FEDERAL COURT OF AUSTRALIA ASIC v McNeany [2001] FCA 646 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION -v- JOSEPH FRANCIS McNEANY V 295 of 2001 RYAN J MELBOURNE 25 MAY 2001 IN THE FEDERAL COURT OF AUSTRALIA VICTORIADISTRICT REGISTRY V 295 of 2001 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: JOSEPH FRANCIS McNEANY Respondent JUDGE: RYAN J DATE OF ORDER: 25 MAY 2001 WHERE MADE: MELBOURNE In addition to and without derogating from the Orders made herein by consent on 5 May 2001, IT IS FURTHER ORDERED: 1. THAT the respondent be restrained until the hearing and determination of the proceeding or further order whether by himself, his servants or agents or otherwise howsoever from transferring, dealing with, charging, diminishing, mortgaging, assigning or disposing of the balance of the proceeds of any sale by the respondent and Nola Theresa McNeany of the property located at 2 Parkville Street, Burnley, Victoria and described in Certificate of Title Volume 3476 Folio 079, being the balance remaining after: (a) payment of all monies secured by a registered mortgage over the property and owing to St George Bank Ltd; (b) payment of all reasonable expenses of the sale; (c) payment of $30,000 into the trust account of the solicitors for the respondent in accordance with clause 15 of the Special Conditions to the Contract of Sale dated 4 April 2001; and (d) payment of a 50% share of the balance then remaining to Nola Theresa McNeany; (hereinafter referred to as "the proceeds") 2. THAT notwithstanding anything contained in paragraph 1 hereof and subject to paragraphs 3 and 4 of this Order the proceeds be retained by the respondent's solicitors in an interest bearing account on trust to abide any further order of this Court. 3. THAT notwithstanding anything contained in paragraph 2 of this Order, upon the respondent signing an effective authority under s 188 of the Bankruptcy Act 1966, the proceeds be paid to the controlling trustee as part of the respondent's property. 4. THAT the respondent's costs to date of this application including his costs of and incidental to the hearing this day and this Order be taxed and retained out of the proceeds or paid by the controlling trustee as the case may be. 5. THAT the applicant's costs of and incidental to the hearing this day and this Order be reserved. 6. THAT liberty be reserved to either party to apply on not less than 48 hours notice in writing to the other party. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 295 of 2001 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Applicant AND: JOSEPH FRANCIS McNEANY Respondent JUDGE: RYAN J DATE: 25 MAY 2001 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 There is before the Court an amended application under s 12GD of the Australian Securities and Investments Commission Act 1989, ("the ASIC Act"), seeking a wide range of interlocutory relief against the respondent. Much of the interlocutory relief sought by the applicant has been the subject of consent orders which were made on 5 May this year. The outstanding issue for interlocutory resolution between the parties is the disposition of the respondent's share of the net proceeds of sale from a property at 2 Parkville Street, Burnley. A contract of sale has been entered into in respect of that property and I have been told this morning by Mr Kenny, the solicitor for the respondent, that settlement under that contract is expected to take place within the next week or so. 2 It has been contended on behalf of the respondent that he should have an unfettered right to dispose of his share of the net proceeds from the sale of that property. On the other hand, the applicant contends, in effect, that the respondent's share of the proceeds should be frozen until 25 August this year to enable the applicant ("ASIC") to conclude its investigations into the respondent's conduct in relation to the management of a business of an insurance broker or agent in the course of which he is alleged by ASIC to have committed numerous offences. 3 In his first affidavit in opposition to the interlocutory relief sought by ASIC the respondent deposed to a belief that his share of the net proceeds from the sale of the premises would be of the order of $60,000. He further deposed in par 21 of his affidavit: "If the Court does not grant the order sought by the applicant in respect to the property I plan to use that $60,000 to settle a large number of pressing debts that I have. I have retained Mr Keith Sutherland, insolvency practitioner, to contact my creditors for the purpose of attempting a Pt X arrangement. Mr Sutherland has asked me to provide him with the sum of $4,000 as a retainer. I cannot afford to proceed with him unless I am successful in opposing the applicant's application. 4 Then in par 22 of the affidavit the respondent sets out creditors to whom he is indebted, on his account, in a total amount of $93,589. It has been pointed out by Mr Attiwill of Counsel for the applicant that no part of that list of creditors makes reference to actual or contingent creditors who have attained that status by virtue of the impugned insurance dealings of the respondent. 5 It has been submitted this morning on behalf of the respondent that a further reason for allowing him unfettered control of his share of the proceeds from the sale of the property is to enable him to meet living expenses and the costs incurred so far in relation to the present litigation. Having regard to his proposal to settle what he calls a large number of pressing debts, I consider that it would be inappropriate to allow the respondent unfettered control of his share of the proceeds because of the risk that some creditors, or a particular class of creditors, might not be treated evenhandedly. However, I am impressed by the stated readiness of the respondent to make some proposal under Pt X of the Bankruptcy Act 1966 and I consider that the interlocutory restraint which I am minded to impose should be moulded to permit such an approach to be made. 6 Accordingly in the circumstances I have concluded that I should make an order in these terms. In addition to and without derogating from the orders made by consent on 5 May 2001, the Court further orders that: 1. The respondent be restrained until the hearing and determination of the proceeding or further order whether by himself, his servants or agents or otherwise however from transferring, dealing with, charging, diminishing, mortgaging, assigning or disposing of the balance of the proceeds of any sale by the respondent and Nola Theresa McNeany of the property located at 2 Parkville Street, Burnley, Victoria and described in Certificate of Title Volume 3476 Folio 079, being the balance remaining after: (a) payment of all monies secured by a registered mortgage over the property and owing to St George Bank Ltd; (b) payment of all reasonable expenses of the sale; (c) payment of $30,000 into the trust account of the solicitors for the respondent in accordance with clause 15 of the Special Conditions to the Contract of Sale dated 4 April 2001; and (d) payment of a 50% share of the balance then remaining to Nola Theresa McNeany; (referred to as "the proceeds"). 2. Notwithstanding anything contained in paragraph 1 hereof and subject to paragraphs 3 and 4 of this Order, the proceeds be retained by the respondent's solicitors in an interest bearing account on trust to abide any further order of this Court. 3. Notwithstanding anything contained in paragraph 2 of this Order, upon the respondent signing an effective authority under s 188 of the Bankruptcy Act 1966, the proceeds be paid to the controlling trustee as part of the respondent's property. 4. The respondent's costs to date of this application, including his costs of and incidental to the hearing this day and this Order, be taxed and retained out of the proceeds or paid by the controlling trustee as the case may be. 5. The applicant's costs of and incidental to the hearing this day and this Order be reserved. 6. Liberty be reserved to either party to apply on not less than 48 hours notice in writing to the other party. 7 I consider that an order in that form will enable the respondent, if he remains of that mind, to give an authority under Pt X of the Bankruptcy Act 1966 to a controlling trustee of his choice on such terms as he is able to negotiate with that trustee and thereafter his property, including his share of the proceeds of sale, will fall to be administered in accordance with Pt X of the Act. 8 If that election is not made, then sufficient protection, I consider, will be accorded to all of the creditors of the respondent by the proceeds remaining in an interest-bearing trust account until further order of this Court. The question of any need which the respondent may have to resort to the proceeds in order to meet living expenses in the future can be accommodated by the liberty to apply which I shall reserve in paragraph 6 of the Order which I have just announced. Accordingly the order of the Court is in the terms that I have indicated. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan. Associate: Dated: 25 May 2001 Counsel for the Applicant: Mr R H M Attiwill Counsel for the Respondent: Mr M J Kenny Solicitor for the Respondent: Kalus Kenny Date of Hearing: 25 May 2001 Date of Judgment: 25 May 2001