCA 743 as follows:

7.    The purpose of a freezing order is to prevent an abuse or a frustration of the Court’s process by depriving an applicant of the fruits of any judgment obtained in the action: Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 625. It is “no light matter” to freeze a party’s assets and there is, accordingly, a need for the Court to exercise caution: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 324F. A freezing order is a “drastic remedy” which should not be lightly granted: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [51] citing Frigo v Culhari (unreported, NSW Court of Appeal 17 July 1998 at 10-11).

8.    An applicant has a good arguable case if they have “a reasonably arguable case on legal as well as factual matters”: Cardile at [68]; Insolvency Guardian Melbourne Pty Ltd v Carlei (2016) 111 ACSR 236; [2016] FCA 72 at [18]. It has also been said that a “good arguable case” is one “which is more than barely capable of serious argument, and yet not necessarily one the judge considers would have better than a fifty per cent chance of success”: Curtis v NID Pty Ltd [2010] FCA 1072 at [6] citing Ninemia Maritime Corp v Trave Schiffahrtsgesselschaft mbH & Co KG (The Niedersachsen) [1983] Com LR 234 at 235 (affirmed on appeal: [1983] 1 WLR 1412); Deputy Commissioner of Taxation v Greenfield Electrical Services Pty Ltd (2016) 103 ATR 327; [2016] FCA 653 at [7].

9.    Where a freezing order is sought on the basis of a danger of the dissipation of assets, it is not necessary for the Court to be satisfied that the risk of dissipation is more probable than not. Nor is it necessary for the applicant to adduce evidence of an intention on the part of the respondent to dissipate assets: Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194; [2010] FCA 1014 at [8]-[10]; Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) (2012) 90 ATR 711; [2012] FCA 1064 at [23]. The making of a freezing order involves a discretionary exercise of power. The Court retains a discretion to refuse relief even if the requirements in r 7.35 of the Rules are satisfied: Patterson at 321-322.

Is there a good arguable case?

13    Spotlight is first required to establish that it has a good arguable case on an accrued or prospective cause of action that is justiciable.

14    The affidavits relied upon by Spotlight depose to the following matters:

(a)    in interviews conducted by Spotlight on 11 October 2019, Mr Mehta and Mr D’Lima each admitted to receiving unauthorised payments from the Vincent Group. Those admissions were made in the presence of a number of Spotlight representatives, all of whom have deposed to the fact that the admissions were made;

(b)    Mr Mehta admitted that he received 10% of the value of the Vincent Group’s invoices, amounting to approximately $400,000 over the past two years. Mr D’Lima admitted to receiving $10,000 per month from the Vincent Group. Based on admissions made by Mr Mehta at his interview, it appears that the fraudulent arrangement was discussed and agreed upon by Mr Mehta, Mr D’Lima and Mr Vincent at Mr Vincent’s home;

(c)    Mr D’Lima also admitted that:

(i)    he received payments of around $20,000 from the sale of pallets;

(ii)    Mr Mehta kept an office at the distribution centre for his private business and conducted business from the premises; and

(iii)    neither he nor Mr Mehta worked the hours required of them in their employment contracts; and

(d)    whilst both Mr Mehta and Mr D’Lima (after obtaining legal advice) have subsequently denied that they made any admissions on 11 October 2019, there is other evidence which indicates serious dishonesty on the part of the respondents, including:

(i)    corroborating information provided by other employees and contractors of Spotlight;

(ii)    Mr Peter Elliott of CH Pallets has confirmed that he has sold pallets for cash at the distribution centre for the last six or seven years; and

(iii)    Mr Mehta arranged for three bank cheques in the total sum of $55,000 to be made out to the Vincent Group for the purposes of it being paid back to Spotlight to avoid detection of a “ghost-worker” scheme being conducted at the distribution centre. On 13 October 2019, two days after the interviews with Mr Mehta and Mr D’Lima, the Vincent Group provided a credit note to Spotlight for $55,000.

15    Whilst it is not possible to quantify the potential claims that Spotlight may have against the respondents, the affidavit evidence relied upon by Spotlight discloses the following:

(a)    Mr Mehta admitted that he had received from the Vincent Group approximately $200,000 over the past 12 months and approximately $400,000 over the past two years;

(b)    Mr D’Lima admitted to receiving $10,000 per month from the Vincent Group;

(c)    Vincent Group were first engaged by Spotlight in October 2014 and have issued invoices to Spotlight in the total sum of $19,295,829. Even assuming a modest gross profit margin, the profits derived by the Vincent Group are likely to be substantial and may run into the millions of dollars; and

(d)    with respect to the sale of pallets in his interview on 11 October 2019, Mr D’Lima admitted that he had received $20,000 from those sales. Ms Hunt deposes to an estimate that Mr D’Lima may have received as much as $194,000 in cash payments through the unauthorised sale of pallets over a six year period.

16    Based on this evidence, counsel for Spotlight provided to me at the hearing of the application with preliminary calculations of Spotlight’s loss as follows:

1.    As against first and second respondents:

(a)    10% of the value of the Vincent Group invoices ($19,295,829) = $1,929,583

(b)    Estimate of the proceeds of sale of pallets over a 6-year period: $194,000

(c)    Plus compound interest (since 2014) and costs

2.    As against third and fourth respondents:

(a)    Total value of Vincent Group invoices = $19.295,829

(b)    Assumed profit (based on assumed profit margin of 30%) = $5,788,748

(c)    Plus compound interest (since 2014) and costs

17    I am satisfied on the basis of the affidavit evidence referred to above that Spotlight has a good arguable case against Mr Mehta and Mr D’Lima in respect of the following causes of action specified in its originating application:

(a)    contraventions of s 182(1) of the Corporations Act 2001 (Cth) (Act) arising from the improper use of their positions for personal advantage, and associated compensation pursuant to s1317H of the Act;

(b)    breaches of fiduciary duties owed to Spotlight as employees, and associated equitable compensation and/or liability to account including as constructive trustee for the traceable proceeds received as a consequence of the breaches of fiduciary duty;

(c)    breaches of the terms of their employment agreements and associated damages; and

(d)    receipt of secret commissions or bribes received from Mr Vincent and/or the Vincent Group, with compensation pursuant to s1317H for profits resulting from the contravention.

18    I am also satisfied on the basis of the affidavit evidence that Spotlight has a good arguable case against Mr Vincent and the Vincent Group in that they:

(a)    are persons involved (within the meaning of s 79 of the Act) in the contraventions of the Act by Mr Mehta and Mr D’Lima and liable to pay compensation under s1317H of the Act;

(b)    knowingly participated in or procured breaches of fiduciary duties by Mr Mehta and Mr D’Lima;

(c)    induced Mr Mehta and Mr D’Lima to breach the terms of their employment agreements; and

(d)    are liable to account as constructive trustee for any benefits or profits obtained as a result of their knowing participation or procurement of the breaches of fiduciary duties by Mr Mehta and Mr D’Lima.

Is there a danger that a prospective judgment will be wholly or partially unsatisfied?

19    Spotlight must secondly establish that there is a danger that a prospective judgment in its favour would be wholly or partly unsatisfied because, on the facts of the case before the Court, the respondents might dispose of, deal with or diminish in value their assets.

20    The allegations which underpin the causes of action relied upon by Spotlight involve a high level of calculated dishonesty by Mr Mehta and Mr D’Lima to defraud their employer over a number of years. Likewise, the allegations which underpin the causes of action against Mr Vincent and the Vincent Group also involve a high level of dishonesty in participating with Mr Mehta and Mr D’Lima to defraud Spotlight.

21    It is significant that the alleged dishonest scheme has been operating for a number of years and concerns a substantial sum of money being misappropriated from Spotlight. It is also significant that, according to the affidavit evidence, Mr Mehta, Mr D’Lima, Mr Vincent and the Vincent Group have ostensibly sought to conceal the allegedly dishonest scheme and that, on 13 October 2019, two days after the interviews of Mr Mehta and Mr D’Lima, steps were taken to pay back $55,000 by credit note from Vincent Group to Spotlight. It is reasonably open at this preliminary stage to characterise this payment back to Spotlight as evidencing a consciousness of guilty on the part of the respondents.

22    I also take into account that Mr Mehta and Mr D’Lima, after initially cooperating with Spotlight and making admissions as to their conduct, have refused to cooperate any further with Spotlight after obtaining legal advice.

23    Where, as here, allegations made against the respondents contain allegations of serious dishonesty, evidence of that nature is capable of satisfying the Court of the existence of the requisite danger to dispose of, deal with or dissipate assets. Such circumstances were present in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, where Gleeson CJ (with the agreement of Meagher JA and Rogers AJA) observed the following about the circumstances of that case:

In particular, I consider that [the primary judge] was correct in taking the view that the evidence as to the nature of the scheme in which the appellant was allegedly involved, which established a prima facie case against him, was such as to justify the conclusion that there was a danger that the appellant would dispose of assets in order to defeat any judgment that might be obtained against him and that such danger was sufficiently substantial to warrant the injunction. There is no reason in principle why the evidence which is relevant to the first of the issues earlier referred to might not also have a bearing on the second, and this will especially be so where the prima facie case that is made out against a defendant is one of serious dishonesty involving diversion of money from its proper channels. The present is not a case in which a plaintiff who claims simply to be an unsecured creditor seeks to prevent a dissipation of assets which have no particular connection with the claim in question. This is a case in which the plaintiff claims that the defendant, making use of a corporation controlled by him, fraudulently misappropriated a large sum of money which, if it is still under the control of the appellant, would be quite likely to constitute, directly or indirectly, the bulk of his assets. As [the primary judge] held, the nature of the scheme in which, on the evidence to date, the appellant appears to have engaged, is such that it is reasonable to infer that he is not the sort of person who would, unless restrained, preserve his assets intact so that they might be available to his judgment creditor.

(Emphasis added.)

See also Victoria University of Technology v Wilson [2003] VSC 299 at [33] per Redlich J and Distinctive FX Pty Ltd v Wright [2015] VSC 299 at [39] per Elliott J.

24    Based on the affidavit evidence, I am satisfied that the respondents are not the sort of persons who would, unless restrained, preserve their assets in tact so that they might be available to a judgment creditor. It follows that I am satisfied that there is a danger that a prospective judgment that Spotlight may obtain against the respondents will be wholly or partially unsatisfied because the respondents may dispose of, deal with or diminish the value of their assets.

Balance of convenience

25    The Court must also be satisfied that no other interlocutory remedy suitable to the circumstances and less extensive in scope is available, and that the balance of convenience favours the granting of relief.

26    The orders proposed by Spotlight do not prohibit the respondents from paying their ordinary living expenses, their reasonable legal expenses, their ordinary business expenses bona fide and properly incurred, and (with notice to Spotlight) contractual obligations already incurred. In addition, Spotlight has proffered the usual undertaking as to damages. In these circumstances, and having regard to the seriousness of the alleged conduct on the part of the respondents and the evidence provided to date, my view is that the balance of convenience favours the granting of the freezing order.

27    Spotlight seeks to freeze the assets of the respondents up to an unencumbered value of $3 million in the case of each of Mr Mehta and Mr D'Lima, and up to an unencumbered value of $6 million in the case of Mr Vincent and the Vincent Group. I am of the opinion, in the circumstances presented by the affidavit evidence and on an interim basis, that these amounts are appropriate.

Form of the orders

28    The orders proposed by Spotlight were substantially in the example form annexed to the Court’s Freezing Orders Practice Note (GPN-FRZG). I have accepted the orders proposed with only minor amendments. The terms of the freezing orders made against the respondents are set out in the “Orders” section above these reasons.

29    As explained, these interim orders will have effect until 4 pm on 8 November 2019. The proceeding will be adjourned to a hearing on that date.

Associate:    

Dated:        6 November 2019

SCHEDULE OF PARTIES