LR v GK [2024] SADC 91

First Applicant: LR Counsel: MR A CARPENTER - Solicitor: WEBSTERS LAWYERS Second Applicant: EK Counsel: MR A CARPENTER - Solicitor: WEBSTERS LAWYERS Respondent: GK Counsel: MR T MCFARLANE - Solicitor: MADSEN O'DEA AGNEW Hearing Date/s: 03/07/2024 File No/s: CIV-24-005386 B DISTRICT COURT OF SOUTH AUSTRALIA (Civil) 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. R & K v K [2024] SADC 91 Reasons for Decision of her Honour Judge Deuter 1 August 2024 PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - DETENTION, INSPECTION AND PRESERVATION - FREEZING ORDERS Interlocutory application for a freezing order pursuant to UCR 112.14. No substantive proceedings have been filed. Allegations have been made by the Applicants that they were sexually abused by the Respondent when they were children. Those allegations are denied by the Respondent. No formulated claim or details of the damages sought have yet been served. The Applicants allege that the Respondent is taking steps to sell several properties and thereby diminish the value of his assets. They have filed an application to freeze the Respondent’s assets, up to a sum of $1 million. The Respondent opposes the application and argues that there is inadequate evidence to establish the extent of the Applicants’ claim, and therefore the extent of any judgment sum. There is no basis for a freezing order to be made. Review of the legal principles regarding freezing orders in the context of no substantial proceedings being issued. Held: The application for a freezing order is dismissed. Interim freezing orders are set aside. Uniform Civil Rules 2020 (SA), referred to. Yadlamalka Land Pty Ltd v Ragless & Anor [2018] SASC 131; Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319; Z Ltd v A Z and AA LL [1982] 2 WLR 288; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 2) 72 ALJR 873; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; TZ Ltd v ZMS Investments [2010] NSWSC 196, considered. -- 1 of 10 -- -- 2 of 10 -- R & K v K [2024] SADC 91 Introduction 1 The applicants filed an originating application on 7 June 2024 seeking a freezing order over the assets of the respondent, pursuant to Rule 112.14 of the Uniform Civil Rules 2020 (SA) (UCR). 1 This was sought on an ex parte basis, as it was said that there was evidence that the respondent was taking steps to sell two of his properties in the Adelaide Hills.2 An interim freezing order was made on 11 June 2024. 2 The respondent opposes the freezing order and seeks to have the interim order set aside. I heard argument on 3 July 2024. Background 3 The applicants are the respondent’s adult daughters. They both allege that he sexually abused them between the ages of 5 years and 9 years. They confronted the respondent in January 2023. No police prosecution has been brought against the respondent. 4 On 27 March 2024, the applicants’ solicitor wrote to the respondent advising: 1. the extensive nature of the alleged sexual abuse involving each applicant; 2. that he was in the process of collating relevant medical evidence; 3. that an undertaking was sought from the respondent that he would not dispose, encumber or diminish the value of any assets and in particular, properties owned by him at Mount Barker and Littlehampton; and 4. that if any steps were taken to dispose of or encumber the properties in any way, urgent steps would be taken to obtain a freezing order to prevent him from doing so.3 5 The respondent refused to provide the requested undertaking. On 2 June 2024, the applicants learned that the respondent had listed for sale properties he owned at Mount Barker and Littlehampton.4 The applicants took immediate steps to obtain a freezing order to stop the respondent disposing of his assets. 6 A pre-action claim was never filed by the applicants and they are yet to file substantive proceedings or quantify their claims in damages. They are each 1 FDN1. 2 Affidavit of the first applicant dated 7 June 2024 (FDN 3) and affidavit of the second applicant dated 7 June 2024 (FDN 2). 3 Annexure 1 to FDN 3 and annexure 1 to FDN 2. 4 FDN 2 at [7]-[11] and FDN 3 at [6]-[10]. -- 3 of 10 -- [2024] SADC 91 2 awaiting a report from a psychiatrist after reviews in early June 2024. The applicants claim that they have suffered physical and psychiatric injury as a result of the alleged sexual abuse. There has been no time-line provided as to when the reports will be provided, and a pre-action claim served upon the respondent. 7 The respondent categorically denies sexually abusing his daughters, and has never been charged with any offence. He has never been interviewed or contacted by police. He was advised in early April, by his solicitor, that any police prosecution was no longer being progressed.5 On 5 April 2024, a letter was forwarded to the applicants’ solicitor denying the allegations and declining to provide the requested undertaking. 8 The respondent’s health has declined since the allegations of abuse were made. He is now under the care of a psychologist, Dr Keenan, and a cardiologist. He required heart surgery on 19 September 2023 for a pacemaker to be inserted. He continues to suffer from high blood pressure. The respondent has been diagnosed with depression and anxiety, and suffers sleeplessness. 9 On 9 May 2023, the respondent resigned from his role as Program Director of a Green Hydrogen program run by the South Australian Government. This resignation was prefaced by his health issues, and his poor mental health. He has not returned to work as a result of his ongoing health issues, and also, the stress caused by the allegations made against him.6 10 The respondent provided a schedule of his assets and liabilities to the Court as at 19 June 2024. This set out net assets of $864,554.00, in addition to a total superannuation balance of $345,422.00.7 The respondent’s main assets included a sailboat in Queensland, and three investment properties in the Adelaide Hills. These properties included two houses, one in Mount Barker and one in Littlehampton. The third property is a vacant block that was created by sub-dividing the original Littlehampton property. The respondent set out the history of his ownership of these properties in a further affidavit of 26 June 2024.8 11 The two properties with houses on them were at times rented to family members, including the second applicant who lived at the Mount Barker property between July 2021 and May 2023. She chose to move out after the allegations came to light. 12 The sub-division of the Littlehampton property had been conceived many years prior to the allegations made by the applicants. After some issues with the Council, and a change in the respondent’s financial circumstances, this did not proceed until after the respondent ceased working in 2023. The aim of the process 5 Affidavit of the respondent at FDN 14 at [12]-[30] and [102-[109]. 6 FDN 14 at [49]-[59]. 7 Affidavit of the respondent of 19 June 2024 (FDN 8). 8 FDN 14. -- 4 of 10 -- [2024] SADC 91 3 was to maximise the value of the Littlehampton property. The sub-division was not finalised until 6 June 2024. 13 The respondent’s evidence is that the sub-division and sale of two of his properties is not related to the threatened claims, other than to ensure that he has funds available to meet his legal fees. His intent was to ensure he could cover his living expenses after stopping work. 14 The respondent sought financial advice in April 2024 as to how best structure his investments and his debt of over $1 million whilst not working.9 As a result, the respondent placed the two properties with houses onto the market. Whilst arranging this, the interim freezing order was made on 11 June 2024. The respondent kept his properties on the market intending to seek variation of the freezing order if they were sold. 15 As at 26 June 2024, offers to purchase had been placed on each property. The offers were above the estimated price. The offer on the Mount Barker property was $640,000.00 and $710,000.00 on the Littlehampton property. 16 The two properties are subject to registered mortgages. The Mount Barker property at 26 June 2024 had an outstanding mortgage loan of $239,393.78. The Littlehampton property is subject to two mortgages totalling $467,542.60. A total liability of nearly $707,000.00. The sub-divided block is unencumbered, and has been valued at between $350,000.00 and $390,000.00. 17 At the time that the interim freezing order was sought, the respondent had not proceeded with settlement on the two sale contracts. He had calculated that once the two properties were sold, and all debts paid, he would be left with $372,000.00 to fund ongoing living costs and legal fees. These fees have been estimated at a minimum of $200,000.00, including trial costs. 18 The respondent has received financial advice that he does not qualify for any early draw down from his superannuation fund. His only intention in selling the two properties is to have sufficient funds to cover his living expenses and legal fees. He says that he has no intention of moving his assets overseas or to act in such a way to frustrate the court processes. 19 The respondent has sworn by his affidavit that he has: No intention of disposing of his assets for any purpose other than those identified [in his affidavit] and undertakes not to do so.10 20 The respondent filed a further affidavit on 2 July 202411 whereby he set out that he had now signed sale contracts on the two properties that were on the market. The contract on the Mount Barker property was signed on 25 June 2024 for a sale 9 FDN 14 at Annexure GJK-10. 10 FDN 14 at [115]. 11 FDN 18. -- 5 of 10 -- [2024] SADC 91 4 price of $650,000, with settlement to occur on 29 July 2024. The contract on the Littlehampton property was signed on 28 June 2024 for a sale price of $718,000, with settlement to take place on 23 August 2024.12 21 By this affidavit the respondent also addressed: (i) the issue of a lock being placed on his ANZ savings account with no explanation after the interim freezing order of 21 June 2024;13 (ii) a loan agreement entered into with his sister, annexing a copy of that agreement;14 and (iii) his self-managed superannuation fund.15 22 The loan agreement between the respondent and his sister Jackie, in the sum of $75,000 was entered into on 14 June 2024. This was provided to assist the respondent with his living expenses. Repayment of the loan is to be made as funds became available. A 5% interest rate is to apply as compounded annually. 23 The respondent established a self-managed superannuation fund on 25 May 2019 after his divorce. The second applicant was appointed as a trustee of the fund. The respondent is the only member. In May and July 2023, the respondent received notifications from E-Superfund, the SMSF administrator for the superannuation fund. They advised that the second applicant had, on two occasions, attempted to roll over the contents of the superannuation fund into her own superannuation account. This was not authorised by the respondent, and the second applicant has never replied to an email seeking an explanation.16 No explanation was provided at the hearing on 3 July 2024. 24 The respondent remains unemployed. He continues to suffer poor mental health. By his affidavit of 26 June 2024, he says that he has been living off his personal savings; the proceeds from the sale of shares, sale of personal items, furniture and a boat, and the loan from his sister. On 2 June 2024 the respondent left Adelaide to live in Queensland to be closer to his sister and elderly mother. He is currently living on a boat moored at Magnetic Island. 25 No further information was provided by the applicants at the hearing on 3 July regarding the extent of the alleged harm suffered by them as a result of the alleged abuse. No formulated claim was presented. 12 Ibid at [7]-[9]. 13 Ibid at [10]-[18]. 14 Ibid at [19] and Exhibit GJK-16. 15 Ibid at [20]-[29] and Exhibits GJK-17, GJK-18, GJK-19 and GJK-20. 16 Ibid at [25]-[28] and Exhibit GJK-19. -- 6 of 10 -- [2024] SADC 91 5 Legal Principles relating to a Freezing Order UCR 112.14 provides: (1) The Court may make an order (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. (2) A freezing order may be an order restraining a respondent from removing any assets located in or outside Australia or from disposing of, dealing with, or diminishing the value of, those assets. 26 The legal purpose of a freezing order is to prevent the frustration of the Court’s processes, by ensuring enforcement of any prospective judgment. It is not, however, to provide security for an applicant’s claim.17 27 The onus is upon an applicant to prove that there is a real danger that the assets of a respondent will be disposed of, or otherwise diminished in value, such that there is a risk that a prospective judgment will not be satisfied.18 The making of a freezing order is a drastic remedy and is not to be granted lightly. In Yadlamalka, Hinton J observed that its purpose was to observe the status quo.19 28 In determining if there is a risk of a respondent’s assets being disposed of or otherwise diminished, Hinton J in Yadlamalka stated that the applicant must establish by evidence that there is such a real risk. Mere speculation or assertion is not sufficient.20 29 In Patterson v BTR Engineering (Aust) Ltd, (Patterson)21 Gleeson CJ, set out that as a general rule an applicant will have to first establish a prima facie cause of action against the respondent. They must then prove that there is a danger of the respondent absconding, or assets being removed out of the jurisdiction or disposed of. In Z Ltd v A-Z and AA-LL22 it was observed that the jurisdiction to make Mareva type orders should not be abused:23 ….being applied for and granted in circumstances in which there may be no real danger of the defendant dissipating his assets to make himself “judgment-proof”; where it may be invoked, almost as a matter of course, by a plaintiff in order to obtain security in advance for any judgment which he may obtain; and where its real effect is to exert pressure on the defendant to settle the action. 17 Yadlamalka Land Pty Ltd v Ragless & Anor (Yadlamalka) [2018] SASC 131 at [38]; Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (No 2) (Stevedores) 72 ALJR 873 at p 892 (per Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ). 18 Ibid at [35]. 19 Ibid at [40]. 20 Ibid at [43]. 21 (1989) 18 NSWLR 319 at 321-322. 22 [1982] 2 WLR 288. 23 Ibid at page 306. Similar statements were made by the High Court in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at pages 403-404. -- 7 of 10 -- [2024] SADC 91 6 Consideration Arguable Case 30 In determining this issue, it is important to stress that recent allegations made that other family members have also been sexually abused by the respondent are not to be taken into account. The first applicant, in her affidavit of 28 June 2023,24 says that she believes the respondent has sexually abused two of her other sisters and also her son. She provides detail of her son’s complaint to police and goes on to state that:25 I am concerned that the respondent has also committed multiple instances of sexual assault, abuse and rape against my other sisters along with their children. 31 These further allegations are hearsay and speculative and are denied by the respondent. He says the allegations had never been aired before FDN 15 was filed.26 It is my view that these further allegations should not be used to strengthen the applicants’ case for a freezing order. In considering an arguable case, it is only the evidence of the applicants in relation to their claims that should be considered. 32 Having addressed the use of improper evidence, I note that it has been said that establishing a good arguable case is a ‘low bar’. However, it is not enough to merely assert a claim.27 The respondent accepts that given the extent of the allegations in the sworn affidavits, that the threshold for a good arguable case is met.28 In these circumstances, I find that to be the case. The risk or danger of a judgment not being wholly or partially satisfied 33 In determining this issue, I keep in mind that the purpose of a freezing order is to ensure that the court’s processes are not frustrated. It is not to be used as security for the applicants. The evidence relied upon by the applicants in seeking the order is contained in the three affidavits filed on their behalf. It appears that their case for a freezing order is based on the following facts:29 (1) that on 26 March 2024, their solicitor sought an undertaking that the respondent would not dispose, encumber or diminish the value of the Mount Barker and Littlehampton properties, and the respondent refused to give that undertaking; (2) that the applicants later learned that two of two properties were on the market for sale; 24 FDN 15. 25 Ibid at [16]. 26 Third Affidavit of the respondent: FDN 18 at [5]-[6]. 27 Yadlamalka at [41] per Hinton J. 28 T19.30-38. 29 FDN 2, FDN 3 and FDN 15. -- 8 of 10 -- [2024] SADC 91 7 (3) that these were steps being taken by the respondent to diminish his assets; (4) the respondent had always used money to coerce and control the first applicant and was going to do this again in relation to the claims of sexual abuse. 34 The focus is therefore on the behaviour of the respondent and the steps taken by him. Can his conduct be interpreted as potentially leading to the frustration of the processes of the court, including the enforcement of judgments? Does the behaviour indicate dishonesty?30 As a result, does the balance of convenience favour a grant of a freezing order? 35 An important factor in determining this issue is that the applicants have not yet issued proceedings nor set out the basis of any claim except in very general terms. There is no evidence of loss or damage, and no pre-action claim has been filed. This is despite the claims of childhood sexual abuse first being raised with the respondent in January 2023, now 18 months ago. 36 During this time, the respondent has suffered significant health issues and has stopped working. He has sought to manage his financial position by reducing his debt. As a result, the steps taken by the respondent are not prejudicial to the applicants. By selling the two properties, the respondent will liquify assets and remove debt. He will no longer be required to make mortgage payments, nor to pay for upkeep of the properties. It is argued that this is a reasonable step for the respondent to take in the context of his current inability to return to work. It was also part of a plan, to maximise the value of his properties. 37 The sub-division of the Littlehampton property was a long-term investment strategy for the respondent. A Development Application was first lodged with council on 26 November 2016, although it was not finalised until 6 June 2024.31 I am satisfied that the sub-division was part of the respondent’s investment strategy, and was not planned to defeat any future claim by the applicants, or the ordinary processes of the Court for enforcement. 38 The sale of the two properties was not conducted covertly. There were public listings, and a reputable agent was used. I am satisfied in the context of the respondent’s health issues and his inability to work, that the sale of the two properties was undertaken to reduce his liabilities. The respondent is left with one unencumbered property with a value of almost $400,000.00, and the $390,000.00 net profit from the property sales. I am satisfied that in his circumstances, it was a prudent step to sell the two investment properties. 30 TZ Ltd v ZMS Investments [2010] NSWSC 196 at [26]. 31 FDN14 at [68]-[73] and Exhibit GJK-8 attaching development plans showing the first version of sub-division dated 21 November 2016. -- 9 of 10 -- [2024] SADC 91 8 39 The respondent’s counsel during his submissions indicated that the respondent was prepared to give an undertaking that he will provide 14 days notice to the applicants’ solicitors of any intent to place the sub-divided, vacant block of land on the market for sale. This can provide some comfort that the remaining property asset will be available if there was an ultimate finding in the applicant’s favour. 40 I do not find that there is an irresistible inference that the respondent sold his two properties and moved to Queensland with the intent to divest his assets. At the time of the hearing, the respondent had no access to the monies in his ANZ account. He has not determined whether he will permanently retire from work and therefore cannot simply access his superannuation fund as suggested by the applicants. In any event, as a trustee of that fund, the second applicant has full knowledge of that fund and would be advised if steps were taken by the respondent to divest himself of the funds therein. 41 The respondent has not absconded by moving to Queensland to be supported by family. He has been open about that move and the reasons for it. He has retained unencumbered property in South Australia with a significant value, and is prepared to give an undertaking notifying of any proposed sale. 42 Whilst the allegations made by the applicants are undoubtedly serious, they have not been progressed over the last 18 months, with no substantive proceedings being issued. The allegations have not been tested by police prosecutions. The allegations are strongly denied. 43 I am not satisfied that any steps taken by the respondent to manage his debt, and thereby his assets, were taken to frustrate the processes of the court relating to enforcement of any prospective judgment. The applicants have not established that there is a risk absent the making of a freezing order that any prospective judgment will go wholly or partially unsatisfied due to action taken by the respondent. 44 I dismiss the application for a freezing order, and set aside the orders made by the Court regarding an interim order of 11 June 2024 (FDN 6), 21 June 2024 (FDN 12) and 4 July 2024 (FDN 21), except as to the directions to ANZ regarding the unlocking of the respondent’s bank accounts held with them. 45 I also note the undertaking provided by the respondent that he will provide 14 days notice of any steps to be taken to dispose of his vacant land at 10 Pioneer Street Littlehampton. -- 10 of 10 --