Federal Court of Australia

Morcom Holdings Pty Ltd v Mountain Asset Partners Pty Ltd (in liquidation) [2025] FCA 692

ORDERS

THE COURT ORDERS THAT:

1.    The application by the second to sixth defendants to vary the orders made on 14 May 2025 (as varied on 13 and 16 June 2025) be dismissed.

2.    Costs be reserved.

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

REASONS FOR JUDGMENT

GOODMAN J:

1    On 14 May 2025, the Court made asset preservation orders against the second to eighth defendants to this proceeding (Freezing Orders). Those orders were essentially in the form of the orders set out in the Freezing Orders Practice Note (GPN-FRZG) and were expressed to have effect up to 22 May 2025.

2    Paragraphs 6 and 7 of the Freezing Orders provide in so far as is presently relevant:

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:

(i)    the Second Defendant, Benajmin David Ross: AUD $1,985,225.59 (Ross Relevant Amount);

(ii)    the Third Defendant, Ryan Lenton: AUD $949,045.65 (Lenton Relevant Amount);

(iii)    the Fourth Defendant, James Richard Gardner: AUD $1,985,225.59 (Gardner Relevant Amount);

(iv)    the Fifth Defendant, Adam Peter Newman: AUD $1,985,225.59 (Newman Relevant Amount);

(v)    the Sixth Defendant, Adnan Tanveer: AUD $1,985,225.59 (Tanveer Relevant Amount);

…

, and for the purposes of the remainder of the order ‘the Relevant Amount’ is a reference to the Relevant Amount as stated for you personally in Order 6(a) above.

(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.

(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).

3    Paragraphs 10 to 12 of the Freezing Orders provide:

Exceptions to this order

(10)    This order does not prohibit you from:

(a)    paying up to $3,000 a week on your ordinary living expenses;

(b)    paying $30,000 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 Relevant Amount 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.

4    Paragraph 15 of the Freezing Orders provides:

(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.

5    On 22 May 2025, orders were made extending the Freezing Orders until further order of the Court and for the second to sixth defendants to file, by 6 June 2025, any evidence against the continuation of the Freezing Orders. The second to sixth defendants did not comply with that order. Orders were also made for responsive evidence.

6    On 13 June 2025, I heard, inter alia, an application by the second to sixth defendants for orders varying the Freezing Orders in several ways.

7    The first variation sought concerned the cap of reasonable legal expenses in paragraph 10(b) of the Freezing Orders. The plaintiff consented to a variation of that cap from $30,000 to $60,000. An order to this effect was made.

8    The second variation sought was to excise from the operation of the Freezing Orders particular recurring transactions. The plaintiff and the second to sixth defendants ultimately agreed upon a list of such transactions. The plaintiff and seventh defendant reached a similar agreement. I gave effect to those agreements by making orders on 16 June 2025 (16 June 2025 orders) which varied order 10 of the Freezing Orders by adding subparagraph (e) relevantly in the following form:

(e)    subject to 10(a)-(d) above, making or entering into:

i.    the transactions listed in Annexure “A”;

...

9    The third variation sought was to excise from the operation of the Freezing Orders numerous bank accounts. Those accounts are held with Commonwealth Bank of Australia (CBA), Westpac Banking Corporation, National Australia Bank (NAB) and Australia and New Zealand Banking Group Limited (ANZ).

10    During the course of the hearing on 13 June 2025, counsel for the second to sixth defendants indicated that they wished to supplement the evidence they had filed in support of this aspect of the application and sought an adjournment of the hearing for that purpose. That aspect of the application was adjourned part-heard to 20 June 2025.

11    The solicitors for the second to sixth defendants then provided a copy of the 16 June 2025 orders to CBA and Westpac.

12    The response from each of CBA and Westpac was to the effect that it was unable to give automatic effect to the variation effected by the 16 June 2025 orders in circumstances where its systems could not allow some but not all transactions to occur on particular accounts. Each indicated that its usual practice when faced with freezing orders is to require the affected customer to attend their local branch so that permitted transactions may be attended to. Each also suggested an alternative solution by way of orders excising particular accounts from the operation of the Freezing Orders.

13    On 20 June 2025, the hearing of the application by the second to sixth defendants for the excision of particular bank accounts from the operation of the Freezing Orders resumed.

14    The second to sixth defendants relied upon two affidavits made by each of them, the first of which was made on 27 or 28 May 2025 and the second of which was made on 17 June 2025; together with affidavits of their solicitor Mr Adrian Edwards made on 12 and 19 June 2025. The plaintiff relied upon a small selection of documents.

15    The evidence of the second to sixth defendants addresses principally: (1) the approach taken by CBA and Westpac; and (2) the prejudice claimed by the second to six defendants in not being able to operate particular accounts in the usual way.

16    Thus, the situation before the Court is as follows:

(1)    there are extant Freezing Orders freezing the assets of each of the second to sixth defendants, up to the respective limits in order 6 of the Freezing Orders, and subject to the exceptions in order 10 of the Freezing Orders for ordinary living expenses, reasonable legal expenses, transactions in the ordinary course of business, and recurrent contractual obligations;

(2)    various bank accounts with CBA, Westpac, NAB and ANZ are subject to the Freezing Orders;

(3)    the 16 June 2025 orders described explicitly various recurring transactions which are excised from the operation of the Freezing Orders;

(4)    CBA and Westpac have indicated that their systems do not allow for the processing of such recurring transactions while freezing orders are in place and have suggested that particular accounts be excised from the operation of the freezing order; and

(5)    the second to sixth defendants request the Court to vary the Freezing Orders by making an order excising numerous accounts from the operation of those orders, claiming prejudice from the approach taken by CBA and Westpac, and from the operation of the Freezing Orders more generally.

17    I am not persuaded to make the orders sought by the second to sixth defendants for the following reasons.

18    First, to do so would be to undermine the effectiveness of the Freezing Orders. As noted above, the Freezing Orders remain in place and the second to sixth defendants were required to file by 6 June 2025 any evidence against the continuation of the Freezing Orders. That evidence was not completed until 23 June 2025 and an argument as to whether the Freezing Orders should be continued has been set down for hearing on 23 July 2025. The present application concerns only variations to the Freezing Orders and does not involve a challenge to their existence.

19    Secondly, although an obstacle has arisen with respect to the processing by CBA and Westpac of the recurrent payments the subject of the 16 June 2025 orders by reason of their internal systems, the making of the orders sought would be a disproportionate and inappropriate response. This is particularly so when:

(1)    CBA and Westpac have not, in terms, refused to comply with the Freezing Orders as varied on 16 June 2025 but have invited the second to sixth defendants to attend their local branches so that the payments permitted under the Freezing Orders may be made; and

(2)    subject to one exception, the evidence does not suggest that the second to sixth defendants have taken up that invitation.

20    The exception is that the third defendant complains that he was informed by staff at the CBA branch at Miranda that cash withdrawals for living expenses are not permitted absent proof by way of invoices. Such a stance by CBA would go beyond CBA’s approach as explained in its response to the solicitors for the second to sixth defendants ([12] above). This issue should readily be capable of resolution between CBA and the third defendant’s solicitor, yet there appears to be no evidence of any attempt to reach such a resolution. The relief sought would be a disproportionate means of fixing this problem.

21    Thirdly, to the extent that the accounts the subject of the application are held with NAB or ANZ, there is no evidence that the processes of those banks have thwarted compliance with the Freezing Orders.

22    Fourthly, the evidence of prejudice contained in the affidavits relied upon by the second to sixth defendants is insufficient to warrant the making of the orders sought, particularly when it is not apparent that the second to sixth defendants have exhausted the options available to them (including attending their local branches) and much of the prejudice claimed is what might be expected by reason of the operation of freezing orders. Also relevant is the undertaking provided by the plaintiff to the Court on 14 May 2025, as set out in subparagraph (1) in Schedule A to the Freezing Orders:

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.

23    Finally, the second and fourth defendants are in a slightly different position to the third, fifth and sixth defendants in that they each profess to have a net asset position in an amount in excess of AUD $1,985,225.59 (being the amounts described in subparagraphs 6(a)(i) and (6)(a)(iii) of the Freezing Orders). However, I am not persuaded to make to the orders sought with respect to the second and fourth defendants in circumstances where: (1) their net asset positions each depend upon valuations of real estate which has been derived from online real estate sites; and (2) it has been and remains open to the second and fourth defendants to take action in accordance with order 12 of the Freezing Orders (and there is no evidence of any attempt on their part to do so to date).

24    I note also that:

(1)    to the extent that the second to sixth defendants contend that there has been non-compliance by particular banks with the Freezing Orders, it would be open to the second to sixth defendants to take action against those banks: see for example Rambaldi (Trustee) v Meletsis, in the matter of the bankrupt estate of Karas (No 3) [2022] FCA 807 (O’Callaghan J);

(2)    it would also be open to the second to sixth defendants to seek a variation of the Freezing Orders so as to amend order 15 — in this respect see Rambaldi at [42] and Nova Supply Chain Finance Pty Limited v Active Capital Reinsurance Limited (a company incorporated in Barbados) [2024] FCA 1398 at [6] to [13] (Jackman J), although such a course may be problematic at this stage of the proceeding. I respectfully agree with the view expressed by Justice Jackman at [13] that consideration should be given in future cases to making an order to the effect that the freezing order is not to be served on, or notified to any bank or financial institution which is not a party to the order without the leave of the Court; and

(3)    I raised these possibilities during the hearing. Neither course was taken (and I intend no criticism by this comment).

25    For the reasons set out above, the application by the second to sixth defendants to further vary the Freezing Orders should be dismissed.

Associate:

Dated:    25 June 2025

SCHEDULE OF PARTIES