Swim school franchise Jump's assets have been frozen by the Federal Court following an urgent application by the corporate watchdog.
The Australian Competition and Consumer Commission has been investigating Jump after The Age and Sydney Morning Herald revealed in January that dozens of franchisees paid hundreds of thousands of dollars for the construction of swim schools and were still waiting for a refund or for them to be built up to two years later.
The watchdog applied for the order against Jump founder and chief executive Ian Campbell and Swim Loops Holdings, Jump Loops and associated entities Jump Swim Schools Construction, Jump Swim Schools Leasing, Jump Swim Schools, Blue Paddle, Reef Services and JS Reef as it prepares to bring proceedings against Jump.
Justice Michael O'Bryan heard evidence that Jump had said to franchisees that there would be a "12-month turnaround from sign-on to open" on the franchise.
However, 68 franchisees were not operating after 12 months and the watchdog is bringing proceedings against Jump and Mr Campbell, seeking orders directing payment of at least $60,000 to each of these franchisees. The total size of the franchisee refunds and compensation is expected to be at least $4 million.
Justice O'Bryan ordered Jump and Mr Campbell not to remove assets from Australia or in any way dispose of, deal with or diminish the value of the assets.
Mr Campbell will be allowed up to $2000 a week in living expenses.
Justice O'Bryan heard evidence that Jump received "many millions of dollars" in fees from franchisees in 2017 and 2018 but the assets held by the business are "relatively modest".
The orders refer to nine different court proceedings against Jump that are on foot, while ASIC searches show Mr Campbell and former Jump director Stefan Szpitalak incorporated a number of new entities in the last few months including JS Reef in April, Reef Service and Blue Paddle in May.
The ACCC received information from a franchisee that he was advised by an employee of Jump Loops that it intended to transfer all operating franchises to Blue Paddle.
"The evidence, therefore, establishes the risk that the Jump Swim group may attempt to transfer the franchise business and assets to Blue Paddle Pty Ltd, possibly in an attempt to avoid the consequences of the complaints made, and legal proceedings brought, against entities in the Jump Swim group," Justice O'Bryan found.
He also noted evidence indicating Mr Campbell has established a number of new companies and businesses in the United States and New Zealand, and evidence from financial crime watchdog Austrac of substantial financial transfers between Jump and overseas entities.
A spokesperson for the ACCC said if the watchdog is ultimately successful it will apply to the court for any preserved funds to be used to compensate affected Jump franchisees.
Jump franchisee Juliet Sharpe paid $165,000 for a Jump franchise two years ago plus more than $100,000 in rent with no swim school to show for it.
Ms Sharpe said the freezing order is "really positive" and shows franchisees they have not been forgotten.
"It's not really about returning the money it is about stopping Ian and his business activities causing damage to so many people," she says. "Hopefully we will get some justice here. We all thought we were going to be getting this fantastic swim school business and that wasn't the case, it was far from it."
Mr Campbell and Jump did not respond to a request for comment.
A hearing is scheduled for June 20, 2019.