A.P. Motors (No 2) Pty Ltd v Balfour [2024] QSC 18

SUPREME COURT OF QUEENSLAND CITATION: A.P. Motors (No 2) Pty Ltd v Balfour [2024] QSC 18 PARTIES: A.P. MOTORS (NO 2) PTY LTD ACN 010 585 243 (plaintiff) v SANDRA BALFOUR (first defendant) AND STEWART ALEXANDER BALFOUR (second defendant) AND MICHAEL DAVID BALFOUR (third defendant) FILE NO/S: BS No 5288 of 2018 DIVISION: Trial PROCEEDING: Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 16 February 2024 DELIVERED AT: Brisbane HEARING DATE: 3–6 April 2023 Further submissions received 23 May 2023 (plaintiff); and 24 May 2023 (third defendant) JUDGE: Brown J ORDER: 1. The plaintiff is to pay the defendant his costs of the proceedings, including the costs of the Freezing Order on a standard basis until February 2020. 2. The plaintiff is to pay the defendant his costs of the proceedings including the costs of the Freezing Order on an indemnity basis after March 2020. 3. The third defendant’s application for compensation pursuant to the Undertaking be dismissed. -- 1 of 93 -- 2 CATCHWORDS: INDEMNITY COSTS – STANDARD COSTS – DISCRETION – whether plaintiff had no reasonable cause of action against the third defendant - whether the plaintiff acted unreasonably in conduct of litigation – whether plaintiff unduly prolonged allegations against the third defendant for which there was no reasonable cause of action – whether the plaintiff unreasonably delayed the proceedings or otherwise acted unreasonably FREEZING ORDERS – USUAL UNDERTAKING UPON GRANT OF FREEZING ORDER – COMPENSATION – COSTS – LOSS OF OPPORTUNITY – CALCULATION OF DAMAGES BY REFERENCE TO PROBABILITIES – whether the third defendant is entitled to compensation pursuant to an undertaking given for a freezing order - where the third defendant must show damage caused by freezing order as distinct from being caused by existence of litigation – whether costs can be claimed as compensation under an undertaking – whether the third defendant is entitled to compensation under an undertaking for loss of opportunity to purchase property – whether compensation for distress is available under an undertaking – whether compensation for loss of inheritance is available under an undertaking Legal Profession Act 2007 (Qld) ss 316, 341, 705 Uniform Civil Procedures Rules 1999 (Qld) rr 5, 171, 260A, 293, 389, 444, 658 Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 Al-Rawas v Pegasus Energy Ltd [2008] EWHC 617 Badenach v Calvert (2016) 257 CLR 440 Baltic Shipping Company v Dillon (1993) 176 CLR 344 Beach Retreat Pty Ltd v Mooloolaba Marina Ltd [2009] 2 Qd R 356 Cockburn v Edwards [1881] UKLawRpCh 203 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 European Bank Ltd v Evans (2010) 240 CLR 432 First Mortgage Finance Corp Ltd v Kace Management Pty Ltd [2009] QSC 319 Flegg v Hallett [2015] 1 Qd R 191 Hamod v New South Wales (2002) 188 ALR 659 Hunt v Ubhi [2023] EWCA Civ 417 JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 139 Latoudis v Casey (1990) 170 CLR 534 Laws v Collins Exposed Aggregate Pty Ltd [1997] NSWCA 186 Legal Services Commissioner v Bone [2014] QCA 179 Love v Thwaites [2014] VSCA 56 McMahon v Gould (1992) 7 ACLR 202 -- 2 of 93 -- 3 Mineralogy Pty Ltd v The State of Western Australia [2020] QSC 344 Palmer v Parbery (No 4) [2019] QCA 27 Parbery v QNI Metals Pty Ltd [2018] QSC 107 Principle Properties Pty Ltd v Brisbane Broncos Leagues Club Limited [2018] 2 Qd R 584 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Sigma Pharmaceuticals (Australia) Pty v Wyeth (2018) 136 IPR 8 Smith v Day (1882) 21 Ch D 421 Winky Pop Pty Ltd v Mobil Refinery Australia Pty Ltd [2016] VSCA 187 Wyatt v Albert Shire Council [1987] 1 Qd R 486 COUNSEL: N H Ferrett KC for the plaintiff P W Hackett for the third defendant SOLICITORS: Lander & Rogers for the plaintiff Londy Lawyers for the third defendant -- 3 of 93 -- [1] The third defendant, Michael Balfour, is the son of the first and second defendants, Sandra and Stewart Balfour. With no disrespect intended, but for ease of reference, I will refer to the defendants as Sandra, Stewart and Michael. [2] The present case is to determine what orders as to costs should be made following the proceedings against Michael being dismissed and whether Michael is entitled to compensation following dismissal of proceedings against him pursuant to the undertaking given by the plaintiff, A.P. Motors (No 2) Pty Ltd (APM or the plaintiff) contained in the freezing order made by this court which extended to Michael. A myriad of arguments were raised by Michael’s legal representatives in support of his claims, which were vigorously opposed by APM. Significant time and cost were expended by both parties which may have been better spent resolving the matter. The matter involved some four days of hearing and court books of some 4000 pages. [3] Sandra worked as an accountant for the plaintiff, APM, from October 1993 until 31 August 2017 when she was made redundant. APM was originally part of the A.P. Eagers Ltd car dealership group. Sandra’s redundancy occurred in the context of a restructuring of the group and the intended cessation of trading by APM. Sandra was then employed by APM on a temporary basis between 1 September 2017 and 22 January 2018 to assist in closing out matters in advance of APM’s cessation of trading. [4] In May 2022, Sandra was convicted of one count of fraud as an employee in relation to defalcation of funds from APM’s bank accounts. The theft from APM was discovered when, on 30 January 2018, an employee of a related entity noticed a transfer from APM’s bank account to an unknown account. The unknown account belonged to Sandra. An investigation followed which originally suggested that Sandra had misappropriated an amount in excess of $3 million. Sandra was, however, convicted of stealing a lesser amount of $1.8 million. [5] Following the discovery of the theft, APM commenced proceedings by way of originating application on 17 May 2018 and sought a freezing order from the Court. A freezing order was made on 22 May 2018 (Freezing Order). It applied to all three defendants and was varied on several occasions throughout the course of the proceedings. -- 4 of 93 -- 5 [6] On 3 March 2022, the Freezing Order against Michael was set aside by Bradley J. His Honour made orders which gave leave to APM to file a further amended statement of claim by 29 April 2022, deleting certain claims against Michael with which APM was no longer going to proceed and making other amendments in relation to Michael. His Honour made a further order that, if that further amended statement of claim was not filed and served by 29 April 2022, the claims against Michael were to be struck out without further order and that APM was to pay Michael’s costs of the application to be assessed if not agreed. No amendments were made by APM. [7] On 7 July 2022, the proceedings were dismissed and orders were made by Freeburn J for a claim for compensation pursuant to the undertaking as to damages given by APM under the terms of the Freezing Order, and for a determination of whether the costs payable by APM to Michael should be assessed on the standard or indemnity basis, to be heard on the Civil List. [8] Statement of facts and contentions was filed by Michael, a response was filed by APM and a reply to the response was filed with a view to outlining the issues in dispute. [9] APM concedes it should be liable to pay Michael’s costs but on a standard basis. [10] The Court must determine whether Michael is entitled to the following relief: (a) an order that APM pay Michael’s costs of the proceeding on the indemnity basis because either; (i) there was no justification for the Freezing Order against Michael; (ii) there was no justification for continuing the Freezing Order on 4 June 2018; (iii) there was no basis for continuing the Freezing Order on the maintenance of allegations in the amended statement of claim (ASOC); (iv) there was no basis for continuing the claim against Michael after delivery of the Cook report on 4 November 2021; and (v) APM had failed to comply with r 5 of the Uniform Civil Procedures Rules 1999 (UCPR) and had engaged in delay of the prosecution of the claim for over three years. -- 5 of 93 -- 6 (b) compensation pursuant to the undertaking as to damages given by APM in relation to the Freezing Order (the Undertaking) for: (i) the amount by which his costs incurred in respect of the Freezing Order exceed the standard costs, if the Court determines that costs of the proceeding should be awarded on the standard basis rather than the indemnity basis (the Costs Claims); (ii) the loss of an opportunity to purchase both an investment property and a residential property during the operation of the Freezing Order, measured by reference to the capital gain on the investment property lost (the Loss of Opportunity Claim); (iii) general damages for the embarrassment and inconvenience caused by the Freezing Order (the Distress Claim); and (iv) the loss of an inheritance from his father, Stewart, who, it is alleged would have, but for the Freezing Order, severed his joint tenancy with Sandra in their marital home so as to leave his interest in that property to Michael (the Inheritance Claim). Contentions [11] A brief overview of the parties’ contentions is as follows. [12] It is contended on behalf of Michael that he is entitled to indemnity costs because APM commenced and continued proceedings against him when it should not have done and ignored and omitted evidence such that its allegations were not justified and the proceedings were an abuse of process. Michael also contends that APM’s delay in the proceedings warrants an order that costs be assessed on the indemnity basis. APM concedes that it should pay Michael’s costs on a standard basis. [13] As to the matters which are the subject of the claim for compensation, Michael claims that the losses directly flowed from the Freezing Order and are therefore compensable. [14] APM contends that the claims on the Undertaking must fail because: -- 6 of 93 -- 7 (a) properly construed, the Undertaking does not extend to the Costs Claim or the Distress Claim; (b) as to the Loss of Opportunity Claim, there is no reliable evidence supporting any loss of opportunity and that, in relation to the investment property claim, there is an absence of evidence that Michael would have purchased a property at all; and (c) as to the Inheritance Claim, there is insufficient evidence to demonstrate that Stewart intended to effect a severance of the relevant joint tenancy and, in any event, it was the effect of the Freezing Order on Sandra and Stewart which prevented the severance of the joint tenancy, not the effect it had on Michael. History of the Proceedings [15] The history of proceedings has some relevance to the contentions raised in relation to both the claims for indemnity costs and compensation under the Undertaking, particularly given allegations of delay which was levelled by each party against the other, which had been on foot for four years when the parties agreed it should be dismissed. It is therefore necessary to provide a brief overview of the proceedings. [16] On 17 May 2018, APM filed an originating application pursuant to r 260A UCPR for an order that, inter alia, the defendants be ordered not to dispose of, deal with or diminish the value of cash, assets or other property to the value of $3,261,685.84 until further order of the Court. [17] APM’s insurer had instructed Crawford Forensic Accounting Services (Crawford) to investigate whether Sandra had misappropriated funds and, if so, the quantum of funds misappropriated. Crawford provided its report on 28 March 2018 (the First Crawford Report). The First Crawford Report was exhibited to the affidavit supporting APM’s application. [18] On 20 May 2018, Sandra, Stewart and Michael were served with the originating application and supporting affidavit. [19] On 22 May 2018, APM’s application was heard in this Court. No appearance was entered on Michael’s behalf at the hearing, but Sandra and Stewart appeared on behalf of themselves. Davis J made orders providing for, inter alia, the freezing of the assets -- 7 of 93 -- 8 of Sandra, Stewart and Michael. The order had a return date of 4 June 2018. A copy of the Freezing Order was personally served on Michael on 29 May 2018. [20] On 29 May 2018, APM filed its claim and statement of claim. In relation to Michael, the statement of claim: (a) Alleged Sandra had made payments from bank accounts under her control of monies misappropriated from APM to purchase property and other assets and sold properties and purchased them in her name and jointly with Michael. The assets identified when the misappropriated funds were utilised were joint bank accounts, the Caboolture properties and Willow Street, Inala property held by or with Michael. (b) Alleged Michael’s taxable income in 2013 was $89,090.29 and 2015 income was $42,455. (c) Sought to recover monies paid by Sandra to Michael as monies had and received limited the sums representing real and personal property purchased by Michael at the time of commencement of proceedings. (d) Sought an account of monies that Michael had received from Sandra and a declaration that Michael’s properties in Caboolture, Inala and Tingalpa were subject to an equitable charge and an order that they be sold. (e) Did not allege that Michael was a participant in any wrongdoing by Sandra nor had any knowledge of that wrongdoing. The claim was a proprietary claim which is available when the monies can be traced into particular property. [21] On 4 June 2018, the first return date, Boddice J made orders varying the Freezing Order and extended its operation until 21 June 2018. Mr de Jersey appeared on behalf of APM. Mr Morris KC appeared on behalf of Sandra. Stewart appeared himself. Michael did not appear at that hearing but Mr Morris KC informed the Court that “although I don’t appear for [Michael], I can also inform the court that he’s aware of the proceedings and doesn’t seek to appear on this occasion.” Some variations were made to the Freezing Order in relation to living expenses, and directions were made as to the conduct of the proceedings. A copy of the orders of Boddice J were personally served on Michael on 7 June 2018. -- 8 of 93 -- 9 [22] On 19 June 2018, Michael’s representatives, Londy Lawyers, wrote to APM’s representatives, Lander & Rogers (June 2018 Letter). The June 2018 Letter addressed a number of matters. Londy Lawyers expressed the view that there were no circumstances which warranted a freezing order against Michael, that the case pleaded was speculative, and that the affidavit and outline of submissions filed in support of the application for the Freezing Order were misleading and overreached. Londy Lawyers contended that the only reasonable course APM could adopt was to discontinue the proceeding against Michael and pay his costs incurred to date. Londy Lawyers also foreshadowed its intention to make an application for security for costs. No such application was made. [23] The matter came on for further hearing before Boddice J on 21 June 2018. Mr de Jersey appeared on behalf of APM, Mr Morris KC appeared on behalf of Sandra, Mr Londy appeared on behalf of Michael, and Mr Lavercombe appeared on behalf of Stewart. On that occasion, Mr Morris KC stated that “[t]he point has now been reached where, I think, all parties agree that the interim regime should continue until trial, subject to any respondent having liberty to reply on seven days notice for a variation”. Boddice J, accordingly, made orders extending the operation of the Freezing Order to trial of the proceedings or earlier order of the Court and for the exchange of pleadings. [24] On 11 July 2018, Lander & Rogers received an email from Aitken Whyte Lawyers, Sandra’s representatives, requesting that APM agree to a stay of the proceedings until the conclusion of criminal proceedings on foot in relation to the same subject matter as the proceedings. Aitken Whyte Lawyers also requested that APM consent to an extension until 25 July 2018 for the filing of a defence in the proceedings. JML Rose, Stewart’s representatives, indicated his agreement to the extension. [25] On 12 July 2018, Michael filed a defence in the proceedings which included denials that any of APM’s funds: (a) had been utilised by Sandra to purchase assets jointly in her name and Michael’s name; (b) were used by Sandra to provide funds to Michael to help him purchase properties; and -- 9 of 93 -- 10 (c) were represented in the assets the subject of the Freezing Order or any other assets owned by Michael. [26] Michael’s defence also contended that in respect of the Caboolture properties and the Willow Street, Inala property, it was intended that Sandra and/or Stewart only held a bare legal title and had no beneficial interest in the property. It was also pleaded that Sandra and Stewart each only held a one per cent share in the Inala Property and that they transferred their interests to Michael on 19 June 2009, and that Michael paid the stamp duty in respect of such transfer. [27] On 16 July 2018, Lander & Rogers advised the defendants that APM had agreed to an extension for the defendants to file their respective defences until 21 July 2019 so that the parties could discuss the proposed stay of the proceedings. [28] On 23 July 2018, Lander & Rogers received correspondence from Londy Lawyers which stated that Michael was not willing to agree to a stay of the proceedings as between APM and Michael. Londy Lawyers indicated its intention to proceed with the applications for security for costs and a variation to the Freezing Order foreshadowed in the June 2018 Letter. [29] On 20 August 2018, Lander & Rogers received correspondence from Londy Lawyers written pursuant to r 444 UCPR. Londy Lawyers reiterated its position set out in the June 2018 Letter and also indicated that it intended to proceed with the applications for security for costs foreshadowed that correspondence, as well as an application to vary the Freezing Order and for summary judgment. [30] In correspondence between Aitken Whyte Lawyers and Lander & Rogers on 23 August 2018, APM indicated that it would agree to the stay requested but expressed the view that the proceeding would have to be stayed against the remaining defendants, not just as between APM and Sandra, given the commonality between the claims against each of the defendants. [31] On 31 August 2018, Lander & Rogers wrote to Londy Lawyers pursuant to s 445 UCPR requesting that Michael provide disclosure of documentation to determine whether the claim against him should be abandoned. Lander & Rogers reasserted APM’s position that any stay of proceedings agreed between the parties should be a stay of the whole claim. -- 10 of 93 -- 11 [32] On 13 November 2018, Michael filed an application seeking, inter alia: (a) Pursuant to r 293 UCPR, an order for summary judgment in his favour against APM; (b) alternatively, pursuant to r 171 UCPR, an order that the claim against him as pleaded in APM’s statement of claim be struck out; and (c) further or alternatively, pursuant to r 658 UCPR or the inherent jurisdiction of the Court, an order that the Freezing Order be vacated or varied. November 2018 Application [33] Michael’s application did not proceed and on 28 November 2018, Applegarth J relevantly made variations to the Freezing Order and orders by consent that: (a) APM file and serve any amended statement of claim and any further affidavit(s) on which it intended to rely on or before 31 January 2019; (b) Michael file and serve any affidavit in reply to APM’s affidavit(s); and (c) the November 2018 Application be set down for hearing on the Civil List on a date after 1 February 2019 to be fixed by the Registrar upon the giving of seven days’ notice in writing by Michael. [34] Michael did not seek to have the November 2018 Application relisted for hearing. [35] Between November 2018 and December 2018, APM’s solicitors issued subpoenas and non-party disclosure notices to a number of banks seeking financial material relating to Michael’s financial position. That material was then provided to Crawford’s, the forensic accountants who had provided a report to the insurer. [36] On 1 February 2019, Lander & Rogers received a copy of the second report authored by Crawford dated 1 February 2019 (Second Crawford Report). [37] APM filed and served an amended statement of claim and two further affidavits on 5 February and 8 April 2019 respectively. [38] The amended statement of claim pleaded, inter alia: (a) that since approximately 8 July 2010, Sandra and Michael had been the joint registered proprietors of the Bluebell Street, Caboolture Property; -- 11 of 93 -- 12 (b) that Sandra, Stewart and Michael were, from 2 January 2007 to 19 June 2009, the joint registered proprietors of the Inala Property; (c) a new allegation that Sandra made unauthorised payments to bank accounts under the control of, or for the benefit of, Sandra, Stewart and Michael; (d) new allegations that monies were applied out of the bank accounts referred to in paragraph [32(c)] above to: (i) repay loans used to acquire the Burdekin Street Property and the Hopewell Street Units; (ii) acquire with Michael the Inala Property and the Tingalpa Unit or to repay loans used to acquire those properties; (iii) transfer monies to Michael; (iv) pay for improvements to properties owned by Michael or jointly by Sandra and Michael; (v) acquire the Bluebell Street Property and Rosemary Street Property with Michael or repay the loans used to acquire those properties; and (vi) make cash withdrawals and deposits to acquire other assets. (e) given the breach of fiduciary by Sandra, APM was entitled to recovery of monies paid by Sandra to Michael as monies had and received but limited to the sums representing real and personal property purchased by Michael and owned by him as at the date of commencement of the proceedings together with interest; and (f) an alternative claim that APM was entitled to recover monies paid to Michael by which Michael had been unjustly enriched at APM’s expense or a declaration that Michael holds real property together with improvements on trust for APM. [39] No dishonesty was alleged against Michael, nor was any knowledge of his mother’s dishonesty. [40] The Second Crawford Report was served on 12 April 2019. -- 12 of 93 -- 13 [41] Ms Nguyen deposed to APM taking no steps as she considered the progression of the matter was in the hands of Michael and the criminal proceedings against Sandra were progressing towards trial. [42] No defences to the amended statement of claim were filed by any of the respondents nor any affidavit material filed by Michael after receipt of the Crawford Report.1 [43] Between 26 March 2019 and 4 November 2021, limited correspondence was exchanged between the parties and applications were made on behalf of Sandra and Stewart for an increase in the amount allocated to legal costs to defend the criminal proceedings, where the amount sought was the subject of dispute, which was granted at least in part. No provision was made in respect of the civil proceedings on the basis that the criminal proceedings were to be dealt with first. Michael made no applications nor did his lawyers correspond with APM’s lawyers during this period save as to minor matters on 15, 16 April and 25 May 2021. [44] On 4 November 2021, Lander & Rogers received a letter from Londy Lawyers, along with an expert report authorised by Mr Simon Cook of Lotus Amity dated 19 August 2021 (Cook Report). That letter stated that Michael had instructed Londy Lawyers to request that APM consider the Cook Report, reassess its case against Michael, consent to the setting aside of the Freezing Order, and discontinue the claim against Michael. The letter indicated that if confirmation of those matters was not provided within 21 days, Michael would apply to the Court for orders in accordance with the November 2018 Application. [45] APM’s lawyers stated in an email of 24 November 2021, that 21 days was insufficient time to deal with the matters. [46] On 17 December 2021, Michael filed an application seeking orders that: (a) APM’s claim against Michael be struck out for want of prosecution; (b) Michael have leave under r 389 UCPR to give notice to APM pursuant to the orders of Applegarth J in November 2018 to otherwise proceed with the November 2018 Application; and 1 Which followed a letter of Londy Lawyers requiring APM to serve affidavit material, as required by Applegarth J’s order. -- 13 of 93 -- 14 (c) APM pay Michael’s costs of the application and the proceeding, to be agreed or assessed on the indemnity basis or alternatively on the standard basis. [47] APM’s lawyers briefed Crawfords on 24 December 2021. Mr Cameron deposes to having to deal with a potential conflict issue causing some delay in briefing Crawfords. Damien Lawrence of Crawfords requested further material on 25 February 2022 and provided a draft report on 18 February 2022. On 25 February 2022, APM’s lawyers requested Michael’s lawyers agree to an adjournment of the application contending amongst other things that it needed further time to obtain information requested by Crawfords and obtain a report. APM’s lawyers indicated that they expected to receive instructions on 25 February 2022 to drop or abandon some claims and plead additional claims. [48] On 3 March 2022, Bradley J did not strike the proceedings out for want of prosecution but made orders discharging the Freezing Order as against Michael upon his providing an undertaking and that, inter alia: (a) APM file and serve a further amended statement of claim deleting claims against Michael in paragraphs 16(a)(ii), 16(a)(iii), 16(a)(iv), 16(a)(vi), 16(b)(i), 16(b)(ii), 16(c)(ii), 16(c)(iii), 16(c)(iv); (b) if a further amended statement of claim was not filed by 4:00 pm on 29 April 2022, the claims against Michael in the amended statement of claim be struck out without further order; and (c) APM pay Michael’s costs of the application to be assessed if not agreed. [49] APM did not file or serve a further amended statement of claim by 29 April 2022. By operation of the orders of Bradley J, most of APM’s claims against Michael were struck out. [50] On 26 May 2022, APM filed an application for leave to discontinue the proceeding against Michael and for orders that APM pay Michael’s costs of and incidental to the proceeding, until 6 May 2022, on the standard basis and that APM pay Michael’s costs of and incidental to the application on the indemnity basis. [51] On 7 June 2022, Michael filed an application seeking orders that, inter alia: (a) APM’s remaining claims against Michael be dismissed for want of prosecution; -- 14 of 93 -- 15 (b) APM pay Michael’s costs of the proceeding, including reserved costs, in an amount to be agreed or assessed on the indemnity basis; and (c) the Court determine the amount of compensation or damages payable to Michael by reasons of the effect upon him of the Freezing Order. [52] On 7 July 2022, at the hearing of the applications filed on 26 May and 7 June 2022, Freeburn J dismissed APM’s claims against Michael and listed the following issues on the Civil List for determination: (a) whether the costs of the proceedings payable by APM to Michael should be assessed on the standard or indemnity basis; and (b) the assessment of any damages payable to Michael pursuant to the undertaking as to damages given by APM and AIG Insurance Limited. Credit of Witnesses [53] A number of witnesses gave evidence, although not all were subject to cross- examination. [54] Michael was called to give evidence and was cross-examined. I accept that the period during which he was subject to the Freezing Order was stressful. While I felt that Michael was an honest witness, I considered that some of his evidence was clouded by feelings of injustice and anger in relation to how these proceedings have affected him. That affected the reliability and accuracy of some of his evidence. I do not fully accept Michael’s evidence that he did not take any real notice or understand the nature for the application for a Freezing Order or the order that was subsequently imposed due to his shock. Michael is a highly intelligent and educated man with business acumen who appeared throughout his evidence to pay attention to detail and, in my view, he is unlikely to have not engaged and tried to understand what the application or the Freezing Order meant and how it affected him, notwithstanding the emotional trauma he would have been experiencing at the time. [55] Some of Michael’s evidence at times was also exaggerated in certain respects, so as to be self-serving. For instance, I do not accept that Michael did not take an active interest in his mother’s defence of the criminal charges, given documents prepared by him in relation to her case. While Sandra’s actions have clearly had an adverse -- 15 of 93 -- 16 effect on Michael’s life, and appeared to make him understandably angry, Michael still showed that he cared for his mother to the extent that he would not want to see her jail sentence being extended. Michael’s interest in his mother’s criminal case defence going beyond its effect on the civil proceedings was also demonstrated by his draft brief to Mr Simon Cook. In particular, he identified aspects of his mother’s criminal proceedings which were a source of delay, which given the content and detail showed a greater involvement and interest than just identifying things that had the effect of slowing the civil proceedings. Nor do I accept Michael’s evidence that Sandra did not tell him that she had decided to plead guilty after Stewart’s passing in September 2019. That was contrary to Sandra’s evidence and contrary to the fact that in making submissions about the Freezing Order her principal concern was that Michael not be caught up in the matter. Nor do I accept his mother’s pending criminal trial was not at least a factor in his thinking or timing of his application to strike out or seek summary judgment, which was filed in November 2021. [56] I accept Michael’s evidence that he did not act on the basis that there was a stay of the proceedings up until November 2021 and did not delay the proceedings until his mother’s matters were finalised. It is evident from the instructions to Mr Cook and the invoices of Michael’s lawyers that he was working on the proceedings and drafting instructions outlining why the proceedings against him could not succeed had begun in February 2021. [57] Some parts of Michael’s affidavit evidence were more in the nature of submissions, and argumentative in terms of his assertions as to why he considered that APM had no cause of action and the Freezing Order was unjustified, which tainted some of his responses in cross-examination. In particular, the notion that the Freezing Order was of greater concern than the allegations made in the statement of claim, is not reflected by his lack of appearance in response to it or the agreement to extend it where his solicitor attended court on his behalf and then the taking of no steps until late 2021 to set it aside. [58] Sandra was called. Her evidence was generally straight forward and relatively short although her evidence had to be treated with circumspection. That Sandra was responsible for the events which had embroiled her son and her subsequent conviction for misappropriation of monies reduced the weight and reliability of her evidence -- 16 of 93 -- 17 considerably. I considered that Sandra was generally trying to give evidence that was most favourable to her son. I do not accept Sandra’s evidence that she did not even think about severing the joint tenancy in order to ensure that creditors did not get access to the money and as a means of ensuring that her son got the share of the house instead. Sandra appeared to be an intelligent woman. She offered no real explanation as to why she and Stewart wished to severe the joint tenancy other than the existence of the Freezing Order. Her evidence also did not explain why originally she and Stewart proposed to the Public Trustee’s legal representative that she leave her estate to Michael and Stewart would leave his estate to Michael’s wife at the end of July 2021 but that changed in early August 2021 such that Stewart was to leave his share of the property to Michael. It simply lacks credibility that she had not considered that the property could be sold for the benefit of creditors in light of the proceedings that had been filed by APM and it was explained to her by the Public Trustee’s representative how a joint tenancy passes to the other joint tenant upon death. [59] The former Group Financial Controller of A.P. Eagers Ltd, Ms Natasha Daley, was called on behalf of APM. While Ms Daley’s recollection was poor and there were errors in her affidavit, I consider that Michael sought to attack her credit unfairly, though criticisms could fairly be made by Michael of her affidavit. Ms Daley was clearly assisted in the preparation of her affidavit by others providing information, given it was prepared on the basis of knowledge or information which she had received. The affidavit did not comply with the rules of evidence in some respects, in failing to identify some of those sources of information. Ms Daley did not accurately set out, in some respects, where information was based on knowledge and belief. It was also plain from Ms Daley’s evidence that she did not clearly understand the point of distinction between evidence of which she had personal knowledge, as opposed to evidence she had knowledge of because she was informed of it by another person. [60] Mr Thomas Cameron and Ms Lily Nguyen, solicitors from Lander & Rogers, were called. Mr Cameron gave clear and direct evidence which I accept. I also accept the evidence of Ms Nguyen as honest evidence. [61] Mr Simon Cook, a forensic accountant, also gave evidence as to the report which he had provided in support of the strike out application on behalf of Michael. He was considered in his evidence, and I accept the evidence he gave. -- 17 of 93 -- 18 [62] Mr Neil Ackerman, a Senior Financial and Forensic Accountant with Crawford, provided a forensic report on behalf of APM and also gave evidence. Mr Ackerman was candid in the evidence which he gave. [63] Mr Adam Bloom (on behalf the Michael) and Mr Marek Reardon (on behalf of APM) were called as experts in relation to the question of costs. Both experts were candid in their evidence. However, I found neither to be of great assistance to the Court in relation to the question of costs given the nature of their instructions and the deficiencies in the detail and reasoning of both individuals. The real question is in terms of whether there was sufficient reasoning in relation to the report provided by Mr Bloom to support his conclusions as to costs. [64] Mr Londy, the solicitor who has acted on behalf of Michael, gave evidence in relation to the question of costs. Rather surprisingly, he did not engage in the exercise of identifying those costs which he said were incurred as a result of the Freezing Order only, a task which he left that solely to the costs assessor in order to maintain impartiality. That view was misplaced. Given Mr Londy was responsible for carrying out the work, he was best placed to identify the work solely attributable to the Freezing Order, which could then have been assessed by the costs assessor. I accept, however, the evidence that he gave. [65] There was no cross-examination in relation to the property valuation evidence called on behalf of Michael. Should Indemnity Costs be Awarded to Michael in respect of the Proceedings? Legal Principles [66] The legal principles which apply when the Court is considering whether to grant indemnity costs were not contentious. This Court and others have commonly adopted the statement of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd:2 Notwithstanding the fact that [the categories of cases in which the discretion to award indemnity costs are not closed], it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the 2 (1993) 46 FCR 225 at 233. See also Beach Retreat Pty Ltd v Mooloolaba Marina Ltd [2009] 2 Qd R 356. -- 18 of 93 -- 19 making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. (Citations Omitted). [67] Similarly, in Hamod v New South Wales, the Full Federal Court stated that: 3 Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs. [68] The Queensland Court of Appeal discussed the relevant principles in Legal Services Commissioner v Bone.4 Morrison JA (with whom Fraser JA and Gotterson JA agreed) referred to some further decisions relevant to identifying the scope of indemnity costs:5 In LPD Holdings (Aust) Pty Ltd v Phillips, Hickey and Toigo this Court recently referred to the principles applying to the award of indemnity costs, in these terms: [21] The applicable principles for the awarding of indemnity costs were usefully summarised by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd. However, those principles operate as a guide to the 3 (2002) 188 ALR 659 at [20]. 4 [2014] QCA 179. 5 Legal Services Commissioner v Bone [2014] QCA 179 at [67]. -- 19 of 93 -- 20 exercise of the relevant discretion. They do not define all of the circumstances in which the discretion is to be exercised and do not limit the width of that discretion. Further, the categories in which the discretion to award indemnity costs may be exercised are not closed. [22] Whilst the awarding of costs on an indemnity basis will always ultimately depend upon the exercise of a discretion in the particular circumstances of each individual case, the justification for an award of indemnity costs continues to require some special or unusual feature of the particular case. As was observed by Basten JA in Chaina v Alvaro Homes Pty Ltd, the general rule remains that costs should be assessed on a party and party basis, and the standard to be applied in awarding indemnity costs ought not “be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part. (footnotes omitted) [69] His Honour further stated:6 [70] Further, in Di Carlo this Court also adopted as correct the proposition that in order to enliven the discretion one is not confined to the situation of an “ethically or morally delinquent party”, but “… the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation”. Other cases have adopted as the test: “whether there was something irresponsible about the conduct of the losing party which exposed its opponent to costs which should, in fairness, be ordered on the indemnity basis. [71] In Johnstone v Herrod this Court considered a contention that findings of fraudulent misrepresentation or unconscionable conduct would necessarily result in an order for indemnity costs. That proposition was rejected as failing to appreciate the basis on which indemnity costs were normally decided. The Court referred to Di Carlo and Colgate-Palmolive, and then said: [10] It was said in White Industries (Qld) Pty Ltd v Flower & Hart (A Firm) that: [t]he authorities do not support the proposition that simply instituting or maintaining a proceeding on behalf of a client which has no or substantially no prospect of success will invoke the jurisdiction. There must be something more namely, carrying on that conduct unreasonably. 6 [2014] QCA 179 at [70]-[71]. -- 20 of 93 -- 21 [11] It may be seen from the foregoing that, in determining whether indemnity costs should be ordered, the normal focus is on the conduct in and in respect of the litigation by the party against whom the costs order is to be made. The primary judge appeared to have accepted that the respondents’ arguments were not obviously unsustainable. His Honour was entitled to take that view. The respondents, in fact, succeeded on appeal in showing error in some of the primary judge’s findings of fact and law. (footnotes omitted) [70] It is evident that it must be demonstrated that the plaintiff in conducting the proceeding has acted unreasonably, not merely that the plaintiff pursued a weak case. Contentions [71] There is no issue that Michael is entitled to his costs of the proceedings. The point of contention is whether those costs should be awarded on the standard basis or the indemnity basis for the period up until 6 May 2022. [72] Michael’s principal arguments in justifying his claim for indemnity costs are, in summary, that: (a) disclosure of the true facts was not made at the time the Freezing Order was sought. Such disclosure would have led to the Court refusing to make the Freezing Order against Michael; (a) there was no reasonable basis upon which to seek the Freezing Order or to support the pleaded claim made against Michael; (b) there was no reasonable basis to maintain the Freezing Order or the proceedings after June 2018 when information was disclosed to APM by Michael and other information became available at various points in time; (c) APM unreasonably rejected an offer to substitute caveats over Michael’s property in June 2018 and requests to discontinue the proceedings and/or release the freezing order; (d) APM unreasonably delayed the prosecution of the proceedings and failed to narrow the freezing order; (e) APM engaged in other conduct demonstrated that they were acting unreasonably including refusing to pay Michael’s costs when Michael -- 21 of 93 -- 22 determined that the wrong company had offered the undertaking or contacted Suncorp after the Freezing Order had been discharged. [73] Although these contentions were raised on Michael’s behalf in correspondence to APM, it is unfortunate that these matters were not raised before the Court at the time the Freezing Order was made or on the subsequent return dates in the months that followed the making of the Freezing Order. As a result, the Court has been required to revisit the whole history of the proceedings, including the available evidence. The time and cost to the parties in doing so has been considerable. [74] APM had the benefit of the Freezing Order not only against Sandra and Stewart who were accused of wrongdoing, although the charges against Stewart were ultimately discontinued, but Michael who was not accused of wrongdoing for almost four years when the order was discharged in March 2022 and proceedings were later dismissed as a result of APM indicating that the proceedings should be discontinued. [75] APM contend that there is no basis for ordering the plaintiff to pay Michael’s costs on an indemnity basis in circumstances where: (a) It had a reasonable basis for commencing the proceedings and believed that it had a good arguable case against Michael; (b) APM did not mislead the Court as alleged; (c) In the context of the argument that APM should have acted sooner to discontinue the proceeding against Michael or in respect of the Freezing Order, that should be rejected when regard was had to: (i) Michael’s conduct in adjourning his application in 2018 to dismiss the proceedings and not pursuing it again until December 2021; (ii) Michael’s failure to apply to reduce the Freezing Order; (iii) The fact that Sandra was charged with stealing and was not convicted until May 2022, such that a stay of proceedings would likely have been granted if the proceedings had been prosecuted more quickly, as was originally raised by Sandra; (d) No benefit would have accrued to APM if caveats were lodged because they would not have operated to prevent Michael dealing with the property and just -- 22 of 93 -- 23 prior to the offer to lodge caveats the Freezing Order had been extended with Michael’s consent; and (e) The undertaking as to damages was offered by the correct company but the wrong company was accidentally named. Did the plaintiff commence proceedings without any reasonable basis for doing so ? [76] At the hearing seeking the Freezing Order, APM relied on the affidavit of Ms Daley and the First Crawford Report as well as the fact that Michael had accrued an interest in four properties in his 20s. [77] It is uncontroversial that there was evidence that Sandra had misappropriated a significant amount of money over a considerable period of time from APM. According to Ms Daley’s affidavit, Sandra was employed by APM as their dealership accountant between November 2010 and 31 August 2017. Subsequent to that time, she had been engaged as a contractor with APM until 22 January 2018. At the time the application was made, it was estimated that Sandra had fraudulently removed $3.2 million from APM’s accounts between 21 July 2010 to 24 January 2018, while Sandra was employed as the dealership accountant for two dealerships. The fraudulent transactions were initially identified internally when investigating a customer query after another employee had identified a payment to an unidentified account which was found to be an account of Sandra’s. The First Crawford Report prepared for APM’s insurers after they had been notified by APM of the potential claim based on misappropriation of funds. The First Crawford Report identified in excess of 900 payments to various bank accounts said to be under the control of Sandra. The report identified the accounts into which money was paid, where there was evidence that accounts were in the names of Sandra and Stewart jointly. In addition to the payments identified by Crawfords, there were further payments identified as having been paid into a Home Loan account of Sandra and Stewart by Mr Edmonds, the General Manager of Finance of AP Eagers Limited. [78] As to Michael, Ms Daley identified properties revealed in property searches as being properties of Sandra, Stewart and/or Michael. The properties were said to be acquired during the period in which Sandra was an employee of APM or AP Eagers Limited. All properties in which Michael had an interest were acquired prior to 8 July 2010, -- 23 of 93 -- 24 Two of those properties listed Sandra as a joint tenant with Michael. There was also a spreadsheet showing Michael’s income in 2013 and 2015 found in Sandra’s email account. [79] According to Ms Daley:7 Given Balfour’s alleged conduct and the amount alleged to have been frequently misappropriated, I am concerned that if she suspects that she is under police investigation or the subject of civil proceedings, she will dissipate her assets and cause her Husband and Son to dissipate their assets. [80] Michael complains that Ms Daley’s affidavit did not justify the Freezing Order against him because: (a) paragraph 20(f) stated that “[a]mongst other things, the First Crawford Report states that it is ‘highly likely’ that [Sandra] had processed further fraudulent payments prior to 21 July 2010”, when in fact the First Crawford Report stated that:8 The availability of records prior to 21 July 2010, sufficient to prove any further fraud, is uncertain. We have at this stage not attempted to investigate and prove further potential fraud before 21 July 2010 … What is clear from the fraudulent transactions regularity profile is that the frequency of fraudulent transactions has increased from seven payments a month in 2010 to 12 payments a month in 2017. Our opinion is therefore that it is highly likely that the Perpetrator had processed further fraudulent payments prior to what we have proven before 21 July 2010. (b) it established that the real properties acquired by the three defendants were acquired prior to July 2010; (c) it was “wrong and misleading” in failing to identify that the Inala Property was acquired in 2006 by the defendants as tenants in common, with Sandra and Stewart each only holding a one per cent share, and in stating that the transfer of the property from Sandra and Stewart to Michael in 2009 was for “no consideration” when there was no evidence that that was the case. According to Michael, the property searches were attached to Ms Daley’s affidavit and there was nothing to show that the transfer of Sandra and Stewart’s very small 7 Affidavit of Natasha Daley sworn 16 May 2018 at [34]. 8 DN-5 to the Affidavit of Natasha Daley sworn 16 May 2018 at [7.14]. -- 24 of 93 -- 25 interests was done without consideration. APM concedes that to be the case. According to Michael, at the time of the transfer, all of the defendants had a personal covenant to pay the mortgage debt and it was released at the time of the transfer because Michael refinanced and paid the mortgage out. That was not, however, referenced on the transfer, where the consideration was stated to be for “natural love and affection”; and (d) it relied on inadmissible evidence in paragraphs [34] and [35], particularly in relation to Michael, to demonstrate potential dissipation of assets. Ms Daley stated she was concerned that if Sandra found out about the application for a Freezing Order she would cause Michael to sell properties, which is said to have had no reasonable basis. [81] Dealing first with the criticisms of Ms Daley’s evidence: (a) the criticism of Ms Daley’s statement that it was highly likely that Sandra had processed further fraudulent claims prior to 21 July 2010 was clearly based on the First Crawford Report and the opinion expressed therein, even though no investigation had been made of any transactions prior to that date. The view expressed in the First Crawford Report was said to have been based on the increase in frequency of payments between 2010 to 2017 from seven to 12 per month, which suggested that Sandra would have started with fewer payments when she first commenced making fraudulent payments. Ms Daley in other parts of her affidavit stated that the transactions identified as being believed to be fraudulent occurred after July 2010. Given the First Crawford Report was annexed to Ms Daley’s affidavit, I do not consider the affidavit was false or misleading in that regard. While the basis of the assessment made by Crawfords was tenuous, there was a basis for the statement made; (b) it is uncontentious that Ms Daley’s affidavit did not state that Sandra and Stewart each only had a one per cent interest in the Inala Property, nor was the transfer attached (or otherwise before Davis J). However, given that the transfer stated that the consideration was for “natural love and affection,” Mr Ferrett KC submitted that the Court should infer that Ms Daley had reviewed the transfer even though she could not recall what she had looked at to check the accuracy of the table at paragraph [26] of her affidavit, given she -- 25 of 93 -- 26 stated that she believed she would have checked the searches to confirm the table was correct. It seems likely that that would have been the case. The suggestion that the transfer was for “no consideration” is supported by the statement on the transfer itself which reflect that it occurred for no consideration. In the circumstances, the most likely explanation for the reference is that Ms Daley had seen the transfer and failed to refer to it, given her affidavit does accord with the transfer. As to the suggestion that there was valuable consideration provided by Michael refinancing the loan and his parents being released from the mortgages, while that could be valuable consideration that was not a matter raised in the statement of facts and contentions and was only raised at the hearing and, more relevantly, was not identified as consideration on the transfer document, nor a matter that APM should reasonably have known at that stage. In those circumstances, it is not the case that the reference to the transfer of the property being said to be for “no consideration” was not without any factual basis, even though the evidence relied upon was not, as it should have been, identified; (c) significantly, in cross-examination as to the assertion by Ms Daley that the transfer of his parents’ interest in the Inala Property was without consideration, Michael’s evidence was that: … Well, let’s talk about it now. You’ve accused the plaintiff of having misled the court; correct?---Yes. And the – well, one of the allegations, at least, that you make is that the plaintiff misled the court by saying that you paid no consideration when you took over your parents’ interests in that property at Willow Street; correct?---More accurate to say, sir, that they withheld crucial information [indistinct] in support of that. So you say that they withheld crucial information in support of that?---Yes. You’re aware, aren’t you, that your solicitor has written letters accusing the plaintiff of misleading on two counts. One is that it wasn’t made plain in the hearing before Justice Davis that your parents only held a one per cent share each in - - -?---Yes. - - - that property at Willow Street. That’s one; correct?-- -Yes. -- 26 of 93 -- 27 And the other thing that you’ve complained about is the proposition that their interests were transferred to you for no consideration; correct?---I could be wrong, sir, but I do actually believe it was more that there was no evidence for that assertion. All right. Do you accept that you, in fact, got their interests for no – well, let’s pause there. Do you know what “no consideration” means?---For the – the exact technical definition, no, sir. I merely presumed it meant “for nothing”. Yes. All right. We can agree on that. Now, you said that there was no – you were complaining that there was no evidence for it. You accept, though, don’t you, that those interests were conveyed to you for nothing; correct?--- Yes. We started with this point to say you said it was more – the problem was more that there hadn’t been any evidence before Justice Davis that there was no consideration; correct?---Yes, sir. And then what I wanted to put to you was that you would accept in those circumstances that an accusation that the court had been misled before Justice Davis because there was an allegation that no consideration was paid – that accusation would be wrong; correct?---Just on the grounds of that part, yes. (d) as to the fact that Ms Daley’s affidavit referred to the transfer of the Inala Property being for no consideration, as opposed to identifying that the interests of Sandra and Stewart being transferred were only of one per cent and not “the property”, the description of “the property” is infelicitous but the suggestion that the affidavit was misleading is not borne out given that the title search, which showed the interests of Sandra and Stewart which were transferred in 2009, was annexed to the affidavit; and (e) as to the statement by Ms Daley that she was concerned about the dissipation of assets, the basis of the statement was the dishonesty of Sandra, the amount and her exposure to criminal charges and given her connection to Michael and Stewart that she would cause Michael or Stewart to dispose of their assets. I do not consider the statement was inadmissible against Michael given he co- owned two properties with Sandra. The basis of the opinion was set out and it was a matter for the Court to determine whether it accepted it or not. -- 27 of 93 -- 28 [82] According to Michael, the submissions made to the Court by APM’s counsel, Mr de Jersey, overreached and were materially misleading because: (a) of the statement in Ms Daley’s affidavit that it was “highly likely” that Sandra had processed further fraudulent payments prior to 21 July 2010; (b) counsel did not specifically draw to the Court’s attention the fact that all the real properties owned by the defendants had been acquired prior to 21 July 2010, the commencement of the period of the established defalcation, and that there was in fact no evidence that Michael had benefited from the alleged defalcation by Sandra; (c) counsel did not correct the record as required in relation to the statement that the Inala Property had been transferred for no consideration by Sandra and Stewart to Michael in 2009 and compounded that deficiency by submitting: The shadowy circumstances surrounding the transfer for no consideration of 46 Willow Street, Inala by the first respondent to the third respondent is another circumstance supporting the strong inference that it, too, was purchased with the funds that were the subject of the unauthorised transfers. (d) counsel did not highlight the deficiency in Ms Daley’s evidence as to dissipation of assets being directed only to Sandra and not to Michael; (e) counsel’s submission that “a financier is unlikely to advance finance to purchase these properties which are mortgaged” and that it was “unlikely” that a financier would grant a mortgage for the purchase of Michael’s properties was incorrect given that St. George Bank and Suncorp Bank did lend him money and take a mortgage – a fact established by APM’s own material; (f) of counsel’s submission that Michael purchased “three or maybe four real properties” whilst he “studied surveying at university”, because the only property purchased by Michael whilst he was a student was the Inala Property. [83] Michael’s submissions were in part more consistent with the application being an ex parte application, which was not in fact the case. [84] Originally, Michael’s statement of facts and contentions was premised on the Freezing Order being obtained ex parte. However, in his reply, he contended that the -- 28 of 93 -- 29 timeframe for the order meant he did not have time to obtain legal advice or get time off work. Accordingly, the hearing took place in his absence and, in that sense, was heard ex parte, without giving him the reasonable opportunity to be heard and did not draw those matters to the Court’s attention. In submissions, Michael relied on the duty of a barrister or solicitor not to mislead the court rather than the breach of the ex parte duties. [85] It is important to bear in mind the different duties cast upon a party where such an order is sought ex parte as opposed to the where a party has been served, even if they do not subsequently appear at the application. [86] The duties imposed in an ex parte application for a Mareva or freezing order are particularly onerous. A convenient summary of the relevant duties was outlined by Martin J in Mineralogy Pty Ltd v The State of Western Australia,9 which is relevant to the present case. His Honour observed, inter alia, that: (a) An applicant must make a full and fair disclosure of all the material facts. (b) The material facts are those which the judge needs to know in dealing with the application. (Materiality is determined by the court, not the applicant or its legal advisors.) (c) The applicant must make proper enquiries about the facts before making the application. The duty extends to any additional facts the applicant would have known if it had made such enquiries. (d) How far an applicant must go in making these enquiries will depend upon all the circumstances of the case. This will include the probable effect of the order on the defendant and the degree of urgency. (e) The applicant must identify the crucial points for and against the application and not rely on general statements and the mere exhibiting of numerous documents… [87] The same duty does not apply in a case where a party has been served but does not attend court, although there is of course, as there is in all cases, a duty not to deceive or knowingly or recklessly mislead the Court.10 9 [2020] QSC 344 at [82]. 10 See eg, Bar Association of Queensland Barristers’ Conduct Rules (23 February 2018) r 26. -- 29 of 93 -- 30 [88] The hearing of the application for the Freezing Order was not made ex parte. Michael had been served with the application and supporting affidavit on 20 May 2018 but according to Michael he did not appear at the hearing on 22 May 2018 due to work commitments. Michael explained that he was quite blindsided because he did not know that APM was going to try to freeze his assets or what the application was all about at the time. However, Michael agreed that he knew a court hearing was going to be held. He also knew that there was an allegation that his mother was stealing, although he could not understand the full extent of the allegation. [89] I do not find that the submissions of counsel were misleading given that: (a) Counsel’s submissions identified the dates that property was purchased, which were all before 21 July 2010. The schedule in Ms Daley’s affidavit also demonstrated that all of the real properties acquired by Michael, or of which he was a part owner, were acquired prior to 21 July 2010. Counsel’s submissions set out the fact that the misappropriated payments had been found to have been made between 21 July 2010 and 24 January 2018. (b) there was evidence placed before the Court of the percentage interest held by Sandra and Stewart in the Inala Property. It was contained in the searches attached to Ms Daley’s affidavit, albeit that the significance of the transfer in 2009 was exaggerated given the small percentage of the interest transferred. Counsel was not required to correct the record as to the transfer of the Inala Property. In any event, the Court would not objectively have considered the whole of the property was transferred since it was evident from the schedule that the Inala Property was held by Michael, Sandra and Stewart as joint tenants,11 from which one would reasonably infer that Sandra and Stewart could not have held the whole of the interest in the property. As stated above, while not in evidence, the Form 1 transfer of their interests supported the contention that no consideration had been provided by Michael for the transfer. The reference to “shadowy circumstances” as a descriptor of the transfer was an overstatement but was clearly a matter of emphasis rather than fact, made in the context of Sandra’s dishonesty.12 While it was an exaggeration of the facts, the basis of the comment was evident on the material before the Court, which 11 Which was incorrect insofar as it was held as tenants in common. 12 Outline of Submissions on behalf of the Applicant filed 22 May 2018 at [29]. -- 30 of 93 -- 31 did not suggest Michael was a co-conspirator of Sandra, which was made clear in submissions later made; (c) counsel did inaccurately suggest at one stage that Michael was a university student at the time he acquired three properties, which was incorrect. He had, however, earlier stated he had bought the property in 2006 when he was a university student. He had also stated at another point of making submissions that “it’s an inferential case against him on the basis that one property was transferred to him for no consideration. He’s now the owner of three or maybe four real properties. ...he’s 28 years old I think. He’s studied surveying at university.” As the hearing progressed, Sandra also took issue with Michael’s involvement and the suggestion that misappropriated monies had been used in relation to his properties. That included informing the Court that while Michael was a student when he bought the 2006 property, he was a student who had been employed since school and he only paid the deposit and the people he purchased it from rented it from him for a year. In light of all of the statements made to the Court by counsel, to the extent that counsel’s statement suggested Michael was a student throughout when he purchased all properties, the Court would not have been mislead when regard is had to the submissions made in the context of the hearing. This highlights the importance of material being served so that respondents may respond to it and put alternative facts before the Court – an opportunity which Michael did not take up. (d) As to the statement that a financier was unlikely to give finance or a mortgage, to Michael in relation to the properties he purchased in circumstances where he had obtained such finance and been given a mortgage, that does not mean the statement by counsel as to it being unlikely a financier would provide finance or allow him to take a mortgage was not false and misleading. The fact that Michael had obtained his first property as a university student at the age of 24, and subsequently obtained three further properties while in his 20s earning a relevantly modest income, is unusual and does support the submission that it was unlikely that he could have obtained finance unassisted. The Court was aware of the true situation and specifically referred to the evidence that the properties were all subject to mortgages. Counsel conceded that the money could have been money loaned to Michael. The Court also challenged counsel -- 31 of 93 -- 32 that somebody who was studying at university could not buy houses, to which counsel responded: HIS HONOUR: So somebody – somebody who’s studying surveying at university can’t buy houses? MR DE JERSEY: Well, somebody who’s studying surveying at university certainly, in my respectful submission, couldn’t be – it’s not likely that they’d be able to buy three properties and have it transferred to them in their sole name a property for no consideration which they formally owned as joint tenants with their - - - HIS HONOUR: When you say for no consideration, where do you get that from? MR DE JERSEY: Page 11, second row, third column. Your Honour sees transferred to Michael David Balfour as sole tenant on 19 June 2009 for no consideration. HIS HONOUR: I see. So it’s transfers from Mr and Mrs Balfour to him. MR DE JERSEY: Correct. Yes, your Honour. That’s right. HIS HONOUR: Well, what about – what about – I see. MR DE JERSEY: So - - - HIS HONOUR: So you say – so you say that – you say that you hook into Willow Street Inala because you say that’s a transfer from Mr and Mrs Balfour to him for no consideration. MR DE JERSEY: Yes, your Honour. HIS HONOUR: And then you say – and then you say, then there’s all these other properties which are purchased, and the inference can be through the connection of, you say, the fraudulent Mr and Mrs Balfour that those properties could be tainted. Is that the point? MR DE JERSEY: On the footing – yes, your Honour. On the footing that a financier is unlikely to advance finance to purchase three properties which are mortgaged. Your Honour can see that the 96 Wynnum Road, 56 Bluebell Street. HIS HONOUR: Well, that – well, that raises another issue then, though, doesn’t it? I mean, doesn’t the son potentially have a completely different case - - - -- 32 of 93 -- 33 MR DE JERSEY: In the sense it could be a proprietary claim only against him, your Honour. HIS HONOUR: So it could be a different claim against him, but he could have different offences as well. MR DE JERSEY: True. But your Honour, it says at the bottom of page 11, 56 Bluebell Street is owned jointly with his mother, and as is 44 Rosemary Street, Caboolture. So in my respectful submission, what your Honour’s putting to me in the result won’t matter. It says in the formulation of these orders, it says A. HIS HONOUR: Well, I think it matters to this extent, that I will have to leave money for the son to be separately represented. In the context of the exchange, the submissions made the representations as to a financier being unlikely to lend to someone of such an age or loan secured by a mortgage were not false and misleading. At best, the complaints of Michael lessen the weight of such a submission, however the above demonstrates the Court was aware that he had obtained loans and granted mortgages in any event; (e) further, while counsel did not inform the Court of the true level of the interest in the Inala Property transferred by Sandra and Stewart to Michael, he was not obliged to do so. That does not mean it was irrelevant to the basis upon which the freezing order and not one of the matters from which the inference could be drawn that monies of Sandra had been used to contribute to the properties he obtained, albeit of less weight given the small interest transferred. In the circumstances, particularly having regard to the above exchange and additionally Michael’s failure to appear to contradict the position stated to the Court, I do not accept the submission of Michael’s counsel that the Freezing Order would not have been made but for that representation. It is difficult to understand why, if Michael believed that to be so firmly the case, the Court was not provided with material showing the true position on 4 or 21 June 2018 when the matters returned to the Court for hearing; (f) as to the point in relation to the dissipation of assets, there was no evidence of any dissipation, direct or otherwise, but rather the evidence relied on the fact that Sandra had acted dishonestly and that Stewart and Michael were knowing or unknowing recipients of the fraudulent transactions. Commonly, the risk of -- 33 of 93 -- 34 dissipation is a matter of inference rather than direct proof. Dishonesty is prima facie evidence from which it may be inferred there is a real risk of dissipation of assets.13 While it was not suggested that Michael had acted dishonestly or knew of his mother’s dishonesty, Michael was a part owner of two properties with his mother at Caboolture in June 2010. Given that, and his relationship with Sandra where she could be reasonably be expected to exert some influence over her son, there was a reasonable basis for14 an inference to support an apprehension of a real risk of dissipation of assets by Sandra extending to assets held by Michael, particularly where he was a co-owner. It is clear that his Honour understood the claim against Michael may be limited to a proprietary claim only not involving dishonesty in determining whether to grant the Freezing Order. [90] Given Michael was served with the application, the fact that APM’s counsel failed to direct the Court’s attention to a number of material facts consistent with it being an ex part application. [91] It is contended on behalf of APM that there was prima facie evidence before Davis J, who made the Freezing Order, from which it could be inferred that Michael’s properties were at least funded in part by funds stolen by Sandra given his youth, the number of properties he held, his relatively modest income, and the amount Sandra was said to have stolen, which supported the making of the Freezing Order against him. In particular, it was submitted that: (a) Michael owned four properties which had been acquired while Sandra was an employee of APM (or one of the AP Eagers’ companies): (i) the Inala Property, purchased when Michael was 21 years old with Stewart and Sandra as referred to above; (ii) the Tingalpa Property, purchased in 2009 when Michael was 23 years old; and (iii) two Caboolture Properties, purchased in June 2010 when Michael was 24 years of age. 13 Parbery v QNI Metals Pty Ltd [2018] QSC 107 at [38], not overturned on appeal in Palmer v Parbery (No 4) [2019] QCA 27. 14 Ibid at [32], not overturned on appeal in Palmer v Parbery (No 4) [2019] QCA 27. -- 34 of 93 -- 35 (b) Michael’s taxable income in 2015 was $42,455 and $68,347 gross15; and (c) Michael had the same accountant as his mother at least in 2015. [92] According to APM, given Michael’s relatively young age and his relatively low income in 2015, even with the rental income being taken into account in addition to his employment income, there was a basis to infer that Michael’s property had been purchased using funds provided in whole or in part by Sandra which had been misappropriated, whether knowingly or otherwise,16 notwithstanding that the properties had been acquired prior to July 2010. [93] As submitted by counsel for APM in substance the above matters were what was relied on before Davis J, putting aside the reference to the Willow St Inala Property transfer being made in “shadowy circumstances.” The Court was satisfied that a prima facie case was established in determining to grant the order. I have not found that the complaints of Michael demonstrate that the submissions or evidence was misleading or that there was any material non-disclosure (assuming that a duty arose that applied in ex parte applications which it did not). Continuation of the Order [94] Michael contends that the Freezing Order should not have been continued after the filing of the statement of claim on 29 May 2018, as the statement of claim crystallised the period of fraudulent misappropriations as being since July 2010, such that the funds misappropriated by Sandra could not have been used to acquire properties in the name of Michael solely or with Sandra. The statement of claim, however, stated “at least since July 2010” as set out above and was not limited in the way submitted on behalf of Michael. Michael also relies on the fact Sandra filed an affidavit deposing to the fact that she and Stewart had made no financial contributions to the acquisition of Michael’s properties. While Sandra’s evidence no doubt was treated with a level of circumspection given the allegations, the fact that it was merely statements by her without any supporting documentation would have carried little if any weight. No affidavit was provided by Michael at that stage. 15 Which fails to take account of rental income. 16 Although it was fairly conceded by counsel that there was no evidence of Michael having known he had received misappropriated funds. -- 35 of 93 -- 36 [95] After the initial hearing, Michael was served with the Freezing Order. According to Michael, he understood that a Freezing Order was in place but not what it fully meant. [96] Michael did not appear on 4 June 2018 before Boddice J when the matter had been listed for directions. Although submissions were made purportedly for Michael’s benefit by Mr Morris KC who was appearing for Sandra, he was not acting on Michael’s behalf. No material was read by Mr Morris KC, including the affidavit of Sandra filed on 1 June 2018. While Mr Morris KC made submissions that the order against Michael should be narrowed, no submissions were otherwise made that the order should not continue. [97] The proceeding returned before the Court on 21 June 2018. [98] Michael was represented at the hearing of 21 June 2018 by Mr Londy. Prior to that hearing, Michael had relayed his views to Mr Londy, which were ultimately reproduced in a letter by Mr Londy of 19 June 2018 sent to APM’s solicitors. Michael stated he was aware of the arguments raised in that letter which identified flaws in the evidence in the Court and that there was no good arguable case that supported the Freezing Order. The prospect of caveats lodged by consent by APM and the Freezing Order was also proposed. [99] At the 21 June 2018 hearing, the Court was informed by Mr Morris KC that: The point has now been reached where, I think, all parties agree that the interim regime should continue until trial, subject to any respondent having liberty to reply on seven days notice for a variation. And apart from that, the only changes sought are an extension of time for each respondent to deliver a defence until the 11th of July and the applicant to file and serve a reply by the 25th of July… [100] Mr Londy indicated that Michael agreed with the draft order referred to by Mr Morris KC. Michael could not recall that he gave consent to the continuation of the Freezing Order but recalls they were not in a position to pursue the arguments at the time. He did not suggest that he had not given Mr Londy instructions to consent. [101] Given the agreement to the continuation of the Freezing Order, Michael’s contention that the order should not have been continued is misconceived. Michael consented to the continuation, notwithstanding matters had been raised by Mr Londy in correspondence criticising evidence and the case raised against Michael prior to that -- 36 of 93 -- 37 date, and Michael had sworn an affidavit prior to the hearing which stated he had 100 per cent beneficial interest in all properties even where Sandra was a registered co- owner. He also provided some bank statements from Suncorp. That included the account 054435737 in the joint names of Sandra, Stewart and Michael, the existence of which Michael stated he was unaware. [102] The matters raised in the correspondence have largely been addressed in relation to the arguments as to why the Freezing Order should not have been granted. Michael’s affidavit raised some matters which could properly be raised in defence but did not show APM had no cause of action against Michael or basis for maintaining the Freezing Order. Post-June 2018 [103] A defence was filed on behalf of Michael on 12 July 2018 disputing that Sandra and Stewart had anything other than a bare title over the properties for which they were listed as co-owners and that they had made any financial contribution to the properties. Michael disputed that APM had any entitlement to relief against him. [104] A subsequent letter was sent by Londy Lawyers to Lander & Rogers of 20 August 2018, which alleged that APM had no cause of action against Michael and that the claim should be struck out, which foreshadowed an application for summary judgment striking out the statement of claim and/or vacating or varying the Freezing Order would be filed. Such an application was filed on 12 November 2018. [105] Michael had provided two affidavits by the time his application was filed on 12 November 2021. A third affidavit was filed on 27 November 2018. Two affidavits were also filed by Mr Londy. Michael’s affidavits suffered from containing a mixture of evidence and submissions. In some cases, Michael corrected assumptions made by APM in its correspondence as to the true position. For example, Michael corrected the allegation that he paid an $85,000 deposit for the Tingalpa Property, attaching the contract of sale to demonstrate that the deposit paid was $8,000, and explaining that he had combined the loan for the Inala and Tingalpa Properties. In other cases, he deposed to the fact that he was unaware of the Suncorp bank account opened in his name and was unaware a transfer was made from that account to him. In his third affidavit, Michael deposed to his having purchased the four properties with his own -- 37 of 93 -- 38 monies, their being mortgaged and the rental income obtained, and the accounts they were paid into as well details of the mortgage payments and his employment from 2006. Some of those matters had been said not to have been disclosed by Ms Nguyen in her affidavit which in some respects he pointed out was incorrect and otherwise he sought to provide the information which she indicated APM was seeking. [106] Ms Nguyen, a solicitor acting on behalf of APM, outlined the basis of the case against Michael and the matters which APM was not presently aware of but would expect to be the subject of disclosure in her affidavit of 23 November 2018. She also deposed to APM’s investigations in relation to whether misappropriations had occurred prior to July 2010 being ongoing. In correspondence to Michael’s solicitors, APM identified the basis upon which it alleged it had a valid tracing claim against Michael. That claim had not been pleaded in significant respects. That correspondence further indicated that APM needed evidence from Michael to support his defence that no monies were provided to Michael by Sandra or Stewart for the ongoing payments for properties and he did not receive monies into his account from Sandra and Stewart. [107] In cross-examination, Ms Nguyen stated that concerns were held by APM that monies that had been misappropriated had been used to purchase properties held by Michael because he did not have funds to purchase a property and the First Crawford Report stated that it was likely that misappropriations had occurred prior to July 2010. Ms Nguyen stated that even though the property was subject to a mortgage, she did not think it was a real possibility that the bank would have 100% financed the purchase of a property (though she accepted it was a possibility). Ms Nguyen did not know that Michael had employment while he was a university student or the amount of income he earned when she swore the affidavit. She considered the fact that Michael was young and a university student when he purchased a property was unusual. Ms Nguyen also placed weight on Michael’s salary in relation to the acquisition of the other three properties which she thought was approximately $40,000, but agreed, that looking at his tax return for 2015 his gross income, taking into account work allowances and rental income and negative gearing losses, was in the realm of $100,000. [108] None of the above matters were tested before the Court. Michael agreed to an adjournment of the application and orders were made by consent including for the -- 38 of 93 -- 39 filing of an amended statement of claim and further material in relation to Michael’s application, with an order that the matter be listed on the Civil List on seven days’ notice. The matter was not sought to be relisted until November 2021. [109] After the matter was adjourned, APM subpoenaed or gave non-party disclosure notices to a number of financial institutions including Suncorp. APM received some 10,000 documents in response. APM also commissioned a second report from Crawford. Ms Nguyen left Crawford to analyse the documents received. [110] APM filed an amended statement of claim which alleged that Sandra had misappropriated monies from May 2006. According to Michael, that was the only alteration to APM’s case. However, the case was expanded to not merely allege funds misappropriated were applied by: (a) Sandra and/or Stewart to: (i) purchase properties which included the Inala Property and Tingalpa Property acquired with Michael; (ii) transfer money to Michael; (iii) pay for improvements to Michaels’ property or properties of which he was a co-owner; (b) Sandra: (i) to acquire with Michael the Caboolture Properties or alternatively to repay the loans taken out to acquire the properties; (c) Michael: (i) to acquire with Sandra the Caboolture Properties; (ii) to repay loans used to acquire the Caboolture Properties; (iii) to acquire the Inala Property and Tingalpa Property; or (iv) to repay the loans used to acquire the Inala Property and Tingalpa Property; (d) for the purpose of Sandra, Stewart and Michael making cash withdrawals with a view to acquiring other assets. -- 39 of 93 -- 40 [111] The amounts said to have been transferred and paid were particularised in tables 1–8 annexed to the statement of claim by reference to account numbers. The amended statement of claim pleaded that Michael was a full-time student until 2007 and his taxable income in 2013 and 2015. [112] The relief sought from Michael in the amended statement of claim was recovery of monies paid by Sandra to Michael limited to sums representing real and personal property purchased by him as at the date of the commencement of proceedings and a declaration that Michael held on trust for APM all property in his name including the Caboolture, Inala and Tingalpa Properties. No allegation was made that Michael was aware that the sums claimed against him had been misappropriated from APM by Sandra. [113] The Second Crawford Report was obtained and provided to Michael in February 2019 after Michael’s solicitors demanded it be provided, as had been ordered by Applegarth J. According to that report, Crawford was provided with some 10,000 pages of documents and bank statements relevant to Sandra, Michael and Stewart, although the Report noted that all statements for some accounts had not been provided. The Report noted in a flow chart the transfer of funds from APM’s ANZ bank account to accounts associated with Sandra, Stewart and Michael. Appendix 4 of the Report identified transaction support which consisted of a number of excel worksheets. No suspicious transfers were identified from APM’s bank account prior to 2006. [114] The Second Crawford Report identified several matters including, relevantly, that: (a) $538,000 of allegedly misappropriated funds had flowed to a joint account with Suncorp which had Sandra, Stewart and Michael as the named account holders (Account 054435737), with one payment of $3,000 being made to a separate Suncorp account in Michael’s name; (b) Michael had received $3,000 direct to his account from the APM account in a single transaction; (c) there were unexplained “significant” cash deposits into Michael’s bank account, the quantum of which was approximately twice as much as the amount withdrawn; -- 40 of 93 -- 41 (d) amounts had been transferred from Sandra and joint accounts to Michael, but also amounts were transferred by Michael to Sandra and joint accounts which far exceeded the amounts transferred to Michael’s account and joint accounts. Nearly half of the transfers from Michael had occurred prior to 2009; (e) a small number of loan repayments had been paid from the joint account and also Sandra and Stewart’s joint account, with a number of the loan repayments referring having a transaction reference of “Mike’s renovations” or similar; (f) Michael had paid the vast majority of the repayments on four loan accounts himself, which included jointly owned accounts, and in excess of $800,000 remained outstanding on the loans; (g) Michael was regularly employed throughout the period and received rental income, although the amounts paid had not been verified with real estate agencies; and (h) in excess of 1,000 transactions between February 2006 and December 2017 were identified as suspicious. [115] Michael raises several deficiencies in relation to the Crawford Report to demonstrate that APM had no case against him or was acting unreasonably. One of those complaints is that Mr Ackerman, the author of the Crawford Report, was not provided with the UCPR provisions as to the requirements of an expert report when instructed to provide the report. Little turns on that insofar as Mr Ackerman was not providing an expert report, but it was evident that he had not made all inquiries that an expert would make for a report, nor identified further inquiries he considered should be made as was conceded by him in cross-examination. [116] What is of more significance is that Mr Ackerman’s first report was primarily prepared for the insurer, and not for Court purposes. Mr Ackerman was not asked to examine whether Michael’s properties were purchased from misappropriated funds, whether Michael’s mortgages had been paid from misappropriated funds, or whether Michael had received any misappropriated funds. [117] In relation to the Second Crawford Report, Mr Ackerman identified suspicious transactions going back to February 2006. He was as part of his instructions asked to highlight transactions evidencing that misappropriated funds: -- 41 of 93 -- 42 (a) were used to pay down mortgages on properties owned by the Sandra, Stewart and Michael; and/or (b) filtered into accounts held by Michael and Stewart. [118] Mr Ackerman’s report was directed to showing the flow of transactions or funds between accounts from APM to any accounts of the accounts of the Balfours which had been identified as a Suncorp Account of Michael’s; a joint account of Sandra and Stewart with Suncorp; a joint account of Sandra and Stewart with Westpac and a joint account of Michael, Stewart and Sandra with Suncorp (the joint account). In cross- examination, Mr Ackerman stated that he was not asked to obtain the source documentation for transactions said to be suspicious or fraudulent in his report. Mr Ackerman stated that he could not specify whether misappropriated funds were used to acquire any of Michael’s properties because the funds were mixed. Mr Ackerman did not identify in the First or Second Crawford Report whether any misappropriated funds were used to acquire Michael’s properties, repay his loans, or acquire any other assets. Nor did he identify whether Michael had received any of the funds misappropriated. He clarified in cross-examination that he was not instructed to ascertain whether Michael’s properties had been purchased from misappropriated funds, was not asked to ascertain whether any part of Michael’s mortgages had been paid from misappropriated funds. [119] As to the joint account to which $538,000 of allegedly misappropriated money had flowed, a letter dated 17 September 2018 was provided by Suncorp stating that the account had been established when they were processing a loan in Sandra, Stewart and Michael’s names and was established in connection with a home loan solely in Sandra and Stewart’s names. According to Suncorp, Michael had not had the benefit of the funds and they could find no evidence that he ever had access to the account. The letter stated that it was “reasonably possible we had added [Michael] to the account incorrectly.”17 That letter was annexed to Michael’s second affidavit, but not provided to Mr Ackerman for the purpose of his report. [120] According to APM, even though Suncorp had provided a letter in September 2018 stating that Michael was not a signatory to the joint account and had been added by 17 Exhibit MDB-4 to the Affidavit of Michael Balfour affirmed 12 November 2018 at page 7. -- 42 of 93 -- 43 mistake, it was entitled to be sceptical without investigations being conducted to determine what investigations had been undertaken by Suncorp. Ms Nguyen stated that she wanted to write to Suncorp for clarification and did not accept the inclusion of Michael’s name on the account was necessarily a mistake. She stated that she appreciated that the letter raised concerns in relation to the joint account and it was subject to further investigations. While that may be so, clearly the letter should have been provided to Mr Ackerman to consider given the reliance by APM upon the forensic accountant in respect of the conduct of its case. In that regard, Mr Ackermann when asked about the Suncorp letter and what his response would have been stated that: But it’s fair to say, if you had been provided with a copy of it, what you say in paragraph 4.3 of your report and what you’ve summarised in the table would have been very different, wouldn’t it, in reference to the holder and controllers of the account?---Yes. The account holder wouldn’t have included MD Balfour, then, yes. [121] Michael points to a further deficiency in the Second Crawford Report insofar as Suncorp bank account statements for the period between 17 October 2009 and 29 July 2010, during which he purchased the Caboolture Properties, and which APM had subpoenaed, were not provided to Mr Ackerman. According to Michael, had Mr Ackerman seen those statements he could not have reasonably concluded that Michael’s properties had been funded by misappropriated monies, which is supported by the analysis subsequently carried out by Mr Cook on behalf of Michael. In cross- examination, Mr Ackerman stated that he had used Sandra and Stewart’s other accounts to reconstruct the transfers in relation to Michael’s account: Can I put it, again, paraphrase it, and correct me if I’m wrong, in respect of my client, Michael Balfour, you analysed his income by reference to bank statements and his income from his employment and rental properties, and you dealt with all in and outflows otherwise to his bank account from accounts controlled by his mother or his father, correct?---That’s correct. [122] Mr Ackerman also accepted in cross-examination that he did not maintain that the payment of $3,000 to Michael was fraudulent given he had not gone to the source documents. He further accepted the sampling process Crawford carried out in relation to the 900 transactions identified as suspicious was not of a sufficient level for an expert report, and that additional documentation review would have been required. -- 43 of 93 -- 44 He noted, however, that the sampling process gave them an understanding of the processes used to misappropriate funds and the theme of the fraudulent process, such that the sample of volume of transactions indicates something is amiss. [123] Mr Ackerman clarified in cross-examination that on his analysis Michael’s income exceeded his expenses and that his analysis did not appear to include tax refunds which would have increased Michael’s available income. He accepted his transaction summary of loan repayments, expenditures and income for Michael would have shown a greater surplus including for the 2009 and 2010 years for which Michael’s Suncorp Bank statements were missing. As a result of the missing bank statements for 2009 and 2010, Mr Ackerman conceded that he did not have information for other sources of income, such as rental, having relied on cross-referencing from Sandra and Stewart’s bank accounts where funds went into Michael’s account. [124] Mr Ackerman also conceded that the reference to the $3,000 being paid by Michael to BMA as a fraudulent transaction was incorrect as he did not have the source documents for that transaction. The lack of investigation of source documents at least led to some transactions being wrongly characterised. Mr Ackerman conceded in cross-examination that one transaction said to be a fraudulent receipt for $20,000 did appear to be a valid transaction for the purchase of a vehicle for Stewart Balfour. [125] In his evidence, Mr Ackerman stated he had found that a total of $89,000 was deposited in Michael’s accounts between 2003 and 2018. He considered that an average per year deposit of $6,000 was significant in an age of the use of EFT. While Michael sought to challenge such a view, such a challenge goes to the weight of the view advanced and does not establish that the view was without any foundation. While the cross-examination of Mr Ackerman did highlight a number of deficiencies in the Second Crawford Report some of those matters were relevant to the probative value of the opinion which is of limited relevance to the present application. [126] Michael did not provide any further evidence in response to the material provided pursuant to the orders made on 28 November 2018, nor did he seek to relist the application on the civil list. It was not until 4 November 2021 that Michael sought to provide the Cook Report and invite APM to discontinue its claim and release him from the Freezing Order. -- 44 of 93 -- 45 [127] It is further contended by Michael that upon provision of the Cook Report and the accompanying letter from Michael’s solicitor to APM’s solicitor requesting APM reassess its claim, APM should have discontinued its claim against Michael or agreed to set aside the Freezing Order [128] The purpose of the Cook Report was identified as being to assess the claims against Michael set out in the amended statement of claim and whether the Crawford Reports and other documents supported those claims. Mr Cook in particular reviewed Appendix 4 of the Second Crawford Report to ascertain whether the transaction detail sheets supported the claims and amounts pleaded against Michael. Mr Cook’s report was lengthy and included Appendices A–O. The Cook Report stated that: (a) the Second Crawford Report did not establish that Suncorp account 54435737 was under the control of Michael and that based on the Suncorp letter “it appears that [Michael] may not have had control”, but did establish that Michael received $2,500 from that account (a matter which Michael deposed he had not ascertained or been aware of); (b) the Second Crawford Report confirmed that Michael did receive $3,000 from an APM bank account but did not establish that the payment was unauthorised; (c) there was no evidence that the transfers identified in Tables 2 and 5 of the amended statement of claim were used by Michael to acquire properties, nor was that supported by the Second Crawford Report. According to Mr Cook, additional documents provided showed that the Properties were principally funded through loans; (d) the documentary evidence provided to Mr Cook established that in addition to the loan funding obtained by Michael, Michael personally funded the purchase of all of his properties, namely the Caboolture Properties, the Inala Property and the Tingalpa Property. In his analysis, Mr Cook referred to matters of which he was informed by Michael; (e) loan payments were made from receiving accounts identified in the Second Crawford Report to loan accounts solely or jointly in Michael’s name in the sum of $37,013 in respect of the Inala Property, the Tingalpa Property and one of the Caboolture Properties; -- 45 of 93 -- 46 (f) the financial records relied upon by Mr Ackerman did not support the allegation that funds received from Sandra were used for improvements to Michael’s properties as set out in Table 3 of the amended statement of claim, other than the transaction descriptions with respect to payments of $38,900 and $9,000 which referred to “Mike’s renovation”; (g) the amounts in Table 4 said to relate to improvements to properties owned by Sandra, Stewart or Michael were unlikely to relate to improvements to Michael’s property. The amount of $197,841.82 consisted of three bank cheques for $118,490.03, $54,000 and $25,351.79 dated in 2006 and were made at a time prior to Michael becoming the registered owner of any properties and were shown by Michael who provided progress claims to be work completed by Sandra and Stewart on their Wakerley Property. Michael identified the other amounts in Table 4 to be for landscaping to the Wakerley Property. At that time, the amount alleged to have been misappropriated by Sandra was $11,370; (h) the financial records did not support the allegation that funds received from APM were applied to acquire other assets by Michael as particularised in Table 8 of the amended statement of claim. The Second Crawford Report showed only that a payment of $89,554.91 was deposited into Michael’s account but not the source of those funds nor evidence that assets were acquired with those funds; (i) there was evidence that there was a transfer of $28,000 from Sandra and Stewart’s account to Michael’s account as set out in Table 3; (j) the amended statement of claim did not identify transfers from Michael’s account to the receiving account of Sandra and Stewart. The Second Crawford Report identified $227,302 of transfers from Michael to the receiving account. That amount exceeded the amount identified in the amended statement of claim by $108,889; (k) Table 5 of the amended statement of claim was supported by the Second Crawford Report in respect of the Rosemary St, Caboolture Property; and (l) Tables 6 and 7 of the amended statement of claim showed transfers from Michael’s accounts, not monies being applied out of the receiving accounts. -- 46 of 93 -- 47 The Second Crawford Report did not provide evidence that the amounts identified in Tables 6 and 7 were used to acquire properties as alleged. [129] Mr Cook in cross-examination clarified that his initial instructions involved him analysing the Crawford Report. He was subsequently requested to look at how the properties were funded via email correspondence. He did not rely solely on the letter provided by Michael but evidence that could be provided. According to Mr Cook, Michael’s letter became more relevant in understanding the acquisition of funding of the properties and the loan payments. [130] Mr Cook’s report was reviewed by Mr Lawrence on behalf of APM, in the third draft Crawford Report, although he was not instructed until December 2021. It was not ever finalised and, on its face, required further instructions. Mr Lawrence in the draft report reviewed Mr Cook’s report. He did not disagree with a lot of the conclusions of Mr Cook but noted a number of his conclusions did not cause any material alteration in the Second Crawford Report. For instance, he stated that Mr Cook’s findings still supported the fact funds were paid from the joint accounts of Sandra and Stewart towards loan repayments of properties where Michael was the title holder or a joint title holder with Sandra and/or Stewart. As to the renovation payments, no invoices were obtained to demonstrate they were for renovations and it is only supported by the statements in the bank accounts. Mr Lawrence pointed out Mr Cook did not include an amount of $28,000 paid from the Receiving Account 991921 to Michael’s bank account. Mr Lawrence in the third draft report agreed the amounts in Tables 6 and 7 which included transfers and payments of $157,325 and $130,216 from Michael’s account to Suncorp loan accounts for each of the Caboolture properties and transfers and payments of $60,979 and $235,431 in respect of Wynnum Road and Willow St were according to his own definition paid out of a receiving account. He states that Mr Cook has not determined if monies were used to repay loans to acquire the properties only that there was no evidence that they were used to acquire properties. He agreed with Mr Cook that the deposits totalling $89,554.91 paid into Michael’s accounts as cash deposits do not demonstrate the source of the deposit. Mr Lawrence noted that an amount of $20,000 had been paid by receiving account 99121 for the deposit of Willow St which Michael Balfour had advised had been repaid by him to Sandra and Stewart and was not included in Mr Cook’s report. Mr Cook also reported that an amount of $8000 had been paid by -- 47 of 93 -- 48 Receiving Account 991921 for the deposit of Wynnum Road which Michael advised had been repaid by him to Sandra and Stewart and was not included in Mr Cook’s report. [131] Mr Cameron, one of the solicitors acting on behalf of APM, in November 2021 agreed that the third draft report of Crawford provided in 2022 in response to the Cook Report largely agreed with the conclusions in the Cook Report. [132] Ms Nguyen was a partner by the time of the November 2021. She acknowledged in her evidence that Michael made transfers to Sandra and Stewart which far exceeded the amounts transferred to Michael but contended that they did not explain the source of cash deposits into Michael’s account. She stated that Michael had stated that Sandra had given him money for a deposit even though he stated it was repaid. She considered that the Second Crawford Report did give support for misappropriated monies being used to purchase any of Michael’s property because in the appendix there was a matrix of funds flowing into different accounts which showed funds directed to accounts in Michael’s names or to mortgages in his name. She further considered that the Second Crawford Report supported the amended statement of claim. [133] In cross-examination, Ms Nguyen: (a) when taken to Michael’s 2015 tax return, conceded that Michael’s gross income was in the vicinity of $100,000 when rental was taken into account, rather than $42,455 referred to by her and Ms Daley; (b) considered that there was an informal stay in place notwithstanding Michael had not agreed to a stay when Sandra and Stewart had agreed; and (c) considered that the Cook Report still supported the fact monies had been paid to Michael from which his properties benefitted which supported APM’s case and that further investigations had to be undertaken and documents obtained to ascertain whether Mr Cook’s report was correct. [134] The fact that the Second Crawford Report provided limited support for APM’s pleaded case was acknowledged in the letter from Michael’s solicitors to APM’s solicitors dated 4 November 2021. The report was stated to be the basis upon which -- 48 of 93 -- 49 Michael deferred listing his application to strike out and/or for summary judgment and that Michael determined to obtain his own forensic accounting report. [135] APM in a further letter dated 28 February 2022, prior to the hearing of the application, stated that it would abandon part of its claims, it did not specify which parts of the claim would be abandoned. At that time, APM said it would be making further additional claims. APM did not disclose the draft Crawford Report until just prior to the hearing of Michael’s application. APM sought further time to allow it to have Crawford complete its investigations and to amend its statement of claim. APM’s lawyers sought to justify the elongated timetable on the basis they had not been progressing the matter while Sandra and Stewart’s criminal proceedings were being finalised and stated that: We see no material prejudice to your client in granting our client further time to address these matters, particularly given that: (a) your client has not sought to progress its application since November 2018; (b) your client has not particularised any urgency in dealing with the matter in the next month; (c) your client’s position is protected by our client’s undertaking as to damages; (d) the amendments are likely to address some of the aspects your client has raised in its application material. There is no urgency in progressing the matter. No steps have been taken for approximately 3 years now. [136] Such a view suffers from obvious flaws in circumstances where APM had the benefit of the Freezing Order. [137] In the application before Bradley J on 3 March 2022, to dismiss the claim out for want of prosecution and summary judgment, APM sought an adjournment to obtain a further forensic accounting report, which was opposed by Michael. At that application, APM indicated it was going to abandon claims which appeared to be hopeless. APM stated that the claim against Michael was a tracing claim but wished to identify whether there were claims for knowing receipt of monies paid out in breach of fiduciary duty or knowing assistance based on monies said to have been paid by Michael to Sandra and vice versa. APM, however, conceded when challenged by Bradley J as to whether they maintained that the Freezing Order should remain in -- 49 of 93 -- 50 place, that it at least should be reduced significantly from the full amount of the claim from approximately $3 million to between $200,000 and $250,000. According to APM, it started to look at the claims made when it received the draft Crawford Report. [138] APM contended that it would maintain claims based on improvements to property of approximately $48,000 and $89,000 identified in paragraph [16(d)] of the amended statement of claim. APM’s counsel indicated that there was a further $80,000 in cash payments it wished to investigate. [139] In response to Bradley J indicating that he was not at that stage minded to strike out the whole proceeding for want of prosecution notwithstanding the extraordinary delay and noting that the claim that could be made against Michael was a far more modest claim that would not justify the Freezing Order being in place, Michael instructed his counsel that he would offer an undertaking. Bradley J subsequently ordered that: UPON the third defendant undertaking that if he sells or otherwise deals with the equity in any of his real properties, the same will be for the purposes of either acquiring another property or properties or paying or repaying loans for legal fees of this proceeding. THE ORDER OF THE COURT IS THAT: 1. The Orders made on 22 May 2018 and 4 June 2018 be discharged as against the third defendant. 2. The third defendant have leave pursuant to rule 389 to give notice to the plaintiff pursuant to paragraph 4(c) of the Order of Applegarth J made on 28 November 2018 and to otherwise proceed with the third defendant’s application filed on 13 November 2018 for summary judgment and other relief. 3. The plaintiff file and serve by 4pm on 29 April 2022 a further amended statement of claim deleting claims against the third defendant which it is no longer to proceed with and making any other amendments against the third defendant as it may be advised. 4. If a further amended statement of claim in accordance with paragraph 3 is not filed and served by 4pm on 29 April 2022, the claims against the third defendant in paragraphs 16(a)(ii), 16(a)(iii), 16(a)(iv), 16(a)(vi), 16(b)(i), 16(b)(ii), 16(c)(ii), 16(c)(iii), 16(c)(iv), and of the amended statement of claim be struck out without further order. -- 50 of 93 -- 51 5. The plaintiff pay the third defendant’s costs of the application to be assessed if not agreed. [140] The statement of claim was not subsequently amended and the claims against Michael were struck out. [141] According to Michael, the hearing before Bradley J and his Honour’s subsequent orders demonstrate that APM’s case was always bound to fail and should not have been maintained. While his Honour made a number of comments in relation to the delay by APM and that certain aspects of APM’s case appeared hopeless those comments were not part of the reasons of the decision his Honour made and as such are of limited relevance to the present application. [142] According to APM, the fact that Michael considered it necessary to obtain an expert report from Mr Cook, a forensic accountant, demonstrates that the case was complex and it was not clear that it was bound to fail, particularly given Mr Cook had the benefit of detailed instructions prepared by Mr Londy and the draft analysis prepared by Michael of some 33 pages, which included documentary references, which APM did not have the benefit of until the provision of the report. In his instructions to Mr Cook, Mr Londy stated that: Since reviewing the further expert report from the plaintiffs, Michael Balfour has carefully reviewed relevant documentation and has provided us with a detailed analysis in the form of a draft letter to the solicitors for the plaintiffs with annexures. According to this analysis, the plaintiff's case cannot be sustained. [143] APM submits that the Cook Report was not delivered to it until November 2021,18 and followed a number of exchanges between Mr Cook and Mr Londy seeking further information and instructions. The fact Mr Cook required substantial information and documentation to be provided to him to finalise his report, according to APM, demonstrates that the position in relation to the use of funds was far from clear and APM did not act unreasonably in pursuing the claim, particularly where it had asked for Michael to provide information to demonstrate that the claim was misconceived. Michael, of course, was not obliged to provide that information unless it was disclosable. However, APM highlights that Mr Londy and Michael had taken the 18 Despite being provided to Mr Londy in August 2021. -- 51 of 93 -- 52 position that they had provided sufficient information to show that the claim against Michael was unsustainable, which did not include all of the information provided to Mr Cook. [144] APM contends that it could not have reasonably informed itself of some of the conclusions in Mr Cook’s Report in the absence of Michael’s instructions and the provision of additional documents, noting that there were 10 teleconferences between Mr Londy and Mr Cook as well as requests for additional instructions. Further, APM submits that while it had been invited to believe that Sandra had not paid any monies towards the acquisition of Michael’s properties or loan repayments, that position was not clarified by Michael in his affidavit filed 17 December 2021. [145] Mr Hackett, however, submitted that Michael in his first affidavit material disclosed the contracts for the purchase of properties, the mortgages, loan applications, and bank statements for the mortgages and his saving account. He also deposed to knowing nothing about the account in his and Sandra’s name, which was supported by the Suncorp letter. An examination of the bank accounts would have shown the fact that Michael had made payments for the loans. It was also submitted on behalf of Michael that Mr Cook’s Report did not result in the discontinuance by APM. APM continued to oppose Michael’s application before Bradley J and failed to disclose Mr Crawford’s draft report. [146] On 4 November 2021, upon provision of the Cook Report, Michael’s lawyers requested that APM reassess its claim against Michael. APM did not do so. APM, however, relies on the 4 November 2021 letter to demonstrate that APM had not been provided with documents that it had requested on 4 December 2018, with the letter stating that “Mr Cook’s report annexes our client’s documents of the kind you requested, and contains compelling expert forensic opinion evidence from which it can be concluded that there is no case against our client”. Consideration – did APM’s conduct after November 2018 in continuing the Freezing Order and the proceedings against Michael warrant an indemnity costs order? [147] The present case was one of complexity with a large amount of money alleged to have been misappropriated through a large amount of transactions which were then paid into different accounts by Sandra. -- 52 of 93 -- 53 [148] It is evident that APM delayed its investigations and appeared to take no substantive steps after the provision of the amended statement of claim and Second Crawford Report in early 2019, until Michael filed his application at the end of 2021. According to APM, the explanation for its inactivity was that the proceedings were “practically stayed” until Sandra’s criminal prosecution was resolved and it could not have realistically pursued the proceedings against Michael in circumstances where he was sued for the receipt of monies misappropriated by Sandra. APM further submits that Michael contributed to the delay in taking no active steps to advance his application until 2021 which APM contended appeared to be commensurate with the approximate time that Sandra had determined she would plead guilty. [149] Michael maintained that he did not take steps earlier than 2021 because he did not have the resources to do so. It is reasonable to infer that his ability to borrow against his property interests and pay legal costs was constrained by the Freezing Order, given Suncorp’s rejection of his extending the mortgage. APM contends even if it was true that Michael lacked the financial resources to prosecute his application until 2021, that demonstrates that he could not have had the resources to defend the action if it was prosecuted more quickly. [150] Michael’s failure to prosecute his application more quickly however does not alleviate the obligation that lay on APM to prosecute its action with expedition in circumstances where Michael had not agreed to the informal stay of the action and it had the benefit of a freezing order extending of the majority of assets held by Michael and which limited his expenditure. While I consider there was a reasonable prospect that the Court would have stayed the whole proceeding while the criminal proceedings were prosecuted had an application for stay been made given the claims against Michael relied on establishing the misappropriations by Sandra and that that misappropriated money had “filtered” through to assets held by Michael, in circumstances where no stay had been agreed, APM were not entitled to act on the basis that such stay would inevitably be granted over the whole proceeding. Even if granted, any stay may have only be granted in relation to the trial and not the interim steps.19 Militating against the granting of a stay in relation to Michael would be the fact he was not the subject of criminal charges, was not alleged to have been 19 As to the principles which are relevant for a stay, see Flegg v Hallett [2015] 1 Qd R 191 at [28]-[40] per Flanagan J, referring to McMahon v Gould (1992) 7 ACLR 202. -- 53 of 93 -- 54 knowingly involved in or a knowing recipient of his mother’s conduct and was subject to a Freezing Order which affected the vast majority of his assets. Not having a formal order in place to that effect resulted in Michael seeking to have the proceedings against him struck out for want of prosecution, which was part of the application before Justice Bradley. It also appeared to give APM a false sense that it could await the outcome of the criminal proceedings before preparing the matter for trial. Even if there had been an informal stay that does not exonerate a party from taking any steps in the litigation, albeit some steps in respect of trial and the trial itself may have to be delayed. That is particularly so where red flags are raised by a defendant which could undermine at least in part the extent of the claim against them in circumstances where the freezing order has been applied for the full extent of alleged misappropriated monies against a party who was alleged to have assets into which the misappropriated monies could be traced rather than as a knowing recipient. [151] While APM had obtained the Second Crawford Report to analyse the numerous bank records that APM had obtained through subpoenas and otherwise and which showed alleged misappropriated monies were paid into the accounts which were subsequently prima facie used for payments of Michael’s loan accounts although the vast majority was found to have been paid for by him, the report only went some way towards establishing that APM had a claim against Michael. APM through its lawyers would have been aware that the Second Crawford Report did not review source documentation nor did it trace through alleged misappropriated monies into Michael’s assets, given Crawford’s limited instructions to Crawford’s. A proper analysis would have revealed the limitations of the report as found by Mr Cook in relation to the matters alleged who demonstrated in his analysis the limitations of the findings of the Second Crawford Report largely by reference to the documents relied upon by Mr Ackerman and that the claims that were the subject of Bradley J’s order of 3 March 2022 as liable to be struck out were not maintainable. [152] The fact that Mr Ackerman considered that the Suncorp letter of 17 September 2018 as to there being a reasonably possibility that Michael was added to the joint account would not have led them to opine that Michael was an account holder of the joint account significantly undermined the prospect of APM succeeding in establishing that he was an account holder and had control over the funds paid into the account. That is, of course, a matter of opinion and could be refuted by establishing that -- 54 of 93 -- 55 Michael was in fact a joint account holder. While APM’s lawyers could have relied on the fact that Michael is a named account holder, as prima facie evidence he was an account holder, it is unlikely without further evidence that they would have succeeded. Further, they could not have reasonably acted on that basis in light of the correspondence received from Suncorp. Ms Ngyuen stated that they wished to investigate the matter further with Suncorp between 2018 and 2022 but they obtained no evidence contradicting the position stated by Suncorp, which was explained on the basis that an informal stay was in place. However, evidence of any inquiries or further investigations was not in evidence after Michael’s second application was relisted in November 2021. To the extent that APM wished to rely on misappropriated monies received into that account being received by Sandra, Stewart and Michael which was estimated to be some $538,000, such steps should have been taken within a reasonable time after the possibility it was incorrect was raised. [153] In addition, Tables 6 and 7 were not included as a result of the Second Crawford Report which while did not show the monies were paid out of the accounts into which misappropriated monies were paid but were directed to monies paid from Michael into the loans in question. [154] According to Mr Cook, the allegations in [16(b)] and [16(c)(ii),(iii) and (iv)] that misappropriated monies were used in relation to the allegations said to be supported by tables 6 and 7, were not supported by the financial records relied upon by Mr Ackerman, a matter concluded by Mr Cook. That is borne out by the fact that those allegations were the subject of the order that they be struck out by Justice Bradley if not repleaded. [155] The further fact that Michael had transferred monies back to account of Sandra and/or Stewart that well exceeded the amounts transferred to him, while it may not have as a matter of principle displaced the possibility of a tracing claim being successful, it would or should have at least have put APM on notice that it had little prospect of success in succeeding in its tracing claim. [156] While APM contend that they had requested Michael to provide them with the records to substantiate his position that the claim against him had no foundation and was told in December 2018 that Michael would rely on his formal right as to disclosure and the documents were then said to be contained in the Cook report, the onus did not lie -- 55 of 93 -- 56 on Michael to disprove the claim against him. Further, given there was not a stay in place to which Michael had agreed, APM could have continued to prosecute the proceedings against him to at least obtain disclosure at a time well prior to the delivery of the Cook report in November 2021 and require a defence to the ASOC. It is with respect no answer, as APM seek to contend, that Michael delayed in briefing Mr Cook or filing its application that the proceeding be struck out in December 2021 and is equally culpable for the proceeding being in abeyance, notwithstanding r 5 UCPR places an obligation on both parties to act with expedition. [157] While I have no doubt that APM and its lawyers considered that they had a sufficient basis to continue with APM’s claim against Michael after providing the ASOC, the Second Crawford Report and the Suncorp letter of 17 September 2018, it should have been appreciated that unless they could obtain further evidence, the Second Crawford Report and the inferences that they sought to rely on would be insufficient to substantiate the pleaded claim. However, while there was evidence that moneys had been used on occasion to pay a deposit for Michael, meet some loan repayments and pay for renovations, APM and its lawyers must have been aware that the claim against Michael, being a proprietary claim, was likely to be considerably less than the amount of his assets that were the subject of the Freezing Order. No compelling evidence was given on behalf of APM demonstrating that the claim against Michael was still of the magnitude reflected by the Freezing Order, particularly after the second Crawford report. While the fact that Michael had transferred greater funds to Sandra and/or Stewart’s accounts out of which moneys were paid was not an absolute answer to the proprietary claim APM lawyers must have been aware the claim was considerably weaker and some allegations such as the acquisition of properties by Michael using misappropriated funds at least in relation to the properties he owns solely were unsustainable. [158] I consider that given that they had the benefit of the Freezing Order against Michael, knowing the limited nature of the claim against him by APM and the difficulties in establishing a tracing claim obliged them to take reasonable steps to prosecute the action against Michael and to ensure that its pleaded claim against Michael was maintainable and the Freezing Order should continue in the magnitude in which it had been granted, it did not do so notwithstanding the affidavit evidence of Michael, the Suncorp letter of 17 September 2018 and the limited exercise carried out by -- 56 of 93 -- 57 Crawfords. Nor did it obtain the missing Suncorp bank statements for the period from 17 October 2009 to 29 July 2010 identified in the Second Crawford Report which was the period in which the Caboolture Properties were purchased by Sandra and Michael. [159] I consider that a reasonable time for those steps to been carried out was a twelve months after providing the Crawford Report taking into account the complexity of the matter by which time APM would have been in a position to determine that its claim based on inferences and the flow of money into accounts against Michael was not maintainable, or to the extent any part of its claim remained it was for such a small amount of money, that continuing the claim was unjustifiable and abandoned the claims prior to March 2022. [160] As to the claims which were not struck out, APM ultimately determined not to proceed with any claim against Michael. [161] As to the remaining allegations that had not been the subject of the order of 3 March 2022, the allegation Michael had applied misappropriated monies to acquire the Caboolture properties with Sandra who was on the joint title holder was denied by Michael in his defence and affidavit evidence, Michael had sworn that Sandra had only been added to the title to assist him to obtain the loans to acquire the properties and that he had advanced all the funds to acquire the properties and repay the loans in November 2018. While APM was entitled to treat that with circumspection, it failed to provide Mr Ackerman with the Suncorp bank statements for the period 17 October 2009 until 29 July 2010 which had been subpoenaed which were for the period in which the Caboolture Properties were purchased. Those bank statements showed and supported Michael’s evidence insofar as they showed transfers to James Dean Residential and Ray White. The alleged use of misappropriated monies to repay the loans relied on Tables 6 and 7 of the ASOC which are discussed above. [162] As to the allegation in [16(a)(v)] that misappropriated monies had been applied to renovate Michael’s property, the only evidence for that suggestion was the entry in the Suncorp joint account 991921 for the amounts of $9,000 and $38,900. The bank accounts do not disclose where those monies went. In the absence of any further evidence, APM could not establish its claim. Although Michael did agree costs of some renovations were met by Sandra and/or Stewart, relevant to the assessment of -- 57 of 93 -- 58 that claim in respect of the renovations is the fact that Michael had transferred $227,302 to that account which well exceeded the transfers made to him. [163] As to APM’s claim in [16(d)] that Michael had used misappropriated monies to make cash withdrawals or deposits to acquire assets, the particulars of which are set out in Table 8, that claim was also unsustainable. While Table 8 referred to deposits of $89,564, there was no evidence to show those monies had been misappropriated or that they had been used to acquire any assets. The allegation was therefore unsupported by any evidence. [164] The difficulty for APM is that while the circumstances may have raised suspicion that misappropriated monies had been used as alleged, it was not borne out by the evidence APM had and the allegations had been denied by Michael. [165] In my view, APM acted unreasonably and delayed the conduct of the litigation by failing to investigate the claims against Michael and take available interlocutory steps, such as disclosure. APM had unduly prolonged allegations for which there was no reasonable cause of action in circumstances where it had been placed on notice by Michael that its claims against him were ill-founded and the ASOC allegations against him were largely unsupported by the findings in the Second Crawford Report and it had been provided with the letter of Suncorp of 17 September 2018. I find that it was unreasonable for Michael to have been subjected to the expenditure of costs after March 2020. Other Complaints [166] I will briefly deal with the additional arguments raised on behalf of Michael which are directed to the question of whether or not APM acted unreasonably in the conduct of the proceedings against Michael, which do not change my view set out above. A number of matters are raised: (a) The failure of APM to accept the offer to place a consent caveat over each of the four properties over which Michael was a titleholder solely and jointly with his mother in June 2018 on the basis that the same undertaking as to damages as the Freezing Order continuing to apply. APM rejected the offer on 23 August 2018 on the basis that it is not appropriate (and not the same) to substitute a caveat for a Freezing Order. In particular, APM asserted that it -- 58 of 93 -- 59 would not prevent Michael from further encumbering the properties nor limit Michael’s expenses. The letter from Lander & Rogers to Londy Lawyers dated 23 August 2018 further stated that: “If Michael Balfour has another proposal that would address our client’s concerns, our client would be happy to consider such proposal.”20 It is true that a caveat only would apply to the properties and not limit expenses. The suggestion it would not stop Michael from encumbering the properties could only apply if he encumbered the property in a way which would not require registration of an interest which would be rare. In August 2018 the correspondence demonstrates that investigations were still at an early stage. The amount of money estimated to have been misappropriated is a large amount. While the offer to lodge a caveat was a reasonable one, in the circumstances, at the time I do not consider that the refusal to substitute caveats for the Freezing Order was unreasonable at that stage; (b) Not supporting an extension of a loan from Suncorp to obtain further money for legal costs following Applegarth J varying the Freezing Order to permit Michael to spend a further $50,000 on legal costs and to mortgage his Tingalpa Property to raise money for that purpose. In this regard, Michael complains that in an email to Suncorp about the variation, APM’s lawyers stated “monies that were misappropriated were used to acquire properties (including the Tingalpa Property) or to pay down any mortgages/loans on those properties including Tingalpa Property” notwithstanding that at the time the proceedings included such a claim and APM knew that no such claim was maintainable. While the terms of the email was in slightly different terms then that pleaded, the difference is not material. Suncorp refused to lend the additional money and extend the mortgage to Michael. No reasons were given. APM’s solicitors had sent an email to Londy Lawyers on 29 November 2018 with the draft email that they proposed to send to Suncorp (as requested by Londy Lawyers). When the solicitors received no response within a short time frame of an hour they sent the email to Suncorp. While it is true that the statement of claim did not plead the monies were used to pay down the mortgage of the Tingalpa Property or any loan, APM had articulated the claim it proposed to plead in 20 MDB-4 to the Affidavit of Michael Balfour sworn 12 November 2018 at page 111. -- 59 of 93 -- 60 correspondence to Londy lawyers and in an affidavit of Ms Ngyuen. In the circumstances, APM had not acted unreasonably; (c) APM proposing that they would not provide affidavit evidence unless the third defendant applied to progress its application for strike out or summary judgment having provided the amended statement of claim to which they had received no response from Michael “in an effort to save incurring any unnecessary costs”. Notwithstanding the Court orders made which should not be varied informally by parties, given an amended statement of claim had been served it is not unreasonable for APM to seek to avoid incurring costs unnecessarily if Michael had determined not to pursue his application to strike out or seek summary judgment. APM did later provide affidavit evidence when Michael’s lawyers demanded they do so; (d) Proffered an undertaking in the incorrect name and when that was raised by Michael, AIG Australia Ltd agreed to be bound by the undertaking as to damage but would not pay Michael’s costs in relation to the issue. I accept that the undertaking was always to be offered by AIG Australia Ltd. As to the costs, it was bound up in a number of complaints made by Michael and it is difficult to see how the costs of that issue could in fact be calculated. This complaint is of such a minor nature and is of no consequence such that one wonders the basis upon which it was even raised. Similarly, while I understand that Michael would have felt considerable angst in Suncorp failing to act on the dismissal of the order without APM notifying it could do so notwithstanding the order, the failure of APM to notify Suncorp was clearly an oversight and not an example of APM continuing to act unreasonable. [167] The orders that should be made are that APM pay Michael’s costs of the proceedings including any costs in respect of the Freezing Order on the standard basis until February 2020 and on an indemnity basis from March 2020, save where specific costs orders have been made. -- 60 of 93 -- 61 Compensation pursuant to undertakings [168] A person who is applying for a Freezing Order will generally be required to give an “unlimited cross-undertaking in damages, that being the price for interfering with the defendant’s freedom before he has been found liable for anything.”21 [169] In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (Air Express),22 Gibbs J (as his Honour then was) said of an undertaking as to damages given in respect of a continuing injunction, that the object of requiring such an undertaking: is an attempt to ensure that a defendant will receive compensation for any loss which he suffers by reason of the grant of the injunction if it appears in the event that the plaintiff was not entitled to obtain it. The insistence upon the giving of an undertaking is a very important if not an essential means of preventing injustice from being done by the court when it makes an order at an interlocutory stage before the rights of the parties have been finally determined. [170] Practice Direction 1 of 2007 provides for a pro forma undertaking to be given by an applicant. In the present case the proforma undertaking was generally adopted save paragraph 8 was omitted and the undertakings were given by the applicant and AIG Insurance Limited. [171] The terms of the Undertaking provides that: The applicant undertakes to submit to such order (if any) as the Court may consider 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. [172] The Undertaking only speaks of costs in terms of someone other than the respondent, providing that: The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent’s assets. 21 Hunt v Ubhi [2023] EWCA Civ 417 per Newey LJ at [29(ii)], summarising relevant principles from JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 139 per Lewison LJ. 22 (1981) 146 CLR 249 at 311 (Air Express). -- 61 of 93 -- 62 [173] The onus is on the defendant to prove the loss allegedly sustained was caused by the making of the order.23 The order for an inquiry into damages is discretionary, however a plaintiff who fails will generally be liable to recompense the defendant for the damages suffered by him or her as a result of the making of the interlocutory order.24 [174] In Air Express, Aickin J considered that: (a) the Court is not concerned with the question whether it was correct in the circumstances prevailing at the time to grant the interlocutory injunction;25 and (b) there is a distinction between damages flowing from the injunction and damages flowing from the litigation itself.26 [175] The analysis of legal principles by Aickin J in Air Express was approved by the majority of the High Court on appeal,27 save for some relatively minor deviations which are of no concern in the present case. [176] There are few cases addressing what is contemplated by the phrase “just for the payment of compensation.” [177] A similar form of undertaking was considered by the High Court in European Bank Ltd v Evans (European Bank).28 [178] In European Bank, the Court: (a) observed that: (i) the undertaking as to damages is given to the court for enforcement by the court; it is not a contract between the parties or some other cause of action upon which one party can sue the other;29 (ii) its origins in equity practice had been explained by Aickin J in Air Express;30 23 Air Express at 313 per Gibbs J. 24 Ibid at 311-2 per Gibbs J. 25 Ibid at 262, although it is not irrelevant if no cause of action was asserted or existed. 26 Ibid at 268. 27 Ibid at 309 (Barwick CJ), 312 (Gibbs J), 315 (Stephen J) and 324-325 (Mason J). 28 (2010) 240 CLR 432 at [8] (European Bank). 29 Ibid at [14]. 30 Ibid at [15], citing Air Express at 260-261. -- 62 of 93 -- 63 (iii) a party seeking an equitable remedy is required to “do equity” and this is the origin of the requirement that the party giving an undertaking as to damages submit to such order for payment of compensation as the court may consider to be just;31 (iv) the process of assessment of compensation cannot be constrained by rigid formulation;32 (b) approved the statement of Aickin J that:33 In a proceeding of an equitable nature it is generally proper to adopt a view which is just and equitable, or fair and reasonable, in all the circumstances rather than to apply a rigid rule. However the view that the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted, is one which will be just and equitable in the circumstances of most cases and certainly in the present case. (c) considered that the appropriate pathway of questioning in that case involved asking what the loss was that is alleged, did it flow directly from the Freezing Order and could the loss sustained have been foreseen at the time of that order;34 and (d) stated that in making an inquiry as to whether the loss could have been foreseen, the inquiry is whether loss of the kind actually sustained could have been foreseen.35 [179] In Sigma Pharmaceuticals (Australia) Pty v Wyeth (Sigma Pharmaceuticals),36 Jagot J having discussed Air Express and European Bank, stated that she did not accept any approach to the claim for damages pursuant to undertakings given in respect of injunctions that involved compensating the claimants for anything other than the operation of the interlocutory orders.37 In particular, her Honour observed:38 The fact that the origins of the undertaking as to damages is equitable and that considerations of fairness mean that a rigid 31 European Bank at [17]. 32 Ibid at [17]. 33 Ibid at [18], citing Air Express at 266-267. 34 Ibid at [29]. 35 Ibid at [29]. 36 (2018) 136 IPR 8 (Sigma Pharmaceuticals). 37 Ibid at [140]. 38 Ibid at [140]. -- 63 of 93 -- 64 approach to compensable loss would be inappropriate, do not expand the scope of compensable loss beyond the terms of the undertakings… [180] The Court of Appeal in Love v Thwaites39 rejected as a ground of appeal that the trial judge failed to consider whether the respondent had properly mitigated its loss for the period from March 2003 to June 2003, assuming that the rules in mitigation had application. Their Honours found there was no basis for the trial judge to conclude that the principles operated to reduce any part of the respondent’s claim against the appellant. While the Court of Appeal assumed that principles of mitigation applied by analogy, they further observed:40 That said, in European Banking Ltd v Evans, the High Court said: In Air Express, Mason J said that there was little to be gained from an examination of the authorities dealing with causation of damage in contract, tort and other situations; the Court was better advised to look to the purpose which the undertaking as to damages is to serve and to identify the causal connection or standard of causal connection which is most appropriate to that purpose. A party seeking an equitable remedy is required to ‘do equity’ and this is the origin of the requirement that the party giving an undertaking as to damages submit to such order for payment of compensation as the court may consider to be just. Given its origin and application to varied circumstances in particular cases, the process of assessment of compensation cannot be constrained by a rigid formulation. The judge applied these principles to the assessment of the respondent’s damages. With respect, that was an entirely correct approach. The appellant has not demonstrated any error in the judge’s approach. No error having been demonstrated in respect of the judge’s application of any principle concerning the assessment of the respondent’s damages, ground 8 must be rejected. (footnotes omitted). [181] After the hearing, Michael’s legal representatives provided a decision of the Court of Appeal of England and Wales, Hunt v Ubhi,41 and sought to highlight passages relevant to the present discussion which were said to support the proposition that a Freezing Order is effectively unlimited unless expressly confined. The context of the 39 [2014] VSCA 56 at [42]-[48] per Warren JA and Beach JA, with whom Tate JA agreed. 40 Ibid at [47]-[48]. 41 [2023] EWCA Civ 417. -- 64 of 93 -- 65 remarks identified by Michael’s counsel was that one of the grounds of appeal was that the judge was wrong to accept a limited cross-undertaking from the provisional liquidator confining the undertaking to “the amount of monies and net realisable value of the unpledged assets” of the partnership to which the provisional liquidator had been appointed, rather than a cross-undertaking unlimited in amount.42 That provides little assistance in the present case in terms of principle. Hunt v Ubhi does not negate the importance of the terms of the undertaking.43 [182] APM contends that notwithstanding the admonition of the High Court in European Bank not to elide compensation under an undertaking with damages for breach of contract, the authorities still acknowledge a close analogy between the two. In that regard APM referred to Aickin J’s reference in Air Express to Brett LJ in Smith v Day.44 However, caution must be exercised in drawing such an analogy given that, while his Honour did make such a reference, it was in the context of discussing the historical context of the principles in respect of the assessment of damages for an undertaking rather than approving the particular statement made, given the caution expressed by the High Court.45 However, as stated above, the terms of the undertaking are relevant to the scope of any loss claimed. [183] In the present case the Undertakings provided on behalf of APM and AIG was set out in Schedule A of the Order, paragraph 1 of which provides: The applicant undertakes to submit to such order ( if any) as the Court may consider 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. [184] Michael claims compensation for loss: (a) for the difference between standard costs and indemnity costs; (b) for distress suffered as a result of the order; (c) of opportunity to purchase a larger residential house and an investment property before a rising property market; and 42 [2023] EWCA Civ 417 at [56]-[65]. 43 As was discussed by Jagot J in Sigma Pharmaceuticals at [140]. 44 (1882) 21 Ch D 421 at 427. 45 See also Jagot J in Sigma Pharmaceuticals at [132]. -- 65 of 93 -- 66 (d) of an inheritance from his father Stewart. [185] In Sigma Pharmaceuticals, Jagot J considered a claim for loss could be made in that case on the basis that a party claimed it had lost an opportunity of some value as a result of the interlocutory injunctions.46 APM’s Counsel, Mr Ferrett KC, does not question that compensation could be awarded on that basis, but contends that Michael hasn’t established his entitlement to such damages. As to the other matters, APM contends they are outside the terms of what is compensable under the Undertaking. Costs as compensation [186] Michael seeks his legal costs associated with the Freezing Order on the basis he had to incur costs associated with the Freezing Order which should never have been made and which was discharged by the Court. Michael contends that, but for the Freezing Order, he would not have incurred the amount of $283,835.17 in defending the aspects of the proceedings which were caused by the Freezing Order alone. This sum was based on the assessment of Mr Bloom, who was instructed to assess the costs of the proceedings that would have been incurred by Michael had the Freezing Order not been made. That amount was assessed as $35,429.40. [187] APM, however, contends that the undertaking did not extend to such a claim. In particular, it points to the fact that the Freezing Order separately made specific provision for costs in relation to third parties and costs of the application was reserved in [12] of the Freezing Order. [188] According to Mr Hackett, if the claim for indemnity costs was successful, the Court would not make any further assessment for damages for legal costs associated with the Freezing Order. I have found that Michael should be paid his costs on an indemnity basis for the proceedings, including costs incurred in respect of the Freezing Order after February 2020 due to the unreasonable delay of APM and failure to make reasonable inquiries to determine whether its case against Michael was maintainable. Given I have not awarded Michael indemnity costs for the period before March 2020, I will still consider this head of damages. 46 Sigma Pharmaceuticals at [156]-[165] and [168], where Jagot J discusses relevant principles; see also [174]-[176]. -- 66 of 93 -- 67 [189] The contention claiming costs as compensation made on behalf of Michael is bereft of authority. In the authorities to which I have been referred and have referred, the question of costs has been separately determined from the determination of compensation to be paid. That of course does not preclude their being claimed as part of compensation, but the question does not appear to have been specifically considered. [190] The power to award costs is a creation of statute.47 Costs are “compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings.”48 In some cases, costs reasonably incurred can be claimed as part of damages by a plaintiff who has incurred costs as a result of a defendant’s wrong in tort or contract in other proceedings.49 That is not the case here. [191] On its proper construction the Undertaking does not extend to costs. The undertaking provided is to compensate a party for the losses which flow directly from the Freezing Order. That entails considering the nature of the Freezing Order and the context in which it is given. In particular, the Court has power to make orders as to costs. While costs incurred in the context of a claim by a party against a third party can in certain circumstances be claimed as damages, costs between parties are generally not regarded as damages. As between parties the power to make orders as to costs arises out of a statutory power which would be enlivened in the relation to an application for the making of a Freezing Order. In those circumstances, damages which flow from the granting of the Freezing Order would not be contemplated to include the costs of the parties in relation to an application for which there is a separate power. [192] According to McGregor on Damages in a civil action, the successful party will generally recover costs against the other party. The writers contend that: 50 It would make nonsense of the rules about costs if the successful party in an action who has been awarded costs could automatically claim in a further action by way of damages the amount by which the costs awarded to them fell short of the 47 Wyatt v Albert Shire Council [1987] 1 Qd R 486 at 488 per Andrews CJ, Demack J and McPherson JJ. 48 Latoudis v Casey (1990) 170 CLR 534 at 543 per Mason CJ. 49 GE Dal Pont, Law of Costs (LexisNexis, 5 th ed, 2021) at [11.64]. See for example Laws v Collins Exposed Aggregate Pty Ltd [1997] NSWCA 186 at 18 per Handley JA, with whom Priestley JA and Sheller JA agreed. 50 (Sweet & Maxwell, 21 st Ed, 2022) 21-003. -- 67 of 93 -- 68 costs actually incurred by them. This naturally has never been allowed and it is hardly surprising that there is a dearth of authority on the point. [193] McGregor on Damages refer to the case of Cockburn v Edwards51 as the only case in which such a claim was attempted but which was rejected by the Court of Appeal. In Cockburn v Edwards Cotton LJ stated:52 “The difference between solicitor and client costs and party and party costs in an action cannot be given by way of damages in the same action, the latter costs being all that the Plaintiff is entitled to.” [194] Given costs may be awarded on a standard basis or an indemnity basis, the observation of the authors in McGregor on Damages is relevant in considering whether compensation under the Undertaking would extend to costs which are not ordered to be paid to the defendant as part of the proceeding. In my view, the better construction is that compensation does not include legal costs incurred in respect of the Freezing Order to which the defendant is a party given the Court’s powers to determine costs, which extend to awarding costs on an indemnity basis “for the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do” in particular circumstances warranting such an order. That construction is given some limited support by the fact that separate provision is made for costs of third parties in the Undertaking in [4] and by the fact that the pro forma order contained in Practice Direction 1 of 2007 makes provision for costs being reserved. In that regard, each of the orders in respect of the Freezing Order reserved the costs. However, there is an argument in favour of a contrary construction given the considerations for the awarding of indemnity costs and compensation are not the same. But given costs have their source in statute, I consider the better view is that the Undertaking does not extend to costs. [195] While it may be possible, as Michael has sought to do, to separate the costs said to be incurred in defending the Freezing Order, they are part of the costs of the proceedings and are arguably the result of the litigation process rather than flowing from the Freezing Order itself. That distinction is given some support by the observation of Gibbs J (as his Honour then was) in Air Express:53 “except in certain cases analogous to malicious prosecution, a defendant is not entitled to recover damages for loss 51 [1881] UKLawRpCh 203. 52 Cockburn v Edwards [1881] UKLawRpCh 203 at 463. 53 Air Express at 313. -- 68 of 93 -- 69 resulting from legal proceedings brought against him – the only liability of the unsuccessful plaintiff is to pay costs.” Similarly, in First Mortgage Finance Corp Ltd v Kace Management Pty Ltd McMurdo J adopted the approach of the majority in Air Express and did not allow a claim for legal costs, on the basis it was not compensable because it was caused by the litigation not the injunction.”54 It is not apparent from the judgment whether the party claiming compensation had sought to separate the costs said to be defending the Freezing Order rather than the overall proceedings. [196] Assuming that the compensation contemplated by the Undertaking could extend to costs incurred in defending the Freezing Order, the fact that the Court has the power to determine costs of the proceedings on a standard or indemnity basis in favour of Michael is a significant factor which mitigates against the court determining that costs be included in calculating an amount that is just for the payment of compensation. [197] In any event given my decision to award Michael costs on an indemnity basis, albeit not in respect of all costs that he may have incurred, I do not think that it would be just and equitable or fair and reasonable to award costs for the remaining period on an indemnity basis in circumstances where I was not satisfied the freezing order would not have been made at all and the extension of the order on 21 June 2018 was agreed to by Michael. [198] On an evidential level, there is some difficulty with Michael’s contention that $283,835.17 of costs has been incurred as a result flowing directly from the Freezing Order and but for the Freezing Order those costs would not have been incurred. [199] The evidence as to the costs incurred from the Freezing Order alone has a number of difficulties. Mr Londy, although conscious of impartiality, did not give evidence identifying what work related to the Freezing Order and what work related to work outside that scope. Given he had carried out the work, he was best placed to identify the work done. Whether it was reasonably incurred or not could then have been determined by Mr Bloom. He did, however, depose that the charges for all the work done were reasonable without any explanation as to why. Therefore it suffers from being an opinion without any factual foundation. Mr Bloom was instructed to prepare a report providing an opinion on the legal costs Michael would have incurred and 54 [2009] QSC 319 at [20]. -- 69 of 93 -- 70 paid to his lawyers in relation to the proceedings had the Freezing Order of 22 May 2018 not been made against him. The costs claim to have been incurred in respect of the freezing order were then determined by deducting the amount from the total. That approach therefore assumes that all of the work other than that which was excluded was reasonably incurred in relation to the Freezing Order. [200] In that regard Mr Bloom was told that Michael would not have instructed his solicitors to actively do any work other than what was necessary to protect his interests and in particular:55 1. Michael Balfour has instructed us that if the Freezing Order had not been made, his approach to the litigation would have been as follows: (a) he would have instructed his solicitors to do the bare minimum of work to ensure that default judgment was not entered against him; (b) he would not have instructed his solicitors to do any legal work unless it was essential for the protection of his interests; (c) he would have agreed to a stay of the proceedings the moment it was proposed; (d) he would have taken no steps in the action, after agreeing to the stay, and would simply have stood by whilst the plaintiff’s case against him became stayed for want of prosecution. 2. More particularly, Michael Balfour has instructed us that if the Freezing Order had not been made: (a) he would not have instructed us to write to the plaintiff’s solicitors demanding that the proceedings be discontinued; (b) he would have taken no steps to progress the litigation after the stay had been agreed; (c) he would not have brought the application for summary judgment; (d) he would not have engaged a forensic accountant; (e) he would not have applied to dismiss the plaintiff’s case for want of prosecution; (f) he would only have taken further steps in the litigation after the stay was lifted. 55 AB-1 to the Affidavit of Adam Bloom affirmed 4 November 2022 at page 15. See also Affidavit of Michael Balfour affirmed 11 November 2022 at [35]-[36] and [39]; Affidavit of Michael Balfour affirmed 16 March 2023 at [6]-[8]. -- 70 of 93 -- 71 [201] Michael deposed as to above and was not challenged in cross-examination in relation to these matters. [202] Mr Bloom adopted the methodology, which is outlined in [4]-[6] of his report. Mr Bloom concluded that the restricted work based on the instructions of Michael would have included: “(a) A conference with the client for instructions relating to the Statement of Claim (excluding time relevant to the Freezing Order); (b) Drafting the defence and briefing counsel to assist in settling it and advising on preliminary issues and strategy; (c) initial communications with the other parties’ lawyers to sufficiently understand the issues, allegations and evidence as then known in order to draft Balfour’s defence; (d) A consideration of the Plaintiff’s first forensic accounting report as referred to in the Statement of Claim in order to understand the allegations against the client; (e) some work concerning the proposal to stay the proceedings on the basis that Mr Balfour would have agreed to it; (f) Considering an Amended Statement of Claim when served; (g) Considering any interlocutory application when served upon Londy Lawyers to protect the client’s position, and (h) Some recent work on a request for further and better particulars.” [203] He considered that work that would not have been done but for the Freezing Order included: (a) any correspondence with the plaintiff’s lawyers seeking to set aside or vary the order; (b) work concerning the summary judgment or seeking to set aside or vary the Freezing Order and subsequent strike out application; (c) the briefing of a forensic accountant, Mr Cook, on behalf of Michael, reviewing the second forensic accountant’s report of the plaintiff in response to Mr Cook’s report and Michael’s summary judgment application; and (d) briefing counsel beyond drafting of the defence. -- 71 of 93 -- 72 [204] In the exercise carried out by Mr Bloom he prepared a timesheet listing of the work he considered fell within the restricted scope based on his judgement but only in a few cases expressed reasons for his selection. He provided an overview in the body of his report for the work entries selected and the broad basis of his approach. He was not briefed on nor did he take into account costs orders that were made. In re- examination he agreed that he may have been briefed with all court documents if it was outlined in the letter of instruction. It was not apparent from the description of “court documents” what was or was not included. [205] Thus Mr Bloom concluded, based on his instructions, that Michael would only have incurred costs of $35,929.40 in defending the proceedings but for the Freezing Order out of the total costs of $319,222.90. He did not in his initial report find that the costs of $280,950.45 had been reasonably incurred in defending the Freezing Order or pursuing the work outside that identified as within the restricted scope of work. [206] In a subsequent report, Mr Bloom stated, in response to criticisms of his first report by Mr Reardon, that he did not have to consider whether costs were reasonably necessary as that was not the required test for indemnity costs or standard costs under rr 703 and 702 of the UCPR. He expressed the view however that he considered the amount he quantified under the specific instructions, namely the restricted work scope, to be reasonable costs based on the quality of Mr Londy’s time records; the time accorded with what he regarded most experienced solicitors would take to perform a task and there were no costs which appeared to be outlandish. He confirmed he considered it to be within his expertise to determine whether or not particular items were carried out in relation to the Freezing Order, based on the firm’s file and invoice evidence. The plaintiff, however, contends that is not the exercise of expertise by a costs assessor but rather a factual exercise that should have been undertaken by Michael’s solicitor. [207] Mr Reardon, the expert called on behalf of the plaintiff critiqued Mr Bloom’s report and opined that: (a) the exercise carried out by Mr Bloom was not remotely approximate to the preparation of a costs statement for a litigant for submission to a costs assessor and was an assessment but not one in the true sense; -- 72 of 93 -- 73 (b) under the indemnity costs rule, a party cannot recover more than a party is legally obliged to pay and in that regard the costs agreement is required to be compliant with Division 3, Part 3.4 of the Legal Profession Act 2007 (Qld) (LPA). In his view the costs agreement is not fully compliant and Mr Bloom has undertaken the assessment process on the basis that it is compliant and did not apply any reduction under s 316(4) of the LPA; (c) the exercise of Mr Bloom is of marginal utility because to carry out a proper assessment of the costs, a positive inquiry should be undertaken not a deductive process. There is no attempt to assess the reasonableness of the fees charged under s 341(1)(c) of the LPA; (d) nowhere in his report has Mr Bloom appeared to undertake an analysis of the reasonableness of what is charged, nor the deductions for the vague items in reviewing the time sheets which would be a basis for objection under r 705(2) of the LPA; and (e) Mr Bloom had insufficient material of sufficient quality to undertake the task briefed to him in that he was forced to do the best he could to correlate bill items with substantiation documents on file, based on his comment in paragraph 4 of this report. However the degree to which the insufficiency of material had impacted upon his opinion was unclear. [208] In his report, Mr Bloom refuted the relevance of the above matters in the exercise he carried out. He considered the LPA to be more relevant to an assessment between a solicitor and a client, and clarified the exercise he had carried out in making his assessment. [209] In cross-examination, Mr Reardon stated that Mr Bloom in his further report responding to the matters raised by Mr Reardon had clarified the exercise he had carried out in reviewing the file and comparing it to a line item schedule. Mr Reardon stated the exercise Mr Bloom said that he had carried out was a fairly universal practice amongst costs assessors. Mr Reardon accepted that what Mr Bloom had carried out was a global review in assessing costs and checked the file for the reasonableness of the costs. -- 73 of 93 -- 74 [210] While it is somewhat difficult to accept that Michael would not have taken any steps to strike out the statement of claim or seek summary judgment and the commensurate work that went with that but for the Freezing Order, which carries the implication that he would have let the matter run to trial on the basis of the ASOC, his evidence was not challenged in that regard and I therefore accept that to be the case. [211] The limitation with Mr Bloom’s approach is that it is “a global review and quantification of the Third Defendant’s reasonable limited costs that would have been incurred but for the court’s prior freezing order” as described in the joint report of Mr Bloom and Mr Reardon. It was agreed by both Mr Bloom and Mr Reardon that a full itemisation of the costs the Third Defendant asserts that it has lost by reasons of the freezing order is the ideal method for the Plaintiff to test the reasonableness of those costs. That of course would be an exercise that would have involved Michael having to expend considerable costs to obtain such an assessment. [212] While a global review could provide evidence to support the loss said to be incurred on the basis of the costs incurred the inherent difficulty with the approach adopted is it has an air of unreality about it given the work done on behalf of Michael said to be solely in relation to the Freezing order was based on attacking the allegations in the Statement of Claim and Amended Statement of Claim. The applications made were not only directed to vacating or varying the Freezing Order but to bringing the whole proceedings to an end. The neat point of distinction sought to be made by Michael if the Freezing order had not been made does not demonstrate that the costs incurred flowed directly from the Freezing order. Michael’s evidence as to what he would have done the minimal amount of work to defend the proceedings suffers from being evidence of a hypothetical based on hindsight. There is a lack of detail for the Court to determine whether the balance of the costs said not to be the restrictive scope are costs reasonably incurred by Michael and that the assessment of Mr Bloom as to the costs that fall within the restrictive scope and those that would be attributable to the Freezing Order. While I accept the exercise of Mr Bloom was within his expertise, it is insufficient to establish that the work said to flow from the existence of the Freezing Order and the amount of costs claimed in that regard did flow from the Freezing Order. -- 74 of 93 -- 75 [213] In my view the approach of Mr Bloom is flawed and can be given little weight in determining the costs that directly flowed from the order made. [214] There is also an added difficulty, although insurmountable, that the costs orders made by Bradley and Freeburn JJ, which provided that costs of the review were to be costs in the proceedings and that APM pay the costs of the application of 3 March 2022, do not appear to have been taken into account by Mr Bloom. [215] If I had formed the view that Michael was entitled to costs as part of the compensation under the Undertaking, there is no doubt that Michael has incurred costs which can be attributable solely to the Freezing Order. In that circumstance, I would have called for further submissions as to whether I should direct a further inquiry into the costs and as to how the assessment, which would include how costs ordered by Bradley and Freeburn JJ, should be dealt with so there was not double recovery. [216] The claim for costs pursuant to the terms of the Undertaking fails. The Distress Claim [217] According to Michael he has incurred expense, embarrassment and inconvenience in dealing with creditors and managing his affairs because of the Freezing Order. In particular, Mr Balfour was engaged to be married at the time that the order was imposed. He states that he and his wife have subsequently suffered considerable stress as a result of the order as well as dealing with the stress of practicable problems and financial hardship which arose as a result of the order, putting their lives on hold for the period for which the order applied. [218] Michael stated amongst other things that as a result of the Freezing Order, he experienced practical problems in dealing with Suncorp and inconvenience as well as embarrassment. In particular, Suncorp impeded him using online banking, refused to allow him to withdraw funds for legal fees for a month until clarification from his solicitor was received and would not provide a loan against his Tingalpa property. He also found that they treated him with suspicion and he still had difficulties even after the order was discharged. Michael in particular suffered considerable anxiety from the fact that his wife had to pay legal costs on his behalf and has had difficulties in his personal relationship with his wife as a result of the stress and particularly them -- 75 of 93 -- 76 not being able to move forward to purchase additional houses. They lived on a tight budget and could enjoy things such as holidays. [219] Damages are sought in the sum of $30,000. [220] The respondent does not challenge that Mr Balfour suffered stress as a result of the Freezing Order but contends that as a matter of law there is no authority supporting the making of an order for damages on this basis. The respondent cited English authorities such as Al-Rawas v Pegasus Energy Ltd56 where Jack J stated: Unless the particular facts make it appropriate as an exception, damages for emotional distress are not recoverable under an undertaking in damages. [221] In the context of a claim for damages for contract, Mason J in Baltic Shipping Company v Dillon noted that:57 As a matter of ordinary experience it is evident that, while the innocent party to a contract will generally be disappointed if the defendant does not perform the contract, the innocent party’s disappointment and distress are seldom so significant as to attract an award of damages on that score. [222] His Honour found that in light of that:58 It is preferable to adopt the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation. [223] Inevitably by their very nature, Freezing Orders are stressful and will cause distress. The Undertaking provides the Court with the power to award compensation that the court “may consider just for the payment of compensation” to any person affected by the operation of the order. Damaged of this kind, for general distress and disappointment from the order, will generally only be awarded in exceptional circumstances, as was noted by Jack LJ in Al-Rawas v Pegasus Energy Ltd. [224] In my view, however, on its proper construction the Undertaking properly construed does not extend to emotional distress and it is not loss which would flow directly from 56 [2008] EWHC 617 at [40]. 57 (1993) 176 CLR 344 at 365. 58 Ibid at 365, where Toohey J, Gaudron J agreed and McHugh J applied an analogous approach at 405. -- 76 of 93 -- 77 the Freezing Order, although it may be an indirect effect arising from it. The Freezing Order is directed to freezing a party’s financial and asset position subject to the exceptions made. The purpose of the Undertaking is to protect a party from damage sustained from the freezing of assets. The emotional effect of the grant of a Freezing Order where the properties are investment properties and a residential property are not within the contemplation of losses which are those which are the natural consequence of granting the Freezing Order which is directed to assets albeit it constrains the financial freedom of the individual. [225] The evidence showed Michael had additional stresses during this period brought about by the charges initially against both his parents although the charges against his father were later dropped. In cross-examination Michael conceded that although he could not recall how he felt about the fact his mother was going to potentially go to jail at the time he would find it distressing if his mother was to spend extra time in jail and he was also distressed, quite understandably, at the passing of his father. [226] While I accept that Michael would have suffered distress and inconvenience as a result of the Freezing Order being in existence, I consider that that distress would have been contributed to by the position of his mother and father being the subject of criminal charges and his father ultimately passing away. While he would not have been the subject to the financial restrictions that he has, even absent the Freezing Order, he and his wife would have still experienced difficulties in dealing with financial institutions, at least those with whom Sandra dealt, demonstrated by the closing of his wife’s account with a financial institution, which appeared to be influenced by Sandra’s conduct and the consequences that have flowed to some extent by her connection with Sandra, albeit like Michael, she is an innocent party in the whole saga. [227] While I accept that Michael endured the effect of the Freezing Order for some four years as a relatively young man and who was married in that period and accept that the period would be stressful, the nature of the distress was not solely due to the Freezing Order but also what he was experiencing in his broader life with his parents at the time. While I accept that loss of the kind suffered is of a kind that was foreseeable as a result of the Freezing Order, I do not accept that the Undertaking extends to loss for emotional distress. -- 77 of 93 -- 78 [228] I consider that the undertaking is not sufficiently broad to encompass within a matter “just for the payment of compensation” to extend to emotional distress. In any event, if it did so extend, consistent with the Court’s general approach to such claims in other contexts such as contract, the Court would only award such compensation if the circumstances were exceptional. The circumstances and the stress experienced are not exceptional and I do not find that he has suffered emotional distress compensable within the terms of the undertaking. [229] In my view that is not what is contemplated by compensatory damages pursuant to the undertaking. If I were to award damages in Michael’s favour, it would be a sum of $7,500. Claim for loss of opportunity [230] Michael claims the lost opportunity to purchase both: (a) a larger home for himself, his wife and future children during the operation of the Freezing Order; and (b) a further investment property. [231] The loss claimed is the increase in the market value of properties that occurred from the period of the Freezing Order to the period when the Freezing Order was lifted. [232] He claims a loss of $312,000, being the difference between the value of the home which the defendant purchased within the months after the Freezing Order was lifted and the amount for which he could have purchased the same home during the operation of the order.59 I note that the Statement of Facts and Contentions identifies a number of properties which he and his wife would have purchased during the period of the Freezing Order. A loss of $291,431 is claimed in respect of the investment property as an average of the movement in capital growth of ten properties which he and his wife had looked at during the period of the Freezing Order. [233] APM accepts that the claim in relation to Michael’s personal residence is within the terms of the undertaking and that loss of the kind claimed if suffered was foreseeable. It does not contest the evidence provided by Mr Bristow valuing the properties in 59 Exhibit HWB-2 to the affidavit of HW Bristow filed 11 November 2022. -- 78 of 93 -- 79 question, which is the basis of the calculation for the loss in capital growth. Mr Bristow compared the value of properties as at the date they were sold and their value in March 2022. According to Mr Bristow the “period between May 2019 and March 2022 was one of significant change and included the greatest period of capital growth in the residential market since 2003.”60 APM, however, contends that Michael has not put forward evidence that can establish that he has suffered the damage claimed. [234] In order to recover for damages for lost opportunity: 61 [t]he fact that some loss or damage was caused must be proved on the balance of probabilities. If that fact is proved, it is then for the court to assess the extent of the plaintiff’s loss. The value of the lost opportunity must then be “ascertained by reference to the degree of probabilities or possibilities of the relevant factual hypotheses, by the approach explained in Malec v JC Hutton Pty. Ltd. [235] In order to successfully establish his entitlement to damages, Michael must prove:62 (a) that on the balance of probabilities he suffered some loss or damage, by demonstrating that his being subject to the Freezing Order caused the loss of a commercial opportunity which had some value (not being a negligible value); and (b) if (a) is satisfied, the value of the lost opportunity which requires the Court’s assessment of degrees of possibilities or probabilities of events occurring. [236] As to the first step, as French CJ, Kiefel and Keane JJ stated in Badenach v Calvert,63 “[a]n opportunity will be of value where there is a substantial, and not a merely speculative, prospect that a benefit will be acquired or a detriment avoided”. It is necessary to prove to the usual standard that there was a substantial prospect of a beneficial outcome. Their Honours further stated that proving there was such a prospect “requires evidence of what would have been done if the opportunity had been afforded”.64 Brennan J in Sellars v Adelaide Petroleum NL65 described the proof of causation in this way: Unless it can be predicated of an hypothesis in favour of causation of a loss that it is more probable than competing 60 Exhibit HWB-1 to the affidavit of HW Bristow sworn 27 October 2022 at [4.2.1]. 61 Principle Properties Pty Ltd v Brisbane Broncos Leagues Club Limited [2018] 2 Qd R 584 at [13]. 62 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ and 368 per Brennan J. 63 (2016) 257 CLR 440 at [39]. 64 Ibid at [40]. 65 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 367-368. -- 79 of 93 -- 80 hypotheses denying causation, it cannot be said that the plaintiff has satisfied the court that the conduct of the defendant caused the loss. Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point when there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. [237] In Winky Pop Pty Ltd v Mobil Refinery Australia Pty Ltd,66 the Victorian Court of Appeal considered that the trial judge was correct in his approach that the valuable opportunity said to have been lost must be properly identified. In that regard, they stated that without proper identification of the opportunity there can be no basis for determining whether a plaintiff has established, on the balance of probabilities, the existence of an opportunity which had some value.67 [238] The onus of proving causation is only discharged where a plaintiff can prove that it was more probable than not that they would have acquired a valuable opportunity, not by a finding that there was more than a negligible chance that the outcome is favourable or even by a finding that there was a substantial chance of such an outcome.68 [239] It is then for the plaintiff who asserts the loss of valuable opportunity to establish on the balance of probabilities “not only that the opportunity existed, but that it was lost, and that the breaching party’s conduct was causative of the loss”.69 Of course in this case it is not a breach but the existence of the Freezing Order. [240] As to satisfying the first step it must be demonstrated that the Freezing Order caused the loss of the commercial opportunity which had some value which entails demonstrating on the balance of probabilities that the opportunity was valuable but also had Michael been offered the lost commercial opportunity, namely the property at a lesser price, he would have acted to secure the property and been able to acquire it. 66 [2016] VSCA 187. 67 Ibid at [333]. 68 Badenach v Calvert (2016) 257 CLR 440 at [41]. 69 Winky Pop Pty Ltd v Mobil Refinery Australia Pty Ltd [2016] VSCA 187 at [334]. -- 80 of 93 -- 81 [241] According to the respondent, the lost opportunities identified by Michael are claimed as alternative opportunities. Each opportunity according to the plaintiff involves an analysis of the following hypotheses: (a) that Mr and Mrs Balfour would have been the successful bidders in respect of the particular property at an identified price (Notional Purchase Price); (b) that Mr and Mrs Balfour would have had the means to compete the hypothetical contract that would then have arisen; (c) the property in question would have been held longer than the period of the Freezing Order; (d) the property in question would have increased in value beyond the Notional Purchase Price. Personal Residence [242] According to Michael’s counsel, the claim for damages based on loss of opportunity is based on a loss of capital growth and one does not have to consider how that offset the question of capital gain on the property in which he and his wife resided in, in the same area that he ultimately bought in, because his intention was to keep the Tingalpa townhouse where they resided, use it as an investment property and rented it so he would have had that capital growth in any event. [243] Mr Bristow provided a further property in relation to 16 Michael Place, Tingalpa which was the property ultimately purchased by Michael and his wife. According to Mr Bristow the market value of the property as at 30 June 2019 was estimated to be $530,000 whereas the market value of the same property on 8 November 2022 was estimated to be $842,000, with the difference being $312,000.70 [244] As to whether the Court can be satisfied that on the balance of probabilities that he would have bought the property, it is uncontroversial that Michael and his wife was looking for a property during the period 2018-2020. The evidence of the opportunity is that the Tingalpa property was on sale during the Freezing Order. Michael gave evidence that he would not have sold his Wynnum Road Tingalpa property or any of 70 Exhibit HWB-2 to the affidavit of HW Bristow filed 11 November 2022 at [1.6.2]. -- 81 of 93 -- 82 his investment properties if the Freezing Order was not in place and would have used the equity in his properties and mortgaged one or more of the properties to buy a house for his wife and family and rented the Wynnum Road Tingalpa property. His experience in relation to the investment properties was that the Bank would lend him 80% of the value of the investment properties and he had equity he could have accessed to obtain a loan. [245] According to Michael he sold two properties to repay his wife for legal bills that she had paid once the Freezing Order was lifted, namely the property at Willow ( Clematis) St Inala and the Rosemary St, Caboolture property. From early September 2022 he stated that he and his wife resumed looking for a new home as they had previously planned. He obtained a pre-approval for a loan up to $800,000 and signed a contract on a Tingalpa property for $842,000. He still hopes to buy a bigger home in the future. [246] As to the evidence that Michael and/or his could have secured the property is scant. The evidence Michael relies on is that: (a) he had equity in the four properties the subject of the Freezing Order by reference to the affidavit of Natasha Daley that the estimated value of the properties in which Michael held an interest in 2018 which according to her property searches presented to support the Freezing Orders had an estimated value of between $1.1 million - $1.415 million based on estimates on real estate.com and the Second Crawford report that showed the total balance owing on loans by Michael was approximately $800,000. Given the value is based on a predicted range of the sale price for the property the evidence of Ms Daley is not of significant weight. Based on this evidence Michael submits that he held equity was between $400,000-$650,000; (b) he was a consistent investor in property, having had four properties by the age of 24, and that the Freezing Order prevented any expansion of that activity as he did not have access to the equity in his properties because the quantum of the Freezing Order exceeded that equity. (c) he had sufficient income to support a loan based on a schedule which was set out his income and rent return offset taking into account tax refunds against expenses including loan repayments between 2005 and 2018 which showed -- 82 of 93 -- 83 there was a surplus each year after he paid expenses, which varied ranging between $2860 in 2005 with two years $33,283.73 and $53,942 where he had miscellaneous income credited to him after refinancing and in 2017 and 2018, $25,644 and $10,706;71 (d) the National Australia Bank provided a pre-approval of $800,000 after the Freezing Order was lifted. The information upon which that pre-approval was given was not in evidence; (e) he bought the Tingalpa property in which he now resides in 2022 within months after the Freezing Order was lifted for $842,000. [247] As to causation, Michael contends that the Freezing Order prevented him from getting a loan on the basis that: (a) Suncorp would not provide him with a further mortgage to loan $100,000 in 2018 despite the terms of the Freezing Order as varied providing he was could do so; (b) His wife was told by the Commonwealth Bank that as sole borrower she could purchase a property of $550,000 based on a twenty per cent contribution or a loan of $600,000 to purchase a property with a purchase price of $750,000 if the loan was taken out by both Michael and his wife. According to Michael he did not apply for the loan because the Bank would required more information about his assets and liabilities and he would have had to disclose the Freezing Order which he contends would have prevented him getting a loan and he was also constrained by the need to preserve money for legal costs. [248] APM contends that Michael has not established that he and his wife would have had the capacity to borrow during the relevant period or secure the property for the asking price. In that regard APM submits: (a) Michael did not put any evidence before the court as to what his earnings were in 2019 -2020 when he intended to buy the next property nor of his wife’s finances or her capacity to borrow, a matter which he agreed in cross- examination; 71 MDB-5 to the Affidavit of Michael Balfour affirmed 17 December 2021. -- 83 of 93 -- 84 (b) Michael has not shown evidence of his capacity to borrow. In that regard it points to the lack of evidence that the bank would have provided the loan given he would have had to provide his assets and liabilities and was relatively highly geared given he had four properties all of which were subject to mortgages; (c) In that regard, the respondent points to the email from the National Australia Bank dated 14 October 2022 which indicated the process that would occur in relation to a loan. The email stated, amongst other things, that if the valuation and credit assessment were acceptable and “your financial situation has not changed” it would send a formal offer.72 There is no evidence however of what Michael and his wife’s financial circumstances were or what information was placed before the bank. It further contends that the court would question Michael’s ability to have borrowed given his income in 2018 dropped and that his evidence of his living expenses showed a level of frugality such that a lender may question its accuracy; (d) Michael’s evidence (and instructions to Mr Cook) as to his mother being placed on the title for each of the Caboolture properties in 2009 was that he was not at that stage able to obtain loan without his mother being a co-owner; (e) That the court should infer that Michael was not committed to getting a property. The respondent submits that given Michael was contending that the case supporting the Freezing Order was bound to fail and that the Freezing Order would be discharged, he did not apply to set it aside until November 2018 and then did not pursue the application to set it aside. The respondent contends that had he been so eager, he would have proceeded with the strike out application. (f) In January 2019 he was informed by Suncorp that the loan was refused. According to the email, it stated that the application did not meet current servicing and policy requirements. Michael however attributes the refusal to the Freezing loan and the manner in which APM’s lawyers described the proceeding. APM rely on Michael’s evidence that he couldn’t pay legal costs until 2020 when he was able to borrow from his wife and that in relation to 72 MDB-111 to the Affidavit of Michael Balfour affirmed 11 November 2022. -- 84 of 93 -- 85 refusal by Suncorp in 2019, Michael had stated at paragraph 25 of his affidavit of 16 March 2023 that: 73 At the time the loan application was refused, I owed a substantial amount in legal costs and my income from employment and rent was covering mortgage payments and other expenses from my four properties and my living expenses, and not leaving a sufficient amount to pay outstanding legal costs or the cost of further action. As at 5 February 2019 my bank balance was $5,111.81. [249] The further difficulties with Michael’s claim that APM identifies is that: (a) Further, the notion that the property would have been held until the discharge of the Freezing Order rather than having been realised for a capital gain when he was reasonably geared is highly questionable and should be subject to a significant discount; and (b) Any loss is not purely Michael’s given that he and his wife were planning on buying the property together. Thus, only half loss could be attributed to being Mr Balfour’s. The latter was not a point in contention. [250] The respondent therefore contends that the value of the opportunity must be discounted to take account of the risk factors. [251] According to the report of the National Australia Bank, the Michael Road, Tingalpa Property had been sold in January 2018 prior to the making of the Freezing Order. Counsel for Michael however in oral submissions stated that the property was for sale during the Freezing Order period which was not challenged by APM in reply. I will assume that there was an opportunity to buy the property or at least one of the properties identified by Michael that was looked at by his wife and that they would have bought for a similar price. [252] I accept that after July 2019 and 2020 Michael and his wife were looking to buy a house having been married the year before. The real question is whether Michael and/or his wife would have been in a position to purchase the property absent the Freezing Order. In that regard APM submits the Court should find that Michael has not established that he had the borrowing capacity to purchase a property at that time. 73 Michael provided a bank statement for his Suncorp Account which showed a closing balance of $11,982.54: MDB-128 to the Affidavit of Michael Balfour filed 16 March 2023. -- 85 of 93 -- 86 [253] I accept Michael had shown himself to be a capable investor and had purchased four properties by the age of 24. He was funding those properties through his income and the rental income. On the evidence before me given that he had some surplus after payment of the loan repayments, incidental property costs and other expenses, although generally not significant and with very modest living expenses. He was not challenged in relation to those figures. However, it is apparent from the best evidence before me, namely the schedule prepared by Michael himself that his income and rental dropped in 2018. That is significant given the period when he would be looking to buy a property was after 2018 and no financial information has been provided as to Michael’s earnings or liabilities. His income and rental was in early 2019 said by Michael to be covering his mortgage, property costs, expenses and living costs without sufficient leftover funds to meet his legal costs. In 2019-2020 his wife was able to contribute to the purchase of the property and he had some equity in the properties he owned. While the Commonwealth Bank had in an email to his wife referred to a loan of $600,000 being able to be provided if Michael also purchased the property, that was contingent on him providing his assets and liabilities so whether or not, regardless of the Freezing Order, his financial position would have resulted in the grant of a loan remains unknown. His income did not appear to be increasing significantly and indeed in 2018 was decreasing. It is also the fact that the National Australia Bank lent he and his wife $800,000 and they were able to purchase the Tingalpa property. According to his own evidence that followed the sale of two of his properties which would have reduced his expenses. While the equity in his properties would have been a factor in his favour in obtaining finance, the absence does not enable me to conclude that he and his wife could have serviced the loan while maintaining the other four properties. Unfortunately on the present state of the evidence I cannot be satisfied on the balance of probabilities that Michael would have been able to purchase the Tingalpa property if the Freezing Order had not been in existence. [254] If I had been satisfied that Michael and his wife had the capacity to borrow sufficient funds to purchase the Tingalpa property I would have discounted any loss to take account of the fact that other purchasers may have been able to outbid Michael and his wife or been able to purchase the property before they did. I would have further discounted it to take account of the fact that they may not have been able to service -- 86 of 93 -- 87 the loans of all of the properties and the Tingalpa property and may have had to sell the property. Taking into account the possibilities and probabilities I would have reduced the claimed capital loss of $312,000 by 30 %. Only half of that loss would have been claimable by Michael albeit that his wife were joint tenants. Investment Property [255] Michael claims he would have purchased a further investment property as well as the residential property. [256] Michael has presented evidence that he and his wife looked at a number of different properties and, in that regard, have supporting emails with real estate agents that show that contact was made with real estate agents and interest expressed. Accordingly, Michael has identified multiple properties, including ten that he could have purchased. [257] In his affidavit of 11 November 2022, Michael identified houses at 18 Doherty Place, Wakerley; 89 Randall Street, Wynnum West; 15 Poinciana Street, Wynnum West; 11 Bent Street, Cannon Hill; and 10 Verdun Street, Tingalpa, one of which, but for Freezing Order, they would have purchased.74 Michael noted that the houses at Wynnum West and Cannon Hill were at a lower price range than the house at Wakerley, but because their savings were insufficient even those houses were beyond their ability to raise finance without getting security. [258] . In final submissions Mr Hackett, on behalf of Michael, submitted that the relevant lost opportunity in this case was in relation to Michael’s opportunity to purchase a residence when housing prices were lower during the operation of the Freezing Order. It is contended that the loss suffered by Michael is a capital loss of $291 4310 based on an average of ten properties. This was derived from the report of Mr Bristow, the valuation expert called on behalf of Michael. He provided a report comparing the price of the property as at the sale date of the property in 2019 and 2020 and then gave a value for that property as at March 2022 and a percentage increase in the property. That was supported by providing a suburb by suburb summary as to the movement in the price of property. 74 Affidavit of Michael Balfour affirmed 11 November 2022 at [11]. -- 87 of 93 -- 88 [259] Putting aside the challenges of dealing with multiple alternatives the same difficulties as identified in relation to the residential property applies to the purchase of an investment property. For the same reasons outlined above, such that I cannot be satisfied that Michael on the balance of probabilities would have been able to purchase the property but for the Freezing Order in place. [260] While it is clear that Michael was a fairly entrepreneurial young man, accruing four properties by the time he was 26 years of age. However, that had not continued to purchase properties after 2010 up until the Freezing Order was made. [261] While the court has considerable sympathy for Michael in terms of the position he found himself in in being subject to a Freezing Order which ultimately was discharged and a proceeding against him which was ultimately dismissed, the evidence before me does not establish that he would have been in the position to purchase the house but for the Freezing Order. Accordingly, I cannot conclude on the balance of probabilities on the evidence before me that he did suffer loss as a result of the Freezing Order. [262] If I had been satisfied on the balance of probabilities that loss was caused to Michael I would have characterised the loss of opportunity as a loss to an investment property before the rise in the market and make a capital gain between 2019 and 2020. Given the fact that the evidence does not suggest his income had gone up significantly in that period. I estimate that he would have, lost an opportunity to buy a house at the lower end of the scale between $550,000 to $600,000. Assuming that he would have been able to buy one of the Properties at Wynnum West which Michael and his wife had looked at and which he said he would have bought in the period 2019 and 2020 that were priced between $500,000 and $600,000, other than Samarinda Street, Tingalpa the increases in the property between the sale date and 3 March 2022 was 46 per cent, 54 per cent, 44 per cent, 45 per cent, 48 per cent, 58 per cent and 44 per cent. Taking the difference between the sale price and the value as at March 2022 for each property and then drawing the average of the movement in those properties is a price of approximately $274,250 as the approximate capital loss. I would discount that amount by one-third to take account of the risk factors which would include the terms of offer for the loan not being acceptable, other parties buying the properties first or outbidding Michael and not being able to retain the properties. -- 88 of 93 -- 89 Loss of inheritance [263] Michael contends that he lost the benefit of his inheritance of $650,000 from his late father, Stewart, because the Freezing Order prevented his father from severing the joint tenancy on the Wakerley property. [264] For the purposes of this argument I have assumed that Michael can claim for payment of a compensation on the basis that he is a person affected by the operation of the order against Stewart. However, ultimately that does not alter the outcome and I find this basis for the claim for damages is not made out. [265] After the criminal charges were dropped against Michael’s father in July 2021, Stewart was diagnosed with terminal cancer. He did not have a Will and went to the Public Trustee in order to obtain one. The instructions given to the Public Trustee assumed that Sandra and Stewart could separately bequeath their respective half shares in the house. Under Stewart’s Will dated 16 August 2022, Stewart provided that Michael and his wife would share equally in his share and interest in the Wakerley property. However, the joint tenancy had not been severed between his father and his mother. In an exchange of emails with the Public Trustee, the Public Trustee officer informed Sandra on 26 July 2021 that she and her husband owned the properties jointly with the effect that should either of them pass, the survivor would automatically own 100 per cent of the property. Following that email, it appears Stewart sent an email stating:75 After me and my wife having discussions with you yesterday this is what we are wanting to happen. At present Stewart and Sandra have a Commonwealth Bank account separately. We also have a joint bank account with Suncorp. If anything happens to Stewart Lauren Balfour will receive everything that he has. If anything happens to Sandra, Michael Balfour will receive everything that she has. If something happens to both of us then they each get 50%… [266] The Will made by Stewart in fact provided:76 75 MDB-29 to the Affidavit of Michael Balfour affirmed 30 June 2022. 76 MDB-30 to the Affidavit of Michael Balfour affirmed 30 June 2022. -- 89 of 93 -- 90 I give – the whole of my estate to my wife Sandra Balfour otherwise known as Alexandrina Cummings but if this gift fails then the following provisions for this distribution shall apply instead. 8. Specific Bequest I give to my son Michael Balfour and my daughter-in-law Lauren Balfour my share and interest in the property known as 14 Burdekin Street, Wakerley, Queensland and all my household furniture and household effects (other than motor vehicles) therein at my death which shall be held by them or the survivor of them equally. 9. Further gift of residue I give – my residuary estate to my son Michael David Balfour absolutely. … [267] Stewart passed away before his wife and his wife and his wife remains living. As such, the specific bequest did not operate given clause 7 of the Will. [268] Sandra gave evidence. According to her, she and her husband in about early June 2021 had decided to get their Wills done and had decided to get them done by the Public Trustee. According to her, when the Public Trustee officer told them that Sandra would receive Stewart’s interest because the property was owned by them as joint tenants, they were not happy. Sandra and Stewart wanted the draft Wills to expressly state Michael would receive Stewart’s half of the Wakerley property if Stewart died and her half if she died. Sandra states that after she received the 26 July 2021 email explaining the effect of joint ownership, she and Stewart had discussed things again and decided because of the Freezing Order on Michael, it would better for Stewart to leave his 50 per cent interest in the Wakerley property to Michael’s wife Lauren and for Sandra to leave her interest to Michael. That resulted in the email of 29 July 2021. According to Sandra, following that both she and Stewart reconsidered and decided each would leave their half share to both Michael and Lauren. As a result of that, she stated that they had a telephone conference with the Public Trustee officer and told her what they wanted. She stated that she and Stewart wanted to change the Wakerley property from joint tenancy to tenants-in-common, however because of the Freezing Order and the solicitors of the plaintiff being so uncompromising they knew asking for permission to transfer the property to each of -- 90 of 93 -- 91 them as tenants-in-common would be a waste of time and therefore did not pursue it. They signed the Will on 16 August 2021. [269] In cross-examination Sandra denied that she understood that because she was guilty for at least part of the amount of money that she was accused of, it was likely that when the house was sold the money would go back to the people from who she had stolen money. She denied that one of the reasons she was keen to sever the tenancy was as a way of ensuring the creditors would not get the money but rather Michael would instead. That was a matter she denied. In relation to the suggestion that it would have been a waste of time to approach APM’s lawyers to see whether they would permit the title to be severed, because they had “refused every request made by my solicitors” she had to agree that the plaintiff’s solicitors had consented to enlarging the amount she could spend from her assets in April 2022 and August 2021 and December 2021. The enlargement of the amounts were not opposed by the plaintiff’s solicitors rather the amount which she had sought. The extent of the amount which she had sought had been sought. [270] While I do accept Sandra’s evidence that she and Stewart discussed leaving Michael the property as reflected in their exchanges with the Public Trustee. I don’t accept that it had gone beyond that and that Stewart had decided to sever the tenancy and only did not do so as a result of the Freezing Order. This is supported by the fact that Stewart ultimately left his whole estate to his wife, and did not take any steps towards severance. While Stewart was an unwell man and passed away in September 2021, if he and Sandra had both wished to sever the joint tenancy, one would have envisaged that they would have at least taken steps to write to the other side to request that they would be able to do so and then take urgent steps to have the Freezing Order discharged against Stewart to be able to effect a severance of the tenancy. While there were exchanges with the Public Trustee none of these steps were taken. [271] In any event, in order to succeed in his claim, Michael must show that the Freezing Order was wrongly ordered against Stewart. [272] The claim fails given that the evidence does not establish that the order against Stewart was wrongly made. -- 91 of 93 -- 92 [273] As to the notion that the proceedings were wrongly brought against Stewart on the same basis as Michael, there are a number of difficulties with that proposition. First, Stewart had legal representation in relation to the Freezing Order and did not contend that the Freezing Order should not be made. Secondly, the proceedings against Michael were dismissed in June 2021. Stewart was informed that the criminal charges against him would be dropped on 9 June 2021. Notwithstanding that, he took no steps to have the Freezing Order dismissed against him. While Counsel for Michael referred to the same evidence he had relied on in relation to Michael to say there was no case, Stewart was in a different position to Michael insofar as he shared the joint bank accounts into which large amounts of money alleged to be misappropriated were paid. the property was jointly owned by Sandra and Stewart and the allegation made against him were different. As to the question of whether the loss claimed is foreseeable at the time the Freezing Order was granted, Counsel for Michael contends that the proper question was whether property frozen cannot be dealt with by a registered proprietor in a way in which he ordinarily could and any loss that flows from that inability to so deal with it which would include the property being disposed of under that person’s Will. However the loss claimed is that suffered by a beneficiary under the Will said to arise because the party to a Freezing Order could not sever a tenancy to leave the beneficiary the property the subject of the Freezing Order. In circumstances where the Freezing Order was against both property owners and there was no evidence that Stewart was in ill health at the time of the making of the order, loss was not of a kind that could have been reasonably foreseen. Summary of Conclusions [274] Michael has been successful insofar as the Court has determined he is to be paid standard costs of the proceedings up until February 2020 and indemnity costs from March 2020 until the proceedings were dismissed. [275] As to the claims for compensation, I do not find that Michael has established an entitlement to compensation under the undertaking. -- 92 of 93 -- 93 Orders [276] The Court orders that: (a) The plaintiff is to pay the defendant: (i) His costs of the proceedings, including the costs of the Freezing Order on a standard basis until February 2020; (ii) His costs of the proceedings including the costs of the Freezing Order on an indemnity basis after March 2020. (b) The third defendant’s application for compensation pursuant to the Undertaking be dismissed. [277] I will hear submissions from the parties as to costs of the third defendant’s application filed 26 May 2022 at a time to be agreed between the Court and the parties in the week of 26 February 2024 unless the Orders can be agreed between the parties. [278] When judgment was delivered, following submissions of the parties, the Court gave directions for the delivery of submissions as to costs if the costs order could not be agreed. The Court therefore directed that the plaintiff would deliver its submissions on 8 March 2024 and the third defendant will deliver his submissions on 15 March 2024. -- 93 of 93 --