JANE PANAGARIS MCENTEE [2024] SADC 8

First Applicant: JANE PANAGARIS MCENTEE Counsel: MR P BULLOCK - Solicitor: COWELL CLARKE Second Applicant: DEBORAH ANN MCENTEE Counsel: MR P BULLOCK - Solicitor: COWELL CLARKE Second Respondent: SANDRA JOY BERRY In Person Hearing Date/s: 19/12/2023 File No/s: DCCIV-18-1150 B DISTRICT COURT OF SOUTH AUSTRALIA (Civil: Interlocutory Application) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court in which it was generated. JANE PANAGARIS MCENTEE & ANOR v SJ BERRY PTY LTD & ANOR [2024] SADC 8 Reasons for Decision of his Honour Judge Burnett 7 February 2024 PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - DETENTION, INSPECTION AND PRESERVATION - FREEZING ORDERS On 8 September 2021, the applicants obtained judgment against all respondents in the sum of $204,243. The first and second respondents were found liable in deceit. Following judgment, the insurers of the first and second respondents withdrew indemnity because of the finding of deceit. The applicants obtained a freezing order against the first and second respondents on 2 November 2021 (post-judgment), preventing the first and second respondents and a related third party, TGYH Pty Ltd, from dealing with or disposing of assets up to the value of $400,000. The applicant now seeks to vary the freezing order by increasing the sums specified to $610,000. The second respondent (the first respondent is now in liquidation) seeks to set aside or discharge the freezing order. Held: 1. The application of the applicants to increase the specified sum in the freezing order is granted, based on the estimate of the costs they are likely to recover, but varying the sum to $580,000. The second respondent’s application to set aside the freezing order is dismissed. 2. Freezing orders may be made and may continue to operate after final judgment to protect the efficacy of the future execution of judgment: Deputy Commissioner of Taxation v Shi (2021) 273 CLR 235; Deputy Commissioner of Taxation v Huang (No 4) [2022] FCA 618 applied. 3. An application for the variation or discharge of a freezing order will be determined by what the interest of justice demands in the particular circumstances of the case: Deputy Commissioner v Huang (No 4) applied. -- 1 of 18 -- 4. The second respondent has not established any basis for discharging or setting aside the order. There is a danger that the assets of the second respondent may be dealt with in a way that frustrates the enforcement of the judgment. It is not necessary that there be an intention on the part of the second respondent to frustrate the judgment: Hayden & Ors v Teplitzky (1997) 74 FCR 7 applied. The danger is sufficiently substantial to warrant the freezing order: Deputy Commissioner of Taxation v State Grid International Australian Development Company Limited (2022) 114 ATR 314 applied. 5. The second respondent had not adduced any evidence that the applicants were not liable to their solicitors for costs: Trevorrow v State of South Australia (No 7) [2008] SASC 5 applied. McEntee & Anor v SJ Berry Pty Ltd & Ors [2021] SADC 121; Deputy Commissioner of Taxation v Shi (2021) 273 CLR 235; Deputy Commissioner of Taxation v Huang (No 4) [2022] FCA 618; Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44; Liu v The Age Company Pty Ltd (2016) 92 NSWLR 679; Seeley International Pty Ltd v Millennium Electronics Pty Ltd [2020] SASC 205; Yadlamalka Land Pty Ltd v Ragless [2018] SASC 131; Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; Zhen v Mo [2008] VSC 300; Cardile v Led Builders Pty Ltd (1999) 198 CLR 380; Patterson v BTR Engineering (Aust) Pty Ltd (1989) 18 NSWLR 319; Hayden & Ors v Teplitzky & Ors (1997) 74 FCR 7; Deputy Commissioner of Taxation v State Grid International Australia Development Company Limited (2022) 114 ATR 31; Trevorrow v The State of South Australia (No 7) [2008] SASC 5; Adams v London Improved Motor Coach Builders Ltd [1921] 1 KB 495; Flowers v Finlayson (No 2) [2023] SASCA 12, considered. -- 2 of 18 -- JANE PANAGARIS MCENTEE & ANOR v SJ BERRY PTY LTD & ANOR [2024] SADC 8 Introduction 1 The applicants have filed an interlocutory application in which they seek, inter alia, an order that the freezing order dated 4 November 2021 (the Freezing Order) be varied to increase the sum specified to $610,000.00. 2 The second respondent has filed an interlocutory application dated 3 November 2023, in which she has sought some twenty-one orders, including an order that the Freezing Order be set aside. 3 At the hearing on 19 December 2023, I heard argument on the application of the applicants to vary the Freezing Order to increase the amount specified in the Freezing Order and the application of the second respondent to set aside or discharge the Freezing Order. I propose to give judgment on those applications only at this stage. Background 4 On 8 September 2021, Judge O’Sullivan entered judgment in favour of the applicants against all respondents, including the first and second respondents, in the sum of $204,243.00 inclusive of pre-judgment interest. Judge O’Sullivan found against the first and second respondents in deceit in relation to the encroachment issues. Damages were assessed on the encroachment issues in the sum of $116,875.00. Those damages had been reduced by 15% by reason of the applicants’ failure to take reasonable care. 5 Costs were reserved at that stage but later awarded in favour of the applicants. 6 Shortly after judgment was entered, the first and second respondents received notice from their insurer that it had withdrawn indemnity because of the findings of deceit. 7 The applicants applied for the Freezing Order on 11 October 2021. 8 On 2 November 2021, Judge O’Sullivan granted the Freezing Order against the first and second respondents and TGYH Pty Ltd (a company of which the second respondent is the sole director and shareholder) preventing those parties from dealing with or disposing of assets up to the value of $400,000.00 or such other or further amount that might be ordered by the Court in the future. At that time, no order for costs had been made (because the applicants were considering seeking a costs order against the third party). Judge O’Sullivan proceeded on the basis that the first and second respondents were prospective judgment debtors in relation to costs and that there was a good arguable case that they would be liable for costs. The order stated that the first and second respondents and TGYH Pty Ltd could apply at any time to vary or discharge the freezing order. The order further -- 3 of 18 -- [2024] SADC 8 2 stated that the first and second respondents or TGYH Pty Ltd were not prohibited from paying $700.00 per week for living expenses and $60,000.00 on reasonable legal expenses. 9 Judge O’Sullivan published his reasons for making the Freezing Order on 8 November 2021.1 Judge O’Sullivan held: SJ Berry Pty Ltd [42] It is not clear to me why it was necessary to change the trustees at the time that the trustees were changed and no explanation has been proffered, other than in a very cursory way. The adverse judgment against SJ Berry Pty Ltd leads to the question of its capacity to be indemnified from the assets of the SJ Berry Family Trust in circumstances where those assets have been transferred out of that trust. Ms Berry [43] I consider that there is a danger that Ms Berry's assets, whether actual or expectancies, may be disposed of, dealt with or diminished in value. In particular, I consider there is a danger that any equity that Ms Berry may have in the Hahndorf property or any funds she may have received from the sale of the rent roll of her previous real estate business, may well be committed to the Macclesfield project, or otherwise committed, either now or prospectively. Although I accept that involves a degree of speculation, nonetheless there was no information available to me or any suggestion on information given to me on the part of the first and second respondent that such a scenario is not the case. [44.2] In all the circumstances, I am satisfied that there is a danger that the judgment will be wholly or partially unsatisfied because the assets of the first and second respondents, or another person, may be disposed of, dealt with or diminished in value. In particular, I am satisfied that there is a danger that the judgment will be wholly or partly unsatisfied because a third party, namely TGYH Pty Ltd holds, or is using, or has exercised, or is exercising a power of disposition over assets (including claims and expectancies) of Ms Berry. As to Ms Berry herself, she has put no information before the Court as to her asset position. She has some equity in the Hahndorf property but I cannot be satisfied that it will not be used for the development of the Macclesfield property. 10 In coming to those conclusions, Judge O’Sullivan referred to the following transactions. A property in Unley that was in the name of the first respondent, as the sole trustee of a trust known as the SSHA Property Trust, was sold in December 2018, some 9 months after the proceedings were commenced.2 Although the evidence suggested that the property was sold for a sale price that was less than the mortgage, this was contrary to subsequent advice from the accountant of the second respondent that there was a small capital gain on the sale of the property. The second respondent submitted that although there was a small capital gain, the mortgage exceeded the sale price and therefore there was negative equity in the property. 1 McEntee & Anor v SJ Berry Pty Ltd & Ors [2021] SADC 121. 2 Ibid at [19.1]. -- 4 of 18 -- [2024] SADC 8 3 11 Secondly, a commercial property in Macclesfield was transferred on about 30 June 2020, from the first respondent, S J Berry Pty Ltd, as trustee of the SJ Berry Family Trust to TGYH Pty Ltd, as trustee of the SSHA Property Trust for nil consideration on the basis the transfer was from trustee to trustee. 12 TGYH Pty Ltd, as the organisational representative for the Adelaide Hills PM Trust, registered the business name Cheddar Studios. That business name was registered for the purpose of undertaking the development of the Macclesfield Property. Further, TGYH Pty Ltd had been registered in 2020 and, as trustee of the Adelaide Hills PM Trust trading as Sandra Berry Real Estate, had taken over some of the business interests of the first respondent. The second respondent had undertaken a restructure of her real estate business. The first respondent, as trustee of the Sandra Berry Family Trust, by Deed Poll transferred the ownership of that business to the Adelaide Hills PM Trust. The Sandra Berry Real Estate Property Management Division, including the book of property management contracts, was sold in February 2020 to a third party for the sum of $335,769. The second respondent said that the proceeds of sale were used to pay out a business loan against the Macclesfield Property and the balance distributed to Cheddar Studios and payment of legal expenses prior to the Freezing Order being made. 13 TGHY Pty Ltd is the trustee of the Adelaide Hills PM Trust which owns the business name Cheddar Studios. TGHY Pty Ltd is also the organisational representative for the business name Cheddar Studios. Cheddar Studios Pty Ltd (a company owned and controlled by the second respondent) and Cheddar Studios were registered for the purpose of developing the Macclesfield property. 14 There was no appeal from the Freezing Order. 15 By orders dated 12 November 2021 (after the Freezing Order was made), Judge O’Sullivan ordered that the first and second respondents pay the applicants’ costs of and incidental to the trial proceedings: 1. On a party/party basis for the period up to and including 10 April 2020; 2. On a full indemnity basis for the remainder of the costs in the trial proceedings. 16 The first and second respondents appealed the judgment on the substantive hearing to the Court of Appeal. On 9 December 2022, the Court of Appeal delivered its judgment dismissing the appeal. 17 The first and second respondents filed an application for special leave to appeal to the High Court on 27 January 2023. By orders dated 13 April 2023, the High Court dismissed that application for special leave. 18 On 24 January 2023, the first respondent was served with a statutory demand by the applicants. -- 5 of 18 -- [2024] SADC 8 4 19 On 9 June 2023, the first respondent was wound up in insolvency. A report from the liquidator stated that his investigations in relation to uncommercial transactions were ongoing and contemplated the circumstances of certain asset transfers that occurred in July 2019, between the SJ Berry Family Trust and the SSHA Property Trust and transfers that occurred between the SJ Berry Family Trust to clear the directors beneficiary loan account and the subsequent change in trustee of the SSHA Property Trust from the first respondent, to a related entity, TGHY Pty Ltd. These transactions included a transfer of a development site in Macclesfield South Australia. The report also indicated that the liquidator was examining how the first respondent appropriated the proceeds from the sale of the rent roll. 20 At this stage, the statements made by the liquidator in his report are matters of speculation and do not provide any evidence of wrongdoing. I do not take the matters raised by the liquidator in his report into account when determining the applications of the applicants or the second respondent. 21 Since the Freezing Order was granted, the judgment sum of $225,671.10 has been paid. That sum included post judgment interest to 16 August 2023. The payment of the judgment sum was made by TGYH Pty Ltd as trustee of the Adelaide Hills PM Trust. TGYH Pty Ltd borrowed $200,000 from family members of the second respondent for the purposes of paying the judgment sum. In affidavit material filed by the second respondent, there is evidence that the loan was taken out by TGYH Pty Ltd as trustee of the SSHA Property Trust (which owned the Macclesfield property) but was subsequently waived. 22 The second respondent has paid the sum of $159,993 in October 2023 in respect of her own legal costs incurred in the period from 26 November 2021 to 27 October 2022. The affidavit evidence of the second respondent was that she had incurred costs in the sum of $319,117 in respect of the Freezing Order application, the appeal and special leave applications and the security of costs application and the payment of $30,000 into Court for security of costs of the appeal. I accept the submission of the applicants that is not clear on the evidence before me, beyond the loan of the $200,000, where the second respondent obtained funds to pay the judgment sum of $225,671.10 and the costs that were paid of $159,993. 23 Subsequent to the trial, the second respondent has filed a number of applications in which she has sought orders to set aside the judgment in the trial proceedings and/or stay the enforcement of those proceedings. The second respondent has also made applications that third parties, such as the insurer or its agent, pay the judgment sum. The second respondent has made various applications to the effect that she has no liability to pay the costs of the applicants on the basis that the applicants incurred no liability to pay costs to their solicitors. The second respondent submits that Mr Paul McEntee was the true applicant in the proceedings and was liable to pay the costs of the solicitors. I have dealt with some aspects of those applications previously. Although Mr Paul McEntee entered into the contract to purchase the property that was the subject of the proceedings, he -- 6 of 18 -- [2024] SADC 8 5 did so in his own name and/or nominee. Jane and Deborah McEntee were nominated as purchasers of the property and became the registered proprietors of the property. Jane McEntee is the wife of Paul McEntee. Deborah is married to Paul’s brother and is therefore the sister-in-law of Paul and Jane. Jane and Deborah McEntee were the applicants in the proceedings. They entered onto into a costs agreement with their solicitors, Cowell Clarke, on 7 March 2018. The letter of engagement that accompanied the costs agreement stated that Mr Paul McEntee would provide instructions on behalf of the applicants. The costs agreement provided for a liability on the part of Jane and Deborah McEntee to pay the costs of Cowell Clarke. Mr Paul McEntee had entered into an earlier costs agreement with Cowell Clarke. 24 The applicants have estimated their costs to date (excluding the appeal costs and the costs in relation to the special leave application) to be approximately in the sum of $610,000. This estimate did not include costs associated with the further applications, including these applications, that have been made to this Court since judgment was entered. 25 The second respondent in her affidavit sets out her assets including ownership of property at: 1. 2 Schubert Drive, Hahndorf (valued at $1,000,000.00 with a mortgage of $142,282.00). 2. Two properties at Main Street, Nepean Road, Tootgarook, Victoria (valued at $2,500,000.00 and $3,300,000.00 respectively). 3. Cash at Bank SA in the sum of $145,234.00. 4. Cash at other financial institutions in the sum of $489,915.00. 26 The Tootgarook properties were acquired by the second respondent after the Freezing Order was made as part of her inheritance from her father’s estate. The second respondent stated in argument that she had no intention of selling any of the properties. Legal Principles 27 The legal principles relating to a freezing order are set out in the Uniform Civil Rules 2020 (UCR), r 112.14. That rule states that: The court may make 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. Under UCR 112.17(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 -- 7 of 18 -- [2024] SADC 8 6 circumstances that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following may occur: (a)… (b) the assets of the judgment debtor, prospective judgment debtor or another person are- (i) … (ii)disposed of, dealt with or diminished in value. 28 The purpose of a freezing order, therefore, is to prevent the frustration or inhibition of the recovery of a judgment. 29 It is clear from the wording of UCR 112.14 that freezing orders can be made after judgment has been delivered, there being a reference in UCR 112.14 and UCR 112.17 to a freezing order being made when judgment has been obtained. This point was made clear by the High Court in Deputy Commissioner of Taxation v Shi3 where Gordon J ( Kiefel CJ, Gageler, Edelman and Gleeson J agreeing on this issue) held in relation to the identically worded provision in Federal Court Rules 2011 (Cth) 7.32. 7.33. 7.35(4) and 7(36):4 A freezing order, and an asset disclosure order, have the same fundamental purpose: "to prevent the abuse or frustration of [a court's] process in relation to matters coming within its jurisdiction. Freezing orders may be made, and may continue to operate, after final judgment to protect the efficacy of the execution. And for freezing orders to be effective there needs to be timely disclosure of assets. The utility in both orders lies in ensuring that the court's processes for enforcement of a judgment are not frustrated by assets being spirited away between the time of commencement of the proceedings and eventual enforcement. (citations omitted). 30 In Deputy Commissioner of Taxation v Huang (No 4),5 Jagot J discussed the purpose of a freezing order after judgment had been entered and when a variation to the freezing order might be made. She held:6 [21]… On entry of the judgment debt, the freezing order was no longer contemplated to operate until the final disposition of the proceeding. Its purpose became to protect the efficacy of the future execution of the judgment debt. If the interests of justice require the freezing order to be varied to fulfil that purpose, the Court has a discretion to vary the freezing order. [22] This is reflected in Break Fast Investments Pty Ltd v Gravity Ventures Pty Ltd [2013] VSC 89 at [43] where Vickery J said: As to variations, a freezing order may be varied, on the application of the defendant, or indeed any other person who is affected by the making of the order. However, any such 3 (2021) 273 CLR 235; [2021] HCA 22. 4 Ibid at [22]. 5 [2022] FCA 618. 6 Ibid at [21]-[23]. -- 8 of 18 -- [2024] SADC 8 7 variation that is made must not, in the ordinary course, conflict with the purpose for which the order was made in the first place. Secondly, a variation must also accord with the interests of justice. In this respect, reference is made to MG Corrosion Consultants v Gilmour [2012] FCA 568 at [14] where Barker J made the following observations: So far as the court’s power to vary a freezing order is concerned, there can be little doubt about it. Similarly, it is also clear that having made a freezing order a court should not be quick to reverse it save for good reason and the dictates of justice. ... Ultimately, the grant or discharge or variation of an interlocutory injunction, including a freezing order will be dictated by what justice demands in the particular circumstances of the case. [23] Similarly, in Linke v TT Builders Pty Ltd (No 2) [2015] FCA 704 , White J said at [11]: It is in the public interest that the Court’s orders are respected and obeyed. Accordingly, it is appropriate for the Court to assist judgment creditors to enforce their entitlements. Respect for the law will be undermined if judgment debtors can readily frustrate enforcements of judgments against them. Spender J referred to these considerations in Guthrie v Robertson (1987) 13 FCR 336 at 337–8 when he said: It is obviously crucial to the efficiency of the Court’s process that its orders be obeyed, and the Court should be astute to lend whatever assistance it can to enable its orders to be enforced. 31 There are three propositions that arise from these statements. First, once judgment has been obtained, the purpose of the freezing order becomes to protect the efficacy of the future execution of the judgment debt. Secondly, the Court should be prepared to vary the freezing order where the interests of justice require such a variation to be made. Thirdly, the Court should not reverse a freezing order unless for good reason and the dictates of the interests of justice require the order to be discharged. 32 The applicants placed reliance on the decision of McClelland J in Brimaud v Honeysett Instant Print Pty Ltd7 where His Honour held: In such a case [being and interlocutory order of a substantive nature after a contested hearing where it was contemplated that the order would operate until the final disposition of the proceedings] the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard of the discovery of new material which could not reasonably have been put before the court on the hearing of the original application. 7 (1988) 217 ALR 44 at 46. -- 9 of 18 -- [2024] SADC 8 8 33 Brimaud was considered by the New South Wales Court of Appeal in Liu v The Age Company8 where McColl JA held:9 In summary, accordingly, the overriding principle governing the approach of the court to interlocutory applications is that the court should do whatever the interests of justice require in the particular circumstances of the case] That consideration also applies to a second interlocutory application concerning the same, or what is substantially the same, issue or an attempt by a litigant who has unsuccessfully resisted an interlocutory application to re- agitate the same question. However, in determining what the interests of justice require, the court will have regard, among other matters, to the nature of the first interlocutory application, the nature of the change in position and whether any matter relied upon to change the basis upon which the challenged earlier order was made, was open to be advanced at the earlier hearing. (citations omitted) 34 Ward JA agreed with this statement and that the overriding principle was to do what the interests of justice required. 35 Certain general principles relating to freezing orders are relevant to the applications before the Court. These are: (1) The threshold requirement for obtaining a freezing order is a judgment of the Court or in the case of an accrued or prospective cause of action, a good arguable case.10 (2) The Courts have consistently recognised that a freezing order is an exceptional remedy and should not be granted lightly.11 (3) The application must be supported by evidence and not speculation. (4) The applicant for the order bears the onus of satisfying the Court as to the amount which is to be the subject of the order. The applicant for the freezing order must establish with some precision the value of the prospective judgment. The order should not unnecessarily tie up a party’s assets and property.12 (5) The balance of convenience must favour the granting of the freezing order.13 8 (2016) 92 NSWLR 679; [2016] NSWCA 115. 9 Ibid at [199]. 10 UCR 112.17(1) and (2). See Livesey J (as he then was) in Seeley International Pty Ltd v Millennium Electronics Pty Ltd [2020] SASC 205 at [8] as to what constitutes a good arguable case. 11 Yadlamalka Land Pty Ltd v Ragless [2018] SASC 131 at [35]-[41]. Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141 at [57]; [2013] NSWCA 102 at [57]. 12 Zhen v Mo [2008] VSC 300 at [29] citing Cardile v Led Builders Pty Ltd (1999) 198 CLR 380 at [124]. 13 Zhen v Mo [2008] VSC 300 at [27] citing Consolidated Constructions Pty Ltd v Bellenville Pty Ltd [2002] FCA 1513. -- 10 of 18 -- [2024] SADC 8 9 (6) Evidence of dishonesty which may be relevant in establishing whether an applicant for a freezing order has a good arguable case, may also be relevant to the issue of the danger of the risk of a dealing with assets.14 (7) It is not necessary for the applicants to show an actual intention on the part of the respondents to deal with their assets and defeat the recovery of the judgment sum. In Hayden & Ors v Teplitzky & Ors,15 Lindgen J held: I propose to apply the test formulated by Gleeson CJ (in Patterson v BTR Engineering (Aust) Ltd & Ors). It will be noted that it is not necessary for the applicants to show an active intent on the part of the respondent to defeat the applicants from recovering the judgment. It is enough if the applicant establishes that, in the absence of relief, there is a danger that assets will be dealt with in a way which will prevent the applicants recovering the judgment. 36 This issue was also addressed in Huang where the Court held that a freezing order is directed to dispositions which have either the intention to frustrate enforcement action or have the necessary effect of frustrating enforcement actions16 In Deputy Commissioner of Taxation v State Grid International Australia Development Company Limited,17 Perry J accepted, as expressed in Huang,18 that the danger must be “sufficiently substantial to warrant the freezing order.”19 Determination of the applications 37 The approach to be taken by the Court in the application to vary the Freezing Order and the application that the order be discharged or set aside, should be governed by the interests of justice. The Court should not be limited to only setting aside or discharging the order if it was satisfied that there was some change in circumstances since the order was made or the discovery of new material that could not have reasonably been discovered. I have adopted this approach because the Freezing Order, being made after judgment has been entered, is not an interlocutory order that is made as part of the process of the pre-trial procedures but an order that will continue until payment is made. As the amount to be paid is not ascertained and may properly depend on a taxation of costs, the Freezing Order might extend for some, indeterminate time. The strength of the factors that led to the granting of the order will vary over time. In these circumstances, I consider that the Court, in assessing an application to discharge or set aside or an application to vary, should not be limited in its approach to only considering discharging or setting aside the order if new material is discovered. 14 Patterson v BTR Engineering (Aust) Pty Ltd (1989) 18 NSWLR 319 at 325. 15 (1997) 74 FCR 7 at 16. See McEntee & Anor v SJ Berry Pty Ltd & Ors [2021] SADC 121.at [36]. 16 (2021) 96 ALJR 43 at [17]; [2021] HCA 43. 17 (2022) 114 ATR 31; [2022] FCA 139. 18 (2021) 96 ALJR 43 at [18]; [2021] HCA 43. 19 (2022) 114 ATR 314; [2022] FCA 139 at [41]. -- 11 of 18 -- [2024] SADC 8 10 Varying the amount of the Freezing Order 38 I am satisfied that the evidence put forward by the applicants provide a proper basis for varying the Freezing Order by increasing the specified amount. The amount initially set by Judge O’Sullivan was specified before a costs order was made, although in anticipation of such an order. There is no suggestion in the reasons of Judge O’Sullivan that he took into account the possibility that an order for indemnity costs might be made when setting the specified amount in the Freezing Order. In addition, the further work undertaken by the applicants in assessing the amount of their costs, together with the further costs incurred by the applicants in responding to the various applications made post judgment and post appeal by the second respondent, provides a proper basis for increasing the amount specified in the Freezing Order. However, I consider that the affidavit material provides a proper basis for increasing the specified amount to $580,000, rather than $610,000. The percentage used by applicants in calculating their recoverable costs, 95% in the case of indemnity costs and approximately 66% in the case of the usual order for costs, was on the higher side. Not all costs will be recovered. In these circumstances, I do not consider that the applicants have satisfied their onus of establishing that the sum of $610,000 should be the specified amount but consider that they have established that $580,000 is the amount that should be specified in the Freezing Order. Discharge or setting aside of the Freezing Order 39 The second respondent has sought the discharge or setting aside of the Freezing Order for a number of reasons. The second respondent submitted: (1) There was no proper basis for the making of the order in the first place, nor does such a basis presently exist; (2) The applicants committed an abuse of process when they initially sought the Freezing Order such that the interests of justice require the order to be set aside pursuant to UCR186 in the interest of justice; (3) The applicants have no liability for costs to their solicitors and accordingly the respondents have no liability to the applicants for any costs; (4) The applicants did not make proper enquiries or investigations prior to commencing proceedings as to the first and second respondents’ financial position and their ability to pay any judgment sum and should have joined the insurer of the first and second respondents as a party to the litigation; (5) The balance of convenience favours the discharge of the order as, on the contention of the second respondent, she is prohibited by the order from incurring legal expenses. -- 12 of 18 -- [2024] SADC 8 11 40 I do not consider that any of the matters raised by the second respondent provides a proper basis for setting aside or discharging the Freezing Order. (a) Basis for making the Freezing Order 41 There was (at the time that the Freezing Order was made) and continues to be a proper basis for the making of the order. The evidence establishes that the first and second respondents transferred assets from one entity to another. I accept that there is no evidence that the transfers were made for the purpose of defeating future enforcement proceedings undertaken by the applicants and that the transactions were part of the restructuring of the affairs of the first and second respondent. However, the transfers do have the effect of potentially impacting on the enforcement action that might be taken by the applicants. 42 The transfer of the ownership of the Macclesfield property on about 30 June 2020, from the first respondent, S J Berry Pty Ltd, as trustee of the SJ Berry Family Trust to TGYH Pty Ltd, as trustee of the SSHA Property Trust, for nil consideration is such a case. Although I accept that there may be questions as to the ability of SJ Berry Pty Ltd to exercise a right of indemnity from the assets of the SJ Berry Family Trust because of the finding of deceit and dishonesty, at the time the transfer was made, no finding of deceit or fraud had been made. It follows that at the time of the transfer, the matters which might lead to the loss of the right of the indemnity, had not been established. Further, the finding of deceit related to the encroachment issue only and it might be the indemnity under the Trust Deed would respond to the other aspects of the claim which were found to have been substantiated. 43 The way in which the proceeds of the sale of the property management contracts were dealt with also fall into the same category. These proceeds were used to pay out a business loan against the Macclesfield Property and the balance distributed to Cheddar Studios and payment of legal expenses. The assets are therefore not available to the trust in respect of which the first respondent may have had a right of indemnity. 44 The development of the Macclesfield Property might also give rise to a danger that the assets of the second respondent might be disposed of or dealt with or encumbered and enforcement proceedings frustrated. 45 The sale of the Unley property, although not to the detriment of the applicants in that the asset position of the second respondent was not affected, does demonstrate a willingness on the part of the second respondent to deal with her assets, unless restrained. 46 The second respondent, along with the first respondent, was found at trial to have acted dishonestly in relation to the encroachment issues. A finding of dishonesty can lead to an inference that a party may be prepared to act dishonestly -- 13 of 18 -- [2024] SADC 8 12 in some other regard in relation to dealing with assets. The Court in Patterson20 acted in accordance with that approach, although that case involved a transaction where the respondent profited from the transaction. That is not the case in the present case and therefore the weight to be given to an inference of the second respondent dealing with assets arising from the finding of dishonesty in the trial judgment is less than would otherwise be the case. 47 It is also unclear on the evidence how the judgment sum of $225,000 and the costs of $159,000 were paid. The second respondent has given evidence that THYH Pty Ltd borrowed $200,000 from family members but that does not explain how the balance of the two amounts were paid. Further, there is a lack of evidence about the incurring of the remainder of the appeal costs and how they were proposed to be paid. That suggests that the second respondent may have had access to further resources which have not been disclosed. 48 The second respondent appears to be acting under a misapprehension that it was necessary for the applicants to show that, by transferring or dealing with assets, she intended to frustrate any enforcement action. As Lindgren J made clear in Hayden & Ors v Teplitzky & Ors,21 it is sufficient that there is a danger that assets may be dealt with in a way that frustrates the enforcement of the judgment. It is not necessary that there be an intention on the part of the respondent to frustrate enforcement action. Even if the second respondent caused the transfer of assets or dealing with assets as part of some form of business re-structure, that may still cause a danger that the judgment will be unsatisfied. 49 I am satisfied that there is a danger, if the Freezing Order is discharged, that the applicants’ judgment on costs would be unsatisfied because the assets of the second respondent had been disposed of or dealt with. (b) Abuse of Process 50 There was no evidence that the applicants committed an abuse of process when obtaining the Freezing Order. Judge O’Sullivan made the order based on the evidence before him. None of that evidence was false. The first and second respondents had the capacity to and did adduce evidence and made submissions opposing the application. The second respondent advanced submissions that the applicants did not comply with the Rules when making the application and further that the evidence of dealing with assets was not sufficient. 51 After considering all relevant matters, Judge O’Sullivan determined that it was appropriate to grant the Freezing Order. In these circumstances, it was open for the first and second respondent to appeal that order. They did not do so. The second respondent cannot now raise matters which she submits provides a 20 (1989) 18 NSWLR 319. 21 (1997) 74 FCR 7. -- 14 of 18 -- [2024] SADC 8 13 justification for setting aside or discharging the Freezing Order on the basis of an abuse of process which were part of the evidence that was before Judge O’Sullivan. 52 The applicants did not make false allegations of the divesture of assets before Judge O’Sullivan in the Freezing Order application. The applicants asked the Court to draw inferences from the transfers and sales made by the first or second respondent. The first and second respondent submitted the application for a freezing order was an abuse of process by the applicants because at the same time they sought an order for payment for security of costs of the appeal. That submission was rejected by Judge O’Sullivan. The fact that the applicants were considering making an application for non-party costs (but had not yet made that application) was raised before Judge O’Sullivan. It was not a matter relevant to the disposition of the application for the Freezing Order and ultimately the applicants decided not to pursue that application. 53 The second respondent submitted that the applicants had an improper purpose in making the application for the Freezing Order namely to strangle the second respondents’ financial ability to appeal the primary judgment or ameliorate their own failure to join the insurer prior to judgment. Neither matter would mean that the applicants did not have a proper purpose in bringing the application namely to protect the enforcement of their judgment. There was no evidence of the applicants having either of the purposes alleged by the second respondent. Any inability of the second respondent to pay for the costs of the appeal might be relevant to the balance of convenience although in fact the second respondent was able to pursue the appeal and did have sufficient assets or resources to pay for costs for the appeal. The applicants were not obliged to join the insurer and would likely have faced difficulties in doing so. 54 The second respondent submitted that the applicants did not comply with the rules when initially applying for the Freezing Order including the schedule 3 protocols. Even if that were the case, that does not give rise to any abuse of process. The second respondent was represented by counsel at the hearing of the application for the Freezing Order and was able to make submissions on these matters if they caused her any prejudice and in fact did make submissions on this issue. (c) Applicants’ liability for costs 55 The second respondent has submitted that the applicants are not liable to their solicitors for costs and that any liability for such costs rests with Mr Paul McEntee. Accordingly, the second respondent submitted that she owes no sum to the applicants for costs, there being no relevant costs to which the order for costs could apply. Such an argument will only succeed if the second respondent can establish that there was an agreement between the applicants and their solicitors or the third party, Mr McEntee, and the solicitors that under no circumstances would the applicants be liable for costs. -- 15 of 18 -- [2024] SADC 8 14 56 Gray J dealt with such an argument in Trevorrow v The State of South Australia (No 7)22 where he made the following comments:23 In Adams v London Improved Motor Coach Builders Ltd,24 the plaintiff brought an action for wrongful dismissal. He was successful and was awarded costs. The defendant contended that the plaintiff was not entitled to recover costs as his union had retained the solicitors in the case and it was the union to which the solicitors looked for payment. The Court of Appeal rejected the argument. Bankes LJ observed:25 once it is established that the solicitors were acting for the plaintiff with his knowledge and assent, it seems to me that he became liable to the solicitors for costs, and that liability would not be excluded merely because the Union also undertook to pay the costs. It is necessary to go a step further and prove that there was a bargain, either between the Union and the solicitors, or between the plaintiff and the solicitors, that under no circumstances was the plaintiff to be liable for costs. 57 That principle is apposite to the present case. The costs agreement between the applicants and their solicitors, Cowell Clarke, provides clear evidence that the applicants are liable to their solicitors for their costs. The fact that there may be a similar and earlier agreement between Mr Paul McEntee and Cowell Clarke does not affect that liability. There is no evidence that Mr Paul McEntee and the applicants entered into an agreement whereby Mr Paul McEntee agreed to make a gift to the applicants of the amount paid for costs. Certainly, for the purposes of this argument and the applications before the Court, I am satisfied that there is strong evidence of a liability on the part of the applicants to Cowell Clarke for costs. 58 The second respondent seeks to impugn the Costs Agreement between the applicants and the second respondent and alleges, without being specific, that the agreement was fraudulent or backdated. There is no evidence for this allegation which I reject. The only matter to which the second respondent referred to in support of that contention, was the use of the same file number on the file for the proceedings (ie the file in respect of which the applicants and Cowell Clarke entered into a costs agreement) and the file number on two earlier invoices which dealt with advice on the dispute. That provides no basis for impugning the Costs Agreement or its authenticity. As the Court of Appeal held in Flowers v Finlayson (No 2),26 (although in different context), to allege fraud is a very serious matter and there must be a proper basis for making such an allegation. 22 [2008] SASC 5. 23 Ibid at [9]. 24 [1921] 1 KB 495; [1920] All ER Rep 340. 25 Ibid at 501. 26 [2023] SASCA 12 at [26]. -- 16 of 18 -- [2024] SADC 8 15 (d) Failure to undertake proper investigations prior to the commencement of the proceedings and failure to join the insurer of the first and second respondents 59 The second respondent referred to the failure of the applicants to undertake proper investigations into the financial position of the first or second respondents prior to the commencement of the litigation. The second respondent also referred to the failure of the applicants to join the insurer of the first and second respondent as a respondent to the proceedings. 60 These are not matters relevant either to the granting of the Freezing Order or considering any application for its discharge. The matters relevant to the granting of the order, in addition to the normal considerations that are relevant when the Court exercises its discretion whether or not to grant injunctive relief are (1) do the applicants have a judgment in their favour or if not, a good arguable case; (2) is there a danger that the respondent might deal with assets such that the judgment will not be able to be enforced and (3) does the balance of convenience favour the granting of the order (or in this case, its discharge). (e) Prejudice to the second respondent and the balance of convenience 61 The second respondent also submitted that the Freezing Order prohibited her from incurring legal expenses in excess of $60,000. 62 That submission is based on a misapprehension or misunderstanding of the Freezing Order. Paragraph 7(c) clearly states that: If the unencumbered value of your Australian assets exceeds the Relevant Amount [which was then $400,000], 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. 63 The second respondent has given evidence that she now has assets in excess of $4 million. It follows that it is clear that, as long as she has assets, the unencumbered value of which exceeds the Relevant Amount (which will be $580,000 after the variation is made to the Freezing Order), then she was and is permitted to expend in excess of $60,000 on legal costs. The applicants accepted that this was the proper construction of the Freezing Order. The Freezing Order is standard across Australia. 64 The second respondent has not explained if she held this belief, how it was that her costs of the appeal were paid. If it was the case that she bears no liability for those costs, then it would appear that she has access to some other source of funds. 65 The second respondent has submitted that she has no intention of selling the properties that she owns. The second respondent has not provided any further evidence in relation to the balance of convenience or the inconvenience to which -- 17 of 18 -- [2024] SADC 8 16 she may be subject if the Freezing Order is extended. There is no evidence that if the Freezing Order was extended that she would be restricted in some way in her business or personal dealings. On the other hand, the applicants would suffer in convenience if the order were not made and the assets of the second respondent are dealt with or dissipated. 66 In these circumstances, I am satisfied that the balance of convenience favours the continuation of the Freezing Order. Conclusion 67 It follows that the application of the second respondent to set aside or discharge the Freezing Order is dismissed. The second respondent has not established that it is in the interests of justice that such an order should be made. The application of the applicants to increase the amount specified in the Freezing Order is granted, although the amount specified in the Freezing Order as the Relevant Amount is to be increased to $580,000. I am satisfied that there is a proper basis for the continuation of the Freezing Order. 68 The applicants are to bring into Court minutes of order reflecting the terms of the Freezing Order. -- 18 of 18 --