FEDERAL COURT OF AUSTRALIA

TJ & P Pty Ltd as trustee for the Post Family Trust v Agrinova Pty Ltd (No 2) [2024] FCA 1496

ORDERS

THE COURT ORDERS THAT:

1.    The undated notice to produce at hearing of 12 paragraphs served on 9 December 2024 by the applicant on the respondent be set aside.

2.    The applicant’s interlocutory application filed on 29 November 2024 be dismissed.

3.    Subject to orders 4 to 6, the applicant pay the respondent’s costs of the interlocutory application as agreed or taxed.

4.    Should either party seek a variation of order 3 then it may file and serve a proposed order, submissions of no more than three (3) pages, and any evidence in support by 31 January 2025.

5.    If a party exercises the liberty provided in order 4, then:

(a)    the other party may file and serve any submissions in response of no more than three (3) pages and any evidence in support by 14 February 2025; and

(b)    the party that exercised the liberty provided in order 4 may file and serve any submissions in reply of no more than three (3) pages by 21 February 2025.

6.    Any application for a variation of order 3 be determined on the papers.

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

REASONS FOR JUDGMENT

GOODMAN J:

A.    INTRODUCTION AND BACKGROUND

1    The applicant seeks orders under rr 7.32 and 7.35 of the Federal Court Rules 2011 (Cth) which (subject to some exceptions) would require the respondent upon the completion of any disposition of any real property, water licences or shares it owns to not dispose of any of the proceeds of sale. Ancillary orders are also sought.

2    The respondent owns, directly or indirectly, various rural properties. In September 2020, the respondent, qua borrower, entered into a Land Facility Agreement with Merricks Capital Investments Pty Ltd, qua financier. Properties owned by the respondent are security for the loan provided by Merricks.

3    On 3 April 2024, I dismissed an earlier application brought by the applicant for similar orders: TJ & P Pty Ltd as trustee for the Post Family Trust v Agrinova Pty Ltd [2024] FCA 318 (Agrinova (No.1)). Some familiarity with the background facts set out in Agrinova (No.1) is assumed in these reasons for judgment.

4    The present application was filed on 29 November 2024, supported by an affidavit of the applicant’s solicitor, Mr Keleher, sworn on 28 November 2024. An urgent hearing date was sought on the basis of an imminent sale of a property owned by Manbijim Farm Pty Ltd, a company in which the respondent holds an 80 per cent interest.

5    On 2 December 2024, I made orders for the filing of evidence by the respondent and by the applicant in reply; and for each to file and serve an outline of submissions by 4pm on 4 December 2024. I listed the application for hearing on 5 December 2024 before Shariff J in his Honour’s capacity as the Commercial and Corporations duty judge. Further evidence was filed and the respondent filed an outline of submissions as directed. The applicant did not file an outline of submissions.

6    On 5 December 2024, the applicant sought and obtained an adjournment to 17 December 2024 to allow it to file and serve a subpoena addressed to Merricks so as to address contended discrepancies in the level of the respondent’s borrowings. That subpoena was not ultimately filed, I infer, because the respondent provided the applicant with statements from Merricks.

7    I heard the application on 17 December 2024. The applicant read affidavits of Mr Keleher, sworn on 28 November and 4 and 16 December 2024. The respondent read affidavits of its solicitor, Mr Long sworn on 22 and 26 March and 2, 3 and 16 December 2024, save for two paragraphs of the first of these affidavits. Various exhibits were also tendered and received into evidence.

B.    RELEVANT PRINCIPLES

8    In Agrinova (No.1), I described the relevant principles at [17] to [18]:

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.

(emphasis in original)

C.    CONSIDERATION

9    I am satisfied, for the purposes of this application, that the applicant has an arguable case in the proceeding.

10    The principal areas of controversy on this application are as to whether the applicant has established that there is a danger that the respondent’s assets will be dealt with in a way which would frustrate or inhibit the processes of the Court, such that a freezing order is warranted; and as to the effect of the failure of the applicant to proffer the usual undertaking as to damages.

11    The evidence which supported the interlocutory application when it was filed, namely Mr Keleher’s 28 November 2024 affidavit, was addressed to the imminent sale of the property owned by Manbijim Farm. At the hearing on 17 December 2024, there was no submission – in writing or orally – that this sale presented a relevant risk, such as to justify the relief sought. It need not be considered further. Instead, the applicant’s argument as set out in the submissions filed by the applicant on the eve of the hearing and developed orally involved the following steps: (1) the respondent’s net asset position has diminished since late March 2024 when the previous application was heard; (2) the extent of that diminution is such that there is a danger that a prospective judgment in the applicant’s favour will be wholly or partly unsatisfied; and (3) it would amount to a frustration or inhibition of the Court’s processes if a prospective judgment were to be wholly or partly unsatisfied.

12    The starting point is the contention that the respondent’s assets have diminished in value since late March 2024 (applicant’s diminution premise). The applicant’s submission is in essence that:

(1)    as at March 2024:

(a)    the respondent had interests in land, water licences and shares, with a value in the order of $76.54 million;

(b)    the respondent had liabilities to:

(i)    Merricks in an amount in the order of $41.87 million; and

(ii)    Thera Agri Capital No 2 Pty Limited, in an unknown amount;

(c)    the net asset position was $34.67 million (being $76.54 million less $41.87 million);

(2)    as at December 2024:

(a)    the respondent has interests in land and water licences and shares, with a value in the order of $54.94 million;

(b)    the respondent owes:

(i)    Merricks $23.56 million; and

(ii)    Thera $13.25 million,

(a total of $36.81 million)

(c)    the net position is $18.13 million (being $54.94 million less $36.81 million);

(3)    the difference between the March and December 2024 net asset positions is $16.54 million (being $34.67 million less $18.13 million).

13    Expressed another way, the applicant’s diminution premise involves the following steps:

14    Having identified the applicant’s argument, I pause at this point to address an application by the respondent to set aside a notice to produce served by the applicant. The arguments on that application were heard simultaneously with the arguments on the substantive application, as they were inter-related. I have come to the view that the notice to produce should be set aside on the basis that the applicant has not demonstrated that the notice to produce has a legitimate forensic purpose (see Seven Network (Operations) Limited v Fairfax Media Publications Pty Limited [2023] FCAFC 185; (2023) 418 ALR 284 at 297 to 298 ([37] to [38]) per Wheelahan, Anderson and Jackman JJ). In particular, the notice to produce calls for many documents having no apparent relevance to the issues on the application as formulated in the applicant’s argument.

15    I note that counsel for the applicant also submitted that there were discrepancies in the respondent’s evidence as to its liability to Merricks as at March 2024, including the correction by Mr Long of evidence upon which the Court had acted in Agrinova (No.1). However, these matters are of little, if any, relevance to the applicant’s argument which includes as a premise that the respondent’s liability to Merricks as at March 2024 was $41.87 million, in accordance with the statements from Merricks recently provided to the applicant. It is not a legitimate forensic purpose to cast the net wide for documents that might throw doubt upon an earlier position when the applicant has adopted the corrected position in its argument. In any event, the notice to produce should be set aside for the reasons set out in the previous paragraph.

16    Returning to the substantive application, I do not accept the starting point of the applicant’s argument, namely the applicant’s diminution premise, for the following reasons.

17    First, the affidavit evidence upon which the applicant’s submission is founded, being primarily evidence from Mr Long, the respondent’s solicitor, does not purport to be – either at March or December 2024 – evidence of the respondent’s net asset position. Rather, it was filed in response to applications based upon the foreshadowed sales of particular properties and addresses particular assets (or groups of assets) and liabilities.

18    Secondly, even if the assets and liabilities relied upon by the applicant to establish the respondent’s net asset positions were to be taken as the respondent’s only (or only material) assets and liabilities, the premises of the argument do not permit the conclusion sought to be drawn. As is apparent from [12] and [13] above, the applicant’s submission as to the December 2024 net asset position includes a liability to Thera of $13.25 million, but the applicant’s submission as to the March 2024 net asset position does not, recognising it only as an unknown or uncertain amount (i.e., x). The applicant’s argument then proceeds on the basis that the respondent’s exposure to Thera in March 2024 was zero (i.e., x = 0). No basis for proceeding on this basis has been established.

19    Thirdly, there is evidence suggesting that the respondent’s exposure to Thera in March 2024 was not zero, and in particular evidence that:

(1)    on 11 September 2020 Agrinova Operations Pty Ltd, a wholly owned subsidiary of the respondent, and Thera entered into an agreement titled “Master Crops Facility Agreement” (MCFA);

(2)    on 20 February 2023, Agrinova Operations and Thera entered into an agreement titled “Master Murabaha Agreement” (MMA);

(3)    as at March 2024, the respondent was a guarantor to Thera of the obligations of Agrinova Operations;

(4)    on 28 May 2024, Thera issued notices of default and payment demands, in relation to the MMA and the MCFA, which specified events of defaults under those agreements; and

(5)    on 16 July 2024, the respondent, Thera and others entered into a deed of forbearance and partial release which recorded that the amount owing by Agrinova Operations under the MCFA and the MMA as at the date of that deed was a total of $14,142,882.42, and pursuant to which Thera agreed to refrain from enforcing its securities over properties owned by the respondent.

20    Fourthly, a more readily available inference is that the respondent’s exposure to Thera as at March 2024 was closer to $14.14 million than to zero, in which case the net position in March 2024 was closer to $20.7 million than $34.67 million, and the difference between the March and December 2024 positions is unlikely to be material given the size of the respondent’s enterprise.

21    It may be the case that as at March 2024, the respondent’s exposure to Thera was a contingent liability, which later crystallised when the guarantee was called upon in May 2024. However, that would not assist the applicant because there is nothing to suggest that such crystallisation occurred otherwise than in the ordinary course of the respondent’s business or that it had the effect of frustrating or inhibiting the Court’s processes.

22    Thus, I am not satisfied that the applicant’s diminution premise has been established. In any event, such satisfaction would have been insufficient to justify the relief sought, for the reasons which follow.

23    Rule 7.35(4) requires the Court to be satisfied that (relevantly) “a prospective judgment will be wholly or partly unsatisfied because any of the following might occur ... the assets of the prospective judgment debtor are disposed of, dealt with or diminished in value” (emphasis added). A past occurrence may inform an assessment of what might occur in the future (see Simmons v Giezekamp [2024] FCA 649 at [21] (Thawley J)), but central to such consideration in the present case would be the nature of the past diminution including whether it occurred as part of the respondent’s ordinary course of business. This has not been addressed by the applicant (which has focussed on the applicant’s diminution premise) and the applicant has not established the requisite risk.

24    Counsel for the applicant also submitted that the respondent is unable to pay its debts as and when they fall due and that this may prevent the applicant from recovering the full amount of any judgment. The evidence falls well short of establishing this proposition, noting in particular that solvency involves a cashflow test and the evidence, such as it is, concerns assets and liabilities rather than cashflow. In any event, the establishment of impending insolvency or impecuniosity does not provide a basis for the imposition of an order in the nature of a freezing order and such orders are not made so as to provide security to an applicant for a judgment in advance of its execution: see, e.g., Hortico (Australia) Pty Ltd v Energy Equipment Co (Australia) Pty Ltd (1985) 1 NSWLR 545 at 558 (Young J); Frigo v Culhaci [1998] NSWCA 88 at 6 and 8 (Mason P, Sheller JA and Sheppard AJA); Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 at 403 to 404 [51] (Gaudron, McHugh, Gummow and Callinan JJ) and 428 [122] (Kirby J); Finn v Carelli [2007] NSWSC 261 at [5] (Brereton J); and Samimi v Seyedabadi [2013] NSWCA 279 at [74] (McColl JA).

25    If contrary to the above, the applicant had established: (1) the applicant’s diminution premise; and (2) the requisite risk of future dissipation, dealing or diminution operating so as to frustrate or inhibit the Court’s processes, I would nevertheless have declined to grant the relief sought as a matter of discretion in circumstances where the applicant has not proffered the usual undertaking as to damages.

26    The usual position that an applicant for an order in the nature of a freezing order is required to provide the usual undertaking as to damages is reflected in Practice Notes GPN-FRZG at [2.16] and GPN-UNDR at [2.1], and is well-established: see e.g., Southern Tableland Insurance Brokers Pty Ltd (in liq) v Schomberg (1986) 11 ACLR 337 at 340 to 342 (Young J); and Cardile at 401 [43]. The rationale for requiring the provision of such an undertaking is the protection of the interests of the party the subject of (and third parties affected by) the freezing order: Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 at 311 to 312 (Gibbs J).

27    Although the applicant, after initially indicating that it would not provide the usual undertaking, did offer to provide an undertaking capped at $50,000, this does not change the position. The usual undertaking is uncapped, consistent with the above-mentioned aim of protecting the interests of the party the subject of (and third parties affected by) the freezing order.

28    Counsel for the applicant submitted that the usual undertaking is not always required, and relied in particular upon Tomlinson v Cut Price Deli Pty Limited (unreported, 23 June 1995, Kiefel J). I accept that there have been occasions when the usual undertaking has not been required, but these have involved exceptional circumstances. This is not an exceptional case. Tomlinson does not assist the applicant as it turns on its own facts.

D.    CONCLUSION

29    For the reasons set out above, the notice to produce should be set aside, and the applicant’s application should be dismissed. Subject to hearing from the parties, my view is that the applicant should pay the respondent’s costs of the application. I will make orders accordingly.

Associate:

Dated:    20 December 2024