Australian Competition and Consumer Commission v We Buy Houses Pty Limited (Freezing Orders)
[2020] FCA 154
•11 February 2020
FEDERAL COURT OF AUSTRALIA
Australian Competition and Consumer Commission v We Buy Houses Pty Limited (Freezing Orders) [2020] FCA 154
File number: NSD 170 of 2015 Judge: PERRAM J Date of judgment: 11 February 2020 Date of publication of reasons: 18 February 2020 Catchwords: PRACTICE AND PROCEDURE – ex parte application for freezing orders – where First and Second Respondents contravened Competition and Consumer Act 2010 (Cth) Sch 2, Australian Consumer Law – where leave sought to remove Third Respondent for having ceased to be necessary party – where leave sought to join two respondents in their capacity as trustees of superannuation fund of Second Respondent – where freezing orders opposed by one respondent on basis that they would impede capacity of superannuation fund to invest – where Applicant foreshadowed application for garnishee orders
PRACTICE AND PROCEDURE – application for substituted service – where one trustee respondent appeared in person and confirmed email contact with other trustee respondent, who did not appear
Legislation: Federal Court of Australia Act 1976 (Cth) s 23
Federal Court Rules 2011 (Cth) rr 1.39, 7.32, 7.35, 9.08, 10.24
Date of hearing: 11 February 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 10 Counsel for the Applicant: Mr S T White SC with Mr T Glover Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the First and Second Respondents: The First and Second Respondents did not appear Counsel for Mrs Otton and Mr Keliher: Mrs Otton and Mr Keliher did not appear Counsel for Mr Sarai: Mr Sarai appeared in person ORDERS
NSD 170 of 2015 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: WE BUY HOUSES PTY LIMITED (ACN 094 068 023)
First Respondent
RICHARD KEITH OTTON
Second Respondent
JANE KELLEHER OTTON, IN HER CAPACITY AS TRUSTEE OF THE OTTON SUPERANNUATION FUND
Third Respondent
JUDGE:
PERRAM J
DATE OF ORDER:
11 FEBRUARY 2020 AS VARIED ON 14 FEBRUARY 2020
THE COURT ORDERS THAT:
1.The freezing orders made against the second respondent on 5 February 2020 be extended until 4pm on 20 February 2020.
2.Pursuant to rule 9.08 of the Federal Court Rules 2011, the third respondent, Mrs Jane Otton, cease to be a party to the proceedings.
3.Leave be granted to join as a third respondent, Mr Jovan Sarai, in his capacity as trustee of the Otton Superannuation Fund.
4.Leave be granted to join as a fourth respondent, Mr Stephen Robert Keliher, in his capacity as trustee of the Otton Superannuation Fund.
5.Pursuant to section 23 of the Federal Court of Australia Act 1976, freezing orders addressed to the third and fourth respondent, in their capacities as trustees of the Otton Superannuation Fund, be made in accordance with rules 7.32 and 7.35(5) of the Federal Court Rules 2011 and in the terms of the orders annexed and marked “A”.
6.Pursuant to rule 1.39 of the Federal Court Rules 2011, the time for service of the interlocutory application, the affidavits in support, submissions, and any other documents relied on and the orders be abridged to 7pm on 11 February 2020.
7.General access be granted to the documents produced under the subpoena filed on 6 February 2020 to Malcolm Kimball Howell.
8.The Trustee make payment of the balance of the surplus of the bankrupt estate of the second respondent, less his reasonable fees and disbursements, to the Applicant.
9.The interlocutory application dated 5 February 2020 be listed for further hearing at 10:15am on 20 February 2020 before Griffiths J.
10.Pursuant to rule 10.24 of the Federal Court Rules 2011, service on the fourth respondent be effected by sending a copy of this interlocutory application, the affidavits in support, submissions, any documents relied on and the orders made by electronic mail message to [email protected].
11.Pursuant to rule 10.24 of the Federal Court Rules 2011, service on the third respondent be effected by sending a copy of this interlocutory application, the affidavits in support, submissions, any documents relied on and the orders made by electronic mail message to [email protected].
12.Any garnishee application and affidavit in support be filed before 5pm on 12 February 2020, and be made returnable at 10:15am on 20 February 2020 before Griffiths J.
13.Any submissions in support of the application for garnishee order be filed by 5pm on 18 February 2020.
14.By 5pm on 13 February 2020, Mr Jovan Sarai produce to the Applicant the following documents in relation to the Otton Superannuation Fund:
(a)any current listing of assets;
(b)current financial accounts;
(c)current membership statements and entitlements; and
(d)the trust deed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Annexure A
Form 35
Rule 17.01(1)
No. NSD 170 of 2015
Federal Court of Australia
District Registry: New South Wales
Division: General Division
Australian Competition and Consumer Commission and another
Applicants
We Buy Houses Pty Ltd ACN 094 068 023 and others
Respondents
PENAL NOTICE
TO: JOVAN SARAI AND STEPHEN ROBERT KELIHER AS TRUSTEES FOR THE OTTON SUPERANNUATION FUND
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: JOVAN SARAI AND STEPHEN ROBERT KELIHER AS TRUSTEES FOR THE OTTON SUPERANNUATION FUND
This is a ‘freezing order’ made against you and third parties on 11 February 2020 by Justice Perram at a hearing without notice to you 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 11 February 2020.
2.Subject to the next paragraph, this order has effect up to and including 4pm on 20 February 2020 (‘the Return Date’). On the Return Date at 10:15 am there will be a further hearing in respect of this order before Justice Griffiths.
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 Mr Richard Keith Otton’s assets in Australia (‘Australian assets’) up to the unencumbered value of AUD$6,000,000 (‘the Relevant Amount’).
(b)If the unencumbered value of Mr Otton’s 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 Mr Otton’s Australian assets still exceeds the Relevant Amount.
(c)If the unencumbered value of Mr Otton’s Australian assets is less than the Relevant Amount:
(i)You must not dispose of, deal with or diminish the value of any of Mr Otton’s Australian assets and ex-Australian assets up to the unencumbered value of Mr Otton’s Australian and ex-Australian assets of the Relevant Amount; and
(ii)You may dispose of, deal with or diminish the value of any of Mr Otton’s ex-Australian assets, so long as the unencumbered value of Mr Otton’s Australian assets and ex-Australian assets still exceeds the Relevant Amount.
7.For the purposes of this order:
(1)Mr Otton’s assets include:
(a)any of Mr Otton’s assets 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
(b)Mr Otton’s entitlements under the Otton Superannuation Fund.
EXCEPTIONS TO THIS ORDER
8.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 Mr Otton’s ordinary living expenses;
(c)dealing with or disposing any of Mr Otton’s assets in the ordinary and proper course of the Otton Superannuation Fund or Mr Otton’s business, including paying business expenses bona fide and properly incurred;
(d)in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of Mr Otton’s 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 applicant, if possible, at least two working days written notice of the particulars of the obligation;
(e)paying fair and reasonable legal fees incurred by Mr Otton;
(f)paying fair and reasonable legal fees incurred by the Otton Superannuation fund; and
(g)paying fair and reasonable management fees payable to trustees, pursuant to the trust deed, which are properly incurred on a bona fide basis and in accordance with a resolution of the members approving such management fees which was passed prior to 5 February 2020.
9.Mr Sarai and/or Mr Keliher 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.
10.(a) This order will cease to have effect if you:
(i)pay the sum of $6,000,000 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
11.The costs of this application are reserved to the Court hearing the application on the Return Date.
PERSONS OTHER THAN THE APPLICANT AND RESPONDENT
12.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.
13.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.
14.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.
15.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 of deponent
Date affidavit made
(1) Richard John Flitcroft
11 February 2020
5 February 2020
20 December 2018
(2) James Chapman Wood
6 December 2018
(3) Michael Taylor
6 December 2018
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
REASONS FOR JUDGMENT
PERRAM J:
This is an application for the continuation of freezing orders made against the Second and Third Respondents on 5 February 2020 by Robertson J. Today, when the matter was called on, it was explained that that application was pursued on the basis that those two respondents had been trustees of the Otton Superannuation Fund and that the Third Respondent, who was the wife of the Second Respondent, was no longer a trustee of that fund, having resigned from that office under a deed executed in 2019.
In that circumstance, it was suggested that the Third Respondent should be removed as a party to the proceedings under r 9.08 of the Federal Court Rules 2011 (Cth) (‘FCR’) for having ceased to be a proper or necessary party. I accept that proposition. In place of Mrs Otton, it would appear that Mr Jovan Sarai and Mr Stephen Robert Keliher have become trustees of the Otton Superannuation Fund (‘the Fund’). The Applicant, the Australian Competition and Consumer Commission (‘the Commission’), applied to this Court for their joinder respectively as the Third and Fourth Respondents.
The necessity for the trustees to be respondents to the present application arises from the Commission’s desire to enforce the judgment it obtained in these proceedings against the First Respondent, We Buy Houses Pty Limited, by means of garnishee notices addressed to the trustees of the Fund in respect of any interest that Mr Otton has by way of present entitlement in that fund. Any such application under the FCR is governed by the relevant State Supreme Court Rules or Civil Procedure Rules dealing with garnishee notices.
On that basis, the Commission submits that the freezing orders are to be seen as being pertinent to that enforcement procedure. Presently, there is no application for garnishee orders before the Court. But it was indicated to me during the course of the hearing that such an application was effectively ready to be filed tomorrow, being 12 February 2020. It seems to me that it would be convenient that the application for garnishee orders and the freezing order application in its final contested form should proceed at the same time, since they raise much the same issues.
On this first return of the application to continue the freezing orders made by Robertson J on 5 February 2020, the Second Respondent, Mr Otton, did not appear. Ordinarily, that would have made it a simple matter just to continue the freezing orders made by Robertson J until next week when the matter will be heard. However, in this case, although Mr Keliher did not appear, Mr Sarai did appear and opposed the making of the freezing orders. This was on the basis that the Fund was engaged in and was proposing to engage in what would be successful investment activities in the future, and that the continued existence of the freezing order was apt to interfere with that legitimate profit making enterprise.
I accept that a long-term restraint of the Fund would deleteriously impact upon its ability to conduct investment activities. However, it seems to me that the delay which is likely to transpire if the freezing order is extended is likely to be a matter of weeks and certainly not more than a matter of months, since all that needs to be resolved is the application for garnishee orders.
It was not submitted by Mr Sarai that the Commission did not have a prima facie case that it was entitled to the garnishee orders which it has foreshadowed today. So it seems to me that there is a serious question to be tried about whether the garnishee orders should be granted. The inconvenience to the Fund seems to me to be relatively minimal at this time. In that circumstance, the balance of convenience would favour the making of the freezing orders.
There are two other minor matters which need resolution. The first was an order that service upon Mr Keliher be effected by service upon Mr Sarai. I am content to make that order under FCR 10.24. Mr Sarai indicated to me during the course of the hearing that he was in touch with Mr Keliher and had his email address. I am satisfied in that circumstance that service upon Mr Sarai will bring the application to his attention.
The second administrative matter is that there is a large volume of documentation which needs to be served. Mr Sarai was present in Court. I am prepared to accede to the Commission’s application under FCR 10.24 that service upon Mr Sarai be effected also by service via the email address which Mr White SC for the Commission mentioned to me during the course of argument.
The third procedural matter is that I will direct the Commission to file any application for garnishee orders together with any affidavits in support of that application by the close of business on 12 February 2020, with any submissions to be filed by the close of business on 18 February 2020. Any such application will be listed before Griffiths J, as the general duty judge for the week beginning 17 February 2020, at 10.15 am on 20 February 2020.
I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate:
Dated: 18 February 2020
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