Australian Securities and Investments Commission v Pearson
[2014] FCA 799
•4 July 2014
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Pearson [2014] FCA 799
Citation: Australian Securities and Investments Commission v Pearson [2014] FCA 799 Parties: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v MARION JOAN PEARSON and COLISA PTY LTD (ACN 066 267 196) File number(s): WAD 198 of 2014 Judge(s): SIOPIS J Date of judgment: 4 July 2014 Catchwords: CORPORATIONS – ex parte application for freezing orders and travel restriction orders – whether evidence before the Court justified the making of the orders. Legislation: Corporations Act 2001 (Cth) s 1323 Date of hearing: 4 July 2014 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 17 Counsel for the Plaintiff: Mr C Slater Solicitor for the Plaintiff: Australian Securities and Investments Commission Counsel for the First and Second Defendants The First and Second Defendants did not appear
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 198 of 2014
BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
PlaintiffAND: MARION JOAN PEARSON
First DefendantCOLISA PTY LTD (ACN 066 267 196)
Second Defendant
JUDGE:
SIOPIS J
DATE OF ORDER:
4 JULY 2014
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.In the first instance, service of this Originating Process be dispensed with.
2.In the first instance, this Originating Process be returnable instanter.
3.Time for service of this Originating Process be abridged to Monday 7 July at 12 noon.
4.This Originating Process be returnable before Court at 2.15 pm on Friday, 11 July 2014.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 198 of 2014
BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
PlaintiffAND: MARION JOAN PEARSON
First DefendantCOLISA PTY LTD (ACN 066 267 196)
Second Defendant
JUDGE:
SIOPIS J
DATE:
4 JULY 2014
PLACE:
PERTH
REASONS FOR JUDGMENT
This is an ex parte application which is brought on an urgent basis.
The plaintiff is the Australian Securities and Investments Commission (ASIC). ASIC seeks freezing orders in respect of the property and bank accounts of Ms Marion Pearson, the first defendant, and her company, Colisa Pty Ltd (Colisa), the second defendant. The defendants are former authorised representatives of Ballast Pty Ltd (Ballast), a company which provides financial services to the public. ASIC also seeks orders preventing Ms Pearson from leaving Australia. Ms Pearson resides in Australia but holds a New Zealand passport. ASIC relies upon s 1323 of the Corporations Act 2001 (Cth) for the orders sought.
On 12 December 2013, ASIC commenced an investigation into the activities of Ms Pearson and Colisa when they were authorised representatives of Ballast. ASIC commenced the investigation following the receipt of a report from Ballast that Ms Pearson may have paid client funds into bank accounts under her control.
Mr and Mrs Pettitt are former clients of Ballast. Ms Pearson was the financial adviser at Ballast with whom Mr and Mrs Pettitt dealt in respect of their superannuation fund. As part of its investigation, ASIC issued notices to produce documents to a number of financial institutions, particularly those involved with investments which were apparently made on behalf of Mr and Mrs Pettitt by Ms Pearson. Among the institutions to which notices were sent are BT Funds Management Limited (BT) and Macquarie Bank Limited (Macquarie). Each of BT and Macquarie responded to the notices by advising that the account numbers for the investments recorded in the Pettitt superannuation fund statement as an investment in one of its products, was not a genuine account number.
Mr John Booth, an ASIC investigator, deposed that ASIC wishes to examine Ms Pearson in relation to her and Colisa’s activities as authorised representatives of Ballast, and requires Ms Pearson’s assistance in explaining the movement of monies through the bank accounts under her control.
On 24 June 2014, ASIC issued a notice to produce documents to Ms Pearson. The notice requires Ms Pearson to produce the documents by 14 July 2014. Ms Pearson is represented by a solicitor in relation to the ASIC investigation. The notice was served on Ms Pearson’s solicitor on 24 June 2014. In response to being served with that notice, Ms Pearson’s solicitor responded by advising ASIC that he would pass the information on to his client who would respond, or words to that effect.
Mr Booth also deposed that on 3 July 2014, ASIC received a document from Ballast which indicated that Ms Pearson had been the authorised representative dealing with about 25 of its clients, and listing those clients. The document advised that the total amount of funds involved in respect of those clients was $4.3 million. The document characterised those funds as potentially lost. Counsel for ASIC advised the Court that it was the receipt of this document which prompted ASIC to apply urgently and on an ex parte basis for the orders sought, notwithstanding that the ASIC investigation had been on foot for about seven months.
In relation to its application for the making of the freezing orders, ASIC referred to evidence that Ms Pearson owns one real property jointly and another real property in her own name, in Western Australia. There is also evidence that each of Colisa and Ms Pearson has a bank account. There is about $2,327.33 in the Colisa bank account and $86.39 in Ms Pearson’s bank account. Further, there is evidence that Ms Pearson has a credit card account with the National Australia Bank Limited on which she owes about $26,000. Mr Booth also deposed, at a high level of generality, that “some funds” had been transferred from Colisa’s bank account to a New Zealand bank account, believed to be that of Ms Pearson’s partner.
In support of its application for the making of an order restraining Ms Pearson from leaving Australia, ASIC relies on the following evidence. Ms Pearson is a New Zealand passport holder who has travelled to New Zealand on nine occasions during the period August 2009 to November 2013. Further, says ASIC, Ms Pearson left Australia in March 2014 and returned to Australia on 2 July 2014. It is also said that Ms Pearson has yet to provide documents pursuant to the notice served on her solicitor.
In relation to the freezing orders sought, I am not satisfied that there is a real risk of the assets being disposed of within the next seven days before the matter comes back to Court on an inter partes basis. Insofar as the real properties are concerned, there is, in my view, no serious risk of them being sold and the proceeds disposed of, within the next seven days. In this regard, I observe that the properties are encumbered to the extent of $962,489.20. Also, the credit balance in the bank account of each of Ms Pearson and Colisa is so small that there is no real point in enjoining the disposal of those sums, either. Further, Mr Booth’s evidence in relation to the monies transferred out of the Colisa bank account is at such a high level of generality that I can put no weight on it.
I am also of the view that the evidence in relation to the alleged flight risk of Ms Pearson is not sufficient to support the making of the orders sought on an ex parte basis. To be weighed against the evidence relied upon by ASIC, to which I have referred, is the following evidence.
Although Ms Pearson is a New Zealand passport holder she is a long term permanent resident of Australia. Also, Ms Pearson has other strong connections to Australia. She is the owner of two real properties here and she has a granddaughter who lives here. Further, she continues to conduct a financial advisory business in Perth - albeit that it appears, on the evidence, that she is doing so without holding a current licence. With regard to her business, the evidence is that notwithstanding that Ballast advised those clients serviced by Ms Pearson whilst at Ballast, of its allegations against Ms Pearson, many of those clients elected to take their business to Ms Pearson when she left Ballast. In its document of 3 July 2014, Ballast has included those of its former clients’ funds in the funds which Ballast says are unaccounted for; and, in my view, that affects the weight to be accorded to the document.
In addition, there is evidence that Ms Pearson has instructed a solicitor to represent her in relation to the ASIC investigation and ASIC has had dealings with the solicitor in relation to the investigation.
Further, and importantly, the evidence shows that notwithstanding that Ms Pearson was aware of the ASIC investigation, she returned to Australia from overseas on 2 July 2014. In the absence of evidence that this is only a temporary return visit to Australia, the fact that Ms Pearson, knowing of the investigation, was prepared to return to Australia, does not support the contention that she is a flight risk. To the contrary, this conduct, particularly in conjunction with the evidence that she has instructed a solicitor to represent her in the investigation, leads to an inference that Ms Pearson intends to participate in the investigation.
In relation to the fact that Ms Pearson has yet to provide documents pursuant to ASIC’s notice of 24 June 2014 served on her solicitor, no weight can be placed on her failure to provide those documents, because the time for providing those documents has not yet expired.
I am conscious of the observations in the cases about the importance of an individual’s right to travel. Of course, this consideration must be weighed against the potential prejudice to the ASIC investigation and to any persons who have potential claims against Ms Pearson, should she not participate in the investigation. However, in weighing those factors in the balance, the Court acts on the evidence that is before the Court. I am not satisfied that the evidence in its current state is sufficiently probative on the question of Ms Pearson constituting a flight risk to justify making the travel restriction orders sought, in the absence of hearing argument from Ms Pearson. Therefore, I decline to make the travel restriction orders.
However, I will make orders for short service and the application being returnable on Friday of next week.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate:
Dated: 31 July 2014
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