CHINESE LENDING GROUP WHICH SEEKS TO FREEZE ASSETS OF BUSINESSMAN WHO DEFAULTED ON MULTIMILLION LOAN REFUSED

China Insurance Group Finance Company Ltd v Kingston

[2020] NSWSC 1273

This is an appeal of the denial of an application for injunctions and freezing order made by a Chinese lending company against its debtor, the director of Sargon Companies. Chinese lending company claims that debtor’s past conducts suggest that his probity cannot be relied upon.

Facts: 

1. China Insurance Group Finance Ltd ("China Insurance"), is a Chinese State-owned corporation based in Hong Kong. It agreed to lend the defendant, Mr Phillip Kingston, some HKD653 million (equivalent to approximately AUD122 million). Mr Kingston has defaulted and the loan is now due.
2. Mr Kingston was a director of Sargon Capital Pty Ltd ("Sargon Capital"), Trimantium Investment Management Pty Ltd ("TTIM") and Trimantium Capital Funds Management Pty Ltd ("TCFM") (together, "the Sargon Companies").
3. Mr Kingston is one of a number of people summonsed by the Receivers to appear in this Court to be publicly examined in relation to the affairs of the Sargon Companies for seven days commencing 19 October 2020.
4. China Insurance sought a freezing order against Mr Kingston and an order requiring him to give an affidavit of assets. It claims that a freezing order should be made because:
   • China Insurance has a strong prima facie case against Mr Kingston;
   • Receivers have expressed “concern that funds may have been misappropriated or misdirected” by Mr Kingston from one or other of the Sargon Companies (TTIM borrowed $50 Million from Tiaping and some $40.3 million was paid from TCFM to recipients that the Receivers have not been able to identify);
   • Mr Kingston has “not acceded fully” to requests by the Receivers to deliver books and records of the Sargon Companies and has caused the removal the trustee of a trust that the Receivers are investigating (Mr Kingston's replacement of TCFM as trustee of the Trust should be seen as an example of him "obstructing" the Receivers’ investigation and a breach of his obligation to Taiping);
   • Mr Kingston “appears” to have evaded service of these proceedings (no response was received at the intercom of his Melbourne residence on a number of occasions and his solicitors did not receive instructions from him to accept service).

Law:

The making of a freezing order is a drastic remedy and should not be granted lightly. An applicant for a freezing order must:

1. show a good arguable case being a case more than barely capable of serious argument although not necessarily one which has a better than even chance of success
2. show a danger that any judgment obtained by it against the defendant will be wholly or partly unsatisfied because the defendant’s assets might be disposed of or dealt with or diminished in value or that the defendant has previously acted in a way which shows that his probity is not to be relied upon or that, unless restrained, the defendant would take steps to make himself proof against an order to pay any judgment obtained.

Analysis:

• China Insurance has a good arguable case to recover the loan.
• China Insurance could not point to any imminent threat of dissipation by Mr Kingston of his assets or of any "other special feature of the case beyond the Receivers' expressions of concern".
• Although Mr Kingston was the sole director of TCFM, there is no sound basis upon which to draw a tentative conclusion about Mr. Kingston’s probity with regards to the proceeds of the $50 Million promissory note drawn by TCFM.
• It is drawing a long bow to conclude from the replacement of the trustees that Mr Kingston has acted in a way that suggests that his probity cannot be relied on. While it may be that TCFM has, in a technical sense, acted in breach its obligations under the General Security Deed by retiring as trustee of the Trust, the significance of that breach is not apparent to the application for a freezing order.
• Evidence raised does not warrant a conclusion, nor even a suggestion, that Mr Kingston was "evading" service.

Conclusion:

China Insurance has not  satisfactorily made out a case for a freezing order. Application for freezing order should be dismissed.