Australian Securities and Investments Commission v Grubb
[1999] WASC 103
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION -v- GRUBB & ANOR [1999] WASC 103
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [1999] WASC 103 | |
| Case No: | COR:173/1999 | 14 JULY 1999 | |
| Coram: | WHITE J | 27/07/99 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Application for injunction and other relief granted | ||
| PDF Version |
| Parties: | AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION GRAEME CLIFFORD GRUBB MARGARET ELIZABETH GRUBB |
Catchwords: | Injunction Interlocutory injunction following breach of an enforceable undertaking pursuant to the Australian Securities and Investment Commission Act, 1989 (Cth) Turns on own facts |
Legislation: | Australian Securities and Investments Commission Act, 1989 (Cth) Finance Brokers Control Act 1975 (WA) |
Case References: | Nil Doherty v Allman (1878) 3 App Cas 709 Hampstead & Suburban Properties Ltd v Diomedous [1969] 1 Ch 248 ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 Trade Practices Commission v Santos (1992) 38 FCR 382 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Applicant
AND
GRAEME CLIFFORD GRUBB
First Respondent
MARGARET ELIZABETH GRUBB
Second Respondent
Catchwords:
Injunction - Interlocutory injunction following breach of an enforceable undertaking pursuant to the Australian Securities and Investment Commission Act, 1989 (Cth) - Turns on own facts
Legislation:
Australian Securities and Investments Commission Act, 1989 (Cth)
Finance Brokers Control Act 1975 (WA)
(Page 2)
Result:
Application for injunction and other relief granted
Representation:
Counsel:
Applicant : Mr A N Siopis
First Respondent : Mr J G Hanly
Second Respondent : Mr J G Hanly
Solicitors:
Applicant : Australian Securities & Investments Commission
First Respondent : Hotchkin Hanly
Second Respondent : Hotchkin Hanly
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Doherty v Allman (1878) 3 App Cas 709
Hampstead & Suburban Properties Ltd v Diomedous [1969] 1 Ch 248
ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248
Trade Practices Commission v Santos (1992) 38 FCR 382
(Page 3)
- WHITE J:
The application
1 The applicant seeks the following orders in terms of a substituted Chamber Summons dated 14 July 1999:
"1. An order requiring the First Respondent to file and serve on the Applicant an affidavit by 4pm on 16 July 1999, disclosing the following information:
a) The names and addresses of all the persons who were sent a circular letter dated 11 June 1999, and signed by the First Respondent;
b) The names and addresses of all those persons who completed and returned the document entitled "Authorisation for Change of Mortgage Management" ("the Letter of Authority") enclosed with the circular letter and addressed to Graeme Grubb Consultancy and the New Finance Broker ("the new Business");
c) The following details of the bank account referred to in letters dated 28 and 29 June 1999 sent to Mark Conlan by the First Respondent:
i) The name of the bank;
ii) The number of the bank account;
iii) The names of the signatories to each such account;
a) each Letter of Authority referred to in paragraph 1(b) above;
b) bank statements since 4 May 1999 for the account referred to in paragraph 1(c) above.
(Page 4)
- 3. An injunction restrainingthe first respondent whether by himself, his servant or agents until trial or further order from:
a) carrying on business as a finance broker or mortgage manager or being in any way directly or indirectly concerned in the management of any such business or businesses;
b) entering into, or giving effect to, any contract, arrangement or understanding with Mr Barry Maxwell Allen ("Mr Allen") or any other person, pursuant to which the first respondent would:
i) engage or participate whether as partner or principal or otherwise, in the conduct of any business providing mortgage management and/or finance broking services; or
ii) be involved whether directly or indirectly in the management of any such business;
c) taking any steps to implement the instructions or otherwise give effect to the authority purportedly conferred on the first respondent and Mr Allen by persons who completed and returned the Letter of Authority which was enclosed with the circular letter from the first respondent dated 11 June 1999;
d) Procuring or permitting any other person to implement or otherwise give effect to the instructions and authorisation contained in each of the completed Letters of Authority.
4. An injunction restraining the first respondent until trial or further order from writing letters to clients or former clients of Rowena Nominees Ply Ltd which convey the impression that the First Respondent is entitled to carry on business as a mortgage manage or finance broker or participate in the management of any such business.
(Page 5)
- 5. An order requiring that by no later than 4 pm on 19 July 1999, the first respondent do write and post to each person who completed a Letter of Authority a letter in the terms annexed to this order.
6. There be liberty to apply on 12 hours notice.
7. Costs."
2 The respondents on various grounds oppose the application but, at the hearing before me on 14 July 1999, the opposition was confined to the issues encapsulated within the following submissions, namely:
"3.1 It is submitted that it is far from clear that the Court would be satisfied that the circular letters issued by the First Respondent are in breach of his undertakings in relation to winding down and ceasing his business as a broker.
3.2 Even if the Court was so satisfied, given the affidavit of the First Respondent as to his future intentions, the Court should not make any further orders."
3 The application is made pursuant to the provisions of s 93AA of the Australian Securities and Investments Commission Act, 1989 (Cth) ("the ASIC Act")
4 Sub-section 93AA(1) provides that:
"The Commission may accept a written undertaking given by a person in connection with a matter in relation to which the Commission has a function or power under this Act."
The background
5 Prior to April 1999, the respondents were directors of Rowena Nominees Pty Ltd ("Rowena") which was a finance broker licensed under the Finance Brokers Control Act 1975 (WA) ("the FBC Act") and which carried on business under the name or style of "Graeme Grubb Finance Broker". That business included managing mortgage investments for clients and the operation of a trust account in respect of clients' moneys. The first respondent was responsible for the day-to-day operations of Rowena and its business.
(Page 6)
6 In April 1999, following the receipt of complaints, the applicant commenced an investigation into Rowena. In consequence, Rowena has been placed in provisional liquidation and a provisional liquidator appointed. An independent accountant (who was subsequently appointed as the provisional liquidator of Rowena) carried out an investigation and reported serious irregularities in relation to Rowena's business including, inter alia, the overdrawing of the trust account. That accountant has estimated that the deficiency in the trust account may be greater than $1 million and could be as high as $5 million.
7 The respondents executed a written "Enforceable Undertaking" in May 1999 which was accepted by the applicant in which the respondents express the wish to "wind down their involvement in the finance broking industry". The undertakings were expressed as follows:
"Rowena and Grubb to Cease Business
7. Except to the extent necessary to comply with their other commitments in this undertaking, the Parties will not carry on any further business as a finance broker (as that term is defined in the Finance Brokers Control Act) or carry on a business of managing mortgages, or be in any way (whether directly or indirectly) concerned in or take part in the management of such businesses, whether in their own right or as director, manager, or other officer of any other person carrying on any such business.
8. Without limiting the generality of clause 7, the Parties will not, as principal or agent, negotiate or arrange any new loans as part of the business of Rowena, or solicit, invite, or accept any further loan moneys as part of the business of Rowena. This prohibition extends to not arranging any new loan investment for existing Lenders who may receive payment of outstanding principal or interest from loan investments negotiated or arranged by the Parties."
"14. The Parties will, as soon as reasonably practicable:
a) advise each Lender that Rowena is ceasing the business of finance broking and winding down its mortgage management business; and
(Page 7)
- b) procure, that the management of each mortgage and loan agreement is transferred to another person, being such person as the Lender may agree or direct.
- 15. The Parties will not recommend or suggest any person as new manager to any Lender unless the Parties have reasonable grounds to believe, and do actually believe, that the proposed manager is appropriately qualified and authorised and will manage that Lender's mortgage honestly and efficiently.
16. The Parties will not accept or receive any repayment of principal by any borrower, except to the extent of any fees or cashflow guarantee repayments to which Rowena is entitled. The Parties will ensure that any repayments of principal are paid to the appropriate Lender or to such person as the Lender may direct.
17. Rowena may continue to receive interest payments on behalf of a Lender and such fees and commissions as may have been agreed between Rowena and the Lender, until such time as the management agreement between Rowena and the Lender has been terminated.
18. For such time as the Parties continue to manage any mortgage for a Lender, or continue to receive moneys on behalf of a Lender in respect of a mortgage, the Parties will manage the mortgage in the best interests of the Lender and with reasonable care and diligence."
8 It appears that, while the first respondent is a licensed finance broker, he does not hold a current business certificate. Section 26(1) of the FBC Act provides:
"26. (1) On and after the appointed day [1 August 1977] a person shall not carry on business, or by any means hold himself or itself out, as a finance broker unless he or it is licensed as such under this Act and holds a current business certificate in respect of the licence."
9 On 7 May 1999, the first respondent sent a circular letter to the clients of Rowena's business, reading, in part, as follows:
(Page 8)
- "Further to our letter of 29 April 1999 advising you in depth about our restructuring as a result of the Global Finance liquidation we are pleased to confirm that all the details forwarded to you remain as advised and the final detail of this restructuring is attached.
The writer also wishes to clarify the following matters that have either appeared in the media or for reasons best known to others have selectively not been disclosed by the media.
• The writer has not quit and will not quit and does not intent (sic) to quit.
• We are not closing our office at Level 1/77 Mill Point Road South Perth, in fact we are presently refurbishing and extending our reception area in a general upgrading.
• The writer is not retiring and as advised in a letter sent to all clients in March 1999 (a copy of which is attached for your reference) will continue working on a full time basis in the business until 2005. My son Bruce Grubb resigned from Solicitors Kott Gunning in 1997 and joined the Grubb Family Group of Companies on 01 January 1998 with the purpose of eventual succession to a position of controlling management of our finance organisation.
• Bruce Grubb of Grubb Legal has prepared all the Mortgage documentation and securities for us over the past 16 months.
Bruce has now agreed to take management and responsibility for our family business and to be totally accountable to you our Mortgagee Investor Clients when his Finance Broking License (sic) is granted which we anticipate will be by early June."
11 In a circular letter to "Dear Investor/Mortgage Client" which has an annexure dated 2 May 1999, first respondent said, inter alia:
(Page 9)
- "After 30 years in the industry, it is my intention to continue the partnership already established with you, our Investor/Mortgagee client, and with the firms legal counsel Bruce GRUBB on a progressive basis. The transition period with us working jointly together is expected to last until the year 2005 when I will hand over management and succession of this successful family business, established for now some 30 years."
12 On 11 June 1999, the first respondent sent another circular letter, similarly addressed, in which he said, inter alia, the following:
"The reason you have not heard from the writer for nearly three weeks is due to the fact that I have not had access to client files, my office, my phones and have even had the computer chip removed from my mobile phone.
An arrangement made by us with Bird Cameron for us to contract with a previous Administration Manager to bring all our client computer records and Finance Broking Trust Account Bank Re-conciliation's (sic) up to date, and which the previous Administration Manager had confirmed in writing with us and forwarded to Bird Cameron, was cancelled several days after we had entered into this agreement with Bird Cameron. Subsequently Bird Cameron put our business into Provisional Liquidation.
Bird Cameron have further refused to allow interest for Mortgagee/Investor clients that has been paid by the Mortgagors/Borrowers to be released to the Mortgagees/Investors.
Up until last Friday, we did not have a post office box, as our post office keys had also been confiscated. Therefore we have not seen any mail whatsoever from our clients for the past three weeks.
…
In order to overcome present unsatisfactory situation for Mortgagee/Investor clients, we advise as follows:
* Effective immediately our new postal address is PO Box 7761 Cloisters Square, Perth WA 6850.
(Page 10)
- …
* Effective as from today, Friday 11 June 1999, we have negotiated with the owners of the building to take over our original Reception Area and Boardroom, for a 5 year period with a further 5 year option. The writer has also leased an area adjacent to Grubb Legal, at the rear of our reception area.
* We have purchased a new Mortgage Finance Trust Account computer program, and Candice has now entered into this program all of the clients who agreed to be transferred from Rowena Nominees Pty Ltd to Grubb Legal.
* In order that there is no conflict of interest with my solicitor son Bruce Grubb, we have accepted an offer from a Finance Broker, to lease an area of office space adjacent to us on Level 1, 77 Mill Point Road. He has agreed to assist the client base that wish to be transferred, by servicing all our valued Mortgagee Investor clients that had originally agreed to have their tiles transferred to Grubb Legal.
* The writer and the new Finance Broker will work closely together to ensure that clients security documentation is in place and that any documents which have not been registered due to the problems over the past few months, are registered as quickly as possible.
* If all documentation that is attached to this letter is returned to us within 5 working days, Graeme Grubb and the new Finance Broker, should be in the position to pay clients interest in the first week of July 1999.
* Any clients who have not nominated for Graeme Grubb and the new Finance Broker to act for them by Friday the 17 June 1999, will need to deal directly with Bird Cameron or their nominated solicitor, as Graeme Grubb and the new Finance Broker will only be able to act for the clients who have authorised them to by executing the attached documentation.
…
(Page 11)
- Would you please complete the following documentation.
1) Internal Audit Form
2) Authority for Graeme Grubb and the new Finance Broker to act in managing your existing Mortgage, effective as from Friday 11 June 1999.
… "
OF MORTGAGE MANAGEMENT
- FROM: Graeme Grubb Finance Broker
TO: Graeme Grubb Consultancy and the New Finance Broker
I/We (Print Full Names) _______________________________
________________________________________________
___________________________________________________________________
OF (Print Postal Address)____________________________________
___________________________________________________________________
___________________________________________________________________
____________________________________________________________________
___________________________________________P/Code ________
Ph (Home)____________________ (Business) _________________
(Mobile) _____________________ (Facsimile) _________________
Hereby Authorise Graeme Grubb and the new Finance Broker to:
* Manage our existing Mortgage investments on the same terms and conditions as Graeme Grubb Finance Broker advised in their Deed of Authority and Certificate of Confirmation.
* Collect monthly interest payments in advance.
* Pay Cash-Flow Guarantee payments.
* Take legal action if the terms of our Mortgage Investments are not adhered to by the Mortgagors/Borrowers."
(Page 12)
13 It appears that the "New Finance Broker" referred to in the Authorisation for Change of Mortgage Management was one, Barry Maxwell Allen who was, at 11 June 1999 not a licensed finance broker. I am now informed by his affidavit sworn on 16 July 1999 that he applied for the reinstatement of his finance broker's licence (which had been cancelled in 1990) on 14 July 1999 and was granted a conditional licence which, because of the restrictions imposed thereon, result in his being presently unable to be involved with the first respondent.
14 The applicant complains that first respondent has breached the Enforceable Undertaking by carrying on or threatening to carry on the business of finance broker by acquiring premises, by acquiring a new software package for the management of mortgages, by soliciting instructions from clients to appoint himself and Mr Allen to manage their investments or mortgages, notwithstanding that neither he nor Mr Allen were at the time (or now are) appropriately qualified to do so. In addition, first respondent appears to have made or attempted to make arrangements for trust funds to be paid to his employee, Ms Candice Burgess, at his postal address. The inference from the circular letters is, I think inescapable that the first respondent intends to take over and to manage the investments or mortgages of those clients or former clients of Rowena who furnish him with the requested authorisation, notwithstanding what the first respondent has said in his affidavit as to his future intentions. In my opinion, the applicant has established a serious question as to whether the first respondent has manifested an intention to act in breach of his Enforceable Undertaking.
15 As to the balance of convenience, the first respondent has stated that he is incapable of operating as a finance broker as he suffers from Attention Deficiency Disorder, he is currently not in possession of the requisite business certificate required under s 26(1) of the FBC Act, the "New Finance Broker" whom he invited the addressees of the circular letter dated 11 June 1999 to appoint, with himself, as manager of their investments or mortgages, is also not qualified to undertake that task and the affairs of the various clients of Rowena are therefore in some doubt.
16 In my opinion, the applicant has made out a case for the grant of an interlocutory injunction and the other orders sought. Accordingly, I shall make an order as asked in the chamber summons, with appropriate amendments to the dates set out therein, as to which I will hear from counsel.
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