Australian Securities and Investments Commission v Burnard - [2007] NSWSC 1217

No judgment structure available for this case.

Reported Decision:
64 ACSR 360
(2007) 25 ACLC 1,505

New South Wales

Supreme Court

CITATION: ASIC v Burnard [2007] NSWSC 1217

HEARING DATE(S): 04/10/07, 09/10/07, 10/10/07

JUDGMENT DATE :
31 October 2007

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Asset freezing orders to be made in respect of two defendants up to 11 February 2008; Asset disclosure orders to be made in respect of the same defendants; Liberty to apply to be reserved

CATCHWORDS: CORPORATIONS - jurisdiction in respect of property of "relevant person" where ASIC investigation in progress - application by ASIC for freezing orders in respect of property of two "relevant persons" and property of two other persons - where ASIC alleges that "relevant persons" have equitable interests in property owned by the other persons - whether the other persons may be subjected to orders under s.1323 - consideration of interests of "aggrieved persons" - where investigation in progress for 20 months - whether asset disclosure orders should be made in support of freezing orders

LEGISLATION CITED: Australian Securities and Investments Commission Act 2001 (Cth), ss.12GF, 19, 50
Corporations Act 2001 (Cth), ss.1041I, 1323, 1324(10), 1325(5)(e)
Crimes Act 1900, s.178BB
Family Law Act 1975 (Cth), s.79

CASES CITED: Anglo-Italian Bank v Davies (1878) 9 ChD 275
Australian Securities and Investments Commission v Banovec (No 2) [2007] NSWSC 961
Australian Securities and Investments Commission v Burnard [2006] NSWSC 611
Australian Securities and Investments Commission v Carey (No 6) (2006) 58 ACSR 141
Australian Securities and Investments Commission v Ivey (1998) 29 ACSR 391
Australian Securities and Investments Commission v Krecichwost [2007] NSWSC 948
Australian Securities and Investments Commission v Wiggins (1998) 30 ACSR 190
Baumgartner v Baumgartner (1987) 164 CLR 137
Calverley v Green (1984) 155 CLR 242
Cardile v LED Builders Pty Ltd (1999) 198 CLR 380
Chief Commissioner of Stamp Duties v Buckle (1995) 38 NSWLR 574
Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226
Corin v Patton (1990) 169 CLR 540
CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (1982) 149 CLR 431
Flinn v Flinn [1999] 3 VR 712
Giumelli v Giumelli (1999) 196 CLR 101
Hayes v O’Sullivan (2001) 24 WAR 40
Re HIH Insurance Ltd; Australian Securities and Investments Commission v Adler (2001) 38 ACSR 266
Ideal Bedding Co Ltd v Holland [1907] 2 Ch 157
Ioppolo v Ioppolo (unreported, WASC, Full Court, 13 November 1978)
Jones v Dunkel (1959) 101 CLR 298
Lightfoot v Lightfoot (unreported, WASC, 27 February 1991)
Mullane v Mullane (1983) 158 CLR 436
Mushinski v Dodds (1985) 160 CLR 583
Napier v Public Trustee (WA) (1980) 55 ALJR 1
Peldan v Anderson (2006) 227 CLR 471
Re Richstar Enterprises Pty Ltd; Australian Securities and Investments Commission v Carey (No 3) (2006) 57 ACSR 307
Richstar Enterprises Pty Ltd v Carey (No 5) (2006) 58 ACSR 6
Re Suco Gold Pty Ltd (1983) 33 SASR 99
Vacuum Oil Co Ltd v Wiltshire (1945) 72 CLR 319

PARTIES: Australian Securities and Investments Commission - Plaintiff
Neil Burnard - First Defendant
Palentia Pty Limited - Second Defendant
Tenala Pty Ltd - Third Defendant
Jennifer Lee Robins - Fourth Defendant
BDI Pty Ltd - Fifth Defendant

FILE NUMBER(S): SC 3061/06

COUNSEL: Mr D.R. Stack - Plaintiff
Mr A.G. Hartnell, Solicitor - Defendants

SOLICITORS: Conrad Gray, Solicitor for ASIC - Plaintiff
Atanaskovic Hartnell - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

WEDNESDAY, 31 OCTOBER 2007

3061/06 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v NEIL AUSTIN BURNARD & 4 ORS

JUDGMENT

The proceedings

1 On 2 June 2006, Australian Securities and Investments Commission (“ASIC”) filed an originating process in which it sought relief against three defendants, Neil Austin Burnard (“Mr Burnard”), Palentia Pty Ltd (which may more conveniently be referred to by its former name “Kebbel NSW”) and Tenala Pty Limited. Certain orders were thereafter made in circumstances to which I shall refer presently.

2 On 4 October 2007 (the first day of the hearing before me), ASIC filed an amended originating process in which the same three defendants were named, together with two other defendants who had been added as parties in December 2006, namely, Jennifer Lee Robins (“Ms Robins”) and BDI Pty Ltd (“BDI”). Ms Robins is the wife of Mr Burnard. BDI is a company owned and controlled by Mr Burnard and Ms Robins. Its principal activity, it seems, is to act as the trustee of trusts, being the trusts known as the Asset Trust No 2, the Tessa Trust and the Executive Superannuation Plan One.

3 By the amended originating process, ASIC seeks continuation, in somewhat modified form, of orders currently in force in respect of the three original defendants, as well as orders subsequently made by consent (but without admissions) in respect of the two additional defendants, Ms Robins and BDI. All such orders, if made, would continue until further order, although ASIC did make it clear that it seeks, in the alternative, a regime under which all the orders are continued until a specified time and then reviewed.

ASIC’s resort to s.1323

4 ASIC’s application stems from the financial collapse of the Westpoint Group and investigations and other actions undertaken by ASIC in consequence of that collapse. As it affects all five defendants, the application is based on s.1323 of the Corporations Act 2001 (Cth). It is desirable that I set out that section in full:

“ Power of Court to prohibit payment or transfer of money, financial products or other property

aggrieved person

relevant person

(2B) Subsection (2A) is to avoid doubt, is not to limit the generality of anything in subsection (1) and is not to affect by implication the interpretation of any other provision of this Act.

(2) An order under subsection (1) prohibiting conduct may prohibit the conduct either absolutely or subject to conditions.

(3) Where an application is made to the Court for an order under subsection (1), the Court may, if in the opinion of the Court it is desirable to do so, before considering the application, grant an interim order, being an order of the kind applied for that is expressed to have effect pending the determination of the application.

(4) On an application under subsection (1), the Court must not require the applicant or any other person, as a condition of granting an interim order under subsection (3), to give an undertaking as to damages.

(5) Where the Court has made an order under this section on a person’s application, the Court may, on application by that person or by any person affected by the order, make a further order discharging or varying the first-mentioned order.

(6) An order made under subsection (1) or (2) may be expressed to operate for a specified period or until the order is discharged by a further order under this section.

(7) Nothing in this section affects the powers that the Court has apart from this section.

(8) This section has effect subject to the Bankruptcy Act 1966 .

(9) A person must not contravene an order by the Court under this section that is applicable to the person.

strict liability

Criminal Code

The scheme of s.1323 and the orders sought

5 ASIC contends (and the defendants do not deny) that, as referred to in s.1323(1)(a), an investigation is being carried out by ASIC under the Australian Securities and Investments Commission Act 2001 (Cth) “in relation to an act or omission by” Mr Burnard or Kebbel NSW or both of them. It is that circumstance which, in conjunction with others, is relied upon by ASIC as the foundation for its claim to relief by way of orders under s.1323. Counsel for ASIC made it clear that ASIC does not rely on the existence of any relevant investigation involving Ms Robins or BDI (transcript, page 89, line 20).

6 The principal orders which, on ASIC’s case, may be made and should be made are as follows (with the names of the parties substituted for ease of reference):

Order 1
“Until further order, each of Mr Burnard and Kebbel NSW, by themselves, their servants, agents or employees, is restrained from:
(a) removing, or causing or permitting to be removed from any State of Australia and from Australia; and/or
(b) selling, charging, mortgaging or otherwise dealing with or disposing of or causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of,
all or any of their respective assets whether located within Australia or outside Australia and whether owned legally or beneficially PROVIDED that … [here follow exceptions]”

Order 2
“Until further order, Ms Robins, by herself and her servants, agents or employees, is restrained from selling, charging, mortgaging or otherwise dealing with or disposing of or causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of, all [sic] or any [sic] of the following properties:
(a) the property known as and situated at [an address at Mosman]; and
(b) the property known as and situated at [an address at Mona Vale].”

Order 3

7 The orders just mentioned are set out in short minutes of order handed up at the hearing. They differ somewhat from the orders in the amended originating process. I have not included in this description of the orders sought any reference to certain orders appointing receivers. Although ASIC made application for those orders in the originating process (and maintains the application in the amended originating process), it does not at this stage press for them. The significance of this will be mentioned presently. I have also omitted reference to asset disclosure orders. Consideration of that aspect should be deferred until the question of restraining orders has been dealt with.

8 Because the circumstance which, as it were, provides access to s.1323 is the ASIC investigation in relation to acts or omissions of Mr Burnard and Kebbel NSW, it is each of Mr Burnard and Kebbel NSW that is, in terms of s.1323(1), the “relevant person”. Each of them is “the person referred to in paragraph (a)”, that is, the person whose act or omission is the subject of the ASIC investigation. From that flows the need for the court to examine, at the threshold, other matters relevant to the availability of the jurisdiction created by s.1323(1).

9 In the first place, the court must identify the persons to whom the “relevant person” (here, each of Mr Burnard and Kebbel NSW)

10 The persons so identified are, in terms of the section, “aggrieved persons”.

11 Having identified the “aggrieved persons”, the court must turn its mind to the question of what is necessary or desirable for the purpose of protecting the interests of the “aggrieved persons” – and, more specifically, to the question whether the making of the particular orders it is asked to make is necessary or desirable for the purpose of protecting those interests.

12 With the protection of the interests of the “aggrieved persons” at the forefront of its mind, the court must then decide whether each of the orders sought is an order within one of paragraphs (d) to (k) of s.1323(1) or an order of a kind comprehended by one of the paragraphs.

13 Finally and if all the considerations so far mentioned indicate that a particular order may be made consistently with the section, the court must decide whether, as a matter of discretion, it should make that order.

14 At the heart of s.1323 is a concern to protect the interests of aggrieved persons. The section aims to provide a means by which property that may in due course represent a source for the vindication of the rights of those persons is preserved for their benefit, shielded from inroads that might otherwise be made upon it. The section is auxiliary to the investigation, prosecution or civil proceeding which provides access to it.

Identification of “aggrieved persons”

15 So far as identification of “aggrieved persons” is concerned, ASIC does not suggest that either Mr Burnard or Kebbel NSW is presently liable to pay money or to account for property to any person. ASIC’s position is, rather, that each “may be or become” liable to pay or account in favour of certain persons who invested money through channels made available by and involving Kebbel NSW, with Mr Burnard having played a central role in the soliciting of such investments. In summary, it appears that Kebbel NSW was a medium through which Westpoint companies raised funds; that Kebbel NSW received commissions from Westpoint companies on funds introduced by it; that certain persons invested money in Westpoint property development projects through Kebbel NSW after attending seminars addressed by Mr Burnard on behalf of Kebbel NSW; that the invested moneys became substantially irrecoverable; and that the circumstances are such as to be suggestive of statutory contraventions by Mr Burnard and Kebbel NSW involving misleading or deceptive conduct, the giving of financial product advice by an unlicensed person or non-disclosure of commissions that should have been disclosed or some combination of the foregoing.

16 If a case to this effect were eventually made out against Mr Burnard or Kebbel NSW or both, the consequences could be or include judgment for recovery of loss or damage under s.1041I of the Corporations Act, an award of damages under s.1324(10), an order for the payment of the amount of loss or damage under s.1325(5)(e) or judgment for recovery of loss or damage under s.12GF of the Australian Securities and Investments Commission Act 2001 (Cth).

17 At the hearing before me (and in written submissions), Mr A.G. Hartnell, solicitor, who appeared for all of Mr Burnard, Kebbel NSW, Ms Robins and BDI, conceded that each of Mr Burnard and Kebbel NSW is a person who “may be or become” liable to pay money to various investors as contemplated by s.1323(1). There was no like concession in relation to either Ms Robins or BDI. That, however, is beside the point, since ASIC does not put either Ms Robins or BDI forward as a “relevant person”.

The approach to ASIC’s application

18 Against this background, I approach ASIC’s application for the orders set out at [6] above on the footing, first, that regard is to be had to what is “necessary or desirable” for the protection of the interests of investors to whom either or both of Mr Burnard and Kebbel NSW may become liable in one or more of the ways briefly outlined at [9] above; and second, that Mr Burnard and Kebbel NSW are the only persons to be taken into account as “relevant persons” when considering and applying paragraphs (d) to (k) of s.1323(1). It follows that references in those paragraphs to “property of” the “relevant person” are, in the context, references to “property of” Mr Burnard or Kebbel NSW; and that references to a person “holding … property, on behalf of the relevant person” are references to a person holding property “on behalf of” Mr Burnard or Kebbel NSW.

19 The desirable course is to consider first whether each of the orders sought by ASIC is, of its nature, an order that s.1323(1) allows the court to make. If it should appear that a particular order is not an order falling within one of paragraphs (d) to (k), the question whether the making of the order is “necessary or desirable” for the protection of the identified class of persons will not arise. If any order is an order that s.1323(1) allows the court to make, consideration can be given to the question whether the particular order should be made.

Is Order 1 authorised by s.1323(1)?

20 Order 1 (see [6] above) is an asset preservation or “freezing” order in respect of the whole of the property of Mr Burnard and the whole of the property of Kebbel NSW, with the “freeze” operating subject to qualifications or “carve-outs” in the proviso. ASIC accepts that none of paragraphs (d) to (k) of s.1323(1) empowers the court in explicit terms to make such an order. It contends, however, that paragraph (h) provides a jurisdictional basis for the making of the order.

21 Three recent decisions support that view: see Re Richstar Enterprises Pty Ltd; Australian Securities and Investments Commission v Carey (No 3) (2006) 57 ACSR 307 (French J), Australian Securities and Investments Commission v Krecichwost [2007] NSWSC 948 (McDougall J) and Australian Securities and Investments Commission v Banovec (No 2) [2007] NSWSC 961 (White J). There is no need to discuss those decisions in detail. They all proceeded on the basis that, if grounds are established for the making of an order under s.1323(1)(h) (that is, an order appointing a receiver of property of the “relevant person”), it is open to the court to make instead an “alternative or lesser order” which does not appoint a receiver but otherwise safeguards or preserves the property in respect of which a receiver could have been appointed.

22 While there were some differences of approach in the three cases, the essential message was consistent. It is necessary for the court to address the question whether a case has been made out for a grant of the relief actually provided for by s.1323(1)(h), namely, the appointment of a receiver of the whole or some part of the property of a “relevant person”. If that question is answered in the affirmative so that the statutory jurisdiction is enlivened, the court must, in the words of White J in Banovec (No 2) (above), “consider whether a less drastic remedy will suffice”. If that question too is answered in the affirmative, the court may make the lesser alternative order in the same way as it could have made an order appointing a receiver. And that lesser order is itself an order comprehended by s.1323(1)(h).

23 In the hearing before me, ASIC put its case squarely on the basis that, as regards the property generally of each of Mr Burnard and Kebbel NSW, circumstances are such as to justify an order under s.1323(1)(h) appointing a receiver. As I have said the relief sought in the amended originating process includes the appointment of receivers, even though that aspect is not presently pressed. Since, in each case, the court could appoint a receiver (assuming evidence warranting such an order), it is submitted that it should be satisfied that the lesser order in the nature of an asset preservation order that ASIC actually seeks can and should be made.

24 On my understanding of the submissions made on behalf of Mr Burnard and Kebbel NSW, neither challenges the proposition that, if a case for the appointment of a receiver is made out under s.1323(1)(h), the court may instead make an asset preservation order affecting the property in respect of which it could have appointed a receiver. Mr Burnard and Kebbel NSW do not, however, accept that a case for the appointment of a receiver is made out in this instance.

Order 1 is authorised by s.1323(1)

25 My conclusion in relation to Order 1 is that, for the reasons I have stated, it is an order that it is open to the court to make under s.1323(1). Whether the court should proceed to make the order is a matter to which I shall come in due course.

Is Order 2 authorised by s.1323(1)?

26 Order 2 at [6] above is an order directed to and binding upon Ms Robins. It relates to the items of real property at Mosman (the family home of Mr Burnard, Ms Robins and their children) and Mona Vale (described, in the course of the hearing, as “the holiday house”). The registered proprietors of the Mosman property are Ms Robins and Mr Burnard. They hold as tenants in common in unequal shares with Ms Robins holding a 99% undivided interest and Mr Burnard holding a 1% undivided interest. Ms Robins is the sole registered proprietor of the Mona Vale property.

27 The co-ownership of the house at Mosman means that Order 2, as it affects that property, must be read as extending only to Ms Robins’ undivided interest as one of two tenants in common. An injunction directed to Ms Robins could restrain dealings with that interest only. In the discussion that follows regarding the house at Mosman, references to “the Mosman property” should be understood as references to Ms Robins’ undivided interest as one of two tenants in common.

28 The jurisdiction to make Order 2 is said by ASIC to arise by virtue of the following:

1. The funds for the acquisition by Ms Robins of the Mosman property and the Mona Vale property came from BDI and Kebbel NSW. Those companies were the source of moneys actually outlaid in the purchase and moneys used to service and reduce borrowings obtained to assist with the purchase.

2. To be more precise, $2,027,399.75 of the total of $2,651,251.11 used in the acquisition of the Mona Vale property (or attendant debt servicing and reduction) came from BDI, with the balance of $623,851.36 coming from Kebbel NSW; while the whole of the $1,909,393.31 used in the acquisition of the Mosman property (or attendant debt servicing and reduction) came from BDI.

3. The funds that came from BDI were, in part, assets of the Tessa Trust and as to the remainder assets of the Asset Trust No 2.

4. The whole of the assets of each of those trusts was, at all material times, “property of” Mr Burnard. This is a key component of ASIC’s case, the allegation being that the money ostensibly sourced from BDI and used in relation to the two properties was Mr Burnard’s money.

5. Because of the source and application of funds, as described, each of the Mosman property and the Mona Vale property is held upon a resulting or constructive trust for Mr Burnard, to the extent of the funds provided out of the assets of the two trusts; and the Mona Vale property is held upon a resulting or constructive trust for Kebbel NSW to the extent of the funds provided by Kebbel NSW.

6. Mr Burnard accordingly has an equitable estate or interest in the Mosman property and both he and Kebbel NSW have equitable estates or interests in the Mona Vale property.

29 For the moment, I assume (without deciding) that ASIC’s contentions reflect the true legal position with respect to ownership interests in the two properties. On that assumption, I consider whether s.1323(1) empowers the court to make Order 2 which, as I have said, is an order directed to and binding on Ms Robins. If made, the order would restrain Ms Robins from dealing with the Mosman property and the Mona Vale property.

30 One basis of jurisdiction canvassed in submissions is s.1323(1)(e), Some time in submissions was devoted to the question whether the postulated equitable interest of Mr Burnard or Kebbel NSW would mean that Ms Robins is properly to be regarded as “holding … property, on behalf of the relevant person”, being Mr Burnard or Kebbel NSW.

31 Even if it were the case that Ms Robins is “holding” the Mosman property or the Mona Vale property “on behalf of” Mr Burnard or Kebbel NSW, s.1323(1)(e) would not empower the court to make Order 2. Where one person (“A”) is holding property “on behalf of” a “relevant person” (“B”), s.1323(1)(e) permits only an order prohibiting A from transferring (or otherwise parting with possession of) the property to a transferee within a specified class. That class consists of (and is limited to) the person on behalf of whom the property is held (here, B) and any persons to whom the transfer is to be made at the direction or request of the person on behalf of whom the property is held (B). If s.1323(1)(e) is seen as mainly concerned with situations of agency, trust and bailment (see the observations of Finkelstein J in Australian Securities and Investments Commission v Wiggins (1998) 30 ACSR 190 at p.195), the most the section will support is an order prohibiting the agent, trustee or bailee from transferring the property to the principal, beneficiary or bailor. The fullest effect of a permitted order is to ensure that the “relevant person” does not attain the dominion over the property, to the exclusion of the person holding “on behalf of” the “relevant person”, that, in the absence of the order, it would be open to the “relevant person” to require or attain.

32 Order 2 would prohibit transfer by Ms Robins to Mr Burnard or Kebbel NSW, as the case may be. But it would also have a much more extensive operation, in that it would also prohibit transfer by Ms Robins to every other person in the world. Section 1323(1)(e) does not allow the court to make an order having that more extensive operation.

33 In seeking Order 2, ASIC also relies on s.1323(1)(f). That section is concerned with “money of the relevant person or of an associate of the relevant person”. The Mosman property and the Mona Vale property are not “money”. In any event, there was no explicit submission by ASIC that Ms Robins is an “associate” of Mr Burnard or Kebbel NSW, whether for the purposes of s.1323(1)(f) or for any other purpose. Section 1323(1)(f) will not support Order 2.

34 ASIC next relies on s.1323(1)(g). That provision will obviously not support Order 2. Even if the Mosman property and the Mona Vale property, or some interest in them, be “property of the relevant person” (Mr Burnard or Kebbel NSW), that property is, of its nature, incapable of being taken, sent or transferred “from a place in this jurisdiction” or “from a place in Australia” to some other place. The concept of movement, in a geographic sense, of land or an interest in land (whether legal or equitable) is not meaningful.

35 ASIC’s final contention is that s.1323(1)(h) constitutes a basis for the making of Order 2, assuming that, because of the postulated applications of funds, Mr Burnard and Kebbel NSW have equitable interests in the properties.

36 To the extent that Mr Burnard has, in the eyes of equity, a proprietary interest in the Mosman property and the Mona Vale property and Kebbel NSW has an proprietary interest in the Mona Vale property, an order under s.1323(1)(h) might be made in respect of each such interest. This is because the proprietary interest itself would be “property of” Mr Burnard or Kebbel NSW. And, for reasons already noticed, the s.1323(1)(h) power to appoint a receiver in respect of Mr Burnard’s equitable interest or that of Kebbel NSW would comprehend an “alternative or lesser” order restraining Mr Burnard or Kebbel NSW from dealing with the equitable interest.

37 But would s.1323(1)(h) ground the order actually sought, that is, an order restraining Ms Robins from dealing with the Mosman property and the Mona Vale property? On the thesis advanced by ASIC (that is, that Mr Burnard has, in the eyes of equity, a proprietary interest in each property and Kebbel NSW has a proprietary interest in one of them), an affirmative answer could be given to that question only if such an order represented an “alternative or lesser” measure compared to an order appointing a receiver of Mr Burnard’s interest or that of Kebbel NSW.

38 The relevant concept of “alternative or lesser” order is, I think, clear. If a case for the appointment of a receiver of property of a relevant person is established, the court may instead impose some less drastic order producing, in practical terms, a substantially similar result. The object of the appointment of a receiver is to preserve property intact and in safe hands pending a final decision as to its proper fate or destination. Where a receiver is appointed by way of equitable execution of a money judgment, the appointment precludes the debtor from receiving the relevant property and dealing with it to the detriment of the judgment creditor: see Ideal Bedding Co Ltd v Holland [1907] 2 Ch 157 at pp.169, 170. If, in the present context, the “aggrieved persons” are regarded as occupying a position conceptually akin to that of a judgment creditor vis a vis a debtor, an order that leaves the property with the debtor but restrains him from dealing with it is less drastic than an order putting a receiver into possession. It is a “lesser” order because it is less drastic. It is an “alternative” order because it produces, in practical terms, a like outcome.

39 If Order 2 were made, it would bind Ms Robins not only in such a way as to immobilise the interests of Mr Burnard and Kebbel NSW but also to immobilise the interest of Ms Robins. If Ms Robins were a bare trustee having no beneficial interest whatsoever in the properties, an order restraining her from disposing of them might well be seen as a lesser alternative to the appointment of a receiver of Mr Burnard’s equitable interest or that of Kebbel NSW. But if Ms Robins has some beneficial interest of her own, the alternative order is not a lesser order. It is, in those circumstances, an order that not only affects the interests of Mr Burnard and Kebbel NSW but also restrains dealings affecting enjoyment by Ms Robins of her interest, being an interest to which an order under s.1323(1)(h) cannot properly extend.

40 It is therefore my opinion that s.1321(1)(h) will support Order 2 only if all beneficial interests in the Mosman property (by which, as I have said, I mean Ms Robins’ undivided 99% interest as one of two tenants in common) and all beneficial interests in the Mona Vale property reside in Mr Burnard and Kebbel NSW, so that Ms Robins, as nominee or bare trustee, has no more than the bare legal estate which is, for practical purposes, negligible.

The meaning of “property”

41 In the above discussion, I have referred on several occasions to equitable interests in property and treated such an interest as property in its own right. I should pause, however, to ensure that that is the correct approach since, in dealing with questions based ultimately on s.1323(1)(h), I am exercising a statutory jurisdiction concerned with “property of” a “relevant person”.

42 Section 1323 itself contains some guidance as to the meaning of “property of” a person for the purposes of s.1323(1)(h). Section 1323(2A) says that, for the purposes of ss.1323(1)(g) and 1323(1)(h), a reference to “property of” a person includes a reference to “property that the person holds otherwise than as sole beneficial owner”. It then gives two examples: first, where the person holds as trustee for, nominee for or otherwise on behalf of or on account of someone else; and, second, where the person holds in a fiduciary capacity. It is thus made clear that the estate or interest of a bare trustee or nominee is “property” for the purposes of s.1323(1)(g) and s.1323(1)(h).

43 Also relevant is the definition of “property” in s.9:

property

44 Having regard to this definition and s.1323(2A), the “property of” Mr Burnard or Kebbel NSW must be taken to include any legal or equitable estate or interest in property that he or it enjoys and any property held by him or it for the benefit of someone else. The course advocated by ASIC of inquiring into proprietary interests recognised by equity as held by a person other than the legal owner is therefore an appropriate course.

45 It is, however, important to remember that a receivership order under s.1323(1)(h) can extend only to “property of” the “relevant person”. There is no authority to appoint a receiver of “property of” any other person. In a case where the “property of” the “relevant person” is the equitable and beneficial interest in property held for that person by a nominee who is not a “relevant person”, a receivership imposed under s.1323(1)(h) could comprehend only that equitable and beneficial interest (an example of the appointment of a receiver of an equitable interest, being a mortgagor’s equity of redemption, is found in Anglo-Italian Bank v Davies (1878) 9 ChD 275). While a receiver could, under s.1323(1)(h), be appointed of the equitable and beneficial interest, there would be no statutory warrant for the appointment of a receiver of the bare legal estate of the nominee who was not a “relevant person”.

46 When it comes to an injunction as a substitute for the appointment of a receiver, however, the court has greater latitude. Having found a case for the appointment of a receiver of the equitable and beneficial interest, the court may make some other order, provided that it is a lesser order. The circumstance that the nominee’s interest was a bare legal estate which the nominee was bound to deal with as the beneficiary directs (and not otherwise) – being an interest which, as Deane J put it in Corin v Patton (1990) 169 CLR 540 at p.579, equity would regard as “no interest in the property at all” - would mean that the alternative order had no impact on the nominee. In judging whether the order actually proposed was a lesser order, the circumstance that it affected the bare legal estate would therefore be neutral. And from the beneficiary’s viewpoint, the circumstance that the order left possession undisturbed would mean that the order was less drastic than one which saw a receiver go into possession.

Interests in the Mosman and Mona Vale properties

47 Let it be assumed that the source and application of funds in relation to the Mosman property and the Mona Vale property were as described at [28] above (and leave to one side the statements in examinations of Mr Burnard and Ms Robins by ASIC delegates tending to suggest that funds were lent to Ms Robins by BDI). Does it follow that there subsist the postulated equitable estates and interests of Mr Burnard and Kebbel NSW?

48 The mere fact that one person (“A”) provides money with which another person (“B”) buys property or pays off or services debt incurred to obtain money to buy property says nothing about whether there subsists in the property owned by B an equitable interest on the part of A. The payment by A to B may be a loan, so that B’s expenditure, being expenditure of the loan proceeds, is an expenditure of B’s own money, with A’s position being that he owns a debt owed to him by B. Another possibility is that the payment by A to B was a gift, so that again B’s expenditure, being expenditure of the money given, was an expenditure of B’s own money. If A pays money direct to the person who seeks the property to B (so that the expenditure on the purchase is an expenditure of A’s own money), the situation may be one in which B is the ostensible purchaser but A is the real purchaser; or, by contrast, A may intend to confer a benefit on B and that the property should belong to B absolutely. Other possibilities also arise.

49 ASIC has provided evidence of cash flows. It is of what I might call a high level nature, in the sense that it consists only of conclusions of Mr Potter, a forensic accountant, drawn from his investigation and analysis of the source and application of funds. It is his evidence that forms the basis for the submission summarised at [28] above.

50 Having regard to Mr Potter’s evidence, ASIC invited the court to make findings about resulting trust and constructive trust. In relation to resulting trust, submissions referred to paragraph 1210 of the seventh edition (2006) of “Jacobs’ Law of Trusts in Australia” (by J D Heydon and M J Leeming) which quotes the following passage from the judgment of Aickin J (Stephen J, Mason J and Murphy J concurring) in Napier v Public Trustee (WA) (1980) 55 ALJR 1 at p.3:

in loco parentis

51 Acknowledging that these principles about resulting trusts do not operate where property is acquired by one person with borrowed money and the other person pays off the loan in whole or in part (Calverley v Green (1984) 155 CLR 242 at pp. 257 and 267, 268) – which Mr Potter’s evidence suggests was predominantly the case here – ASIC relied on principles about constructive trusts. Counsel for ASIC noted that a constructive trust will be found to have arisen (or will be imposed) where it is necessary to recognise and protect contributions made to a joint endeavour. Reference was made to the observation of Deane J (with whom Mason J agreed) in Mushinski v Dodds (1985) 160 CLR 583 (at pp.619, 620) concerning a particular principle of equity which, “[l]ike most of the traditional doctrines of equity … operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct”. The principle was said to operate:

“… in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do …”

52 ASIC also called in aid the decision in Baumgartner v Baumgartner (1987) 164 CLR 137 which concerned a de facto couple who had pooled their financial resources but in circumstances where the man had become the legal owner of the home to the exclusion of the woman. In determining a dispute that had arisen after the break down of the relationship, the court held that the woman’s financial contribution should be recognised in the form of an interest in the home. The man was to be regarded as holding it for the two parties in proportion to their contributions to its acquisition. The man’s assertion that the home was his sole property, beneficially and to the exclusion of any interest of the woman, was said to amount to “unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent [woman]”: per Mason CJ, Wilson J and Deane J at p.149. The joint judgment contains, on the same page, the following passage:

“In this context it would be unreal and artificial to say that the respondent intended to make a gift to the appellant of so much of her earnings as were applied in payment or mortgage instalments. There is no evidence which would sustain a finding that the respondent intended to make a gift to the appellant in this way.”

53 The key judicial statements refer in several places to the parties’ intentions. The uncontroversial propositions about resulting trusts are based on presumptions regarding the parties’ intentions: it is presumed that the person in whose name title is taken intended and was intended by the person providing the money to hold the property for the benefit of that second person, unless the person taking title is a wife or child of the person providing the money, in which event the intention is presumed to be, on both sides, one of benefaction of the wife or child. Each presumption is rebuttable by evidence. In the constructive trust cases, the court must decide what, in the whole of the circumstances of the parties’ relationship, was their intention and expectation regarding beneficial enjoyment and, given that intention and expectation, whether retention of legal ownership without recognition of some intervening equity or equitable interest involves unconscionability.

54 It follows, in my view, that no reliable conclusion regarding resulting trust or constructive trust can be reached merely by having regard to cash flows. There must be evidence from which the nature of each payment – in particular, whether it was a gift or a loan or a contribution for gain – might be gathered. In the absence of evidence about the actual dealings and the circumstances in which they occurred, questions of unconscionability cannot be addressed and decisions about the subsistence of equities cannot be made.

55 An assessment of the whole of the circumstances is important for another reason as well. Once findings of unconscionability are made, there is a necessary process of deciding what, in the particular case, must be done to satisfy the equity that has arisen and how an outcome can be shaped consistent with the conscientious behaviour that should have been exhibited: see Giumelli v Giumelli (1999) 196 CLR 101 at p.122; Flinn v Flinn [1999] 3 VR 712. To the extent that any proprietary interest arises, it is ultimately a product of the court’s order. As was said by Gummow ACJ, Kirby J, Hayne J, Callinan J and Crennan J in Peldan v Anderson (2006) 227 CLR 471 at p.485, by reference to the High Court’s earlier decision in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (1982) 149 CLR 431:

“Nor can the interest of a beneficiary under a trust be identified prior to the trust being declared; where the whole legal and beneficial in property is united in one owner, there is no separate beneficial interest in existence.”

56 In the case of a constructive trust, there is no beneficial interest until the court, having determined upon the remedy necessary and appropriate to redress the activating unconscionability, imposes that remedy.

57 The court is not undertaking here an inquiry whether there is a serious question to be tried. It is not seeking some prima facie position or asking whether grounds for suspicion exist. Its task is to make a firm and final decision whether, as ASIC necessarily contends, all beneficial interests in the Mosman property and the Mona Vale property are vested in Mr Burnard and Kebbel NSW so those properties are properly regarded as “property of” Mr Burnard and Kebbel NSW, Ms Robins being merely a bare trustee or nominee. On the evidence available, any finding to that effect is simply unavailable. The evidence is confined to Mr Potter’s high level analysis of cash flows from which the court is asked to infer that the relevant money was in part money of Mr Burnard and in part money of Kebbel NSW (a proposition which, in its own right, would require extensive examination). But let it be assumed that the money was money owned by Mr Burnard and Kebbel NSW. The court has no insight whatsoever into actual payments, the circumstances in which they were made or other matters which might contribute to a finding on the central issue of unconscionability – in other words, whether it is unconscionable for Ms Robins, as the legal owner, to assert and rely on her legal title to the exclusion of any interest of Mr Burnard or Kebbel NSW. In those circumstances, there is no basis for the court to conclude that Ms Robins cannot conscientiously claim to be the full owner. There is therefore no basis for a finding that might lead to a conclusion that some measure of beneficial ownership resides in Mr Burnard and Kebbel NSW in the way for which ASIC contends.

58 ASIC puts forward another argument in support of its contention regarding beneficial ownership by Mr Burnard. It refers to s.79 of the Family Law Act 1975 (Cth) which empowers a court exercising jurisdiction under the Act in “property settlement proceedings” to “make such order as it considers appropriate … altering the interests of the parties to the marriage in” the “property of the parties to the marriage”. The High Court pointed out in Mullane v Mullane (1983) 158 CLR 436 that orders under this section work an alteration of legal and equitable interests. Unless and until and order is made, therefore, the legal and equitable interests rest where they have fallen according to ordinary legal principle. The property law position was succinctly stated by Owen J in Lightfoot v Lightfoot (unreported, WASC, 27 February 1991), referring to the decision of the Full Court of the Supreme Court of Western Australia in Ioppolo v Ioppolo (unreported, WASC, Full Court, 13 November 1978; see (1978) 5 Fam LN N27):

59 Since there is no suggestion that any order under s.79 has been made in respect of Mr Burnard and Ms Robins (or, for that matter, that matrimonial proceedings are even remotely in contemplation), this matter requires no further consideration.

The Jones v Dunkel submission

60 In the context of the submissions concerning resulting trust and constructive trust, ASIC drew attention to the fact that Mr Burnard and Ms Robins gave no evidence about the source and application of funds. It is submitted that, because they are the only persons who could give such evidence, it is open to the court to infer that their evidence would not have assisted their own case. Reference is made to Jones v Dunkel (1959) 101 CLR 298.

61 I do not think that any Jones v Dunkel inference should be drawn here. ASIC’s high level evidence did not rise to the level of creating a prima facie position in need of rebuttal. ASIC relied on nothing more than broad statements of cash flow which, without more, could not have created any prima facie position.

Order 2 is not authorised by s.1323(1)

62 For the reasons stated, I am of the opinion that Order 2 is not an order that s.1323(1) enables the court to make. That order will not be made.

Is Order 3 authorised by s.1323(1)?

63 Order 3 set out at [6] above is an order directed to BDI. If made, the order would extend to the whole of the property and assets of BDI, including but not limited to the assets of the three trusts of which BDI is trustee (see [2] above).

64 ASIC relies on s.1323(1)(e). That section will not support the making of Order 3, even if the property concerned is held by BDI “on behalf of” Mr Burnard as a “relevant person” (ASIC does not suggest that it is held on behalf of Kebbel NSW). This is because the actions sought to be restrained, as described in paragraphs (a) and (b) of Order 3, go far beyond the action that can be enjoined under s.1323(1)(e), that is, payment or transfer to the “relevant person” (Mr Burnard) or to someone else for his or her benefit or on his or her behalf. The objection stated at [31] and [32] above applies here also.

65 Section 1323(1)(f) is also relied on by ASIC. That section would support an order in terms of paragraph (a) of Order 3 in relation to money (but not other property), to the extent that the money was money “of” Mr Burnard or “of” an “associate” of Mr Burnard (again, ASIC does not seek to make any case here in relation to Kebbel NSW). ASIC has not made any submission centred on any alleged “associate” of Mr Burnard. Its contention is, rather, that the assets of the several trusts are “property of” Mr Burnard and, to the extent that they consist of money, “money of” Mr Burnard. That is a matter to which I shall return. Section 1323(1)(f) will not support other aspects of Order 3.

66 Section 1323(1)(g) will support paragraph (a) of Order 3, provided the assets of the trusts are “financial products or other property of” Mr Burnard. It will not support any other aspect of Order 3.

67 To the extent that ASIC seeks to rely on s.1323(1)(h) as a basis for Order 3, it raises squarely the issue whether the assets of each trust are “property of” Mr Burnard. I am of the opinion that the process of analysis outlined at [35] to [39] above must again be undertaken, with one additional factor in mind, namely, that the class of persons to be benefited under the several trusts is not confined to Mr Burnard. A finding that the whole of the trust assets was, in each case, “property of” Mr Burnard would necessarily entail a conclusion not only that the trustee, BDI, held upon a bare trust as nominee (see [39] and [46] above) but also that no other person within the class contemplated by the trust instrument had any interest in the trust property. I say this because Order 3, in targeting the whole of the assets of BDI, including the assets of each trust, would be an order with respect to “property of” Mr Burnard only if no other interests subsisted in the whole of the assets of BDI.

68 I pause at this point to emphasise that, just as Order 2 is directed to Ms Robins, so too Order 3 is directed to BDI. Order 3 is thus not, in terms, an order affecting property of Mr Burnard. It is thus distinguishable from Order 1. If Mr Burnard has some proprietary interest in the whole of the assets of BDI, that interest is, in its own right, “property of” Mr Burnard. And if Order 1 were made, that proprietary interest would be caught by it. But the whole of the assets of BDI would not properly be regarded as consisting of Mr Burnard’s proprietary interest together with whatever other interests subsist in those assets. The distinct interests held by separate persons would be different items of property. It is for this reason that I am of the opinion that Order 3 could be made under s.1323(1)(h) (and, as to money, under s.1323(1)(f) and, to the extent of paragraph (a) of Order 3, under s.1323(1)(g)) only if BDI, although the legal owner, had no beneficial interest of its own (the position I have described as holding upon a bare trust as nominee). Only then would the whole of the assets of BDI, as distinct from some interest in them, be properly regarded as property (or money) “of” Mr Burnard.

69 The assets of BDI are predominantly and perhaps solely the assets of the three trusts. In contending that assets of the three trusts are “property of” Mr Burnard, ASIC relied on a number of observations of French J in Australian Securities and Investments Commission v Carey (No 6) (2006) 58 ACSR 141. In that case, orders appointing receivers of the property of certain individuals had been made under s.1323. The basis for the orders was, clearly enough, s.1323(1)(h). ASIC later applied for variation of those orders to cause them to extend to a defined class of property designated “Individual Property”. The term “Individual Property” was defined as follows:

but does not include:

70 The case before French J was not one in which an order directed to someone other than a “relevant person” was sought. Rather, the court was asked, in effect, to determine that certain items of property were “property of” the “relevant person” and to recast the existing order affecting the relevant person’s property generally so as to refer to the particular items. The analysis was directed towards the existence and nature of the separate interest a person might have because standing in a particular relationship to a trustee or trust property – whether because included in a class of persons who might be selected to benefit under a discretionary trust, or because a member of a superannuation scheme established as a trust, or because occupying under a trust instrument a position of “guardian” or “appointor” involving some power to alter the composition of classes of discretionary objects or to participate in decision-making with respect to allocation of benefits.

71 It was submitted on behalf of ASIC that the several principles on these matters identified by French J should also be applied in this case. I do not consider this to be the correct approach. French J was called upon to decide whether positions occupied, rights enjoyed and powers exercisable by certain persons in relation to trust property were such as to give rise to interests of those persons in that property, so that those interests were themselves “property of” the persons in question. That is not the question before me in this part of the present case. To the extent that any such interests are enjoyed by Mr Burnard, they will be caught by Order 1, if it is made. The separate and different question posed by the application for Order 3 is whether the whole of the property of BDI, including in particular, the whole of the assets of each of the three trusts, is “property of” (or, where relevant, “money of”) Mr Burnard.

72 That question, as it relates to the assets of the respective trusts, can conveniently be approached by inquiring whether BDI, as trustee, has any beneficial interest in the trust assets. If such an interest does exist, then it cannot be said that all beneficial interests in the assets as a whole reside in Mr Burnard so that the assets as a whole are his property (or money).

73 The documents constituting the three trusts are in evidence. It will be sufficient, for present purposes, to quote one extract from each. The deed constituting the Tessa Trust contains a clause 15.2 as follows:

“Without imposing any liability on the beneficiaries the Trustee will be entitled to be indemnified out of the assets for the time being comprising the Trust Fund against liabilities incurred by it in the execution or attempted execution or as a consequence of the failure to exercise any of the trusts, authorities, powers and discretions conferred upon it by this Deed or by virtue of being the Trustee hereof.”

74 The deed governing the Asset Trust No 2 contains clause 17.5 as follows:

“So long as the Trustee has acted in good faith the Trustee will be entitled to be indemnified out of the Fund for all liabilities incurred in the exercise of any of its powers or duties under this Deed.”

75 In the case of the Executive Superannuation Plan One, the comparable clause is clause 6.9(a):

“To the extent permitted by law but subject to clause 6.9(b), the Trustee and each Authorised Person is entitled to be indemnified from the Fund in respesct of any liability (including for negligence) incurred while acting as Trustee or Authorised Person.”

76 These provisions express the general law principle that a trustee has a right to resort to and apply trust funds for the discharge of liabilities incurred in the authorised conduct of the trust: Vacuum Oil Co Ltd v Wiltshire (1945) 72 CLR 319. That right is given effect to by means of an equitable interest in the whole of the assets of the trust. Until the right to be indemnified is exercised, the trustee has a right to possession superior to the rights of the beneficiaries (Re Suco Gold Pty Ltd (1983) 33 SASR 99 at p.109 per King CJ) and a “preferred beneficial interest in the trust fund” (a description applied by Sheller JA in Chief Commissioner of Stamp Duties v Buckle (1995) 38 NSWLR 574 at p.586 and expressly approved by the High Court in Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226 at p.247). Until satisfaction of the trustee’s right of indemnity, it is not possible to say what the trust fund is: CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 at p.121.

77 Each of the trusts with which I am concerned is an active trust which is ongoing. The trustee must, in the ordinary course, incur expenditure. Financial statements of all three trusts are in evidence. In the case of the Asset Trust No 2 and the Tessa Trust, the financial statements disclose real estate assets. The trustee must therefore become liable to pay rates and outgoings and presumably incurs expenditure for repairs, maintenance and the like. In the case of the Executive Superannuation Plan One, the financial statements show outgoings for tax and surcharge. All these items are of such a nature as to be covered by the trustee’s right to indemnity and reimbursement out of trust property. The “preferred beneficial interest in the trust fund” to which Sheller JA referred in Buckle’s case (above) must therefore be taken to reside in the trustee in each case.

Order 3 is not authorised by s.1323(1)

78 On this basis, I cannot find that the whole of the assets of BDI, including the whole of the assets of each of the three trusts, is “property of” Mr Burnard. It may be that he has an equitable interest of a proprietary kind in the assets of each trust, according to one or more of the approaches explored by French J in Carey (No 6) (above). That is not something that the present application requires me to decide. Any such interest would be susceptible to being dealt with as “property of” Mr Burnard and will be caught by Order 1 accordingly, if that order is made. But the subsistence in the assets as a whole of beneficial interests other than any interest that Mr Burnard may have means that it is not open to the court to make Order 3, being an order directed to BDI.

Matters relevant to the application for Order 1

79 Since, on my analysis, Order 1 is the only order set out at [6] above which it is open to the court to make by reference to s.1323, I proceed to consider matters bearing upon the question whether the order should be made.

80 I begin by referring briefly to the history of the proceedings. ASIC commenced the proceedings by ex parte application on 2 June 2006. Asset preservation orders were made at that time, as was a travel restraint order in respect of Mr Burnard. On 13 June 2006, after a contested hearing, asset preservation orders were made against Mr Burnard and Kebbel NSW, while the travel restraint order against Mr Burnard was continued, all such orders being effective only until 25 July 2006: see Australian Securities and Investments Commission v Burnard [2006] NSWSC 611. On 25 July 2006, 23 October 2006, 20 December 2006, 29 January 2007, 30 July 2007 and 27 August 2007 the orders were further continued. On all occasions after 13 June 2006, orders were made by consent but without admissions (this includes the orders against Ms Robins and BDI). The several orders remained in force when the matter came before me for hearing on 4 October 2007. Following the hearing they were, by consent, continued pending determination of the application.

81 It can thus be seen that Mr Burnard and Kebbel NSW have been subject to court-imposed restraints for almost seventeen months.

82 The ASIC investigation in respect of Kebbel NSW and Mr Burnard which is the continuing foundation for the orders sought began on 9 March 2006. The evidence before me is that the investigation continues. It has thus been in progress for almost twenty months.

83 In December 2006, Mr Burnard was charged with certain offences under the Corporations Act and the Crimes Act 1900. The Corporations Act charges (four charges of dishonest conduct under s.1041G) were later withdrawn. In September 2007, Mr Burnard was committed for trial on eleven charges under s.178BB of the Crimes Act (obtaining money or financial advantage by false or misleading statements). He was granted bail. The prosecution against Mr Burnard for these alleged offences under State law is not a foundation for an order under s.1323(1). The prosecution is not, in terms of the Corporations Act, a prosecution “for a contravention of this Act” and therefore does not come within s.1323(1)(b).

84 I should also mention certain civil proceedings that are in train. They were commenced in the Federal Court in July 2007 by the liquidators of certain companies known as the “Westpoint mezzanine companies”, being, in essence, the recipients of the proceeds of investments raised or arranged by Kebbel NSW and Mr Burnard. Those liquidators have brought proceedings on behalf of the mezzanine companies against certain individuals alleging breach of statutory duty, breach of fiduciary duty and negligence (the relevant statutory duties being duties of officers of corporations). Certain companies, including Kebbel NSW, are alleged to have received moneys known by them to have been improperly obtained. The liquidators informed ASIC in July 2007 that, once discovery is complete, they intend joining Mr Burnard, Ms Robins and BDI as defendants, on the basis that they too received relevant moneys knowing them to have been improperly obtained.

85 As far as Mr Burnard and Kebbel NSW are concerned, the proceedings initiated by the liquidators of the mezzanine companies, in both their present form and their possibly expanded form, entail allegations of knowing receipt only. They are thus not actually or potentially, from the viewpoint of Mr Burnard and Kebbel NSW, civil proceedings “begun against a person under this Act”, that is, the Corporations Act.

86 The investigation begun on 9 March 2006 thus remains the sole means of access by ASIC to s.1323.

87 Mr Carr is an ASIC officer and a senior member of the enforcement team conducting investigations into the Kebbel Group, of which Kebbel NSW forms part. His investigation is part of ASIC’s wider investigation centred on Westpoint. Mr Carr is the principal witness for ASIC in the present proceedings. A number of affidavits sworn by him were read and he was cross-examined. A substantial quantity of documents exhibited to Mr Carr’s affidavits was received into evidence. Apart from tendering some email correspondence, the defendants did not lead any evidence.

88 Mr Carr’s evidence makes it clear that the Westpoint investigation as a whole, of which the Kebbel investigation (involving Mr Burnard and Kebbel NSW) forms a significant part, is very extensive. The ASIC team dedicated to the investigation is based in Perth and consists of 28 investigators, lawyers and accountants. As at December 2006, 111 Westpoint related actions were resourced by ASIC across all States and ASIC’s various directorates, involving approximately 130 people. ASIC has had to lease additional office space to accommodate the investigation team and its documents. As at December 2006, approximately 4,000 boxes containing some six million documents had been assembled, while the Westpoint Group’s server obtained by ASIC contained some 3.5 million files and emails, of which 16,000 referred to “Kebbel”, 5,390 referred to “Kebbel NSW” and 2,500 referred to Mr Burnard.

89 In an affidavit of 17 August 2007, Mr Carr gave an account of activities since January 2007 being, I infer, activities forming part of the investigation relevant to Mr Burnard and Kebbel NSW. As at August 2007, three investigators and lawyers were involved in preparing two voluntary statements and one examination under s.19 of the Australian Securities and Investments Commission Act. Each of these documents is some 300 to 400 pages in length. Three months had been spent on these tasks which were continuing. Notices to produce documents had been issued to the legal advisers to the Westpoint group, from which one may infer that further documents potentially material to the investigation of immediate relevance may be obtained. Members of the investigation team were continuing to review hardcopy and electronic documents and to develop protocols for extraction of data from Westpoint servers by independent computer experts. Again, further relevant material may be forthcoming.

90 Mr Carr also gave evidence of significant work still to be done. I need not go into this. I am satisfied that the investigation is ongoing and that it has some distance to run.

91 Cross-examination of Mr Carr concentrated on two propositions: first, that the investigation involving Mr Burnard and Kebbel NSW is not being pursued in a timely and diligent way; and, second, that Mr Burnard has at all times been co-operative with ASIC.

92 As to the first of these matters, Mr Carr gave evidence which satisfies me that ASIC is proceeding with reasonable despatch, allowing for the size and nature of the task. The Kebbel investigation involving Mr Burnard and Kebbel NSW is a part of the overall Westpoint investigation. There are obviously questions about allocation of resources, as well as limits to those resources. The investigation is, by any measure, very large. It was put to Mr Carr that certain aspects had been “sat on” – in the sense of not being duly or diligently progressed. He candidly accepted that this might have been the impression but made it clear that he had been “agitating” to have them progressed. He explained that he was not always the decision-maker in setting priorities and could, in some areas, only make recommendations to his superiors who no doubt seek to rank requests for resources according to some scale of importance. There is no basis on which I can conclude that ASIC has been dilatory or that there is an attempt to prolong restraints upon the property of Mr Burnard and Kebbel NSW otherwise than genuinely in support of the ongoing investigation.

93 As to the question of Mr Burnard’s co-operation, I note the email correspondence tendered by the defendants. ASIC inquired, by email of 1 September 2006, how a file retrieved from Mr Burnard’s computer could be opened. On 6 September 2006, Mr Burnard’s solicitors provided a step-by-step description of the means of access. It may be noted, however, that the email conveying ASIC’s request drew attention to and quoted statutory provisions requiring a person producing books to ASIC to explain any matter about their compilation.

94 It was put to Mr Carr in cross-examination that Mr Burnard had consistently co-operated with ASIC. He did not accept this. He expressed doubts whether Mr Burnard had fully discovered documents he was required to produce. There was reference to an allegedly incomplete MYOB file and gaps in continuity in a series of bank statements produced. In the absence of evidence from the defendants (except for the email correspondence I have already mentioned), I must accept the existence of Mr Carr’s doubts, although I do note that there has been a great deal of correspondence between ASIC and Mr Burnard’s lawyers. It cannot be said that he has been entirely uncooperative .

95 I refer finally to the position of the “aggrieved persons”, that is, persons who may in the long run come to enjoy the success in proceedings of the kinds suggested at [16] above and thereby come to be entitled to look to Mr Burnard or Kebbel NSW for financial satisfaction. Mr Carr has given evidence about the complaints made by various persons who invested in Westpoint projects through Kebbel NSW. ASIC has filed and read detailed affidavits of twelve such persons.

96 Mr Carr gave evidence to the effect that Kebbel NSW was the largest single fund raiser for the Westpoint mezzanine companies. The total of the funds raised by it from investors was of the order of $140 million. Mr Carr’s estimate is that about 90% of this came through seminars in which Mr Burnard was involved. The affidavits of the investors make cogent a number of allegations, specifically that:

(a) Mr Burnard and Kebbel NSW represented to investors that the information memoranda in respect of each Westpoint mezzanine company accurately reflected the amount of money be raised by the particular mezzanine company, when the amount of money actually raised exceeded (and in many instances far exceeded) the stated amount;

(b) Mr Burnard was heavily involved in Westpoint group’s attempts to have investors “roll over” their investments from one Westpoint product to another at a time when he knew that the Westpoint group was having difficulty in making commission payments and paying redemptions;

(c) Mr Burnard and Kebbel NSW represented that moneys invested by investors were to be used for specific developments;

(d) Mr Burnard and Kebbel NSW represented that they had conducted “due diligence” on the Westpoint products they were recommending;

(e) Mr Burnard and Kebbel NSW represented to investors that Westpoint investments were guaranteed by the Westpoint group;

(f) Mr Burnard and Kebbel NSW represented to investors that Kebbel NSW was a “bank”;

(g) Mr Burnard and Kebbel NSW gave financial product advice when they were not licensed to do so;

(h) Mr Burnard and Kebbel NSW failed to disclose to investors the commissions Kebbel received from the Westpoint group.

97 Mr Carr says, and I accept, that these matters may lead to prosecutions under the Corporations Act, as well as under State law. He also says that he has been informed by ASIC’s Executive Director of Enforcement that ASIC is considering whether to commence proceedings on behalf of investors under s.50 of the Australian Securities and Investments Commission Act with a view to recovering damages or other compensation for those investors.

98 Mr Carr was taken in cross-examination to a recent public statement or news release made by ASIC to the effect that ASIC expected to make by 31 October 2007 decisions on the availability of actions for compensation under s.50 of the Australian Investments and Securities Commission Act. This related to the Westpoint investigation as a whole, not just the aspects involving Mr Burnard and Kebbel NSW. Mr Carr confirmed that he was aware of the statement and that the matter was being considered by ASIC with a view to the making of a decision by 31 October 2007.

Approach to the application for Order 1

99 I am satisfied that it is open to me to make Order 1 if, in terms of s.1323(1), it is “necessary” or “desirable”, for the purpose of “protecting the interests of” the persons I have referred to as investors, to appoint a receiver of the property of Mr Burnard and Kebbel NSW. Order 1 is a lesser alternative.

100 Where the lesser alternative of a freezing order is in contemplation, the statutory pre-conditions related to the interests of aggrieved persons are not accompanied or superseded by the pre-conditions that attend a proposal for the making of an order of a Mareva kind (see, for example, Cardile v LED Builders Pty Ltd (1999) 198 CLR 380). In saying this, I express respectful agreement with the approach taken by McDougall J in Krecichwost (above). At the same time, however, the existence of factors which might enliven the Mareva jurisdiction (such as an apprehension of dissipation of assets) would be relevant to questions of what is “necessary” or “desirable” in the interests of aggrieved persons.

101 As McDougall J also observed, the court may take into account all relevant discretionary factors, including those identified by Santow J in Re HIH Insurance Ltd; Australian Securities and Investments Commission v Adler (2001) 38 ACSR 266 at 268. Santow J there observed that the public interest role of ASIC may warrant an order in circumstances where it might be denied to a private litigant. At the same time, however, any order the court makes must, as Santow J said “operate in a manner that is proportionate and not more intrusive than is necessary in the circumstances, recognising that it is inevitable that such orders will intrude upon private rights”. Santow J also pointed to the significance of the legislative exemption that ASIC enjoys from the requirement to give an undertaking as to damages.

102 In the end, the court’s task is as described, in relation to an application under ss.1323(1)(j) and 1323(1)(k), by Nicholson J in Australian Securities and Investments Commission v Ivey (1998) 29 ACSR 391:

“The Court is required to engage in a balancing exercise which includes a balancing of public and private rights.”

Decision on Order 1

103 I have said that ASIC is proceeding with reasonable despatch, allowing for the size and nature of the task. But I am uneasy about the length of time for which the present restraints upon Mr Burnard and Kebbel NSW have been in force without ASIC having taken concrete steps towards crystallising some claim for relief for the benefit of the investors, as “aggrieved persons”. It may be accepted that the investigation involving Mr Burnard and Kebbel NSW is part of a larger whole and that that whole is of great size and complexity. The fact remains that, after twenty months of investigation, ASIC has not initiated any action aimed at vindicating the perceived rights of the aggrieved persons.

104 It is, however, significant that ASIC has been successful in moves to have Mr Burnard brought to trial for offences against State law entailing dishonesty or, at least, reckless disregard as to the truth or otherwise of statements made. I refer to the offences mentioned at [83] above. Mr Burnard’s conduct has been subjected to scrutiny in that connection and a committing magistrate has found that he has a case to answer. Committal occurred only a short time ago, in September 2007.

105 It is also significant that the liquidators of mezzanine companies have initiated civil recovery proceedings against Kebbel NSW and appear to have decided to extend those proceedings to include claims against Mr Burnard of receipt of money knowing it to have been improperly obtained. There is accordingly room for a reasonably based suspicion that there exist grounds on which ASIC might ultimately pursue some remedy for the benefit of the investors. The proceedings were commenced as recently as July 2007.

106 As to Mr Burnard’s attitude generally, I am satisfied that he has, through his lawyers, maintained relatively open dialogue with ASIC. I also accept, however, that ASIC, through Mr Carr, harbours concern that Mr Burnard has not been, in all respects, co-operative.

107 I do not have before me any evidence of direct threat of dissipation of assets by Mr Burnard or Kebbel NSW but, as I have said, that is not a predominant consideration in this kind of case. I do, however, have evidence of a pattern of past conduct which has seen assets concentrated in the ownership of Ms Robins and the three trusts. Ms Robins, in her s.19 examination by ASIC delegates, made it clear that, apart from performing some office and secretarial duties, she had devoted her time to being a homemaker and mother. While there may well have been legitimate reasons of a family and fiscal kind for ownership of assets to be concentrated in these ways, there is room for some measure of apprehension that similar measures might again be adopted, even if for the same legitimate reasons.

108 I am satisfied that protection of the interests of the aggrieved persons will be enhanced by continuation of restraint upon Mr Burnard with respect to his property. The public interest will thereby be served. I do have some concerns about the inroads upon Mr Burnard’s private rights that continuation of the restraint will entail. These concerns stem from the length of time for which the restraints have already been in place without tangible action aimed at access to his assets for the benefit of the aggrieved persons. The investigation is large and complex. ASIC is, of course, entitled to set its own priorities. But if ASIC has succeeded in obtaining a fetter upon the freedom of an individual to deal as he wishes with his property, it is incumbent upon ASIC to continue to move with reasonable despatch towards having the rights of aggrieved persons satisfied out of the property. If it does not, it cannot expect to have the restraint continued.

109 Against this, however, stands the fact that tangible steps to bring Mr Burnard to account for actions related to solicitation of investments were taken when he was committed for trial on the Crimes Act charges in September 2007. He is also likely to be made a party to the litigation initiated by the mezzanine companies’ liquidators in July 2007. While neither of these recent events will be an avenue of direct redress for aggrieved persons, each tends to indicate actions and courses of conduct which, if ultimately proved, might well ground causes of action benefiting aggrieved persons – by whom I mean, of course, the investors who parted with their money in the circumstances outlined in the affidavits referred to at [95] above.

110 Balancing the rights of those investors – or, at least, their distinct interest in seeing assets preserved while avenues of recovery beneficial to them are explored – against the rights of Mr Burnard to free enjoyment of his property, I am satisfied that freedom of Mr Burnard from restraint continues to be outweighed at this stage by the desirability of providing some measure of assurance for the investors. It is at least desirable and arguably necessary that the restraint continue for the purpose of protecting the interests of the persons aggrieved.

111 The continuation of the restraint upon Mr Burnard should, however, be subject to a time limit so that the matter can be further reviewed. When this case was before the court on 13 June 2006, Palmer J said (see Australian Securities and Investments Commission v Burnard [2006] NSWSC 611 at [19]):

“Having regard to the fact that three months have already elapsed since the investigation into Mr Burnard and Kebbel was first commenced by ASIC, I think that ASIC should be able to report back to the Court meaningfully on its further investigations within a period of six weeks from today. At that time I would expect that ASIC would be either able to substantiate further its suspicions as to the possibility of contraventions of the Act or of the general law, or else be able to tell the Court that despite its investigations it has advanced no further. The Court can then consider whether the risk of a meaningful investigation being frustrated is of such magnitude as to warrant further extension of restrictive orders against the Defendants.”

112 That was said in what can now be seen to have been the very early days of an investigation which has become much larger and more complex. But the principle revealed by the observations of Palmer J remains applicable. The order restraining dealings by Mr Burnard should continue only until a specified day, so that ASIC, if it is to obtain a further continuation, is required to make a positive case justifying that course. I will therefore make an order generally to the effect of Order 1 up to and including 11 February 2008, being a date suggested by ASIC. I consider that date to be appropriate, particularly in light of the suggestion that ASIC may have made decisions by 31 October 2007 on whether to initiate compensation proceedings under s.50 of the Australian Securities and Investments Commission Act. A period of somewhat more than three months from then should allow time for the ramifications of the expected decisions to emerge. ASIC may, of course, make a further application at the end of the period.

113 I have said little about the separate position of Kebbel NSW. In general terms, however, the observations made in relation to Mr Burnard again apply, although perhaps with somewhat lesser force, given that Kebbel NSW is a company and that it is presumably not trading.

Form of order

114 As I have said, the appropriate order is an order up to and including 11 February 2008. But it is necessary to pay some attentions to the form of its proviso. I have not included the content of the proviso in the description of Order 1 at [6] above. It can be said, as a general matter, however, that it contains exceptions and qualifications of the kind typically found in Mareva orders.

115 It was made clear on behalf of Mr Burnard and Kebbel NSW that, if any restraint were to be continued, they would wish to be heard on the question of exceptions and qualifications. I shall therefore receive submissions on that question at a time to be fixed.

Asset disclosure orders

116 ASIC seeks, as against each of Mr Burnard, Kebbel NSW, Ms Robins and BDI, an order that the party (or its “proper officer”) deliver to ASIC “a full and detailed affidavit” setting out certain matters about the party’s assets and liabilities. The order, as framed, contains mechanisms to cover the possibility that a person subjected to the order may wish to assert and preserve the privilege against self-incrimination or exposure to a civil penalty. No issue is taken by the defendants with the adequacy of those mechanisms.

117 ASIC contends that disclosure orders of the kind sought will be justified as adjuncts to any restraining orders. In that respect, it relies on the observation of McDougall J in Australian Securities and Investments Commission v Krecichwost (above) at [50] that, if the court is satisfied that appointment of a receiver is justified, a disclosure order will be ancillary to, and in aid of, the effective implementation of that order. Where the lesser alternative of a restraining order was preferred, his Honour regarded an asset disclosure order as part of the lesser alternative. Disclosure orders were made in aid of the appointment of receivers in the Carey litigation – see the description by French J at paragraphs [2] and [3] of his judgment in Richstar Enterprises Pty Ltd v Carey (No 5) (2006) 58 ACSR 6 which concerned courses that should be taken in case of apprehension of deficient disclosure.

118 It is submitted on behalf of the defendants that disclosure orders could not be made against anyone other than a party in respect of whom an order appointing a receiver is made. It is said that there is no need for disclosure of assets when the order is an order that a person not deal with the person’s assets. The person should be taken to know that his or her assets are and needs no disclosure in order to obey the order. I do not accept this submission. A restraining order is something in which ASIC has a continuing interest. Some ability to monitor compliance should be afforded to ASIC.

119 The defendants also submit (and I agree) that disclosure orders should be made only against persons subjected to substantive orders. This means that disclosure orders will not be made against Ms Robins or BDI.

120 As far as Mr Burnard is concerned, it is pointed out in submissions made on his behalf that, as the evidence shows, he has raised with ASIC practical concerns relating to existing orders to ensure that there is no inadvertent contravention. It is further submitted, therefore, that there should be no concern about contravention by him. This, in my view, is too simplistic an approach. An obligation to disclose assets will focus attention closely on exactly what Mr Burnard’s assets are. It is desirable that he be put to that task.

121 In summary, I am satisfied that asset disclosure orders can and should be made in respect of Mr Burnard and Kebbel NSW.

Disposition

122 Asset preservation orders will be made against Mr Burnard and Kebbel NSW up to and including 11 February 2008. Each asset preservation order will otherwise be in the form of Order 1 set out at [6] of these reasons, but with a proviso in terms to be fixed by the court after receiving further submissions. Asset disclosure orders will be made in respect of Mr Burnard and Kebbel NSW in the form set out in the draft short minutes provided by ASIC at the hearing before me. There should be a reservation of liberty to apply on seven days notice. The subsisting asset preservation orders in respect of Ms Robins and BDI, as most recently made on 27 August 2007 and thereafter continued, including by me on 4 and 10 October 2007, are discharged.

123 I shall make directions for submissions on the precise form of the orders and on the matter of costs.

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Citations

Australian Securities and Investments Commission v Burnard [2007] NSWSC 1217

Most Recent Citation

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30

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Cases Cited

28

Statutory Material Cited

4

Australian Securities and Investments Commission v Krecichwost [2007] NSWSC 948

Australian Securities and Investments Commission v Banovec (No 2) [2007] NSWSC 961

Australian Securities and Investments Commission v Carey (No 3) [2006] FCA 433

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CITATION:	ASIC v Burnard [2007] NSWSC 1217
HEARING DATE(S):	04/10/07, 09/10/07, 10/10/07
JUDGMENT DATE :	31 October 2007
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Asset freezing orders to be made in respect of two defendants up to 11 February 2008; Asset disclosure orders to be made in respect of the same defendants; Liberty to apply to be reserved
CATCHWORDS:	CORPORATIONS - jurisdiction in respect of property of "relevant person" where ASIC investigation in progress - application by ASIC for freezing orders in respect of property of two "relevant persons" and property of two other persons - where ASIC alleges that "relevant persons" have equitable interests in property owned by the other persons - whether the other persons may be subjected to orders under s.1323 - consideration of interests of "aggrieved persons" - where investigation in progress for 20 months - whether asset disclosure orders should be made in support of freezing orders
LEGISLATION CITED:	Australian Securities and Investments Commission Act 2001 (Cth), ss.12GF, 19, 50 Corporations Act 2001 (Cth), ss.1041I, 1323, 1324(10), 1325(5)(e) Crimes Act 1900, s.178BB Family Law Act 1975 (Cth), s.79
CASES CITED:	Anglo-Italian Bank v Davies (1878) 9 ChD 275 Australian Securities and Investments Commission v Banovec (No 2) [2007] NSWSC 961 Australian Securities and Investments Commission v Burnard [2006] NSWSC 611 Australian Securities and Investments Commission v Carey (No 6) (2006) 58 ACSR 141 Australian Securities and Investments Commission v Ivey (1998) 29 ACSR 391 Australian Securities and Investments Commission v Krecichwost [2007] NSWSC 948 Australian Securities and Investments Commission v Wiggins (1998) 30 ACSR 190 Baumgartner v Baumgartner (1987) 164 CLR 137 Calverley v Green (1984) 155 CLR 242 Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 Chief Commissioner of Stamp Duties v Buckle (1995) 38 NSWLR 574 Chief Commissioner of Stamp Duties v Buckle (1998) 192 CLR 226 Corin v Patton (1990) 169 CLR 540 CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (1982) 149 CLR 431 Flinn v Flinn [1999] 3 VR 712 Giumelli v Giumelli (1999) 196 CLR 101 Hayes v O’Sullivan (2001) 24 WAR 40 Re HIH Insurance Ltd; Australian Securities and Investments Commission v Adler (2001) 38 ACSR 266 Ideal Bedding Co Ltd v Holland [1907] 2 Ch 157 Ioppolo v Ioppolo (unreported, WASC, Full Court, 13 November 1978) Jones v Dunkel (1959) 101 CLR 298 Lightfoot v Lightfoot (unreported, WASC, 27 February 1991) Mullane v Mullane (1983) 158 CLR 436 Mushinski v Dodds (1985) 160 CLR 583 Napier v Public Trustee (WA) (1980) 55 ALJR 1 Peldan v Anderson (2006) 227 CLR 471 Re Richstar Enterprises Pty Ltd; Australian Securities and Investments Commission v Carey (No 3) (2006) 57 ACSR 307 Richstar Enterprises Pty Ltd v Carey (No 5) (2006) 58 ACSR 6 Re Suco Gold Pty Ltd (1983) 33 SASR 99 Vacuum Oil Co Ltd v Wiltshire (1945) 72 CLR 319
PARTIES:	Australian Securities and Investments Commission - Plaintiff Neil Burnard - First Defendant Palentia Pty Limited - Second Defendant Tenala Pty Ltd - Third Defendant Jennifer Lee Robins - Fourth Defendant BDI Pty Ltd - Fifth Defendant
FILE NUMBER(S):	SC 3061/06
COUNSEL:	Mr D.R. Stack - Plaintiff Mr A.G. Hartnell, Solicitor - Defendants
SOLICITORS:	Conrad Gray, Solicitor for ASIC - Plaintiff Atanaskovic Hartnell - Defendants