FEDERAL COURT OF AUSTRALIA

Bridges Financial Services Pty Ltd v Brown [2008] FCA 992

BRIDGES FINANCIAL SERVICES PTY LIMITED (ACN 003 474 977), AUSTRALIAN WEALTH MANAGEMENT LIMITED (ACN 111 116 511) and AUSTRALIAN WEALTH MANAGEMENT SERVICE CO PTY LIMITED (ACN 074 572 919)

v ALAN LESLIE BROWN

NSD 858 of 2008

LINDGREN J

30 JUNE 2008

SYDNEY

THE COURT ORDERS THAT:

1.                  Upon the Solicitor for the Applicants' undertaking to pay the relevant filing fees, leave be granted to the Applicants to file in Court the Applicants’ Notice of Motion dated 30 June 2008.

2.                  Pursuant to s 50 of the Federal Court of Australia Act 1976 (Cth), publication of the exhibit to the Affidavit of Belinda Dent affirmed on 10 June 2008 and the documents tendered by the Applicants in support of their Notice of Motion dated 30 June 2008 be restricted to the parties (including Mrs Donna Joyce Brown) and their legal advisors.

3.                  The Notice of Motion dated 30 June 2008 be returnable instanter.

4.                  The time for service of the Notice of Motion dated 30 June 2008, the Affidavit of Belinda Dent affirmed 10 June 2008 and these Orders be abridged to 6.00pm Tuesday, 1 July 2008.

5.                  The further hearing of the Notice of Motion be returnable at 10.15am on Friday, 4 July 2008 before Lindgren J.

6.                  Freezing orders in the form annexed to these orders and marked “A”.

7.                  Liberty to any party to restore on 12 hours’ notice.

8.                  Leave to enter these orders forthwith.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

ANNEXURE A

PENAL NOTICE

TO:  DONNA JOYCE BROWN

IF YOU:

(A)       REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR

(B)       DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING,

YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.

TO: DONNA JOYCE BROWN

This is a freezing order made against you on 30 June 2008 by Justice Lindgren at a hearing without notice to you and after the Court was given the undertakings set out in Schedule A to this Order and after the Court read the affidavits listed in Schedule B to this Order.

THE COURT ORDERS:

INTRODUCTION

1.         Subject to the next paragraph, this order has effect up to and including 4 July 2008 (the Return Date).  On the Return Date at 10.15am there will be a further hearing in respect of this order before Lindgren J.

2.         Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified.

3.         In this order:

(a)        ‘applicant’, if there is more than one applicant, includes all the applicants;

(b)        ‘you’, where there is more than one of you, includes all of you and includes you if you are a corporation;

(c)        ‘third party’ means a person other than you and the applicant;

(d)        ‘unencumbered value’ means value free of mortgages, charges, liens or other encumbrances.

4.         (a)     If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions.

(b)        If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.

FREEZING OF ASSETS

5.         You must not in any way dispose of, deal with or diminish the value of the property registered in your name and located at 1/2B Cypress Drive, Lugarno in the state of New South Wales (the Lugarno Property) so as to reduce the unencumbered value of the Lugarno Property below $150,000 (the Relevant Amount).

6.         If the unencumbered value of the Lugarno Property exceeds the Relevant Amount, you may dispose of, deal with or diminish the value of the Lugarno Property, so long as the total unencumbered value of the Lugarno Property still exceeds the Relevant Amount.

7.         (a)        This order will cease to have effect if you:

(i)         pay the sum of $150,000 into Court; or

(ii)        pay that sum into a joint bank account in the name of your solicitor and the solicitor for the applicant as agreed in writing between them; or

(iii)       provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court.

(b)        Any such payment and any such security will not provide the applicant with any priority over your other creditors in the event of your insolvency.

(c)        If this order ceases to have effect pursuant to (a), you must as soon as practicable file with the Court and serve on the applicant notice of that fact.

COSTS

8.         The costs of this application are reserved to the judge hearing the application on the Return Date.

PERSONS OTHER THAN THE APPLICANT AND RESPONDENT

9.         Set off by banks

This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order.

10.       Bank withdrawals by the respondent

No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order.

SCHEDULE A

UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT

1.         The applicant undertakes to submit to such order (if any) as the Court may consider to be 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.

2.         In addition to a copy of these Orders, the Notice of Motion dated 30 June 2008 and all evidence relied upon in support of these Orders, the applicant will serve upon Donna Joyce Brown copies of:

(a)        any other document that was provided to the Court;

(b)        a transcript, or, if none is available, a note, of any exclusively oral allegation of fact that was made and of any exclusively oral submission that was put, to the Court; and

(c)        the Application filed in the proceedings.

3.         As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it.

4.         The applicant will pay the reasonable costs of anyone other than the respondent and Donna Joyce Brown 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 or Donna Joyce Brown’s assets.

5.         If this order ceases to have effect the applicant will promptly take all reasonable steps to inform in writing anyone to who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect.

6.         The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding.

7.         The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent’s assets.

SCHEDULE B

AFFIDAVITS RELIED ON

(1)        Affidavit of Belinda Dent affirmed 10 June 2008.

REASONS FOR JUDGMENT

1                     This morning, the applicants moved the Court for the orders set out at the commencement of these reasons.  These are the reasons why I made those orders.

2                     The respondent (Mr Brown) was employed as an authorised representative of the first applicant (Bridges) from about 7 June 2007 until 28 May 2008 when his employment was terminated.  Bridges is a wholly owned subsidiary of the second applicant (AWM).  Bridges holds an Australian financial services licence issued by the Australian Securities and Investments Commission.  Bridges operates a planning and stockbroking business and has a network of authorised and accredited financial planners.  The third applicant (AWM Service Co) provides services to AWM and its subsidiaries, such as Bridges.

3                     The applicants claim relief in the nature of payment of money.  They allege that Mr Brown engaged in various forms of conduct in contravention of ss 1041G and 1041H of the Corporations Act 2001 (Cth) and s 42 of the Fair Trading Act 1987 (NSW).  They also alleged that he breached his contract of employment and breached fiduciary duties that he owed to the applicants.  In various ways, it is alleged that Mr Brown misappropriated or failed to account for monies that were paid to him by clients of Bridges.

4                     On 11 June 2008 the Court (Edmonds J) made a freezing order against Mr Brown.

5                     On 17 June 2008, by consent, the Court (Branson J) made a further freezing order against Mr Brown.

6                     The orders I made ex parte this morning are in the nature of a freezing order against the wife of Mr Brown, Donna Joyce Brown (Mrs Brown), who is not a party to the substantive proceeding.

7                     On the hearing, the applicants relied on an affidavit of Belinda Dent affirmed on 10 June 2008 and certain documents that were admitted as exhibits.

8                     The evidence showed that in an interview on 6 May 2008, Mr Brown admitted having used $160,000 of clients’ funds “inappropriately”.

9                     There was evidence that Mr Brown had funded out of funds of his clients a sum of $147,500 towards the purchase in the name of his wife of a property at 1/2B Cypress Drive, Lugarno, being Lot 1 Strata Plan 47684 and being the land in Folio 1/SP47684.  The purchase took place in 2002.  The purchase price was $610,000 of which $450,000 was borrowed from NSW Teachers Credit Union Ltd (the Credit Union), and the remaining $160,000 was provided by Mrs Brown.

10                  When I say that it was provided by Mrs Brown, I note that of this amount some $147,500 was, on the evidence before the Court this morning, provided by Mr Brown out of funds of clients of Bridges.  The evidence suggests that Mr Brown obtained $57,500 from one client and $90,000 from another client.  Later, when the client whose $90,000 had been used, died, Mr Brown used the money of another client to pay out the estate.  Mr Brown caused both amounts to be paid to the trust account of B Hayward & Co, the solicitors who were acting for Mrs Brown on the purchase and mortgage.  It appears that of the $147,500, a sum of $23,676.94 was not needed and was paid to the Credit Union on account of Mr Brown.

11                  It may be that Mrs Brown knew nothing of her husband’s dealings with the clients’ money but in that case it appears that so far as the amounts totalling $147,500 are concerned, she was a volunteer and could not resist a claim for recovery of those amounts.  If, on the other hand, she was aware of the circumstances, it appears that she would be liable in accordance with the principle recognised in Barnes v Addy (1874) LR 9 Ch App 244.

12                  I was satisfied that there was a serious question to be tried as to whether Mrs Brown would be liable in respect of a sum of $150,000 after one includes interest and costs.  The balance of convenience favours the making of a freezing order for a short period.

13                  Of course, I have not heard Mrs Brown’s side of the story on this ex parte application and make no final findings of fact.

14                  For the above reasons, I made the freezing order this morning.  I note that in the heading of the freezing order at Annexure A of the orders set out at the commencement of these reasons, the third applicant is incorrectly referred to as “Australian Wealth Management Co Pty Limited”. 

15                  Further consideration of the applicants’ motion was stood over to this coming Friday at 10.15 am.

Associate:

Dated:         30 June 2008