SP98970 v Capitol Property Services Pty Ltd [2021] NSWSC 950

“Just keep those assets frozen a little longer…”

___

P was an owners corporation that owned the common property in a building.

P sued the developer, D, in relation to alleged defects P afflicting the building - a breach of the HBA statutory warranties: [9]

P tried to organise site inspections of various experts to investigate and hopefully quantify the defects but COVID restrictions frustrated that: [12]

P’s pre-inspection estimate of damage was ~$1m and, P said, that was likely to increase after inspection: [13]

D owned Lot 2 in the building: [18]

P’s lawyers became concerned that D might sell Lot 2 and P’s lawyers raised this issue with D’s lawyers: [21]

Without P’s knowledge, D transferred Lot 2 to Q (a person who had a relationship with D) for a recorded price fo $3.78m, but with no money changing hands: [25], [26]

This left D with around $900K to pay any judgment P might get in the defect proceedings: [29]

P applied for, and got, a “freezing order” preventing Q from selling Lot 2, unless in an arm’s length transaction with the price paid to be held on terms both agreed: [37]

At the time the order was made, D had around $635K: [38]

The Court accepted there was a good, arguable case that the transfer of Lot 2 to Q was voidable, a transaction to defraud D’s creditors - s37A, Conveyancing Act: [41]

At the time of the hearing Q was already restrained by freezing orders. Today’s discussion is P’s application to extend them.

P sought an extension of the freezing orders to get its defect evidence on: [46]

D and Q did not oppose an extension but sought a reduction from the full value of Lot 2 to $800K, following a deposit of $200K into a trust account, and after giving an undertaking not to deal with Lot 2 without P’s knowledge: [48]

The Court accepted a freezing order is a drastic remedy, not to be used improperly as additional security: [50]

Because P undertook to bring s37A proceedings, with the potential to void the transfer of Lot 2 from D to Q, the Court extended the freezing order for Lot 2 (or its sale proceeds) by 4 months: [53]