Done v Financial Wisdom Ltd

Case [2008] FCA 1706

FEDERAL COURT OF AUSTRALIA

Done v Financial Wisdom Limited [2008] FCA 1706

Bankruptcy Act 1966 (Cth) s 58(3)(b)
Corporations Act 2001 (Cth) ss 471B, 562
Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 6(4)
Federal Court Rules O 6 r 2

Ashmere Cove Pty Ltd v Knightsbridge Managed Funds Ltd (in liq) [2007] FCA 1428 referred to
Council of the City of Sydney v West (1965) 114 CLR 481 considered
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 applied
Employers Reinsurance Corporation v Ashmere Cove Pty Ltd (2008) 166 FCR 398 followed
Nissho Iwai Australia Ltd v Malaysian International Shipping Corporation, Berhad (1989) 167 CLR 219 considered
Ogilvie-Grant v East (1983) 7 ACLR 669 considered
Re Rose; Ex parte Devaban Pty Ltd (unreported, Hill J, 7 October 1994) applied
Re Sharp; Ex parte Tietyens Investments Pty Ltd (in liq) [1998] FCA 1367 cited
Sturdy Components Pty Ltd v Trustee of the Bankrupt Estate of Sturt [2000] FCA 884 cited

KENNETH STEPHEN DONE, JUDITH ANNE DONE, KANILO PTY. LIMITED, SILKGROW PTY. LIMITED, WAINIDIVA PTY LIMITED, MOONGAZER PTY LIMITED, KEN DONE & ASSOCIATES PTY LTD and DONE NOMINEES PTY. LIMITED v FINANCIAL WISDOM LIMITED, WAYNE CHEN, BENTLEY BARTON PARTNERS PTY LIMITED (IN LIQ) and GARY TAYLOR

NSD 2178 of 2007

PERRAM J
14 NOVEMBER 2008
SYDNEY


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 2178 of 2007
BETWEEN:

KENNETH STEPHEN DONE & 7 ORS
Applicants
AND:

FINANCIAL WISDOM LIMITED
First Respondent

WAYNE CHEN
Second Respondent

BENTLEY BARTON PARTNERS PTY LIMITED (IN LIQ)
Third Respondent

GARY TAYLOR
Fourth Respondent

JUDGE:

PERRAM J

DATE OF ORDER:

14 NOVEMBER 2008

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Allianz Australia Insurance Limited be joined as a respondent to the proceeding pursuant to Order 6 rule 2 of the Federal Court Rules.

2.Leave is granted to the applicants to proceed against Bentley Barton Partners Pty Limited (in liq).

3.Leave is granted to the applicants to proceed against the estate of Gary Taylor.

4.Leave is granted to the applicants to file a further amended statement of claim in the form of exhibit 4.

5.Allianz Australia Insurance Limited pay the applicants’ costs of the motion seeking its joinder.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


The text of entered orders can be located using eSearch on the Court’s website.


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 2178 of 2007
BETWEEN:

KENNETH STEPHEN DONE
First Applicant

JUDITH ANNE DONE
Second Applicant

KANILO PTY. LIMITED
Third Applicant

SILKGROW PTY. LIMITED
Fourth Applicant

WAINIDIVA PTY LIMITED
Fifth Applicant

MOONGAZER PTY LIMITED
Sixth Applicant

KEN DONE & ASSOCIATES PTY LTD
Seventh Applicant

DONE NOMINEES PTY. LIMITED
Eighth Applicant
AND:

FINANCIAL WISDOM LIMITED
First Respondent

WAYNE CHEN
Second Respondent

BENTLEY BARTON PARTNERS PTY LIMITED (IN LIQ)
Third Respondent

GARY TAYLOR
Fourth Respondent

JUDGE:

PERRAM J

DATE:

14 NOVEMBER 2008

PLACE:

SYDNEY

REASONS FOR JUDGMENT

Introduction

  1. There are before me two notices…

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AGLC
Done v Financial Wisdom Ltd [2008] FCA 1706
Case
[2008] FCA 1706
Decision Date

CaseChat Overview and Summary

In the matter of Done v Financial Wisdom Ltd, the applicants seek to join Allianz Australia Insurance Limited as a respondent to the proceeding and amend the pleadings accordingly. The applicants, who include Mr. and Mrs. Done and their associated trustee companies, allege significant financial losses due to the alleged unauthorised actions of Financial Wisdom Ltd, Bentley Barton, and their representatives. The proposed further amended statement of claim alleges a series of unauthorised investments and loans that the applicants claim were contrary to Mr. Done's express instructions. The applicants seek to join Allianz under various legal provisions, including Order 6 rule 2 of the Federal Court Rules, section 562 of the Corporations Act, and section 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW).

The legal issues before the court revolve around whether Allianz should be joined as a party to the proceeding and if leave should be granted to proceed against Bentley Barton and the estate of Gary Taylor under relevant statutes. The court considered the complexity of the proceeding, the seriousness of the claims, and the potential involvement of an insurance policy in determining whether leave should be granted. The court found that the complexity and potential insurance coverage warranted granting leave to proceed against the respondents as proposed.

The court granted the applicants' motion to join Allianz Australia Insurance Limited as a respondent, granted leave to proceed against Bentley Barton and the estate of Gary Taylor, and permitted the filing of a further amended statement of claim. Allianz was ordered to pay the applicants' costs associated with the motion seeking its joinder. This decision ensures that all relevant parties are included in the proceeding and allows the applicants to pursue their claims against the proposed respondents.

Orders

Orders of the court

1. Allianz Australia Insurance Limited be joined as a respondent to the proceeding pursuant to Order 6 rule 2 of the Federal Court Rules.

2. Leave is granted to the applicants to proceed against Bentley Barton Partners Pty Limited (in liq).

3. Leave is granted to the applicants to proceed against the estate of Gary Taylor.

4. Leave is granted to the applicants to file a further amended statement of claim in the form of exhibit 4.

5. Allianz Australia Insurance Limited pay the applicants’ costs of the motion seeking its joinder.

Note:

Background

Background to the litigation

The second application which is before me is an application to join an insurance company Allianz Australia Insurance Limited (“Allianz”) as a respondent to the proceeding together with a cognate application to amend the pleadings to reflect that joinder. This relief is sought by way of an amended notice of motion which was filed in Court at the hearing before me. The basis upon which it is said that Allianz should be joined to the proceeding is pursuant to O 6 r 2 of the Federal Court Rules, s 562 of the Corporations Act, or s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (“Law Reform Act”).Background The applications arise in the following way. The present proceeding was commenced by the applicants on 2 November 2007. The proceeding is of some complexity with the proposed further amended statement of claim running to some 118 pages and being over 550 paragraphs in length. The first-named applicant (“Mr Done”) is a well-known Australian artist and the second applicant is his wife. The third through to eighth applicants are trustee companies which are associated with Mr and Mrs Done. It is apparent from the allegations which are made in the proposed further amended statement of claim that Mr Done has amassed a considerable fortune. The proposed further amended statement of claim alleges that the Dones and their trustee companies retained the services of a financial adviser known as Financial Wisdom Limited (“Financial Wisdom”), who is the first respondent, and a firm of accountants, Bentley Barton, who is the third respondent. Financial Wisdom is a subsidiary of the Commonwealth Bank of Australia. Financial Wisdom’s authorised representative who, it is alleged, dealt with Mr Done and his companies, was Mr Wayne Chen, and he is the second respondent in the proceeding. The particular accountant at Bentley Barton with whom Mr Done and his companies dealt is the fourth respondent, Mr Gary Taylor. By the proposed further amended statement of claim, the applicants allege that Financial Wisdom and Bentley Barton, together with Mr Chen and Mr Taylor, were responsible for providing him with advice on the management of his fortune. Specifically it is alleged that an investment committee was formed to supervise that advice and that Mr Done gave a particular direction that there were to be no investments without his approval. The proposed amended statement of claim then goes on to allege, in considerable detail, a large number of financial transactions, termed in the pleadings “investments” or “loans”, which it is contended were not authorised by Mr Done as his alleged direction required. That allegation is put against Financial Wisdom, Bentley Barton, Mr Chen and Mr Taylor in a number of ways. For example, it is said to have been a breach of fiduciary duty, to have been negligent and to have involved misleading and/or deceptive conduct. The interests associated with Mr Done claim to have lost a sum of money in excess of $53 million by reason of the conduct which they seek to impugn. The allegations made are not straightforward. However, for present purposes, it is sufficient to observe that the proposed further amended statement of claim alleges that the investments or loans made on behalf of the applicants were done in circumstances which were contrary to the express instructions of Mr Done.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

PERRAM J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: PERRAM J

In their amended notice of motion, the applicants also sought leave to proceed against Allianz under s 562 of the Corporations Act and s 6(4) of the Law Reform Act. It is not necessary, having concluded that Allianz should be joined pursuant to O 6 r 2, to consider the issues raised by these applications.Leave to proceed under the Corporations Act I turn then to the question of whether leave should be granted pursuant to s 471B of the Corporations Act to proceed against Bentley Barton. Section 471B provides:471B Stay of proceedings and suspension of enforcement process While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:(a) a proceeding in a court against the company or in relation to property of the company; or(b) enforcement process in relation to such property;except with the leave of the Court and in accordance with such terms (if any) as the Court imposes. The circumstances in which it would be appropriate to grant leave are not closed. In Ogilvie-Grant v East (1983) 7 ACLR 669 at 672 the following observation was made by McPherson J (with whom Campbell CJ and Sheahan J agreed):It, of course, follows that it is quite impossible to state in an exhaustive manner all the circumstances in which leave to proceed may be appropriate, but in the past they have been said to include factors such as the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and the stage to which the proceedings, if already commenced, may have progressed. Here the proceeding is of considerable complexity. To require those claims to be dealt with by the liquidator on a proof of debt with the almost inevitable consequence of an appeal to a court in relation to any rejection of that proof of debt seems to me to be an inefficient way to proceed. More is this so where I have concluded that there is a potentially an insurance policy involved. Although the proceeding has not progressed far, it seems to me in all the circumstances that the complexity and seriousness of the proceeding, together with the existence of a potential insurance policy, justify a grant of leave pursuant to s 471B.Leave to proceed under the Bankruptcy Act I turn then to the question of whether leave should be granted to the Applicants to proceed against Mr Taylor pursuant to s 58(3)(b) of the Bankruptcy Act. In Re Rose; Ex parte Devaban Pty Ltd [1994] FCA 1082 (unreported, 7 October 1994, Hill J) it was held (at 3-4):On the other hand, the Act does contemplate that the Court will, in an appropriate case, grant leave. In that respect a case would be an appropriate case where the proceedings proposed against the bankrupt are proceedings to which other parties are involved and for the proper conduct of which it may be necessary for the bankrupt to become a party. This principle was applied by Weinberg J in Re Sharp; Ex parte Tietyens Investments Pty Ltd (in liq) [1998] FCA 1367 at 6 and also by Burchett J in Sturdy Components Pty Ltd v Trustee of the Bankrupt Estate of Sturt [2000] FCA 884 at [3]-[4].