Alleron Investment Management Ltd v Shek

Earlier today, as Duty Judge, I made a freezing order against the defendant and orders for substituted service.

These are my reasons for making those orders.

The plaintiff is a funds manager. The defendant is a former employee of the plaintiff. The plaintiff alleges that, while he was an employee of the plaintiff, the defendant fraudulently presented cheques totalling $227,384.73 on the plaintiff's bank account, and converted the proceeds of same to his own use.

The following matters are established by an affidavit sworn by the plaintiff’s solicitor, Mr Timothy Breene, on information and belief.

The defendant commenced employment with the plaintiff in late March 2009 in Sydney as a "Compliance Officer". He was appointed as company secretary a few months later.

As part of his role as Compliance Officer, the defendant was authorised to draw cheques on the plaintiff’s account with St George Bank to pay the plaintiff’s expenses.

Cheques drawn on the plaintiff’s account required two signatures. The defendant was one of five authorised signatories.

Usually, the defendant drew cheques that he then presented to Mr Barry Littler, a director of the plaintiff, for signature.

On 31 December 2014 the defendant ceased employment with the plaintiff, purportedly on the basis of ill health.

The plaintiff has since discovered some 57 instances where a cheque has been prepared by the defendant, with the cheque butt details showing (in the defendant's handwriting) a normal expense of the plaintiff but where the cheque itself was made out to cash, to American Express or to the defendant himself.

Each of those cheques bears the defendant's signature, together with what purports to be a signature of Mr Littler. Mr Littler has informed Mr Breene that the signatures purporting to be his are forgeries. The plaintiff’s case is that the defendant has misappropriated the face value of these cheques. The plaintiff’s investigations to date suggest that the total amount misappropriated in this way by the defendant is $227,384.73.

In three cases, there are cheque butts suggesting that the corresponding cheques were made out to Breene & Breene, the firm of which Mr Breene is principal. In fact, two of those cheques were made out to cash and the third to American Express. Mr Breene has deposed that those cheques were not sent to Breene & Breene nor did his firm receive any cash at that time or have a cheque deposited into any American Express account related to the firm.

The plaintiff is still in the process of investigating the matter and anticipates that the total amount of the fraud will be higher than the amounts presently pleaded in the Statement of Claim.

The plaintiff sought an order restraining the defendant from diminishing his assets to a figure of less than $325,000, being the known amount of fraudulently presented cheques plus interest and costs.

Any fraud occurred last year. It appears the delay in bringing these proceedings since then has been caused by the time taken to conduct the necessary investigations. However, that aspect of the matter will require further consideration when the matter is next before the Court.

For the moment, I am satisfied that the plaintiff has established a prima facie case that it has been defrauded by the defendant and has made out a basis for the making ex parte of a freezing order.

In that regard, Mr McNally SC, who appeared for the plaintiff, referred to the familiar observations of Gleeson CJ in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 325-327 that:

The defendant’s whereabouts are unknown. Mr Breene has annexed to his affidavit an investigators report from Wise McGrath which reports unsuccessful efforts to locate the defendant.

The defendant owns a property in Ashmore in Queensland. There is evidence to suggest that property is occupied by the defendant's parents.

Further, for some reason, the defendant recently sent to his former email address at the plaintiff a form of "test" email from what appears to be his personal email account.

I was persuaded to make an order for substituted service so that service may be effected pursuant to Uniform Civil Procedure Rules r 10.14 by serving the relevant documents upon the occupant of the Ashmore property and to what appears to be the defendant’s personal email account.

In those circumstances, I made the following orders: