Background
MG Homes and related companies sued Grocorp Homes, Bosform and an architecture practice, alleging copyright infringement in townhouse plans used for “The Mill Residences” development at Pimpama, Queensland. They alleged that Grocorp and Bosform copied or substantially reproduced their plans, constructed townhouses using those plans, and sold them. The substantive claims sought injunctions, delivery up, damages or an account of profits.
Pending a later freezing-order application, the applicants sought interim orders restraining Grocorp and Bosform from disbursing proceeds from sales of lots in the development, subject to limited payments to unrelated third parties for construction, sales and financing costs. They relied on continuing sales, limited paid-up capital, incomplete discovery and intercompany transfers. The respondents’ evidence was that they were solvent, held combined net assets of about $46 million, and had not dissipated development proceeds.
The Court’s Holding
Justice Meagher dismissed the interim freezing-order application. The proceeds of townhouse sales were not the subject matter of the copyright proceeding: damages and an account of profits are personal remedies, and the applicants had not pleaded a proprietary, tracing or constructive-trust claim. Rule 14.11 of the Federal Court Rules therefore did not provide a basis to preserve the sale proceeds.
The applicants also failed to establish a real or substantial risk that a prospective judgment would be unsatisfied through dissipation of assets. Intercompany arrangements and payments within the development group appeared to be ordinary commercial arrangements, not evidence of asset removal to defeat enforcement. The respondents’ demonstrated solvency and the director’s stated intention to maintain substantial reserves weighed against that inference.
The balance of convenience also favoured refusal. The proposed restraint over all development proceeds was disproportionate to any recoverable account of profits, would materially hamper ordinary business operations, and was supported by an undertaking as to damages of uncertain value rather than a bank guarantee or payment into court. Costs followed the event for Grocorp and Bosform; there was no order as to the architecture practice’s costs.
Key Takeaways
- A freezing order requires a real, substantial risk that a judgment will be unsatisfied through asset dissipation; ordinary related-party transactions do not alone establish that risk.
- Copyright damages and an account of profits are personal remedies and do not, without more, make sale proceeds property capable of preservation as the subject matter of the action.
- Broad restraints over all business proceeds may be refused as disproportionate and oppressive, particularly where the applicant’s damages undertaking is inadequately secured.
Why It Matters
The decision reinforces that a freezing order is not a device to secure an unquantified claim or compensate for incomplete discovery. Applicants must identify evidence supporting a genuine enforcement risk and seek relief proportionate to the likely judgment.
For intellectual-property disputes involving development projects, the case distinguishes a possible future account of profits from a proprietary entitlement to project revenue. That distinction can be decisive when seeking urgent restraints over ongoing sales.