Former footballer and insurance broker Andrew Donnelly has failed to overturn freezing orders that were imposed in January in relation to the alleged misuse of $5.1 million of trust funds from his old business.
Former footballer and insurance broker Andrew Donnelly has failed to overturn freezing orders that were imposed in January in relation to the alleged misuse of $5.1 million of trust funds from his old business.
Mr Donnelly’s counsel told the Supreme Court he had been unable to sell shares or obtain employment because of the freezing order.
He also claimed that the plaintiffs, led by Mr Donnelly’s former company Vantage Holdings and its subsidiary Australian Reliance Group, had failed to establish a strong arguable case or provide evidence that his assets would be dissipated.
In a ruling handed down today, Justice Peter Martino dismissed the application.
“It is my view that there is a strong arguable case that the first defendant (Mr Donnelly) knowingly aided the dishonest misuse of trust monies,” he stated.
“If that case were to be made out at trial it would be a case of knowingly assisting a dishonest misuse of trust funds.”
Justice Martino noted that the trust monies were not used for purposes external to the business; they were used to make interest payments and to pay trade creditors.
“However, it is my view that if this case is made out at trial it would still amount to involvement in serious dishonesty,” he stated.
“It would be the knowing misuse of trust assets to pay the debts of the second and third plaintiffs (Reliance Franchise Partners and Australian Reliance).”
Justice Martino decided there was a risk of Mr Donnelly’s assets being dissipated.
“I conclude from the strong arguable case, that the first defendant has knowingly assisted that serious dishonesty, that the plaintiffs have established that there is a real risk that if not restrained the first defendant will dispose of assets so as to make a judgment fruitless,” Justice Martino said.
The alleged misuse came to light in January 2016, when Melbourne-based PSC Insurance Group was preparing to buy Mr Donnelly’s insurance broking business, Reliance Group - whoch now trades as PSC Insurance Brokers Perth.
Reliance previously traded as West Coast Group, after Mr Donnelly’s playing career with the West Coast Eagles.
Justice Martino said it appeared that Reliance Group and associated companies had significant financial problems from at least August 2014.
“It also appears that both the first defendant and the second defendant (Reliance Group chief financial officer Kim Hanson) were aware of these problems and that they used personal assets to assist the plaintiff companies to pay their debts,” he stated.
The judgement cited a report by Ferrier Hodgson principal Dermott McVeigh, who was commissioned by Mr Donelly’s fellow directors in January to investigate the trust accounts.
Mr McVeigh’s report stated that the majority of the trust funds were allegedly used to service interest commitments on a convertible note provided by fellow director Jon Fogarty.
The judgement revealed a difficult relationship between the defendants and Mr Fogarty.
In one email, Mr Hanson referred to “Jon’s ongoing threats”.
In another, Mr Donnelly said a proposed share sale made sense “so long as we are protected given how volatile Jon is”.
The judgement disclosed that Mr Donnelly was suspended as chief executive of Vantage Holdings on January 6, and his employment was terminated on January 15, the same day that PSC announced it was paying $31 million for his business.
On January 19, PSC said its conditional agreement included the acquisition of the business assets/trading companies of two AFS licencees.
"PSC is well aware of concerns that those licencees have failed to comply with some of their legal obligations, including those connected with the operation of a trust account," PSC said in a statement at the time.
"It has been advised that breaches or potential breaches by those licencees have been notified to the regulator.
"PSC has not contracted to acquire the licencee entities and, on that basis, will not inherit any failure by them to comply with their obligations as a licencee."
PSC said that, once it completed the acquisition, it would represent part of a solution for customers of Reliance Group by providing a safe and secure platform for the servicing of their future insurance needs.
