FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Campbell [2019] FCA 886

ORDERS

THE COURT ORDERS THAT:

INTRODUCTION

1.    

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

(b)    The time for service of the application and supporting affidavit is abridged and service is to be effected by 6 pm on Monday 10 June 2019.

2.    Subject to the next paragraph, this order has effect up to and including 12 June 2019 (the Return Date). On the Return Date at 9.00 am there will be a further hearing in respect of this order before Justice O’Bryan.

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)    ‘you’ includes all of you and includes you if you are a corporation;

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

(c)    ‘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.    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’).

7.    For the purposes of this order, your assets include:

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

(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).

PROVISION OF INFORMATION

8.    Subject to paragraph 9, you must:

(a)    at or before the further hearing on the Return Date (or within such further time as the Court may allow) to the best of your ability inform the prospective applicant in writing of all your liquid assets world-wide comprising cash, securities and deposits of any kind held with a financial institution, giving their value, location and details and the extent of your interest in the assets;

(b)    within 14 working days after being served with this order, swear and serve on the prospective applicant an affidavit setting out the above information.

9.    

(a)    This paragraph 9 applies if you are not a corporation and you wish to object to complying with paragraph 8 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 9 also applies if you are a corporation and all of the persons who are able to comply with paragraph 8 on your behalf and with whom you have been able to communicate, wish to object to your complying with paragraph 8 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:

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

(ii)    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

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

EXCEPTIONS TO THIS ORDER

10.    This order does not prohibit you from:

(a)    in the case of Ian Michael Campbell, paying up to $2,000 a week on living expenses;

(b)    paying your reasonable legal expenses;

(c)    other than for Ian Campbell, dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and

(d)    other than for Ian Campbell, in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the prospective applicant, if possible, at least two working days written notice of the particulars of the obligation.

11.    You and the prospective applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the prospective 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 prospective applicant and you, and the Court may order that the exceptions are varied accordingly.

COSTS

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

Set off by banks

13.    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.

Bank withdrawals by the respondent

14.    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.

Persons outside Australia

15.    

(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.

Assets located outside Australia

16.    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 prospective applicant.

SCHEDULE A

UNDERTAKINGS GIVEN TO THE COURT BY THE PROSPECTIVE APPLICANT

1.    As soon as practicable, the prospective applicant will file and serve upon the Prospective Respondents copies of:

(a)    this order;

(b)    the urgent application before start of proceeding for this order for hearing on the return date;

(c)    the following material relied on by the prospective applicant at the hearing when the order was made:

(i)    affidavits including annexures;

(ii)    a copy of Exhibit A1; and

(iii)    outline of submissions relied on by the prospective applicant;

(d)    a transcript, if available, of the hearing in which this order was made.

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

3.    If this order ceases to have effect the prospective 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 prospective 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 or the substantive proceeding that is contemplated to be issued by the prospective applicant.

5.    The prospective 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.

6.    The prospective applicant must start a proceeding in relation to the subject matter of the urgent application within 14 days of the date of this order.

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

REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

1    On 6 June 2019, the Australian Competition and Consumer Commission (ACCC) filed an urgent application under Rule 7.01(1)(a) of the Federal Court Rules 2011 (Cth) seeking an ex parte injunction in the nature of freezing orders against the following person and entities:

(a)    Ian Michael Campbell (Mr Campbell), Swim Loops Holdings Pty Ltd (Swim Loops Holdings) and Jump Loops Pty Ltd (Jump Loops), being a person and entities against whom the ACCC intends to start a proceeding (prospective respondents); and

(b)    Jump Swim Schools Construction Pty Ltd, Jump Swim Schools Services Pty Ltd, Jump Swim Schools Leasing Pty Ltd, Jump Swim Schools (Australia) Pty Ltd, ACN 633 329 316 Pty Ltd, Blue Paddle Pty Ltd, Reef Services Pty Ltd and JS Reef Pty Ltd, being entities associated with the prospective respondents (associated entities).

2    The application was heard on 6 and 7 June 2019. The ACCC read an affidavit of Jay Ezra Lewis affirmed the same day, and additional oral testimony was given by Mr Lewis.

3    The ACCC has not given notice of this application to the prospective respondents as there is a risk of further dissipation of assets.

4    The ACCC informed the Court that it intends to bring proceedings against the prospective respondents for contraventions of ss 18, 29(1)(g), 36(3) and 36(4) of the Australian Consumer Law (ACL). The relief proposed to be sought by the ACCC against the prospective respondents includes orders directing them to refund moneys and provide other compensation to franchisees under s 239 of the ACL, to pay pecuniary penalties under s 224 of the ACL and to pay costs. The nature of the proposed proceedings is discussed in more detail below. In accordance with Rule 7.01(3), the ACCC has given an undertaking to the Court to start a proceeding in relation to the subject matter of the application within 14 days of today’s date, being the determination of the application.

5    The Court has power to make a freezing order generally under s 23 of the Federal Court of Australia Act 1976 (Cth) and Division 7.4 of the Federal Court Rules 2011 (Cth), as well as specific jurisdiction to make a freezing order in cases such as the present proposed to brought by the ACCC under s 137F of the Competition and Consumer Act 2010 (Cth). As stated in r 7.32 of the Federal Court Rules, the purpose of a freezing order is to prevent the frustration or inhibition of the Court’s process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.

6    Under Rule 7.33 of the Federal Court Rules, the Court may make an order ancillary to a freezing order, including an order made for the purpose of eliciting information relating to assets relevant to the freezing order. The ACCC seeks such orders by its urgent application.

7    Rule 7.34 of the Federal Court Rules provides that the Court may make a freezing order or an ancillary order against a person even if the person is not a party to the a proceeding in which substantive relief is sought. The ACCC seeks both freezing orders and ancillary orders against the associated entities even though it does not intend to bring proceedings against those entities.

8    The principles governing the grant of freezing orders are well-established:

(a)    the applicant must show that there is a reasonably arguable case;

(b)    the applicant must show that there is a risk of dissipation if the injunction is not granted; and

(c)    the applicant must show that the balance of convenience favours granting the injunction.

9    Those principles were considered and applied in analogous circumstances by Beach J in ACCC v Get Qualified Australia Pty Ltd (2016) 244 FCR 538.

10    For the reasons given below, the ACCC has satisfied me on each of these elements and I will make the orders sought by the ACCC.

Reasonably arguable case

11    Before a freezing order is made, the ACCC must show that there is a reasonably arguable case on legal and factual matters or a sufficiently realistic prospect of success on the proceedings: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [68]; Pearce v Waterhouse [1986] VR 603 at 605; Donnelly v Porteous [2001] FCA 345 at [9].

12    On a date that is not revealed by the evidence, the ACCC commenced an investigation into the conduct of the prospective respondents. The investigation has included the issue of a notice under s 155 of the Competition and Consumer Act 2010 (Cth) to Jump Loops, and the production of information and documents in response to the notice.

13    The evidence from Mr Lewis indicates that:

(a)    Since March 2016, Jump Loops has conducted business as the franchisor of JUMP! Swim Schools, and has promoted those franchises for sale to franchisees.

(b)    Each franchise was sold on a ‘turn-key’ basis, to be handed over to the franchisee ready to operate. The brochures, which were provided by Jump Loops and Swim Loops Holdings to potential franchisees, stated prominently that there would be a ‘12 month turnaround from sign-on to open’ of the franchise (Representation).

(c)    The Representation was not qualified, including by the franchise deeds entered into with franchisees, or the disclosure documents provided to the franchisees.

(d)    The Representation was false, misleading or deceptive, and/or likely to mislead or deceive, because a large number of franchisees (some 90 franchisees) were not provided with an operational franchise within 12 months of signing-on to a franchise deed. In some cases no operational franchise was provided at all, and in other cases operational franchises were provided within a much longer timeframe than 12 months.

(e)    The Representation was with respect to future matters and the fact that the Representation was not fulfilled in respect of a large number of franchisees indicates that Jump Loops did not have reasonable grounds for making the Representation.

(f)    Jump Loops accepted payment of fees from franchisees at a time when there were reasonable grounds for believing that Jump Loops would not be able to provide the operational franchises to the relevant franchisees within the specified period of 12 months of signing the relevant franchise deed or within a reasonable time, and Jump Loops was aware or ought reasonably to have been aware of the absence of reasonable grounds.

(g)    At all relevant times, Swim Loops Holdings has been the parent company of Jump Loops. At all relevant times, Mr Campbell was the managing director of both companies. Mr Campbell was responsible for and had knowledge of all aspects of the operation and management of Jump Loops and Swim Loops Holdings businesses, including marketing and selling franchises. The knowledge of Jump Loops was therefore shared by Mr Campbell and Swim Loops Holdings. Mr Campbell and Swim Loops Holdings participated in preparing and distributing the brochure, and accepting payment from franchisees.

14    I am satisfied that the evidence shows that there is at least a serious question to be tried whether the conduct of Jump Loops and Swim Loops Holdings amounts to contraventions of ss 18 and 29(1)(g) of the ACL, whether the conduct of Jump Loops also amounts to contraventions of ss 36(3) and 36(4) of the ACL, whether Swim Loops Holdings was involved (within the meaning of s 2 of the ACL) in Jump Loops’ contraventions, and whether Mr Campbell was involved in both companies’ contraventions.

15    The relief proposed to be sought by the ACCC against Jump Loops, Swim Loops Holdings and Mr Campbell includes orders directing them to refund moneys and provide other compensation to franchisees under s 239 of the ACL, to pay pecuniary penalties under s 224 of the ACL and to pay costs. The size of the franchisee refunds and compensation is expected to be at least $4 million (based on the payment of at least $60,000 by each of 68 of the approximately 90 franchisees that were not operating after 12 months). As regards penalties, under s 224 of the ACL, the maximum civil pecuniary penalty for each act or omission in contravention of ss 29 or 36 of the ACL was, until September 2018, $1.1 million for a body corporate and $220,000 for a person that is not a body corporate. Since then the maximum penalty amounts have substantially increased. In this case, numerous acts or omissions have been alleged with respect to each contravention, spanning periods both before and after September 2018. Freezing orders can also be granted to preserve the ability to enforce costs orders.

Reasonable apprehension that assets will be dissipated

16    The ACCC must also show that unless the order is granted, there is a reasonable apprehension that assets will be dissipated so as to frustrate the action or execution: Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at [26], [42]; Hyder Consulting (Victoria) Pty Ltd v Transfield Pty Ltd [2002] VSC 315 at [15]-[16]. The evidence adduced by the ACCC establishes the following.

17    The franchise disclosure document published by the Jump! Swim Schools franchise business describes the corporate entities that form part of the franchise group. The document states that:

(a)    Jump Loops is the franchisor;

(b)    Swim Loops Holdings is the ultimate holding company and intellectual property owner;

(c)    Jump Swim Schools (Australia) Pty Ltd is the corporate store operator;

(d)    Swim Loops Pty Ltd was the former franchisor and leasing entity (franchising commenced in 2014);

(e)    Jump Swim Schools Leasing Pty Ltd is the leasing entity;

(f)    Jump Swim Schools Construction Pty Ltd enters into contracts associated with the construction of the fitout of the franchise business;

(g)    Jump Swim Schools Services Pty Ltd is the employment entity for the head office staff and contractors.

18    The document also discloses that Mr Campbell is the Managing Director of the franchisor, Jump Loops, and a director of Swim Loops Holdings, Jump Swim Schools (Australia) Pty Ltd and Swim Loops Pty Ltd. The document also identifies Stefan Szpitalak as a director of Swim Loops Holdings.

19    ASIC searches of the above corporate entities show further that:

(a)    Mr Campbell and Mr Szpitalak are the shareholders of Swim Loops Holdings (and Mr Campbell is the sole director);

(b)    Mr Campbell and Mr Szpitalak are the shareholders of Swim Loops Pty Ltd (and Mr Campbell is the sole director);

(c)    Swim Loops Holdings is the sole shareholder, and Mr Campbell is the sole director, of each of Jump Loops, Jump Swim Schools (Australia) Pty Ltd, Jump Swim Schools Leasing Pty Ltd, Jump Swim Schools Construction Pty Ltd and Jump Swim Schools Services Pty Ltd.

20    I will refer to Swim Loops Holdings and its subsidiaries as the Jump Swim group. Profit and loss statements in respect of the Jump Swim group show that the group has received many millions of dollars in fees from franchisees in FY17 and FY18. However, investigations conducted by the ACCC of real property registers and bank accounts held by group companies suggest that the assets currently held by group companies are relatively modest.

21    Companies in the Jump Swim group are currently facing numerous complaints and legal proceedings, including the following:

(a)    On 30 January 2019, proceedings were commenced against Jump Loops and Ian Michael Campbell in the Federal Circuit Court (proceeding number MLG231/2019).

(b)    Debt recovery proceedings have been commenced against Jump Loops in the County Court of Victoria (proceeding Cl-19-00450).

(c)    Debt recovery proceedings have been commenced against Jump Loops in the District Court of NSW (proceeding 2019/00046072).

(d)    Debt recovery proceedings have been commenced against Jump Swim Schools Leasing Pty Ltd in the Local Court of NSW (proceeding 2018/003344 72).

(e)    On 10 April 2019, the Deputy Commissioner of Taxation commenced winding up proceedings against Jump Swim Schools Services Pty Ltd in the Federal Court of Australia (proceeding QUD238/2019). On 21 May 2019, Workcover Queensland joined the proceedings as a supporting creditor.

(f)    On 18 April 2019, winding up proceedings were commenced against Swim Loops, the previous franchisor, in the Federal Court (proceeding WAD222/2019). The first return is listed for 11 June 2019. On or about 21 May 2019, Swim Loops was placed into voluntary administration.

(g)    On 1 May 2019, winding up proceedings were commenced against Jump Loops in the Federal Court (proceeding VID437/2019). A hearing is listed for 7 June 2019. Between 6 and 30 May 2019, 17 supporting creditors have joined the proceedings.

(h)    On 2 May 2019, bankruptcy proceedings were commenced in the Federal Circuit against Mr Campbell (proceeding BRF415/2019). A creditor's petition is listed for 12 June 2019.

(i)    On 25 May 2019, Surya Swim School Pty Ltd commenced winding up proceedings against Jump Loops in the Supreme Court of Victoria (proceeding SECI 2019 02265). The first return is listed for 19 June 2019.

22    ASIC searches show that Mr Campbell and Mr Szpitalak have recently incorporated a number of new entities:

(a)    JS Reef Pty Ltd was incorporated in April 2019. Its shareholders are Mr Campbell and Mr Szpitalak and Mr Campbell is the sole director.

(b)    Reef Service Pty Ltd was incorporated in April 2019. Its shareholders are Mr Campbell and Mr Szpitalak and Mr Campbell is the sole director.

(c)    Blue Paddle Pty Ltd was incorporated in May 2019. Its sole shareholder is ACN 633 329 316 Pty Ltd and Mr Campbell is the sole director. ACN 633 329 316 Pty Ltd was also incorporated in May 2019. Its shareholders are Mr Szpitalak and ACN 633 286 718 Pty Ltd and Mr Campbell is the sole director. ACN 633 286 718 Pty Ltd was also incorporated in May 2019. Its shareholder and director is Mr Campbell’s wife, Jessica Postgate.

23    On 31 May 2019, the ACCC received information from a Jump Swim franchisee to the effect that he was advised by Ms Freya James, an employee of Jump Loops, that Jump Loops intended to transfer all operating franchises, including his franchise, to Blue Paddle Pty Ltd. The evidence therefore establishes the risk that the Jump Swim group may attempt to transfer the franchise business and assets to Blue Paddle Pty Ltd, possibly in an attempt to avoid the consequences of the complaints made, and legal proceedings brought, against entities in the Jump Swim group.

24    The evidence also indicates that Mr Campbell has established, or is in the process of establishing, a number of new companies and businesses in America and New Zealand. The evidence includes the following:

(a)    Mr Campbell has set up a new business in the name of “Raised on the Reef Swim Academy” (Raised on the Reef) in Piano, Texas, United States, which claims to sell franchises in the United States. The Raised on the Reef website was registered on 12 April 2019. The ACCC has been unable so far to obtain registration details of this website because it was registered using an anonymous web hosting service. However, the registered address appearing on the website, 2500 Dallas Parkway Suite 300 Plano Tx 75093, is the same address as Jump Swim Schools Franchise Corp, as it appears in AUSTRAC. A Google search of this address shows that a firm of accountants and consultants, Montgomery Coscia Greilich LLP, occupies this address.

(b)    The ACCC has obtained information indicating that a franchise in the name of “Shreveport Louisiana Jump! Swim Schools” (Shreveport Jump Swim), and in the name “Raised on the Reef Shreveport” (Raised on the Reef Shreveport), are located in Louisiana, United States. The address of both businesses is 7141 Youree Drive 100, Shreveport, LA 71105.

(c)    The ACCC has obtained information indicating that Mr Campbell has set up a business in the name of Jump Swim Schools (New Zealand) Ltd in New Zealand which claims to sell franchises in New Zealand.

25    The evidence shows that Mr Campbell has travelled frequently between Australia and America. From 14 October 2018 to 15 May 2019, Mr Campbell has made 10 return trips to America. He has landed in either Los Angeles or Dallas and his trips have been between 5 and 14 days. Mr Campbell did not travel to America in 2018 prior to 14 October 2018.

26    The ACCC has also obtained evidence from AUSTRAC of financial transactions undertaken by entities within the Jump Swim group. Those transactions show substantial transfers between entities within the Jump Swim group on the one hand and Jump Swim Schools (New Zealand) Ltd, Jump Swim Schools Franchise Corp and other overseas companies and people on the other hand.

27    The foregoing evidence satisfies me that there is a reasonable apprehension that assets owned directly or indirectly by the prospective respondents will be dissipated so as to frustrate the relief that will be sought by the ACCC in the proposed proceeding. That apprehension arises from the facts that:

(a)    Mr Campbell and the Jump Swim group are facing multiple proceedings in Australia, including debt recovery, bankruptcy and winding up proceedings;

(b)    the apparent owners of the Jump Swim group, Mr Campbell and Mr Szpitalak, have recently created new corporate entities (ACN 633 329 316 Pty Ltd, Blue Paddle Pty Ltd, Reef Services Pty Ltd and JS Reef Pty Ltd) and there is evidence that the purpose of at least one of those entities (Blue Paddle Pty Ltd) is to acquire and take over the franchise business currently being operated by the Jump Swim group;

(c)    Mr Campbell has established similar business operations in America and New Zealand and there is evidence of material financial transactions between the Jump Swim group and the overseas business entities.

28    While the known assets of Mr Campbell and the Jump Swim group are limited, a freezing order will prevent any untoward dissipation of them: Basi v Namitha Nakul Pty Ltd [2019] FCA 743 at [28].

29    As noted earlier, the ACCC proposes to commence proceedings against Mr Campbell, Jump Swim and Swim Loops Holdings. It is appropriate that the freezing orders extend to each of them to preserve their assets to satisfy orders for relief in the proceeding. I am satisfied that there is a danger that a prospective judgment against them will be wholly or partly unsatisfied because of their assets being disposed of, dealt with or diminished in value: r 7.35(4) of the Federal Court Rules.

30    In my view, it is also appropriate that the freezing orders extend to the associated entities, as those entities may be obliged to disgorge assets or contribute toward satisfying the prospective judgment: r 7.35(5) of the Federal Court Rules; PT Bayan Resources TBK v BCBC Singapore Pte Ltd (2015) 258 CLR 1 at [47]. Those obligations may arise in a number of ways. First, it is established on the evidence that Jump Swim Schools Construction Pty Ltd, Jump Swim Schools Services Pty Ltd, Jump Swim Schools Leasing Pty Ltd and Jump Swim Schools (Australia) Pty Ltd are subsidiaries of Swim Loops Holdings. As such, the shares in those companies are assets belonging to Swim Loops Holdings and their assets may in turn be available to Swim Loops Holdings if there were to be a liquidation of Swim Loops Holdings. Second, transfers of assets from Jump Loops and Swim Loops Holdings to the associated entities could be clawed back by liquidators of Jump Loops and Swim Loops Holdings (for example, as unreasonable director-related transactions under s 588FDA of the Corporations Act 2001 (Cth), or uncommercial transactions under s 588FB of the Corporations Act 2001 (Cth), or under the principle of knowing receipt (the first limb of Barnes v Addy (1874) LR 9 Ch App 244), or as transactions designed to defraud creditors (under s 172 of the Property Law Act 1958 (Vic)): see for example Robmatjus Pty Ltd v Violet Home Loans Australia Pty Ltd [2007] VSC 165 at [57]-[66].

Balance of convenience

31    The ACCC must show that the balance of convenience favours the making of the order: Pearce v Waterhouse [1986] VR 603 at 607; Deputy Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194 at [13].

32    A freezing order is an extraordinary remedy and inevitably causes prejudice to the parties subject to the orders. However, the ACCC has made an urgent application ex parte, to avoid the risk of dissipation of assets. In those circumstances, the order will only continue until the return date, which I will set as 12 June 2019, at which time the prospective respondents and associated entities will have an opportunity to be heard. The ACCC will then bear the onus of satisfying the Court that the order should continue. In those circumstances, the prejudice to the prospective respondents and associated entities from the making of the order is temporally confined. The prejudice is also reduced by the terms of the orders which permit the prospective respondents and associated entities to pay their reasonable legal expenses, permits Mr Campbell a reasonable amount for living expenses and permits the companies to meet obligations incurred in the ordinary course of business.

33    Balanced against that prejudice is the risk, in the absence of a freezing order, that the assets may be dissipated, thereby irretrievably rendering any monetary relief obtained by the ACCC worthless.

34    In the circumstances, I am satisfied that the balance of convenience presently favours the making of the freezing orders until the return date.

Ancillary orders

35    The ACCC also sought an ancillary order requiring the prospective respondents and associated entities:

(a)    at or before the further hearing on the return date (or within such further time as the Court may allow), to the best of their ability inform the ACCC in writing of all their 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 their interest in the assets; and

(b)    within 14 working days after being served with this order, swear and serve on the ACCC an affidavit setting out the above information.

36    The proposed disclosure orders were subject to the usual exemptions in respect of the privilege against self-incrimination and the privilege against exposure to a penalty.

37    The ACCC submitted that the ancillary orders are sought in aid of the freezing orders because they will assist the ACCC in identifying all of the assets of the prospective respondents and associated entities, including the existence of assets overseas, and thereby assist in preventing the dissipation of assets.

38    I am not satisfied that, on this urgent application, it is necessary to make ancillary orders of the breadth sought by the ACCC. In the short time before the return date, it seems to me that the ancillary orders will have little utility. Nevertheless, I am persuaded that there is some utility in making a narrower ancillary order, requiring the prospective respondents and associated entities to identify their liquid assets world-wide comprising cash, securities and deposits of any kind held with a financial institution. Such liquid assets may be dissipated more quickly.

Undertaking as to damages

39    The ACCC submitted that it ought not be required to give the usual undertaking as to damages. The question whether the ACCC should be required to give an undertaking as to damages when seeking interim injunctive relief does not often arise. That is because the ACCC usually seeks such relief under the statutory powers in s 80 of the Competition and Consumer Act 2010 (Cth) and s 234 of the ACL. Each of those sections expressly state that the ACCC is not required to give such an undertaking (see s 80(6) and s 234(2)).

40    On the present application, the ACCC relies on the powers conferred on the Court under s 23 of the Federal Court of Australia Act 1976 (Cth) and Division 7.4 of the Federal Court Rules 2011 (Cth), as well as under s 137F of Competition and Consumer Act 2010 (Cth). Those provisions do not expressly address the provision of an undertaking as to damages by a public authority such as the ACCC. Accordingly, the question whether an undertaking should be required from the ACCC is a matter of discretion for the Court when exercising power to make the freezing orders.

41    The exercise of that discretion was considered by Beach J in similar circumstances in ACCC v Get Qualified Australia Pty Ltd (2016) 244 FCR 538. In that case, his Honour concluded that he would not require the ACCC to give an undertaking for reasons that included:

(a)    Proceedings of this kind are not simply private litigation between private parties for their own private purposes. The ACCC is a Commonwealth regulator performing and exercising statutory functions and powers in the public interest and for the benefit of the public.

(b)    Although there is no analogue provision in s 137F of the type set out in, for example, s 80(6) of the Competition and Consumer Act 2010 (Cth) and s 234(2) of the ACL, the rationale underpinning the latter provisions is also present when considering s 137F. At the very least, an analogous rationale justifies an exercise of discretion not to insist on an undertaking as to damages.

42    I respectfully agree with Beach J’s analysis of the issues and adopt the same approach of not requiring the ACCC to give the usual undertaking as to damages.

Associate:

Dated:    11 June 2019