Federal Court of Australia
TJ & P Pty Ltd as trustee for the Post Family Trust v Agrinova Pty Ltd [2024] FCA 318
ORDERS
DATE OF ORDER: | 3 april 2024 |
THE COURT ORDERS THAT:
1. The amended interlocutory application filed by the applicant on 27 March 2024 be dismissed.
2. The applicant pay the respondent’s costs of that application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
GOODMAN J
a. iNTRODUCTION
1 On the eleventh and final day of the hearing of this proceeding, I heard an amended interlocutory application brought by the applicant. In broad terms, the applicant seeks orders preventing the respondent from: (1) subject to certain exceptions, disposing of any of the proceeds of sale of any disposition of real property, water allocation licences or shares held by it; and (2) further encumbering any such assets. The applicant also seeks various ancillary orders.
B. Background
2 The applicant read an affidavit of its solicitor, Mr Keleher, sworn on 25 March 2024. The respondent read affidavits of its solicitor, Mr Long, sworn on 18, 22 and 26 March 2024 and an affidavit of Ms Kim Watts, a real estate agent, sworn on 21 March 2024. Some documents produced in answer to notices to produce were also tendered. From that evidence and uncontroversial facts in the proceeding, the facts germane to the present application are as follows.
3 The respondent is a company under the control of the Stott family, which comprises Richard and Cheryl Stott and their adult children Mathew, Erin and Andrew. Richard and Cheryl Stott have lived in the district around Whitton in New South Wales since the 1950s. They have been married for almost 50 years and have no intention of relocating.
4 The respondent is the registered proprietor of various properties, including properties located at Darlington Point in New South Wales known individually as “Point Farms,” “Wetareel”, “Hastings” and “Cattanachs”, and collectively as the “Point Farms Aggregation”.
5 In September 2020, the respondent, qua borrower, entered into a Land Facility Agreement with Merricks Capital Investments Pty Ltd, qua financier. Under that agreement the respondent was required, inter alia:
(1) within 30 days of the first “Drawdown Date”, to provide Merricks with evidence that: (a) it had appointed a sales agent acceptable to Merricks in connection with the proposed sale of the four properties comprising the Point Farms Aggregation; and (b) the respondent and the sales agent had commenced a marketing campaign, on terms acceptable to Merricks, in connection with those properties, which campaign could not cease absent the prior written consent of Merricks (cl 3.3(b)); and
(2) upon receipt of the proceeds of sale of any of the “Secured Property” – which includes the four properties comprising the Point Farms Aggregation – to immediately pay such proceeds to Merricks in prepayment of the moneys owed by the respondent to Merricks (cl 7.2).
6 Between 31 August 2021 and 22 September 2021, the respondent sold six water allocation licences for a total of approximately $38 million to Australian Executor Trustee Ltd (AETL). During that period and as part of the transaction with AETL, Point Farms AgCo Pty Ltd, a company controlled by Mathew Stott, entered into a lease (qua lessee) with AETL for the lease of the water allocation licences until 30 June 2026.
7 The proceeds of sale of approximately $38 million which the respondent received from AETL for the water allocation licences were applied:
(1) as to $33 million, by payment to Merricks in reduction of the debt owed by the respondent to Merricks;
(2) as to $2 million, by prepayment to AETL under the lease; and
(3) as to $3 million, for use by Agrinova Operations Pty Ltd for operating expenses.
8 On 4 October 2022, the respondent appointed Ms Watts to market the Point Farms Aggregation. Ms Watts has marketed the Point Farms Aggregation since her appointment, although flooding has hampered the marketing process from time to time. The marketing program initially involved an expression of interest program which closed on 18 November 2022. Since November 2022, Ms Watts has received four offers for the properties. The most recent inspection by a potential buyer of the properties occurred in late 2023.
9 On or about 15 March 2024, Mr Keleher became aware that the Point Farms Aggregation was for sale and that Ms Watts was the appointed agent.
10 On 20 March 2024, Mr Keleher sent an email to Mr Long serving a notice to produce and the applicant’s amended interlocutory application of that date. The email requested production of documents in the notice to produce by 25 March 2024 and then stated:
Alternatively, we are instructed to request that the directors of the [the respondent] sign Undertakings consistent with paragraphs 3 and 4A to 4E of the attached Amended Interlocutory Application and serve same on this office by 10:15 am on Monday, 25 March 2024.
11 On 21 March 2024, Mr Keleher sent a further email to Mr Long which included:
We do not see how there can be any detriment to your client arising from the Court entering orders consistent with paragraphs 3 and 4A to 4E of the Interlocutory Application.
Please identify, with specificity, the possible detriment that your client considers might arise in the event the Court entered orders consistent with paragraphs 3 and 4A to 4E of the Interlocutory Application.
Please provide your response by 5 PM on Friday, 22 March 2024.
12 Neither the undertaking nor an identification of the potential detriment was provided. The notice to produce was set aside at the hearing, save for one paragraph.
13 In support of the amended interlocutory application, Mr Keleher deposed that:
By reason of the Water Licence Transfers and the non-response by the Respondent to the Notice to Produce (or failing that, the provision of any information sought by me), I am concerned that there has been dissipation of Agrinova’s assets whilst these proceedings have been on foot. I have received no assurance from the Respondent’s solicitor that further dissipation will not place (sic).
For the foregoing reasons, I respectfully request that the Court make the orders sought in the Applicant’s Amended Interlocutory Application.
14 The applicant proffered the usual undertaking as to damages. The applicant has put in issue the worth of that undertaking.
C. consideration
15 The applicant’s first submission was that the orders that it seeks in the amended interlocutory application represent a narrow or modest regime which does not seek drastic relief and would have minimal impact upon the respondent. Assuming for present purposes, without deciding the point, that the orders sought would have little effect upon the respondent, that of itself provides no basis for the making of the orders sought.
16 The principal basis put forward by the applicant for the making of the orders sought was the concern expressed by Mr Keleher described at [13] above, namely an apprehension that the respondent has dissipated some of its assets and may continue to do so. The relief sought includes an order which has the effect of freezing the proceeds of any sale of real property, water allocation licences or shares held by the respondent. Thus, it is appropriate to treat the amended interlocutory application as an application for a freezing order.
17 The principles to be considered on such an application are well-established: see, e.g., the summaries provided by Anderson J in Rambaldi (Trustee) v Sumpton [2021] FCA 1199 at [9] to [15]; by O’Bryan J in Royal Express Pty Ltd (Recs and Mgrs Apptd) (Admins Apptd) v Huang [2021] FCA 585 at [3] to [4]; by Cheeseman J in Nicols as trustee of the bankrupt estate of Manietta v Manietta, in the matter of Manietta [2022] FCA 39 at [47] to [52]; by Lee J in Merryport Pty Ltd v Lawson [2023] FCA 838 at [6] to [9]; and by Moshinsky J in Fine China Capital Investment Limited v Qi (No 2) [2023] FCA 1059 at [19] to [23]. In summary, the Court must consider whether: (1) the applicant has established a good or arguable case (see r 7.35(1)(b)(i) of the Federal Court Rules 2001 (Cth)); (2) there is a risk that a prospective judgment against the respondent will be unsatisfied in whole or part because the respondent’s assets will be disposed of, dealt with or diminished in value (see r 7.35(4)(b) of the Rules); and (3) as a matter of discretion, including consideration of the balance of convenience, a freezing order should be made.
18 In the present case, it is convenient first to consider the second of these matters – the risk that a prospective judgment against the respondent will be unsatisfied in whole or part because the respondent’s assets will be disposed of, dealt with, or diminished in value – as the answer is dispositive of the application. In this regard:
(1) the applicant bears the onus of persuading the Court that unless the freezing order is made, there is a reasonable apprehension that the respondent’s assets will be dissipated so as to frustrate the Court’s processes: see Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 at 393 to 394 [26], 399 to 401 ([41] to [42]) (Gaudron, McHugh, Gummow and Callinan JJ). As Cheeseman J explained in Hurst, in the matter of Lloyds Curry Shop Pty Ltd (in liq) v Prasad [2021] FCA 1562 at [56], it is not essential for an applicant to demonstrate a positive intention on the part of the respondent to frustrate a judgment (see National Australia Bank Ltd v Bond Brewing Holdings Limited [1990] HCA 10; (1990) 169 CLR 271 at 277 (Mason CJ, Brennan and Deane JJ); Cardile at 394 [26]) or that the risk of dissipation is more probable than not (see Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014; (2010) 273 ALR 194 at 196 to 197 ([8] to [10]) (Kenny J); Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) [2012] FCA 1064; (2012) 90 ATR 711 at 717 [23] (Perram J); Basi v Namitha Nakul Pty Ltd [2019] FCA 743 at [9] (Wigney J)). Rather, it is sufficient for an applicant to establish that, in the absence of a freezing order, there is a danger or real risk that a respondent’s assets will be dealt with in a way which would frustrate the processes of the Court, such that a freezing order is warranted; and
(2) that risk must be demonstrated by evidence: see Fine China at [22(b)]. In an appropriate case this may occur by inference, rather than by direct evidence.
19 I return now to the concern expressed by Mr Keleher. As he explains in the evidence reproduced at [13] above, that concern is said to have arisen from several sources.
20 The first is expressed to be the transfers of the water allocation licences which occurred in August and September 2021. However, nothing in the events surrounding those transfers, and in particular in the application of the proceeds of such transfers, suggests any intention or action on the part of the respondent to frustrate the processes of the Court by dissipating any of the respondent’s assets.
21 The second is expressed to be the absence of a response to various requests made by the applicant’s solicitor to the respondent’s solicitor including for undertakings consistent with paragraphs 3 and 4A to 4E of the amended interlocutory application. It is sufficient to consider the absence of a response to the request for the undertakings, as the absence of a response to the requests for other information rises no higher than the absence of a response to the request for the undertakings.
22 In this regard, counsel for the applicant called in aid the decision of Parker J in Commissioner of State Taxation (WA) v Mechold Pty Ltd (1995) 30 ATR 69, a case in which his Honour took into account the failure of the defendant taxpayers to provide an undertaking to the plaintiff Commissioner, following the entry of judgment in favour of the Commissioner, not to take steps disposing of or diluting their assets until the judgment was satisfied. However, this decision is of little assistance to the present applicant for two reasons. First, a factual level, there was – in contrast to the present case – other evidence before his Honour that justified the conclusion that there was a real risk of dissipation of assets by each of the defendant taxpayers so as to frustrate the enforcement of the judgment. Secondly, at the level of principle, it is consistent with a line of authority to the effect that the mere failure, when requested, to provide an undertaking is insufficient to ground the proposition that there is a real risk that the requested party will act so as to put its assets beyond the reach of the party requesting the provision of the undertaking. In Tomasetti v Brailey [2012] NSWCA 6, Campbell JA explained at [18]:
In some circumstances, as occurred in Commissioner of State Taxation (WA) v Mechold Pty Ltd (1995) 95 ATC 4053, a failure of a respondent to give an undertaking not to dispose of assets when requested to do so can be relevant material for the Court to take into account in deciding whether there is a sufficient risk of dissipation of assets. In that case, however, there was evidence other than a failure to give the undertaking when requested that went to the prospect that there might be a dissipation of assets. A litigant could not request an opposite party to give an undertaking not to dispose of assets, and then, when that request was not complied with, for that to be in itself a sufficient basis to warrant the Court in taking the significant and intrusive step of issuing a freezing order. In the present case I am not satisfied, on the material before me, that there is a sufficient risk demonstrated.
(emphasis added)
23 To similar effect, see In the matter of C & L Cameron Pty Ltd - GB Gazzana v Nadalan Enterprises Pty Ltd; AF Gazzana v Nadalan Enterprises Pty Ltd [2012] NSWSC 676 at [201] (Ward J, as her Honour then was); and Twigg v Twigg [2019] NSWSC 373 at [70] (Stevenson J).
24 The third matter, which is implicit in the application, is that the sale of the properties comprising the Point Farms Aggregation may involve a dissipation of the respondent’s assets. However, there is no evidence that this is so. Further, as noted at [5] above, the sale of the properties comprising the Point Farms Aggregation, and the application of the proceeds of such sale in reduction of the debt owed by the respondent to Merricks, is required by the Land Facility Agreement.
25 For the reasons set out above, I am not satisfied that there is a real risk of dissipation of the assets of the respondent. It follows that the application should be dismissed, and it is unnecessary to consider the first and third matters described at [17] above, or the worth of the undertaking proffered by the applicant.
D. Conclusion
26 For the reasons set out above, the application should be dismissed with costs. I will make orders accordingly.
I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Goodman. |
Associate:
