FEDERAL COURT OF AUSTRALIA

Cull v Davies [2023] FCA 763

ORDERS

THE COURT ORDERS THAT:

1.    The application for interlocutory relief be returnable immediately.

2.    A freezing order be made against the first respondent in the terms specified in Annexure “A” up to 4:00 pm on Wednesday, 5 July 2023.

3.    The proceeding be adjourned to 2:15 pm on Wednesday, 5 July 2023.

4.    The applicants’ costs be costs in the proceeding.

5.    Liberty to apply.

Annexure A

PENAL NOTICE

TO: GAVIN HUGH DAVIES

This is a 'freezing order' made against you on 3 July 2023 at a hearing after the Court was given the undertakings set out in Schedule A to this order.

The Court orders:

Introduction

1.    The:

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

(b)    time for service of the application and supporting affidavit is abridged and service is to be effected by 12 noon on Tuesday, 4 July 2023.

2.    Subject to the next paragraph, this order has effect up to and including 5 July 2023 (the Return Date). On the Return Date at 2:15pm, there will be a further hearing in respect of this order before Justice Snaden.

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 so much 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.    If:

(a)    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)    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$278,812.70 (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, and you have assets outside Australia ('ex-Australian assets'):

(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:

(a)    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)    the following assets in particular (and if any of those assets have been sold, the net proceeds of the sale):

(1)    The money in Commonwealth Bank of Australia bank account in the name of Gavin Hugh Davies (Account BSB 063145 10318184).

(2)    The money in Commonwealth Bank of Australia term deposit in the name of Gavin Hugh Davies (Term Deposit Number 06 3149 50190823).

(3)    A Black 2016 Audi Sedan, Registration “VHYPE” and VIN/Chassis WAUZZZ4G5GN154139.

(b)    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)    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:

(i)    all your assets both in Australia and world-wide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject and the value to which they are encumbered) and the extent of your interest in the assets;

(ii)    Identifying the current whereabouts and condition of the black 2016 Audi Sedan with car registration “VHYPE” currently registered in the name of the First Respondent.

(b)    by no later than 12:00pm on Wednesday, 5 July 2023, swear and serve on the applicants 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 from:

(a)    paying $2,000 on your ordinary living expenses;

(b)    paying up to $25,000 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 applicants, if possible, at least two working days written notice of the particulars of the obligation.

11.    You and the applicants may agree in writing that the exceptions in the preceding paragraph 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 proposed 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.

12.    

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

(i)    pay the sum of $278,812.70 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 to order 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)    any person (including a bank or financial institution) who:

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

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

(3)    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

(ii)    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 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 applicants will file and serve upon the respondents 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 it was relied on by the applicant at the hearing when the order was made:

(i)    affidavit of Innis Anthony Cull sworn 30 June 2023 and the exhibits thereto; and

(ii)    the applicants written submission dated 3 July 2023.

(d)    a transcript if it is available;

(e)    the originating process, or, if none was filed, any draft originating process produced 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 respondents which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondents’ 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 they have reasonable grounds for supposing may act upon this order, that it 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 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 respondents or the respondents’ assets.

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

REASONS FOR JUDGMENT

Ex tempore

(Revised from transcript)

SNADEN J:    

1    The applicants are the trustees of the second respondent’s bankrupt estate. By an originating application filed on 3 July 2023, they move for relief against the respondents under various provisions of the Bankruptcy Act 1966 (Cth) (the “Act”). Of present relevance, they move for urgent, ex parte relief as against the first respondent, who is understood to be a person to whom certain assets that are the subject of exploration below have been transferred. He is understood to be the second respondent’s de facto partner; although little presently turns upon that.

2    For the reasons that follow—and with minimal alteration to which I shall shortly return—it is appropriate to grant the interim relief for which the applicants move.

3    The applicants press for that interim relief on the strength of an affidavit affirmed by Mr Innis Anthony Cull on Monday, 3 July 2023. To that affidavit is exhibited a bundle of relevant documents. The factual propositions that follow are drawn from (and are borne out by) that material.

4    The background to the immediate controversy may shortly be stated. By orders made on 7 September 2022, the second respondent was made the subject of a default judgment in an action commenced against her in the Magistrates’ Court of Victoria. By that judgment, she was required to pay the sum of $68,908.39 to identified plaintiffs. Despite being served with a bankruptcy notice for that sum, she did not do so and, by reason of that default, was made the subject of a sequestration order. That occurred on 9 February 2023.

5    In the period between 7 September 2022 and 9 February 2023, a number of relevant events transpired. On 10 September 2022, the second respondent and her ex-husband (to whom the present matter does not relate) entered into a contract for the sale of a property located in Mount Eliza, Victoria. That sale completed on 9 November 2022. By that point, the bankruptcy notice referred to earlier had been served. The second respondent’s share in the proceeds of the sale was paid to her then lawyers. The following day, they transferred to the first respondent an amount of $240,812.70 (hereafter, the “Property Settlement Sum”), that sum apparently representing the second respondent’s share in those proceeds, less legal expenses. The amount was paid into a savings account belonging solely to the first respondent.

6    On 30 January 2023, the second respondent was served with the creditors’ petition upon which the sequestration order, made a little more than one week later, was based.

7    As at 1 February 2023, a black Audi A7 sedan, registration “VHYPE” (hereafter, the “Audi”), was registered in the second respondent’s name. It appears still to have been so registered as at 9 February 2023. At some point in February 2023—and possibly as late as 25 February 2023, some 10 days after the applicants wrote to her and asserted an interest in it—the second responded transferred the registration of the Audi to the first respondent, apparently for no consideration. It had a market value somewhere in the vicinity of $38,000.00.

8    It is possible, indeed it appears likely, that the Audi was, at some stage, the subject of automotive finance. Bank records disclose that, on 16 December 2022—a little more than a month after he received the Property Settlement Sum—the first respondent paid the sum of $44,954.91 to Macquarie Leasing Pty Ltd. That transfer was recorded with the narration, “transfer to other bank NetBank Silviana Car Audi”.

9    Bank records also disclose that, on 22 December 2022, the first respondent transferred from the savings account referred to earlier the sum of $175,000.00 to a term deposit bearing his name. Other sums have since also been withdrawn from that account, including amounts totalling $16,857.79 apparently referrable to credit card and living expenses.

10    In April 2023, the applicants received the second respondent’s statement of affairs, which reveals that she owes debts of approximately $130,000.00. Upon the usual undertaking as to damages, they now press for orders under div 7.4 of the Federal Court Rules 2011 (Cth) (the “Rules”) to prohibit the first respondent from dissipating funds and assets that might ultimately be realisable in the second respondent’s bankruptcy.

11    The legal principles attending the grant of such relief such are well-settled. Orders under div 7.4 of the Rules qualify as a “drastic remedy” and should not lightly be granted: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380, 403-404 [51] (Gaudron, McHugh, Gummow and Callinan JJ); Deputy Commissioner of Taxation v AES Services (Aust) Pty Ltd (2009) 77 ATR 414, [20] (Forrest J). The jurisdiction conferred upon the court does not serve as a means by which an applicant might obtain security for a judgment ahead of execution: Zhen v Mo [2008] VSC 300 [23] (Forrest J; hereafter “Zhen v Mo”); Jackson v Sterling Industries (1987) 162 CLR 612, 621 (Brennan J with whom Deane J agreed at 625). Instead, it is founded upon the jurisdiction of the court to prevent abuses of its process. To succeed on the present application, the applicants must establish that they have a good arguable case on a prospective cause of action, that there is a sufficient prospect that a judgment obtained as a consequence would be enforced and that there is a danger that a prospective judgment would be wholly or partly unsatisfied because on the facts of the case before the court, the first respondent might dispose of, deal with or diminish in value his assets: Zhen v Mo, [24] (Forrest J).

12    I am satisfied on all three fronts (albeit on an ex parte basis). There appears to be a realistic prospect that the Property Settlement Sum and the Audi are realisable in the second respondent’s bankruptcy. The evidence discloses at least some prospect that the transfers to the first respondent have been made with an eye to frustrating any attempts made by the applicants to realise as much as possible from the second respondent’s estate. The first respondent—particularly insofar as concerns the Audi—appears to have been complicit in those endeavours; although I should stress that I make that observation only for present purposes and that it is made without any testing of the evidence. Similarly, the evidence discloses some risk that, absent relief at this juncture, the first respondent will deal with the property in question in such a way as to defeat the applicants’ claims to it.

13    There are no discretionary considerations that should incline me against the grant of interim relief.

14    I am, then, subject to the following observations, content to grant relief largely in the form that the applicants propose. I will, however, make the following alterations to that form. First, the “relevant amount” that the applicants hope to secure—recorded twice in the draft form of order as $300,000.00—should be reduced to $278,812.70 (being the combined value of the Audi and the Property Settlement Sum). Second, the proceeding should be adjourned to 2:15pm on Wednesday, 5 July 2023, not 9:30am on Friday, 7 July as is proposed. In the event that the first respondent requires additional time, I will accommodate an adjournment until Friday, 7 July 2023; but a more urgent timeframe is appropriate for now. Service of this order, the originating application and the supporting affidavit should be effected by 12:00pm on Tuesday, 4 July 2023, not 5 July as the draft form of order contemplates. The deadline for the provision of the information that is the subject of proposed order 8 will be changed to 12:00pm on Wednesday, 5 July 2023. In the event that it is necessary to adjourn the return date to Friday, 7 July, that deadline will be extended to 12pm on that day. Finally, the applicants don’t press for the relief in proposed order 8(a)(ii) and it will be removed.

15    Subject to those alterations, I will grant relief in the form proposed. The matter will be adjourned until 2:15pm on Wednesday, 5 July 2023.

Associate:

Dated:    6 July 2023