FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v We Buy Houses Pty Ltd (No 3) [2018] FCA 2122

ORDERS

THE COURT ORDERS THAT:

1.    Leave be granted to the applicant to file electronically by 5.00 pm on 10 December 2018 an interlocutory application and the affidavits of James Chapman Wood affirmed 6 December 2018 and Michael Taylor sworn 6 December 2018.

2.    The interlocutory application be made returnable instanter.

3.    Orders be made in accordance with the freezing orders pursuant to r 7.32 of the Federal Court Rules 2011 (“Rules”) addressed to the second respondent annexed to these orders and marked “A”.

4.    Pursuant to r 10.24 of the Rules, service on the second respondent may be effected by sending a copy of the interlocutory application, the affidavits in support and these Orders by electronic mail message to:

(a)    reception@websters.net.au;

(b)    james@websters.net.au; and

(c)    rick22805@gmail.com.

5.    The time for service of the interlocutory application, the affidavits in support and these orders, in accordance with order 4, above be abridged to 5.00 pm on 10 December 2018.

6.    These orders be entered forthwith.

7.    The interlocutory application be listed for further hearing at 10.15 am on Thursday 13 December 2018.

ANNEXURE A

PENAL NOTICE

TO: RICHARD KEITH OTTON

IF YOU (BEING THE PERSON BOUND BY THIS ORDER):

(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 NOT TO DO,

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

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: RICHARD KEITH OTTON

This is a ‘freezing order' made against you on 10 December 2018 by Justice Gleeson at a hearing without notice to you 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.

INTRODUCTION

1.        (a)  The application for this order is made returnable immediately.

   (b)    The time for service of the application, supporting affidavits and originating process is abridged and service is to be effected in the manner set out in the orders made by the Court on 10 December 2018.

2.    Subject to the next paragraph, this order has effect up to and including 4pm on 6 February 2019 (‘the Return Date’). On the Return Date at 10:15am, there will be a further hearing in respect of this order before Justice Gleeson.

3.    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.

4.    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.

5.       (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

6.    (a)    You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia (‘Australian assets’) up to the unencumbered value of AUD$6,292,000 (‘the Relevant Amount’).

(b)    If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount.

(c)    If the unencumbered value of your Australian assets is less than the Relevant Amount:

(i)    You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and

(ii)    You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount.

6A.    Order 6 does not prevent you from selling your interest in the property known as 69 Roscoe Street Bondi Beach, New South Wales, Folio Identifier 2/506227 for fair market value.

7.    For the purposes of this order,

(1)    your assets include:

(a)    all your assets, whether or not they are in your name and whether they are solely or co-owned;

(b)    any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and

(c)    the following assets in particular:

(A)    the property known as 69 Roscoe Street, Bondi Beach, New South Wales 2026, Folio Identifier 2/506227 (the Property) or, if it has been sold, the net proceeds of the sale.

(2)    The value of your assets is the value of the interest you have individually in your assets.

8.    You must not remove from Australia or in any way dispose of, deal with or diminish your share (as tenant in common) of the net proceeds of the sale of the Property, after any financial obligation to Westpac Banking Corporation (Westpac) has been made to discharge Registered Mortgages with dealing numbers AD602424K and AI8098J (the Mortgages) and any taxes or council rates to be discharged at settlement and reasonable costs of sale.

9.    You must:

(a)    Direct that at settlement of the Property, the purchaser pay 50% of the net proceeds of the sale of the Property into a trust account or controlled money account in the name of Malcolm Kimball Howell, in his capacity as the Trustee of the Bankrupt Estate of Richard Keith Otton, to be held until further order; or

(b)    To the extent that a settlement of the Property has already occurred, pay your share of the proceeds of sale forthwith, into a trust account or controlled money account in the name of Corrs Chambers Westgarth, to be held until further order; and

(c)    To the extent the agent is holding a deposit in relation to the Property, direct at the settlement of the property the agent to pay 50% of the deposit into a trust account or controlled money account in the name of Corrs Chambers Westgarth, to be held until further order.

PROVISION OF INFORMATION1

10.    Subject to paragraph 11, you must:

(a)    at or before 4 pm on 19 December 2018 to the best of your ability inform the applicant in writing of all your assets world wide, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets;

(b)    inform the applicant in writing of all your assets in and outside of Australia, giving their value, location and details (including any mortgage, charges or other encumbrances to which they are subject) and the extent of your interest in the assets;

(c)    provide to the applicant a copy of the current version of the contract for sale for the Property;

(d)    provide to the applicant details of the loan or advances to which the Mortgages relate, including but not limited to, their terms and their value;

(e)    provide to the applicant details of any properties which are cross-collateralised to secure the Mortgages;

(f)    provide to the applicant details of all of your sources of income and the amounts of income you receive from each source on a weekly, monthly or annual basis; and

(g)    by 4pm on 18 January 2019, swear and serve on the applicant an affidavit setting out the above information.

11.   (a)      This paragraph (11) applies if you are not a corporation and you wish to object to complying with paragraph 10 on the grounds that some or all of the information required to be disclosed may tend to prove that you:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(b)    This paragraph (11) also applies if you are a corporation and all of the persons who are able to comply with paragraph 10 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 10 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

(c)    You must:

(iii)    disclose so much of the information required to be disclosed to which no objection is taken; and

(iv)    prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and

(v)    file and serve on each other party a separate affidavit setting out the basis of the objection.

EXCEPTIONS TO THIS ORDER

12.    This order does not prohibit you from:

(a)    paying any rental or mortgage payments pursuant to an agreement entered into prior to the date of this freezing order;

(b)    paying up to AUD$1,200 a week for your ordinary living expenses;

(c)    paying your reasonable expenses in order to attend court on the Return Date; or

(d)    paying your reasonable legal expenses.

13.    You and the applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and you, and the Court may order that the exceptions are varied accordingly.

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

(i)    pay the Relevant Amount into Court; or

(ii)    pay that sum into a joint bank account in the name of your lawyer and the lawyer 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 (a), you must as soon as practicable file with the Court and serve on the applicant notice of that fact.

COSTS

15.    The costs of this application are reserved to the Court hearing the application on the Return Date.

PERSONS OTHER THAN THE APPLICANT AND RESPONDENT

16.    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.

17.    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.

18.    Persons outside Australia

(a)    Except as provided in subparagraph (b) below, the terms of this order do not affect or concern anyone outside Australia.

(b)    The terms of this order will affect the following persons outside Australia:

(i)    you and your directors, officers, employees and agents (except banks and financial institutions);

(ii)    any person (including a bank or financial institution) who:

(A)    is subject to the jurisdiction of this Court; and

(B)    has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and

(C)    is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and

(iii)    any other person (including a bank of financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person’s assets.

19.    Assets located outside Australia

Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party’s application, reasonable written notice of the making of the application is given to the applicant.

SCHEDULE A

UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT

(1)    As soon as practicable, the applicant will file and serve upon the respondent copies of:

(a)    this order;

(b)    the application for this order for hearing on the return date;

(c)    the following material in so far as it was relied on by the applicant at the hearing when the order was made:

(i)    affidavits (or draft affidavits);

(ii)    exhibits capable of being copied;

(iii)    any written submission; and

(iv)    any other document that was provided to the Court.

(d)    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;

(e)    the originating process, or, if none was filed, any draft originating process produced to the Court.

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

(3)    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.

(4)    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.

(5)    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

NAME AND ADDRESS OF APPLICANT'S LAWYERS

The applicant’s lawyers are:

Richard Flitcroft, Corrs Chambers Westgarth, 8 Chifley, 8-12 Chifley Square Sydney NSW 2000

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GLEESON J:

1    On 10 December 2018, on an ex parte application made by the first applicant (“ACCC”), I made a freezing order directed to the second respondent (“Mr Otton”) until 13 December 2018. The terms of the freezing order are set out in annexure A to the orders made on 10 December 2018.

2    By orders made on 12 December 2018, 14 December 2018, 20 December 2018 and 29 January 2019, the freezing order was extended until 6 February 2019 when it lapsed. On 12 December 2018, the freezing order was extended by consent to 14 December 2018. On 14 December 2018, the freezing order was extended with minor amendments to 20 December 2018. Although there was some dispute about the proposed amendments, Mr Otton did not oppose the continuation of the freezing order in substance until 20 December 2018. On 20 December 2018, the ACCC and Mr Otton each sought variations to the terms of the freezing order, implicitly on the basis that the orders would have continued in operation until some unspecified time, perhaps to the determination of the appeal that has been filed by Mr Otton against the final orders made in this proceeding. I reserved on those issues and extended the operation of the freezing order until 4.00 pm on the date of delivery of judgment on the reserved questions.

3    When the matter was next before the Court, for delivery of judgment on 29 January 2019, I was informed that Mr Otton had been made bankrupt on 23 January 2019. The solicitor acting for the trustee in bankruptcy did not oppose an extension of the freezing order until 6 February 2019 to enable the ACCC to decide whether it would seek a continuation of the order for a longer period.

4    Thus, there was no contested hearing of the ACCC’s application for the freezing order except in relation to matters of detail.

5    At the time of making the 10 December 2018 freezing order, I did not give reasons for making it. My reasons are set out below.

Background

6    The freezing order was intended to prevent dissipation of assets which may ultimately be applied to satisfy orders made against Mr Otton in relation to contraventions of ss 18, 29(1)(e), 29(1)(g), 34 and 37 of the Australian Consumer Law (“ACL”), being Schedule 2 to the Competition and Consumer Act 2010 (Cth) (“CCA”), arising out of the promotion and conduct of a real estate investment seminar business: see Australian Competition and Consumer Commission v We Buy Houses Pty Ltd [2017] FCA 915; Australian Competition and Consumer Commission v We Buy Houses Pty Ltd (No 2) [2018] FCA 1748 (“relief decision”).

7    In the relief decision, delivered on 15 November 2018, the Court relevantly ordered Mr Otton to pay:

(1)    a pecuniary penalty of $6 million to the Commonwealth, pursuant to s 224 of the ACL; and

(2)    together with the first respondent, We Buy Houses Pty Ltd (“We Buy Houses”), the ACCC’s costs.

8    The ex parte application was supported by an affidavit of James Wood, solicitor, affirmed 6 December 2018 and an affidavit of Michael Taylor, the ACCC’s Director Enforcement NSW & ACT, sworn 6 December 2018.

9    The freezing order made without notice on 10 December 2018 was limited to a duration of three days with a view to a hearing. The ACCC would then bear the onus of satisfying the Court that the order should be continued or renewed, in accordance with the Court’s Freezing Orders Practice Note (GPN-FRZG).

Risk of dissipation of assets

10    The evidence showed that Mr Otton and his wife proposed to sell a property at Bondi Beach, Sydney by auction on 15 December 2018, a month after the relief decision.

11    The evidence supported the following findings:

(1)    Mr Otton frequently travelled overseas in 2018, and last left Australia on 8 October 2018 and had not returned by 30 November 2018;

(2)    on 24 October 2018, Mr Otton gave his mailing address as “Bentinck House, Bentinck Road, West Drayton, Middlesex UB7 7RQ, United Kingdom”;

(3)    Mr Otton conducted live podcasts at various locations in the United Kingdom on 5 November, 7 November and 12 November 2018;

(4)    on 7 November 2018, Mr Otton emailed subscribers to “Rick’s Vault” on the website www.rickotton.com, advising they could access his training library until 5.00 pm on Wednesday 14 November 2018, the day before the relief decision. Mr Otton also stated: “with opportunities opening up in other broken property markets like Greece, Italy, etc., Birmingham [a live podcast at that location on 12 November 2018] will be the last time I will speak in the UK …”;

(5)    on or around 14 November 2018 (i.e., the evening before the relief decision), Mr Otton uploaded 42 videos to his YouTube channel. By 28 November 2018, Mr Otton had either removed or converted those into “private” videos, which could no longer be publicly accessed;

(6)    Mr Otton listed the property for sale after the relief decision;

(7)    as at 21 November 2018, Mr Otton’s solicitors were endeavouring to locate him;

(8)    Mr Otton resigned as a director from We Buy Houses effective 23 November 2018;

(9)    on 1 December 2018, the selling agent told Mr Taylor, who attended the open house of the property, there were two parties interested in the property “around the $3.5 million mark”, and that an offer was likely in the next day or two;

(10)    the selling agent told Mr Taylor the owner was “looking to downsize in the area” and was “intending to travel overseas”;

(11)    the selling agent informed Mr Taylor settlement could occur prior to Christmas; and

(12)    as at 10 December 2018, Mr Otton was probably located overseas.

12    I accepted the ACCC’s submission that the facts set out above gave rise to a compelling risk that, unless restrained, Mr Otton’s share of the net proceeds of sale of the property would be removed from the jurisdiction, thus frustrating the orders of the Court requiring payment of the penalty and the ACCC’s costs.

Court’s power to make freezing order

Statutory framework

13    The ACCC identified two sources of power for the freezing order, being:

(1)    s 23 of the Federal Court of Australia Act 1976 (Cth) (“FCA”); and

(2)    s 137F of the CCA.

14    Section 23 of the FCA confers power on the Court “in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate”.

15    By r 7.32(1) of the Federal Court Rules 2011 (“Rules”), the Court may make a freezing order, with or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the Court’s process by seeking to meet a danger that a judgment of the Court will be wholly or partly unsatisfied. By r 7.32(2), a freezing order may be an order restraining a respondent from, relevantly, disposing of, dealing with, or diminishing the value of, assets located in or outside Australia.

16    Rule 7.35 provides relevantly:

(1)    This rule applies if:

(a)    judgment has been given in favour of an applicant by:

(i)    the Court; …

…

(4)    The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:

(a)    the judgment debtor, prospective judgment debtor or another person absconds;

(b)    the assets of the judgment debtor, prospective judgment debtor or another person are:

(i)    removed from Australia or from a place inside or outside Australia; or

(ii)    disposed of, dealt with or diminished in value.

…

(6)     Nothing in this rule affects the power of the Court to make a freezing order or ancillary order if the Court considers it is in the interests of justice to do so.

17    Rule 7.36 states:

Nothing in this Division diminishes the inherent, implied or statutory jurisdiction of the Court to make a freezing order or ancillary order.

18    Section 137F of the CCA provides relevantly:

Court may make orders for the purpose of preserving money or other property held by a person.

(1)    A court may, on the application of the Commonwealth Minister or the Commission, make an order or orders mentioned in subsection (3) if:

(a)    proceedings of a kind referred to in subsection (2) have been taken against a person, or proceedings of a kind referred to in paragraph (2)(d) may be taken against a person; and

(b)    the court is satisfied that it is necessary or desirable to make the order or orders for the purpose of preserving money or other property held by, or on behalf of, the person if the person is liable, or may become liable, under the Australian Consumer Law:

(i)    to pay money by way of a fine, damages, compensation, refund or otherwise;

…

and

(c)    the court is satisfied that the making of such an order or orders will not unduly prejudice the rights and interests of any other person.

Kinds of proceedings taken against the person

(2)    For the purposes of paragraph (1)(a), the kinds of proceedings taken against the person are:

…

(b)    an application under section 232 of the Australian Consumer Law for an injunction against the person in relation to:

(i)    a contravention of a provision of Chapter 2, 3 or 4 of the Australian Consumer Law;

…

Kinds of orders that may be made

(3)    The court may make the following orders under subsection (1) of this section in a relation to money or other property held by, or on behalf of, a person (the respondent):

…

(c)    an order prohibiting, either absolutely or subject to conditions, the taking or sending by any person of money of the respondent, or of an associate of the respondent, to a place outside the State or Territory in which the money is held;

(d)    an order prohibiting, either absolutely or subject to conditions, the taking, sending or transfer by any person of other property of the respondent, or of an associate of the respondent, to a place outside the State or Territory in which that property is located;

…

Operation of order

(4)    If the court makes such an order, the order operates:

(a)    for the period specified in the order (which must not be longer than 30 days if the application for the order was an ex parte application); or

(b)    if proceedings in relation to which the order is made are concluded before the end of that period—until the conclusion of those proceedings.

Other

(5)    This section:

(a)    has effect subject to the Bankruptcy Act 1966; and

(b)    does not affect any other powers of the court.

19    Section 137F was added by the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth), Act No. 103 of 2010, effective 1 January 2011.

20    “[P]roceedings of a kind referred to in” s 137F(2), within the meaning of s 137F(1)(a), were taken against Mr Otton, being this proceeding.

Case law

21    The ACCC referred to two considerations of the sources of power for the making of freezing orders to prevent frustration of a penalty, namely in Australian Competition and Consumer Commission v Chaste Corporation (No 1) [2003] FCA 180; (2003) 127 FCR 418 (“Chaste”), and Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd [2016] FCA 976; (2016) 244 FCR 538 (“Get Qualified”). As explained below, Chaste is authority against s 23 of the FCA as a source of power for the freezing order made. In Get Qualified, Beach J declined to follow Chaste. However, Get Qualified is authority against s 137F of the CCL as a source of power for the freezing order.

Chaste

22    The ACCC noted that, in Chaste, Spender J held that the Court does not have jurisdiction under s 23 of the FCA to grant interlocutory orders, including freezing orders, where no legal or equitable rights are to be determined in the principal proceeding. In Chaste, the freezing order was sought “in aid of the preservation of assets which might be applied to meet any penalties that the Court might be minded to impose for breaches of provisions of [the Trade Practices Act 1974 (Cth)] and, also, importantly, for any costs order that the Court might be minded to make … in favour of the ACCC in those proceedings” (at [21]).

23    At [26], Spender J expressed the opinion that “there is a real distinction between there being a danger that a plaintiff if he gets judgment will not be able to get it satisfied, and a danger that a fine or penalty ordered to be paid will not be paid. Satisfaction of a judgment is not an apt way of describing the payment of a fine or civil penalty”. At [28], Spender J stated that “[t]he imposition of a pecuniary penalty by a court … is not aptly to be described as a judgment against him in favour of the ACCC”.

24    In concluding that s 23 did not confer power to make a freezing order in the circumstances of the case, Spender J gave the following reasons:

(1)    the nature of the proceedings was “punitive, not compensatory or restitutionary” ([62]);

(2)    his Honour did not regard it as a proper exercise of the Court’s power to make Mareva orders, to freeze the assets of a person so as the better to ensure payment of any penalties that might be ordered by a court sometime in the future, in respect of past contraventions of the Trade Practices Act ([63]); and

(3)    a fortiori, it was not a proper exercise of the power to make Mareva orders to freeze the assets of a person to enhance the prospects of payment of any costs order that might be made in the future in favour of a regulatory authority ([63]).

Get Qualified

25    In Get Qualified, Beach J initially made ex parte freezing orders under s 23 of the FCA, r 7.01 and Div 7.4 of Pt 7 of Ch 2 of the Rules and under s 137F of the CCA (at [9] of his Honour’s reasons). The respondents to the orders subsequently opposed their continuation.

26    At [35(a)], his Honour observed that:

[W]hatever may be the construction and operation of s 137F, the freezing orders are separately justifiable as an exercise of power under r 7.01 and Div 7.4 of Pt 7, Ch 2 of the [Rules] and s 23 of the [FCA].

27    However, at [38], Beach J concluded that the Court could not make an order under s 137F(1) in respect of protecting the position for the payment of a pecuniary penalty which, his Honour considered, was an extraneous subject matter to s 137F(2)(d) (being the relevant “kind of proceeding”). At [39]-[42], his Honour said:

[39]    But although I do not need to presently decide the question, let it be assumed that the ACCC had taken proceedings seeking all the remedies in s 137F(2). The various subparagraphs of s 137F(2) do not, it seems to me, encompass proceedings for a pecuniary penalty under s 224 of the Australian Consumer Law for contraventions of a provision in Ch 2; only the remedies under ss 232, 237(1) and 239(1) are mentioned concerning contraventions of a provision in Ch 2 (see ss 137F(2)(b) and (d)). Moreover, s 137F(2)(a) is not relevant; it is dealing with offences. Moreover, they are offences under Ch 4.

[40]    The ACCC has contended that a pecuniary penalty would fit within the phrase in s 137F(1)(b) as a “fine” (I do not think so), alternatively “or otherwise”. Perhaps it might fit within the latter phrase if decontextualised, but one must read s 137F(1)(b) in the context of s 137F(1)(a). Any order made under s 137F(1)(b) must be ancillary to and protective of the principal relief that might be granted in proceedings of the type identified in s 137F(1) and its enforcement. But that takes you back to s 137F(2) which is not addressing proceedings for a pecuniary penalty under s 224 with respect to contraventions of a provision in Ch 2.

[41]    I am satisfied that s 137F cannot be used to freeze and preserve property to meet or enforce a pecuniary penalty order payable under s 224 in relation to a contravention of a provision in Ch 2.

[42]    But that conclusion leaves open the possibility that r 7.32 could be used for that purpose. The text of r 7.32(1) does not exclude that possibility. Moreover, as I say, there is nothing in s 137F that indicates any express or implied override of, for example, r 7.32 so that it cannot be used for that purpose. Indeed s 137F(5)(b) indicates the opposite.

(Original emphasis.)

28    At [72]-[74], his Honour added:

[72]    Further, it is appropriate that I say something further on whether the freezing orders are in place to deal, in part, with the preservation of assets to meet any pecuniary penalty order or enforcement thereof as distinct from the other remedies foreshadowed by the ACCC. As I have said, such a justification cannot be used for any freezing order under s 137F. Nevertheless, strictly, such a justification is open under the Federal Court Rules and s 23 of the Federal Court of Australia Act. The question is whether an exercise of discretion could be so justified. I would make the following points:

(a)    First, the Clinica decisions seem to proceed on the basis or assume that that would be an appropriate exercise of discretion.

(b)    Second, the concept is not novel. Indeed, although s 137F does not apply, it permits a freezing order to facilitate payment of a fine for an offence. By parity of reasoning, in concept a freezing order to facilitate payment of a pecuniary penalty for a contravention is of a similar genus (albeit not expressly encompassed under s 137F, which is a separate point).

(c)    Third, my attention has been drawn to Spender J’s decision in [Chaste], but I do not propose to follow it. It does not seem to me to be fully consistent with the doctrinal basis for freezing orders (and its breadth), as expounded in the passages from PT Bayan Resources [TBK v BCBC Singapore Pty Ltd [2015] HCA 36; (2015) 258 CLR 1] that I have referred to earlier.

[73]    The prospective respondents have raised the issue that the ACCC has no right or interest in the enforcement of a pecuniary penalty. Only the Commonwealth of Australia has such an interest. Accordingly it is said that the ACCC has no business in seeking a freezing order for that purpose. That lens is too narrow as the cited passages from PT Bayan Resources explain.

[74]    I am inclined to the view that it is an appropriate exercise of discretion to make a freezing order in relation to the preservation of assets to meet a potential pecuniary penalty, but in one sense I do not need to finally decide this question because of the form of order that I have made. The order is a general prohibition with carve outs reasonably justified. It is not an order to positively preserve a quantified amount. I am not in a position to make any such quantification. Given the alleged pattern of GQA’s behaviour as it affects its customers and third parties, there may be orders for substantial reimbursement or repayment to such consumers, which presently is not capable of quantification but could well equal or exceed GQA’s tangible assets (contrary to GQA’s submissions). Thus the general form of order with the carve out is justifiable whether or not a freezing order could be used to preserve assets for a later pecuniary penalty or its enforcement.

29    The Clinica decisions referred to by Beach J are Australian Competition and Consumer Commission v Clinica [2015] FCA 1006 and Australian Competition and Consumer Commission v Clinica (No 3) [2016] FCA 284. In that matter, the Court made and continued a freezing order in the context of the ACCC’s claims for declarations, penalties and injunctions in respect of alleged false, misleading or deceptive conduct and representations and unconscionable conduct in breach of the ACL. The judgments do not refer to Chaste and therefore it is not clear whether the judges who made and continued the freezing order were informed of that authority.

30    In PT Bayan Resources TBK v BCBC Singapore Pty Ltd [2015] HCA 36; (2015) 258 CLR 1, the High Court held that the Supreme Court of Western Australia had power to make a freezing order in relation to a prospective judgment of a foreign court which would be registrable by order of the Supreme Court under the Foreign Judgments Act 1991 (Cth). The plurality (French CJ, Kiefel, Bell, Gageler and Gordon JJ) explained the relevant scope of the Supreme Court’s inherent power at [43] to [46] as follows:

[43]    There is no need here to attempt any novel or exhaustive exposition. It is well established by decisions of this Court that the inherent power of the Supreme Court of a State includes the power to make such orders as that Court may determine to be appropriate “to prevent the abuse or frustration of its process in relation to matters coming within its jurisdiction” [Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612 at 623]. And it has been noted more than once in this Court that a freezing order is “the paradigm example of an order to prevent the frustration of a court’s process” [Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1 at 32 quoted in Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 at [41].

…

[46]    … Even where a court makes a freezing order in circumstances in which a substantive proceeding in that court has commenced or is imminent, the process which the order is designed to protect is “a prospective enforcement process”. That description is drawn from the explanation of the nature of a freezing order given by Lord Nicholls of Birkenhead in Mercedes Benz AG v Leiduck [[1996] AC 284 at 306]. That passage was cited with approval by five members of this Court in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia in a passage which (subject to presently immaterial qualifications) was itself adopted as a correct statement of principle by four members of this Court in Cardile v LED Builders Pty Ltd [(1999) 198 CLR 380 at 400 [41]). Lord Nicholls explained:

“Although normally granted in the proceedings in which the judgment is being sought, [a freezing order] is not granted in aid of the cause of action asserted in the proceedings, at any rate in any ordinary sense. It is not so much relief appurtenant to a money claim as relief appurtenant to a prospective money judgment. It is relief granted to facilitate the process of execution or enforcement which will arise when, but only when, the judgment for payment of an amount of money has been obtained.”

31    Keane and Nettle JJ said, relevantly at [64]:

The doctrinal basis of the inherent power of superior courts in Australia to grant a freezing order is not confined to the protection of a pending action or an immediately justiciable cause of action. A superior court has an inherent power to grant a freezing order proleptically to ensure the efficacy of its exercise of judicial power in accordance with the exigencies of its exercise. When it is demonstrated to a superior court that there is a likelihood that its processes will be abused or frustrated, it is within the court’s power to make orders considered to be appropriate to prevent that from occurring.

32    At [65], Keane and Nettle JJ noted that the content of the power of the Federal Court under s 23 was not different, for the purposes of the case before them, from the inherent power of a superior court to protect its processes.

Other cases

33    In Australian Competition and Consumer Commission v Unique International College Pty Ltd (No 4) [2016] FCA 628, the Court made a freezing order, describing the relief sought as follows (at [5]):

The Originating Application claims relief alleging (inter alia) that Unique engaged in unconscionable conduct and false and misleading conduct. The Originating Application seeks relief, including declarative and injunctive relief; the imposition of pecuniary penalties; and orders for non-party consumer redress. Although difficult to quantify at this stage, the non-party consumer redress may amount to the repayment from Unique to the Commonwealth of a sum in excess of $100,000,000.

(Original emphasis.)

34    In Deputy Commissioner of Taxation v Karas [2011] VSC 673, the Court made a freezing order in the context of taxation and penalty recovery proceedings.

35    The ACCC also referred to Commissioner of State Taxation v Mechold (1995) 95 ATC 4053, in which a freezing order was made where judgment was obtained in favour of the Tax Commissioner in respect of stamp duty and penalties assessed, together with interest and costs to be assessed. In that judgment, the Court noted at 4056 that a Mareva injunction may be granted after judgment “and even in support of a costs order prior to taxation of costs”, citing Commissioner for Taxation (Cth) v Goldspink (1985) 82 FLR 21; Devlin v Collins (1984) 37 SASR 98 at 116; Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac (UK) Ltd [1984] 1 WLR 1097; Commissioner of Taxation v Winter (1980) 92 FLR 327 and Jet West Ltd v Haddican [1992] 2 All ER 545.

36    In Australian Communications and Media Authority v Mobilegate Ltd A Company Incorporated in Hong Kong (No 3) [2009] FCA 1154, the Court made a freezing order to prevent the frustration of a costs order in favour of the authority.

37    Again, none of these judgments refer to Chaste and therefore it is not clear whether the judges who made the freezing orders were informed of that authority.

Consideration and conclusion

38    I was satisfied, following the reasoning articulated by Beach J in Get Qualified, that s 23 of the FCA provided a source of power for the freezing order. In particular, having regard to the likely value of Mr Otton’s interest in the Bondi Beach property, I noted that the freezing order would operate not only in relation to the preservation of assets to meet costs order against Mr Otton and We Buy Houses, but also to meet the pecuniary penalty ordered against Mr Otton.

39    In declining to follow Chaste, I noted that Spender J’s reasons do not explain why the language of a “judgment … wholly or partly unsatisfied” is inapt to cover a judgment ordering payment of a pecuniary penalty or an order for costs in favour of a regulator. In any event, r 7.36 states that nothing in Div 7.4 diminishes the inherent, implied or statutory jurisdiction of the Court to make a freezing order.

40    In relation to 137F of the CCA, again following Beach J’s reasoning, I was not satisfied that s 137F was a relevant source of power.

41    As noted above, I was satisfied that there was a reasonable apprehension that assets will be dissipated so as to frustrate the Court’s process. In this regard, I note that the Court may make a freezing order even though there is no evidence establishing any positive intention to frustrate a judgment: Deputy Commissioner of Taxation v Hua Wang Bank Berhad [2010] FCA 1014; (2010) 273 ALR 194 at [10]; Get Qualified at [61].

42    Accordingly, in the exercise of the Court’s discretion, I made the freezing order until 13 December 2018 at 4.00 pm. I did not require the ACCC to give the usual undertaking as to damages having regard to the public function that it has exercised in the proceeding, and noting the limited duration of the freezing order.

Associate:

Dated:    21 February 2019

1. See Practice Note paragraph 14.