In the matter of The Summit Hotel Bondi Beach Pty Ltd (No 2) [2023] NSWSC 487

In the matter of The Summit Hotel Bondi Beach Pty Ltd (No 2) [2023] NSWSC 487

The Court will make orders substantially as proposed by the defendants, namely, that the proceeds of sale of certain properties be held on trust with a $10 million carveout (limited to repayment of SHBB's debt to Lulubelle) secured by an indemnity and first mortgage over the Vaucluse property, because the evidence does not establish a sufficient risk that satisfaction of any judgment or winding up order will be frustrated justifying a more extensive freezing order, and the protection offered by the secured indemnity is adequate; costs apportioned according to provision of the security.

Parties
First Plaintiff: Efrem Harkham; Second Plaintiff: 10-12 Campbell Parade Pty Ltd; First Defendant: The Summit Hotel Bondi Beach Pty Ltd; Second Defendant: HK Empire Pty Ltd; Third Defendant: Patglen Pty Ltd; Fourth Defendant: Terry Harkham; Fifth Defendant: Geraldine Harkham
Jurisdiction
Australia
Judgment Date
09 May 2023
Procedural Posture
Interlocutory Application (equity, Corporations List) / Ruling on Application for Freezing Orders and Asset Preservation Orders; Costs Order
Outcome
Interlocutory application granted in part: freezing orders made with $10 million carveout (repayment to Lulubelle only), subject to indemnity and mortgage security; plaintiffs' costs in the cause up to provision of mortgage, then defendants' costs in the cause.
Legal Topics
Freezing Orders, Interim Asset Preservation, Shareholder Disputes, Quasi Partnerships, Breach of Fiduciary Duty, Oppression Remedy, Winding Up (corporate)
Civil Procedure Corporations Law Equity Freezing Orders Interim Asset Preservation Shareholder Disputes Quasi Partnerships Breach of Fiduciary Duty +2 more

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Parties

Efrem Harkham

First Plaintiff

10-12 Campbell Parade Pty Ltd

Second Plaintiff

The Summit Hotel Bondi Beach Pty Ltd

First Defendant

HK Empire Pty Ltd

Second Defendant

Patglen Pty Ltd

Third Defendant

Terry Harkham

Fourth Defendant

Geraldine Harkham

Fifth Defendant

Procedural Posture

Interlocutory Application (equity, Corporations List) / Ruling on Application for Freezing Orders and Asset Preservation Orders; Costs Order

Legal Issues

  1. 1 Whether the Court should grant freezing orders over proceeds of sale of company assets pending outcome of shareholder dispute
  2. 2 Whether a $10 million carveout to allow repayment of debt to related entity (Lulubelle) should be permitted
  3. 3 Whether the plaintiffs have established good arguable cases for relief for breach of fiduciary duty, oppression and entitlement to shares

Ratio Decidendi

The Court will make orders substantially as proposed by the defendants, namely, that the proceeds of sale of certain properties be held on trust with a $10 million carveout (limited to repayment of SHBB's debt to Lulubelle) secured by an indemnity and first mortgage over the Vaucluse property, because the evidence does not establish a sufficient risk that satisfaction of any judgment or winding up order will be frustrated justifying a more extensive freezing order, and the protection offered by the secured indemnity is adequate; costs apportioned according to provision of the security.

Court Disposition

Interlocutory application granted in part: freezing orders made with $10 million carveout (repayment to Lulubelle only), subject to indemnity and mortgage security; plaintiffs' costs in the cause up to provision of mortgage, then defendants' costs in the cause.

Orders

  • Orders to preserve sale proceeds of properties, with $10 million carveout to allow partial repayment of SHBB debt to Lulubelle secured by indemnity and mortgage over Vaucluse property; precise form of orders to be settled by the parties in short minutes.
  • Costs to be the parties' costs in the cause up until the indemnity and mortgage offered; thereafter, defendants' costs in the cause.