REASONS FOR JUDGMENT
1 This morning, the applicants moved the Court for the orders set out at the commencement of these reasons. These are the reasons why I made those orders.
2 The respondent (Mr Brown) was employed as an authorised representative of the first applicant (Bridges) from about 7 June 2007 until 28 May 2008 when his employment was terminated. Bridges is a wholly owned subsidiary of the second applicant (AWM). Bridges holds an Australian financial services licence issued by the Australian Securities and Investments Commission. Bridges operates a planning and stockbroking business and has a network of authorised and accredited financial planners. The third applicant (AWM Service Co) provides services to AWM and its subsidiaries, such as Bridges.
3 The applicants claim relief in the nature of payment of money. They allege that Mr Brown engaged in various forms of conduct in contravention of ss 1041G and 1041H of the Corporations Act 2001 (Cth) and s 42 of the Fair Trading Act 1987 (NSW). They also alleged that he breached his contract of employment and breached fiduciary duties that he owed to the applicants. In various ways, it is alleged that Mr Brown misappropriated or failed to account for monies that were paid to him by clients of Bridges.
4 On 11 June 2008 the Court (Edmonds J) made a freezing order against Mr Brown.
5 On 17 June 2008, by consent, the Court (Branson J) made a further freezing order against Mr Brown.
6 The orders I made ex parte this morning are in the nature of a freezing order against the wife of Mr Brown, Donna Joyce Brown (Mrs Brown), who is not a party to the substantive proceeding.
7 On the hearing, the applicants relied on an affidavit of Belinda Dent affirmed on 10 June 2008 and certain documents that were admitted as exhibits.
8 The evidence showed that in an interview on 6 May 2008, Mr Brown admitted having used $160,000 of clients' funds "inappropriately".
9 There was evidence that Mr Brown had funded out of funds of his clients a sum of $147,500 towards the purchase in the name of his wife of a property at 1/2B Cypress Drive, Lugarno, being Lot 1 Strata Plan 47684 and being the land in Folio 1/SP47684. The purchase took place in 2002. The purchase price was $610,000 of which $450,000 was borrowed from NSW Teachers Credit Union Ltd (the Credit Union), and the remaining $160,000 was provided by Mrs Brown.
10 When I say that it was provided by Mrs Brown, I note that of this amount some $147,500 was, on the evidence before the Court this morning, provided by Mr Brown out of funds of clients of Bridges. The evidence suggests that Mr Brown obtained $57,500 from one client and $90,000 from another client. Later, when the client whose $90,000 had been used, died, Mr Brown used the money of another client to pay out the estate. Mr Brown caused both amounts to be paid to the trust account of B Hayward & Co, the solicitors who were acting for Mrs Brown on the purchase and mortgage. It appears that of the $147,500, a sum of $23,676.94 was not needed and was paid to the Credit Union on account of Mr Brown.
11 It may be that Mrs Brown knew nothing of her husband's dealings with the clients' money but in that case it appears that so far as the amounts totalling $147,500 are concerned, she was a volunteer and could not resist a claim for recovery of those amounts. If, on the other hand, she was aware of the circumstances, it appears that she would be liable in accordance with the principle recognised in Barnes v Addy (1874) LR 9 Ch App 244.
12 I was satisfied that there was a serious question to be tried as to whether Mrs Brown would be liable in respect of a sum of $150,000 after one includes interest and costs. The balance of convenience favours the making of a freezing order for a short period.
13 Of course, I have not heard Mrs Brown's side of the story on this ex parte application and make no final findings of fact.
14 For the above reasons, I made the freezing order this morning. I note that in the heading of the freezing order at Annexure A of the orders set out at the commencement of these reasons, the third applicant is incorrectly referred to as "Australian Wealth Management Co Pty Limited".
15 Further consideration of the applicants' motion was stood over to this coming Friday at 10.15 am.
I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.