FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v ACBF Funeral Plans Pty Ltd [2024] FCAFC 19
ORDERS
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Appellant | ||
AND: | ACBF FUNERAL PLANS PTY LTD (IN LIQUIDATION) First Respondent YOUPLA GROUP PTY LTD (IN LIQUIDATION) Second Respondent | |
DATE OF ORDER: | 29 February 2024 |
THE COURT DECLARES THAT:
1. By representing during the Relevant Period, in the course of offering, promoting and selling the Aboriginal Community Funeral Plan, that the First Respondent was owned or managed by an Aboriginal person or persons, the First Respondent:
(a) engaged in conduct, in trade or commerce, in relation to financial services that was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act); and
(b) made, in trade or commerce, in connection with supply or possible supply or promotion of financial services, a false or misleading representation in contravention of s 12DB(1)(f) of the ASIC Act.
THE COURT ORDERS THAT:
2. The Appellant be given leave to file the affidavit of Lucy Rees-Graham affirmed 20 February 2024.
3. The appeal be allowed.
4. Order 1 of the orders made on 5 September 2023 be set aside, and in lieu thereof it be ordered that the proceeding be remitted to the primary judge for determination of the appropriate penalty to be imposed upon the First Respondent pursuant to s 12GBA(1) of the ASIC Act (as it stood during the period 1 January 2015 to 30 November 2018 (the Relevant Period) in accordance with the reasons and orders of the Full Court and in light of the primary judge’s findings not affected by the reasons of the Full Court.
5. There be no order as to costs in the appeal, other than that the Appellant pay the costs of the contradictor.
6. The Appellant not seek to enforce any existing cost orders without further leave of the Court.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
THE COURT:
INTRODUCTION
1 In this proceeding the appellant, the Australian Securities and Investment Commission (ASIC), appeals from the judgment of a single judge of this Court: Australian Securities and Investments Commission v ACBF Funeral Plans Pty Ltd [2023] FCA 1041. ASIC brought the proceeding against the first respondent ACBF Funeral Plans Pty Ltd (ACBF), and the second respondent Youpla Group Pty Ltd (named ACBF Group Holdings Pty Ltd during the Relevant Period), alleging that ACBF’s conduct during the period from 1 January 2015 to 30 November 2018 (the Relevant Period), in offering, promoting and selling a funeral insurance policy named the “Aboriginal Community Funeral Plan” (ACF Plan), conveyed four misleading representations to intended consumers of the ACF Plan (Potential Customers), in breach of ss 12DA and/or 12DB of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), and that Youpla Group was knowingly involved in and a party to the alleged contraventions. ACBF and Youpla Group are now in liquidation, and ASIC has leave to bring the appeal.
2 ASIC commenced the proceeding against ACBF and Youpla Group on 29 October 2020. ACBF was placed in liquidation on 11 March 2022 and Youpla was placed in liquidation on 27 April 2022, before the trial of the proceeding on 22 November 2022. Before they entered liquidation, the respondents filed a defence and actively defended the proceeding. In July 2022, ASIC sought and obtained leave of the Court to proceed against the respondents in liquidation under s 500(2) of the Corporations Act 2001 (Cth) (Corporations Act). The respondents did not appear at the hearing before the primary judge or make submissions on liability or penalty. On 2 February 2024, this Court heard an application by ASIC for leave to bring the appeal against the respondents. The Court granted leave on the condition that ASIC appointed a contradictor. Ms Caryn van Proctor of counsel appeared as contradictor and the Court expresses its appreciation for the assistance provided.
3 Only one of the representations alleged below is relevant in the appeal. ASIC alleged, and the primary judge found, that by ACBF’s conduct in offering, promoting and selling the ACF Plan to Potential Consumers it made the “Aboriginal Ownership/Management Representation”, being a representation that during the Relevant Period ACBF was owned or managed by an Aboriginal person or persons. The primary judge held, however, that ASIC did not establish the falsity of that representation, and thus did not establish the alleged contraventions.
4 The sole issue in the appeal is whether the primary judge erred in finding that ASIC did not establish the falsity of the Aboriginal Ownership/Management Representation. For the reasons we explain, it is appropriate to allow the appeal:
(a) first, because ACBF admitted in its Amended Defence that throughout the Relevant Period it was not owned or managed by an Aboriginal person or persons. In those circumstances it was unnecessary for ASIC to put on evidence to establish the falsity of the representation (the pleading argument); and
(b) second, in any event, the evidence before his Honour was sufficient to establish the falsity of the representation during the Relevant Period.
5 For clarity we describe ACBF and Youpla Group as respondents, notwithstanding that they are properly described as defendants to the proceeding below.
THE FACTS AND PROCEDURAL BACKGROUND
6 Youpla Group (previously named ACBF Group) is the parent company of a group of companies which includes ACBF. ACBF Group was founded in or around 1993 and through ACBF it marketed and sold funeral plans. It promoted itself as “Australia’s only funeral insurance plan dedicated to the Aboriginal community”.
The 1999 ASIC proceeding
7 On 30 June 1999 ASIC brought a proceeding alleging misleading and deceptive conduct by six companies in the ACBF group, including ACBF Group. The proceeding alleged that in the course of promoting the Aboriginal Community Benefit Fund and/or the Aboriginal Community Benefit Fund No 2 (the ACBF Funds) in three Aboriginal communities in the Northern Territory the respondents represented, including by the prominent use of the Aboriginal flag on their marketing materials, that:
(a) they were sponsored, approved, affiliated or connected with a governmental or similar body having as one of its functions the provision of services or other assistance to Aboriginal persons;
(b) Aboriginal people had a commercial interest in the proceeds or profits derived by or through the ACBF Funds; and
(c) the ACBF Fund was established to advance the welfare of the Aboriginal community,
when, in fact, that was not the case.
8 On 24 September 1999 this Court made orders, by consent, including that:
(a) the respondents shall not anywhere within Australia promote or market the ACBF Funds without at the same time, and in particular at the time of the first reference to either “ACBF” or “Aboriginal Community Benefit Fund”, advising orally to the effect that:
(i) the ACBF Funds are private companies; and
(ii) the ACBF Funds are not sponsored by or otherwise connected with any governmental or similar body or an Aboriginal organisation;
(b) the respondents will not anywhere within Australia at or prior to the time of offering membership of the ACBF Funds to any person provide any marketing materials to the person unless they also provide prominent advice to the effect that:
(i) the ACBF Funds are private companies; and
(ii) the ACBF Funds are not sponsored by or otherwise connected with any governmental or similar body or an Aboriginal organisation; and
(c) the respondents by their servants and agents will not anywhere within Australia:
(i) use or display a representation of the Aboriginal flag; or
(ii) use or display words to the effect that the Funds were established to advance the welfare of the Aboriginal community, or words to similar effect,
on any marketing materials.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
9 By letters patent dated 14 December 2017 the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Financial Services Royal Commission or FSRC) was established. The FSRC included an inquiry in relation to the ACBF group’s role in marketing funeral insurance plans to Aboriginal people. Bryn Elwyn Jones, the Chief Executive Officer (CEO) of both ACBF Group and ACBF, and a director of those companies and a series of other companies in the ACBF group, gave evidence before the FSRC on 3 July 2018. Mr Jones’ evidence before the FSRC is discussed below.
10 The FSRC made a number of adverse findings in relation to ACBF in its Interim Report dated 28 September 2018. We do not purport to adopt those findings. Instead, we refer to them merely to provide the background to the steps subsequently taken by Mr Jones and others to re-arrange the ownership of ACBF Group and ACBF so that they had some Aboriginal ownership and management.
11 The adverse findings included that:
(a) ACBF had been ordered to include a disclaimer to the effect that it is a private company, and that it is not sponsored by or otherwise connected with any governmental body or Aboriginal organisation. Despite that some of ACBF’s advertising material had not included the disclaimer;
(b) since the 1999 ASIC proceedings ACBF was required to remove from its marketing materials the Aboriginal flag and any suggestion that it was established to advance the welfare of the Aboriginal community. ACBF no longer used the Aboriginal flag as a marketing device, but since 2012 it had adopted a new logo (using red, yellow and orange colours) associated with Aboriginal culture, it used imagery that is significant in Aboriginal and Torres Strait Islander culture, its promotional material included references to it having spent “over 20 years working in the Aboriginal community”. Even when the disclaimer was used, which it had not always been, consumers may have been induced into thinking that ACBF was an Aboriginal owned company; and
(c) ACBF may have breached its obligations under s 12DA of the ASIC Act to not engage in conduct that is misleading or deceptive or is likely to mislead or deceive,
(see Financial Services Royal Commission, Interim Report, 28 September 2018, pp 447, 452, 454, 455).
The proceeding below
12 On 29 October 2020, ASIC commenced the proceeding below. In the Statement of Claim ASIC alleged that ACBF’s conduct during the Relevant Period (1 January 2015 to 30 November 2018) in offering, promoting and selling the ACF Plan, conveyed the Aboriginal Ownership/Management Representation to Potential Customers, which representations were false or misleading and that its parent company, Youpla Group (at the time named ACBF Group), was knowingly involved in and a party to those alleged contraventions.
13 On 5 February 2021, ASIC filed an Amended Statement of Claim, and the respondents filed an Amended Defence in response on 19 February 2021.
14 On 11 March 2022, ACBF went into liquidation and on 27 April 2022 Youpla Group followed suit. On 15 July 2022, ASIC was granted leave to continue the proceeding against the respondents. At the point the respondents went into liquidation they had filed their lay evidence, but had not filed any expert evidence. For that point on, the respondents ceased to take any steps in the proceeding.
15 On 11 November 2022, ASIC filed a Further Amended Statement of Claim (FASOC).
16 The case was heard on 22 and 23 November 2022. The respondents did not participate in the trial.
17 On 5 September 2023, the primary judge handed down the primary judgment. As we have said, the primary judge was satisfied that ACBF’s conduct in offering, promoting and selling the ACF Plan during the Relevant Period conveyed the Aboriginal Ownership/Management Representation, but held that ASIC did not establish that the representation was false.
The appeal
18 On 3 October 2023, ASIC filed the Notice of Appeal herein. The sole ground of appeal is that the primary judge ought to have held, and erred by failing to hold, that during the Relevant Period the representation by ACBF that it was owned or managed by an Aboriginal person or persons was false, in contravention of ss 12DA(1) and 12DB(1) of the ASIC Act.
19 On 6 November 2023, the respondents’ liquidator filed a submitting notice. On 2 February 2024, the Court granted ASIC leave under s 500(2) of the Corporations Act nunc pro tunc to commence and proceed with the appeal, and also made orders for the appointment of Ms van Proctor of counsel as contradictor.
20 In considering the grant of leave, a question arose whether the appeal constitutes a separate proceeding to the proceeding before the primary judge for the purposes of s 500(2), or whether it is a continuation of the proceeding at first instance (for which leave under s 500(2) had already been granted). We favour the view that an appeal in this Court constitutes a separate proceeding and therefore requires a separate grant of leave under s 500(2): see Commissioner of Taxation of the Commonwealth of Australia v 4 Doonan Street Collinsville Pty Ltd (in liq) [2016] NSWCA 69 at [31] (Gleeson and Leeming JJA and Sackville AJA); Huang v Hua Cheng International Group Pty Ltd [2019] NSWCA 155 at [21] (Basten, Payne and McCallum JJA); Huber V CellOS Software Ltd (in liq) [2022] FCA 744 at [8] (McElwaine J).
21 It is unnecessary, however, to determine finally that question. Even if an appeal were to be considered as a continuation of the proceeding at first instance, a grant of leave in the proceeding at first instance is revocable (see r 39.05(c) of the Federal Court Rules 2011 (FCA Rules) and Sanofi v Parke Davis Pty Ltd [No 1] (1982) 149 CLR 147 at 153 (Gibbs CJ, Stephen and Mason JJ)). Where an appeal (or application for leave to appeal) is brought against a company in liquidation, the Court should consider whether to allow the matter to proceed. The overarching consideration is the interests of justice. Relevant factors include the impact of the proceeding on the company’s creditors and the efficient administration of the liquidation, any public interest associated with the appeal and, having regard to s 37M of the Federal Court of Australia Act (Cth), the efficient use of the judicial and administrative resources available for the purposes of the Court and the efficient disposal of the Court’s overall caseload. In the present matter, we were persuaded that there is a sufficient public interest in the determination of the question raised by the appeal to grant leave.
THE PLEADING ARGUMENT
22 We now turn to the first of the two ways in which we consider the primary judge erred in concluding that the falsity of the Aboriginal Ownership/Management Representation was not established, and thus the alleged contraventions were not made out.
23 Under this argument, ASIC contends that ACBF admitted the falsity of the representation in its Amended Defence; that it was unnecessary for ASIC to adduce evidence in that regard; and that the primary judge erred in failing to so find.
24 ASIC contends that this is not a new argument which it is seeking to argue for the first time on appeal. In doing so, ASIC relies on its written submissions at trial where it said that “[d]uring the Relevant Period, ACBF… was not during that time in any way owned or managed by Aboriginal persons.” The footnote to that submission indicated that the grounds for it were:
(a) the current and historical ASIC company extract for ACBF;
(b) the written response by Mr Jones to a notice from ASIC requiring reasonable assistance pursuant to s 19(2) of the ASIC Act; and
(c) the respondents’ Amended Defence at paragraph 61(a).
25 Paragraph 61(a) of the Amended Defence provided:
And the Defendants say further to the matters described above that as a result of the matters pleaded at paragraphs 11, 12, 27, 28, 29 and 30 of the SOC and paragraphs 1,9(b), 22 to 23 of this Defence, a reasonable person in the position of an ACF Plan Holder would have:
a. understood ACBF was not Aboriginal owned or managed;
b. understood that only an Aboriginal person could be a Nominee of an ACF Plan up until in or around September 2017;
c. not have understood or inferred the:
i. Aboriginal Ownership/Management Representation;
…
d. in the circumstances described above at sub-paragraphs 61(a) to 61(c), no ACF Plan Holder could reasonably have understood or have relied on an [sic] of the representations listed above at sub-paragraphs 61(c)(i) to 61(c)(iv).
26 ASIC concedes that it expressed the contention that ACBF thereby admitted the falsity of the representation “minimally” in writing, and that in oral submissions it said nothing to assert that ACBF admitted the falsity of the representation in its Amended Defence. However, it submits that the primary judge nevertheless recognised that ASIC made that argument, but decided to reject it. ASIC contends that his Honour erred in so deciding.
27 The primary judge referred to ASIC’s submission in relation to paragraph 61(a) of the Amended Defence at [75]-[76] of his Honour’s reasons:
[75] In a footnote to its submissions, ASIC referred to paragraph 61(a) of the Defence, which is in the following terms:
61. And the Defendants say further to the matters described above that as a result of the matters pleaded at paragraphs 11, 12, 27, 28, 29 and 30 of the SOC and paragraphs 1, 9(b), 22 to 23 of this Defence, a reasonable person in the position of an ACF Plan Holder would have:
a. understood ACBF was not Aboriginal owned or managed;
[76] It seems – noting that this paragraph was referred to only in a footnote and was not the subject of elaboration in ASIC’s oral or written submissions – that ASIC relied upon this paragraph as an admission that ACBF was not “Aboriginal owned or managed”. I do not interpret paragraph 61(a) in that way, for the following reasons. First, it is not expressed as an admission that ACBF was not “Aboriginal owned or managed”. It does not respond to such an allegation, rather it is a “further response” to particular matters. Secondly, the cross-referenced paragraphs in paragraph 61(a) relate primarily to the disclaimers and paragraph 61(a) appears to be an expansion of the proposition in paragraph 31 of the Defence that the disclaimers were effective. Thirdly, it is an averment as to the understanding of a reasonable person in the position of an ACF Plan Holder. Finally, to the extent that it may be suggested that there is an implicit acknowledgement that ACBF was not “Aboriginal owned or managed”, such an implication cannot stand with the explicit denial of that proposition in paragraph 30 of the Defence.
28 ASIC’s contention that it “minimally” made the relevant argument below is a stretch, and in our view ASIC did not make the argument at all. It at no point submitted that ACBF had admitted the falsity of the representation such that it was unnecessary for it to put on evidence, and two of the footnoted matters it relied on were pieces of evidence. That strongly points away from concluding that ASIC argued that there was no requirement for it to put on evidence because falsity had been admitted. Nor did ASIC contend that it relied on those evidentiary matters as an alternative approach to establishing falsity. Finally, we note that the argument that ASIC now wishes to make is grounded in paragraphs 31 and 61(a) of the Amended Defence, whereas below ASIC only relied on paragraph 61(a).
29 We consider that ASIC requires leave if it wishes to now make this argument. We are though satisfied that it is expedient and in the interest of justice to grant leave: see generally Water Board v Moustakas [1988] HCA 12; 180 CLR 491 at 497 (Mason CJ, Wilson, Brennan and Dawson JJ); Summers v Repatriation Commission [2015] FCAFC 36; 230 FCR 179 at [94] (Kenny, Murphy and Beach JJ). It is appropriate to do so because the argument has real merit (indeed we have concluded that it is correct), it is a legal argument relating to the proper construction of the pleadings and does not involve any factual controversy, it could not have been met by calling evidence below, it is not an entirely new argument as to some extent ACBF raised it below, and ACBF will not suffer any prejudice by permitting the argument to be run now as it did not participate in the hearing below and has filed a submitting appearance in the appeal. Insofar as costs are concerned, any prejudice to the ACBF can be dealt with by not awarding costs against the respondents in relation to this argument, which ASIC accepts is appropriate.
30 Turning then to the merits of the pleadings argument, it is necessary to understand that ACBF relied upon two forms of disclaimer it published along with its marketing material during the Relevant Period.
31 From prior to the Relevant Period until around 12 September 2018, ACBF published the following disclaimer:
ACBF is a private company which is not connected with or sponsored by any governmental or similar body or Aboriginal organisation,
(the Disclaimer).
32 In paragraph 1 of the Amended Defence ACBF admitted the allegation in paragraph 27 of the FASOC that during the Relevant Period, ACBF and ACF Plan documents were labelled with the Disclaimer, and field representatives were required to give the Disclaimer. ACBF denied paragraph 28 of the FASOC in which ASIC alleged that the terms of the Disclaimer were as stated above, but only on the basis that the Disclaimer was amended over time to contain some different words, all of which (up to September 2018) included the above words.
33 In paragraph 23 of the Amended Defence ACBF admitted the allegation in paragraph 29 of the FASOC that the Disclaimer “did not state… that ACBF was not owned or managed by an Aboriginal person or persons.”
34 Then, for the approximately three-month period from September 2018 to the end of the Relevant Period on 30 November 2018, ACBF published a revised disclaimer which had the same words as the Disclaimer, but with the additional words:
We are not an Aboriginal company. We are not owned or operated by or associated with any governmental or similar body or Aboriginal organisation,
(the New Disclaimer) (collectively, the Disclaimers).
35 The other salient parts of the pleadings are:
(a) in paragraph 36 of the FASOC, ASIC alleged that in offering, promoting and selling the ACF Plan to Potential Customers during the relevant period ACBF impliedly represented that it was owned or managed by an Aboriginal person or persons. ACBF denied that allegation in paragraph 29 of the Amended Defence;
(b) in paragraph 37 of the FASOC, ASIC alleged that the Aboriginal Ownership/Management Representation was false. ACBF made a bare denial of that allegation in paragraph 30 of the Amended Defence;
(c) in paragraph 38 of the FASOC, ASIC alleged that the falsity of the representation was not corrected by the Disclaimers. In paragraph 31 of the Amended Defence ACBF said:
With regard to paragraph 38 of the SOC, the Defendants deny the allegations therein and say further that if the Aboriginal Ownership/Management Representation was made (which is denied) it was corrected by the Disclaimer or the New Disclaimer as the case may be;
and
(d) in paragraph 61(a) of the Amended Defence ACBF made the following positive allegation:
And the Defendants say further to the matters described above that as a result of the matters pleaded at [specified paragraphs of the FASOC and the Amended Defence which included the content of the Disclaimers] a reasonable person in the position of an ACF Plan Holder would have:
(a) understood ACBF was not Aboriginal owned or managed;
…
36 We consider that by so pleading ACBF admitted the falsity of the Aboriginal Ownership/Management Representation.
37 First, that is because the bare denial in paragraph 30 of the Amended Defence is unclear; it being capable of bearing more than one meaning. As ASIC submits, the only interpretation of paragraph 30 of the Amended Defence that is consistent with paragraphs 31 and 61(a) is the construction which takes paragraphs 30 as a denial of the premise of the allegation in paragraph 37 of the FASOC, that the representation was made at all, rather than as a denial of the falsity of the Aboriginal Ownership/Management Representation.
38 Second, paragraph 31 of the Amended Defence provides that, if the Aboriginal Ownership/Management Representation was made, it was “corrected” by the Disclaimer or the New Disclaimer. That necessarily admitted the falsity of the alleged representation, as the representation could not be “corrected” by one or other of the Disclaimers unless the representation was false. One cannot correct something unless it is incorrect.
39 Third, the positive allegation in paragraph 61(a) of the Amended Defence that a reasonable person in the position of an ACF Plan Holder would have understood from, amongst other things, the Disclaimers, that ACBF was not Aboriginal owned or managed is necessarily to the effect that the representation that ACBF was owned or managed by an Aboriginal person or persons was false. We consider that the statement in the New Disclaimer that “we are not an Aboriginal company” was a statement that, in fact, ACBF was not during the Relevant Period owned or managed by an Aboriginal person or persons.
40 Both paragraphs 31 and 61(a) of the Amended Defence fasten upon the Disclaimers as the “correct” position in relation to the Aboriginal Ownership/Management Representation, and the respondents thereby admitted the falsity of the representation. As the contradictor submits, if by paragraph 31 of the Amended Defence ACBF was denying the allegation that the representation was false, then it would have been drafted differently. It would been straightforward for ACBF to allege in paragraph 31 “if the representation was made (which is denied), and if it is found to be false (which is denied) it was corrected by the Disclaimer or the New Disclaimer as the case may be”. It did not do so.
41 Fourth, it is a fundamental rule of pleading that a defence must state the material facts essential to any affirmative case a respondent makes in answer to an applicant’s claim, and any matter of fact that might take the other party by surprise if not pleaded must be pleaded: Delta Metallics v Hawley-Jacobs t/as Flightboi Health and Fitness Centre [2006] FCA 334 at [8]-[9] (Kenny J). Rule 16.08 of the FCA Rules requires a party to “expressly plead a matter of fact … that … if not expressly pleaded, might take another party by surprise if later pleaded”. Thus, had ACBF sought to allege that the Aboriginal Ownership/Management Representation was false because, in fact, ACBF was owned or managed by an Aboriginal person or persons, it was obliged to properly plead that by stating the material facts. It did not do so.
42 It is appropriate to allow the appeal on the basis that ACBF admitted the falsity of the Aboriginal Ownership/Management Representation in the Amended Defence, and it was therefore unnecessary for ASIC to put on evidence to establish its falsity. As noted earlier, this was not a contention advanced by ASIC before the primary judge, but we have allowed it to be raised on the appeal and we accept it.
WHETHER THE EVIDENCE ESTABLISHES THE FALSITY OF THE REPRESENTATION
43 Given our view that ACBF admitted the falsity of the Aboriginal Ownership/Management Representation in the Amended Defence, it is unnecessary to decide whether the evidence before the primary judge established its falsity. But having reviewed the materials we consider the evidence was sufficient to establish the falsity of the representation. We now turn to explain our view in that regard.
44 During the hearing of the appeal, Senior Counsel for ASIC acknowledged on a number of occasions that aspects of the evidence and argument being advanced on the appeal had not been clearly put to the primary judge. Senior Counsel explained that ASIC’s focus at trial was on demonstrating that the Aboriginal Ownership/Management Representation had been made, not on demonstrating that it was false. Our impression is that, following the trial at first instance, the primary judge was left to sort through the evidence adduced by ASIC on the question of falsity with limited assistance from ASIC’s submissions. In contrast, ASIC’s case on appeal was more focussed and we have benefitted from the greater attention that has now been given to the question of falsity.
The Primary Judge’s Reasons
45 The primary judge said (at [2] and [4(1)]) that an “essential proposition” of ASIC’s case at trial was that the Aboriginal Ownership/Management Representation was false or misleading because, in fact:
(a) no director of ACBF was an Aboriginal person;
(b) no shares in ACBF were owned by an Aboriginal person or an Aboriginal organisation; and
(c) ACBF was not managed by an Aboriginal person.
At that point the primary judge appeared to (correctly) understand that the falsity of the representation fell to be determined having regard to whether the evidence established that ACBF was owned or managed by an Aboriginal person or persons.
46 Unfortunately, however, ASIC erroneously particularised the allegation of falsity by reference to matters which extended to all companies in the ACBF group, not just ACBF. Paragraph 37 of the FASOC alleged:
The Aboriginal Ownership/Management Representation was false.
Particulars
During the Relevant Period:
(a) no director of ACBF (or any company in the ACBF group) was an Aboriginal person;
(b) no shares in ACBF were owned by an Aboriginal person or an Aboriginal organisation;
(c) no shares in any company in the ACBF group were owned by an Aboriginal person or an Aboriginal organisation (save that, as to the Aboriginal Community Benefit Fund, a subsidiary of ACBF Group, and a company which, prior to the Relevant Period, had ceased to offer, promote or sell any funeral insurance policy to new customers, 5 of the 100 issued shares were owned by an Aboriginal person); and
(d) ACBF was not (and all other companies in the ACBF group were not) managed by any Aboriginal person.
The primary judge noted (at [53]-[54]) that that was how ASIC put its case.
47 His Honour approached the question of the falsity of the representation by considering whether the evidence established that during the Relevant Period none of the companies in the ACBF group were owned or managed by an Aboriginal person or persons, rather than by reference to ACBF only. Taking that approach, his Honour found that ASIC did not establish the foundation for a finding of falsity. His Honour said:
(a) (at [55]) that the concept of the “ACBF group” or the “ACBF group of companies” was central to ASIC’s case, yet ASIC did not define the concept of the “ACBF group” or the “ACBF group of companies” in the FASOC, nor in its submissions, and thus there was no defined set of companies comprising the ACBF group against which the allegation of falsity could be tested;
(b) (at [56]-[57]) that there was evidence of the existence of a number of companies who appeared to form part of an ACBF group, but the manner in which ASIC had framed the case and the evidence before the Court did not allow a conclusion to be drawn that they were the only companies in the ACBF group, and ASIC did not invite the Court to draw such a conclusion;
(c) (at [58]-[60]) that absent a definition of the set of companies comprising the ACBF group there could be no definition of the set of directors of those companies; that ASIC did not define what was meant by “management” or “managed” in the FASOC; nor did it identify the set of persons alleged to have been involved in management; and
(d) (at [61]-[63]) that absent a definition of the set of companies comprising the ACBF group there could be no definition of the set of shareholders in those companies; and ASIC did not identify in the FASOC or in its submissions the set of persons alleged to have held shares in companies within the ACBF group.
48 His Honour said further (at [64]-[65]) that ASIC had failed to define what it meant by “an Aboriginal person”, and failed to adduce evidence or make submissions by reference to:
(a) authorities such as Mabo v Queensland (No 2) [1992] HCA 23; (1992) 175 CLR 1 at 70 (Brennan J); Love v Commonwealth [2020] HCA 3; (2020) 270 CLR 152; McHugh v Minister for Immigration, Citizenship, Migrant Services & Multicultural Affairs [2020] FCAFC 223; (2020) 283 FCR 602; Helmbright v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (No 2) [2021] FCA 647; (2021) 287 FCR 109;
(b) the definition of “Aboriginal person” in cl 1.2 of the ACF Plan Rules; or
(c) otherwise.
Instead, his Honour said, ASIC relied upon statements made by Mr Jones to the effect that certain people were not Aboriginal.
49 His Honour then turned (at [67]-[70]) to summarise the evidence relied on by ASIC to establish the falsity representation. We will not reiterate that summary as the matters referred to are caught within our recounting of the salient aspects of the evidence. It must, however, be said that the summary was materially incomplete.
50 The primary judge found (at [71]) that the evidence was “plainly inadequate” to establish the falsity of the Aboriginal Ownership/Management Representation, and expressed the following reasons for that view (at [72]-[74]):
[72] The evidence of Mr Jones set out at [67] to [69] above does not establish that there were no Aboriginal persons who held shares in a company in the “ACBF group”, or that there were no Aboriginal persons involved in the management of those companies during the relevant period, particularly when:
(1) Mr Jones appears to have joined ACBF in September 2017, about two-thirds of the way through the relevant period. There is an obvious limitation on the worth of his evidence as to the position before he joined ACBF. As he acknowledged at answers 21 and 23 in the first Jones s 19(2) response, he has little knowledge of the period prior to his joining ACBF;
(2) his “searches” concerning the former management referred to in the first Jones s 19(2) response at answers 6 and 7 (see [67] above) were explained in the second Jones s 19(2) response at answer 11 (see [69] above) in terms which did not establish that there were no Aboriginal persons in the former management. Indeed Mr Jones acknowledged that there were Aboriginal staff who may have held management positions;
(3) Mr Jones identifies that Mr Duncan was (at least in Mr Jones’s view) an Aboriginal person who was a shareholder of Aboriginal Community Benefit Fund and may have been a director of that company (see the second Jones s 19(2) response, answer 12). The evidence establishes that Mr Duncan holds five per cent of the shares in Aboriginal Community Benefit Fund. This appears to have been acknowledged by ASIC (see [4(1)(c)] above);
(4) Mr Jones was unable to opine as to whether Ms McCallie was an Aboriginal person (second Jones s 19(2) response, answer 13);
(5) his answers concerning Ms Thurley and Mr Law (second Jones s 19(2) response, answers 13b. and c.) do not establish that they are not Aboriginal persons;
(6) he expresses no views as to the Aboriginality of other managers or shareholders identified above (such as Mr Pattenden, Mr Wilson, Mr Hughes and Mr Clayton);
(7) his evidence does not address whether he is an Aboriginal person; and
(8) his answer, in the third passage extracted from the Jones transcript (see [68(3)] above), that “There was, to my knowledge, there was no Aboriginal management or ownership” is of little weight in view of the above matters. I take the expression “to my knowledge” to mean “as far as I am aware” rather than the expression of an opinion based upon actual knowledge.
73 The historical company extracts for ACBF, ACBF Group and ACBF Administration do no more than identify who the directors of those companies were at various times (including the relevant period); and, to some extent, who the shareholders were at particular times.
74 Further, to establish the negative proposition as to ownership pleaded by ASIC, it would also be necessary to identify the ultimate natural person shareholders of the companies holding shares in the companies in the “ACBF group” and to consider whether they are Aboriginal persons.
51 Further, his Honour found (at [77]) that even if the falsity of the representation was addressed by reference to Aboriginal ownership and management of ACBF itself (rather than by reference to all companies in the ACBF group), ASIC’s case would have failed because it did not:
(a) prove that ACBF Group, as the owner of all of the shares in ACBF was not an “Aboriginal organisation”;
(b) identify the set of managers of ACBF during the relevant period; and
(c) prove that the managers (and the ultimate owners of the shares in ACBF Group) were not Aboriginal persons.
52 His Honour concluded (at [78]):
Thus, ASIC’s case based upon the Aboriginal Ownership/Management Representation is not made out. In summary:
(1) ASIC alleged that the Aboriginal Ownership/Management Representation was false because no company within the “ACBF group” was owned or managed by Aboriginal persons;
(2) the set of companies forming the “ACBF group” was undefined in the Further Amended Statement of Claim and in ASIC’s submissions. Some companies which may be within that set have been identified by the Court but the evidence does not allow a conclusion that these are a complete set of the companies in the “ACBF group”;
(3) the sets of persons who “owned” and “managed” respectively the companies within the “ACBF group” were also undefined in the Further Amended Statement of Claim and in ASIC’s submissions;
(4) without precision as to the members of the sets of: (a) the companies in the “ACBF group”; (b) the owners of shares in the companies in that group; and (c) the persons who were managers of those companies, the proposition that the Aboriginal Ownership/Management Representation was false for the reasons set out at [53(1) to (4) above] is not established;
(5) further, the evidence as to who was and was not an Aboriginal person did not address any particular set of persons and critically did not rise above the level of uncertain assertion by Mr Jones; and the proposition that no shareholder was an Aboriginal person during the relevant period is falsified by ASIC’s acceptance that Mr Duncan was Aboriginal person;
(6) even on the assumption that the only companies in the “ACBF group” are the apparent group companies, the proposition that the Aboriginal Ownership/Management Representation was false for the reasons set out at [53(1) to (4)] above is not established, for want of precision as to the set of managers of those companies; and because the evidence as to the Aboriginality of the owners of shares and directors in the identified companies is inadequate; and
(7) if the case were (contrary to the manner of its pleading) limited to the ownership and management of ACBF, it would still fail for the reasons set out at [77] above.
Consideration
53 There was a substantial body of evidence before the primary judge relevant to whether during the Relevant Period (1 January 2015 to 30 November 2018) ACBF was owned or managed by an Aboriginal person or persons. The evidence included:
(a) current and historical ASIC company extracts for ACBF, ACBF Group (later named Youpla Group) and other companies in the ACBF group;
(b) a compilation by Sarah Pringle, an ASIC employee, from ASIC records, of the current and historical shareholdings and directorships of ACBF, ACBF Group and other companies in the ACBF group (Pringle compilation);
(c) the transcript of the evidence of Mr Jones, the Chief Executive Officer (CEO) of ACBF Group and ACBF before the FSRC on 3 July 2018 (FSRC Transcript);
(d) the transcript of the ASIC examination of Mr Jones conducted pursuant to s 19(1) of the ASIC Act on 29 June 2020 (s 19(1) examination);
(e) the written response of Mr Jones dated 25 March 2020 to a notice from ASIC requiring reasonable assistance pursuant to s 19(2) of the ASIC Act (first s 19(2) response);
(f) the written response of Mr Jones dated 2 October 2020 to another notice from ASIC requiring reasonable assistance pursuant to s 19(2) of the ASIC Act (second s 19(2) response); and
(g) contemporaneous emails between ACBF officers and/or executives.
54 The primary judge’s reasons make no reference to several important aspects of the evidence; in particular the FSRC Transcript, the contemporaneous emails, nor to some important parts of the s 19(1) examination transcript. We will refer to the salient parts of the evidence in our consideration below.
55 We consider the primary judge fell into error in three broad ways:
(a) first, in concluding that the falsity of the Aboriginal Ownership/Management Representation was to be decided by reference to all the companies in the ACBF group, rather than by reference to ACBF only;
(b) second, in deciding that it was necessary for ASIC to adduce evidence and make submissions in relation to authorities such as Mabo, Love, McHugh or Helmbright; and
(c) third, in deciding that the evidence was inadequate to establish the falsity of the representation. In our view there was strongly probative evidence before the Court which supported the conclusion that the representation was false, and there was no evidence to the contrary.
56 In relation to the first error outlined above, the impugned representation is a representation that during the Relevant Period ACBF was owned or managed by an Aboriginal person or persons. Putting to one side the pleadings argument earlier discussed, it follows that the falsity of that representation will be established by evidence that shows that, in fact, during the Relevant Period ACBF was not owned or managed by an Aboriginal person or persons. It will not be shown by evidence going to whether other companies in the ACBF group were owned or managed by an Aboriginal person or persons.
57 The primary judge erred in focussing on ASIC’s failure to define the concept of the “ACBF group” or the “ACBF group of companies” in the FASOC and in its submissions. It should be noted that the primary judge was misled into that error by ASIC’s particulars in the FASOC which also focused on such matters. It was immaterial whether or not the evidence established that during the Relevant Period other companies in the ACBF group were owned or managed by an Aboriginal person or persons. His Honour erred by focussing on the wrong question, and that error infected all of his considerations in relation to the adequacy of the evidence.
58 In relation to the second error outlined above, contrary to the primary judge’s view (at [64]-[65]), there was no need for ASIC to adduce evidence or make submissions in relation to authorities such as Mabo, Love, McHugh or Helmbright, nor to do so by reference to the definition of “Aboriginal person” in cl 1.2 of the ACF Plan Rules. As a matter of ordinary language an “Aboriginal person” is a person descended from the indigenous inhabitants of Australia prior to British settlement: see Attorney-General (Cth) v Queensland (1990) 25 FCR 125 at 126-127 per Jenkinson J, 131-2 per Spender J and 148 per French J. And the primary judge’s finding that ACBF made the Aboriginal Ownership/Management Representation necessarily implied that the meaning of “Aboriginal person” was sufficiently clear to those to whom the representation was made. Nor did anything turn on the asserted failure by ASIC to better define what it meant by “Aboriginal person”. There is nothing in the evidence to suggest that some other conception of “Aboriginal person” was appropriate in the circumstances of the case, nor that the issue of falsity would be decided differently if some other conception of “Aboriginal person” was used.
59 Next, we note that the question as to whether during the Relevant Period ACBF was “owned” by an Aboriginal person or persons falls to be decided by reference to the ultimate ownership of the shares of ACBF. The question as to whether during the Relevant Period ACBF was “managed” by an Aboriginal person or persons falls to be decided by reference to its management, either through its directors or through (non-director) managers. We now turn to those questions.
The primary “ownership” evidence
60 The primary evidence before the Court going to the ultimate ownership of ACBF during the Relevant Period is the historical ASIC company extracts and the Pringle compilation, which was confirmed by Mr Jones’s evidence before the FSRC and his statements in his 19(1) examination and first and second s 19(2) responses.
61 The evidence shows that throughout the Relevant Period 100% of the shares of ACBF (being 200 ordinary shares and 1000 B class shares) were owned by ACBF Group. That is, it shows that ACBF was a wholly owned subsidiary of ACBF Group throughout the Relevant Period.
62 Turning then to the ownership of ACBF Group, the evidence shows that:
(a) 80% of the shares in ACBF Group (being 400 ordinary shares, and one X class share) were owned by Just Solutions Limited, a Vanuatu company in which the founder of ACBF, Ron Pattenden, had a majority shareholding and Jonathan Law had a minority shareholding; and
(b) the remaining 20% of the shares in ACBF Group (being 100 ordinary shares) were owned by ACBF Consultants Pty Ltd (later renamed Youpla Consultants Pty Ltd).
63 Turning then to the ownership of ACBF Consultants, the evidence shows that 100% of the shares in ACBF Consultants (being 100 ordinary shares) were owned by ACBF Administration Pty Ltd (later renamed Youpla Administration Pty Ltd).
64 Finally, turning to the ownership of ACBF Administration, the position turns full circle. The evidence shows that 100% of the shares in ACBF Administration shares (being one ordinary share) were owned by ACBF Group.
65 Thus, throughout the Relevant Period, all of the shares in ACBF were owned by ACBF Group, and in turn all of the shares of ACBF Group were owned by Just Solutions, the ultimate owners of which were Mr Pattenden and Mr Law. As a result, the question as to whether during the Relevant Period any Aboriginal person or persons “owned” ACBF may be answered by evidence as to whether either of Mr Pattenden or Mr Law are Aboriginal.
66 Importantly, the evidence also shows that there was no change in the ownership of ACBF or ACBF Group during the Relevant Period.
The primary “management” evidence
67 The primary evidentiary material before the Court going to the management of ACBF during the Relevant Period is:
(a) the historical ASIC company extract which establishes the identity of its directors during that period; and
(b) Mr Jones’s evidence before the FSRC and his statements in the s 19(1) examination and first and second s 19(2) responses which go to the identity of other persons who held management roles in ACBF during that period.
68 The historical ASIC company extract for ACBF shows that the following persons were appointed as directors of ACBF during the Relevant Period:
(a) Mr Pattenden from 5 March 2014 to 30 November 2018 (being the end of the Relevant Period);
(b) Mr Law from 18 May 2017 to the 30 November 2018;
(c) Michael Wilson from 18 November 2014 to 19 December 2017;
(d) Mr Jones from 18 December 2017 to 29 January 2021; and
(e) Kerrie McCallie from 21 July 2009 to 18 May 2017.
Each of those persons, except Ms McCallie, was also a director of ACBF Group at some point in the Relevant Period.
69 For completeness, although this is outside the Relevant Period, Isaac Simon and Leanne Court commenced as directors of ACBF (and of ACBF Group) on 30 November 2018.
70 The primary judge said (at [60(2)]) that the following other persons possibly held management positions in the ACBF group during the Relevant Period, namely:
(a) Geoff Clayton (Chief Operating Officer (COO) of ACBF Administration Pty Ltd);
(b) Sandra Thurley;
(c) “Ms McCourt” who during the Relevant Period was described in various documents as the “General Manager”. We take the reference to Ms McCourt to be a typographical error as we can see no reference in the evidence to a person by that name and we assume it is intended to be a reference to Ms Court, who the evidence shows became a director of ACBF and ACBF Group after the Relevant Period; and
(d) David Hughes, who was a solicitor advising ACBF.
The 30 November 2018 Reorganisation
71 To understand the import of some of the evidence it is necessary to understand that there was a significant change in the ownership of ACBF Group on 30 November 2018, and through that, a change in the ownership of ACBF (the 30 November 2018 reorganisation). For all relevant purposes the reorganisation was outside the Relevant Period.
72 The historical ASIC company extracts and the Pringle compilation, confirmed by Mr Jones’s evidence before the FSRC and his statements in the s 19(1) examination and first and second s 19(2) responses, show that following 30 November 2018 ACBF Group continued to own 100% of the shares of ACBF. That is, ACBF continued to be a wholly owned subsidiary of ACBF Group. However, following the 30 November 2018 reorganisation:
(a) Elah Valley Pty Ltd commenced to own 50% of the shares in ACBF Group (being 250 ordinary shares) and one X class share. In turn, Elah Valley was 51% owned by Mr Jones and 49% by Geoffrey Clayton; and
(b) Just Oreis Pty Ltd commenced to own the other 50% of the shares in ACBF Group (being 250 ordinary shares). Just Oreis was 100% owned by Mr Simon. Subsequently, on a date which is not clear on the materials, the ownership of the shares in Just Oreis was transferred to Jamal Idris.
Mr Jones stated, and we accept, that Mr Simon and Mr Idris are Aboriginal men. Thus, from 30 November 2018 ACBF was 50% owned by Aboriginal persons (although the evidence did not disclose the effect of the X class share held by Elah Valley).
Mr Jones’s evidence
73 The primary judge erred in concluding (at [72(4)-(7)]) that Mr Jones’s evidence was inadequate to establish the falsity of the Aboriginal Ownership/Management Representation because: (a) he was unable to express a view as to whether Ms McCallie was an Aboriginal person; (b) his answers concerning Ms Thurley and Mr Law did not establish that they are not Aboriginal persons; (c) he expressed no view as to the Aboriginality of other managers such as Mr Pattenden, Mr Wilson, Mr Hughes and Mr Clayton; and (d) his evidence did not address whether he was himself an Aboriginal person.
74 The first problem with this aspect of the primary judge’s reasoning is that it did not take into account Mr Jones’s general statements about the absence of any Aboriginal ownership and management of ACBF prior to the 30 November 2018 reorganisation. As we will explain, those general statements have real probative value and there is no evidence to the contrary. Further, when one descends to the evidence about specific individuals, it is apparent that his Honour overstated the position. For example:
(a) in his s 19(1) examination Mr Jones said “I am not black”, thereby stating that he is not Aboriginal. His Honour appears to have overlooked that evidence;
(b) in his second s 19(2) response, Mr Jones was asked “[o]n what basis are you able to confirm that the following people are not Aboriginal”:
(i) in relation to Mr Law he responded “I do not believe he identifies as Indigenous.” That is a statement by Mr Jones as to his belief that Mr Law is not Aboriginal. His Honour did not explain why that evidence had no probative value, and there was no evidence to the contrary; and
(ii) in relation to Ms Thurley, the s 19(1) examination and s 19(2) responses show that Mr Jones had personal experience with Ms Thurley. In relation to a specific question as to her Aboriginality he responded “Sandra Thurley was born in England”. Of course, a person could be born in England and yet be Aboriginal, but in context we take Mr Jones as stating that he did not believe Ms Thurley to be of Aboriginal descent. Further, even if Ms Thurley is Aboriginal, in our view that would not mean that the falsity of the representation was not established. She was a sales manager within ACBF and her occupying that position does not show that ACBF was “managed” by an Aboriginal person;
(c) in relation to Mr Clayton, the evidence shows that he was a director of ACBF Administration and of Community Funeral Plans Pty Ltd from 23 October 2017 to 20 November 2018 and also COO of ACBF Administration for a similar period. There is no evidence to show that he had a management role in ACBF, and we infer that he did not;
(d) in relation to Mr Hughes, the evidence shows that he was a partner in the legal firm, Small Myers Hughes, which was retained to advise the companies in the ACBF group. In his s 19(1) examination Mr Jones described him as the “corporate solicitor” and said that he had to report to him when he first joined ACBF. In his second s 19(2) response, Mr Jones described Mr Hughes as a “manager”. It is appropriate to infer that Mr Hughes was an external legal adviser to ACBF, rather than a person occupying a management role in the company and his position is not relevant to the falsity of the representation;
(e) in relation to Mr Pattenden, it is true that Mr Jones said nothing about whether or not he is Aboriginal. However, in July 2018 Mr Jones faced intense cross-examination before the FSRC in relation to allegations that ACBF represented itself to Aboriginal communities as an Aboriginal company when in fact it was not owned or managed by an Aboriginal person or persons. If, in fact, Mr Pattenden, the majority owner of ACBF, was Aboriginal it would have been straightforward for Mr Jones to say so. It is appropriate to infer that Mr Jones did not give that evidence because Mr Pattenden is not Aboriginal; and
(f) each of Mr Pattenden, Mr Law, Ms McCallie, Ms Thurley, Mr Wilson, Mr Hughes, Mr Clayton and Mr Jones himself fell within Mr Jones’s general (in the sense of not being directed to specific individuals) statements before the FSRC and the s 19(2) responses and s 19(1) examination, which support the conclusion that until the 30 November 2018 reorganisation ACBF had no Aboriginal ownership or management.
The other evidence establishing falsity
75 For the reasons we now turn to explain, the evidence before the primary judge established that during the Relevant Period ACBF was not owned or managed by an Aboriginal person or persons.
76 We consider the primary judge erred by either taking no account of or failing to appreciate the significance of five matters going to the falsity of the Aboriginal Ownership/Management Representation. We do not, however, suggest that those errors lie entirely at his Honour’s feet as it appears that ASIC put on a great deal of material, much of which was not well-targeted, and then it failed to identify to his Honour those parts of the evidence, which were most important in relation to falsity. It appears that before the primary judge ASIC only referred to a few aspects of the relevant evidence, whereas before us ASIC conducted a more complete review of the evidence. The relevant evidence includes:
(a) the FSRC Transcript.
(b) Mr Jones’s first and second s 19(2) responses and s 19(1) examination;
(c) the contemporaneous emails;
(d) Mr Jones’s statements regarding the AFCA complaints; and
(e) the New Disclaimer.
We now turn to each of those matters.
The FSRC Transcript
77 The primary judge made no reference to the FSRC Transcript when he summarised the evidence relevant to the falsity of the Aboriginal Ownership/Management Representation (at [67]-[70]). At [131], his Honour said that the FSRC Transcript was not in evidence before him. That was incorrect.
78 We gave leave for ASIC to file an affidavit of Lucy Rees-Graham, a lawyer with ASIC, affirmed 20 February 2024, which went to the evidence that was before the primary judge. Ms Rees-Graham’s affidavit, together with a transcript of the hearing below, shows that:
(a) the Court Book ASIC filed for the trial included an affidavit of Ms Pringle dated 24 September 2021 and its exhibits (Pringle Affidavit), one of which exhibits was the FSRC Transcript. The transcript was exhibited as one of the documents provided to Mr Jones during his examination by ASIC officers under s 19(1) of the ASIC Act;
(b) the trial below proceeded on the basis that only those items in the Court Book to which ASIC expressly referred in written or oral submissions were to be taken to have been admitted into evidence, and that following the trial ASIC was to remove from the Court Book any items which had not been referred to;
(c) after the hearing, Ms Rees-Graham communicated with the primary judge’s chambers and removed all items from the Court Book which had not been referred to in written or oral submissions, and provided chambers with an Amended Court Book and a “List of Removed Items”; and
(d) the Amended Court Book included the Pringle Affidavit to which is exhibited the FSRC Transcript.
Thus, the FSRC Transcript formed part of the evidence before the primary judge.
79 The FSRC Transcript shows that on 3 July 2018 Mr Jones testified that:
(a) none of the directors of ACBF were Aboriginal or Torres Strait Islander people;
(b) none of the managers of ACBF were Aboriginal or Torres Strait Islander people;
(c) ACBF was not owned or run by Aboriginal or Torres Strait Islander people; and
(d) ACBF was not, in his view, an Aboriginal organisation.
In short, he testified that ACBF was not owned or managed by an Aboriginal person or persons at that point in the Relevant Period.
80 The FSRC Transcript was admitted into evidence, without objection, as a record of the statements Mr Jones gave before the Royal Commission, and it is in evidence as such. Having been admitted into evidence, without objection, it is evidence in the proceeding, irrespective of whether any objection, if taken, would have succeeded: Frigger v Trenfield (No 3) [2023] FCAFC 49 at [393] (Allsop CJ, Anderson and Feutrill JJ). Pursuant to s 60(1) of the Evidence Act 1995 (Cth) (Evidence Act), being evidence as a record of what Mr Jones said during his examination before the FSRC, it is also admissible to prove the truth of the facts he asserted during that examination. Further and in any event, it is admissible as an admission of ACBF and ACBF Group under s 87 of the Evidence Act 1995 (Cth) because it is reasonably open to find, and we do find, that when he gave evidence at the FSRC, Mr Jones had authority to make statements on behalf of ACBF and ACBF Group in relation to the question whether ACBF was owned or managed by an Aboriginal person or persons. In that regard, we note the following two matters.
(a) First, at the time Mr Jones gave that evidence before the FSRC he was the CEO of both ACBF Group and ACBF, and a director of ACBF Group, ACBF, Aboriginal Community Benefit Fund Pty Ltd, Aboriginal Community Benefit Fund No 2 Pty Ltd, ACBF Consultants, Community Funeral Plans Pty Ltd, and ACBF Administration. He had been made CEO of ACBF Group in October 2017 and of ACBF in around June 2018, and he was appointed as a director of the companies referred to above over the period from October to December 2017.
(b) Second, he was the officer of ACBF put forward by it to give evidence before the FSRC in relation to allegations of misleading misconduct made against it. As the CEO of ACBF (and ACBF Group) and, as we infer, having made proper enquiries prior to giving his evidence in the formal context of a Royal Commission, Mr Jones was in an excellent position to give evidence as to whether or not ACBF had any Aboriginal ownership or management until that date.
81 Mr Jones’s sworn testimony before the FSRC is highly probative as to whether during the Relevant Period ACBF was owned or managed by an Aboriginal person or persons, and because of the primary judge’s mistaken view that the FSRC Transcript was not before him, he did not consider that evidence.
82 Further, it is important to understand that in relation to the “ownership” of ACBF, Mr Jones’s evidence before the FSRC goes further than showing that, as at 3 July 2018, ACBF had no Aboriginal ownership. That is so because the evidence shows that the ownership of ACBF and ACBF Group did not change during the Relevant Period. Throughout the Relevant Period ACBF Group had the ultimate ownership of all ACBF shares; and Just Solutions owned all of the shares of ACBF Group. Mr Pattenden and Mr Law were the owners of Just Solutions. Thus, unless one or other of Mr Pattenden or Mr Law is Aboriginal, ACBF had no Aboriginal ownership throughout the Relevant Period.
83 As is evident from the foregoing, the FSRC Transcript contained evidence that was both compelling and probative to ASIC’s case on falsity, but our attention was not drawn to any part of the oral or written submissions before the primary judge that drew attention to its significance. Indeed, as we have pointed out, the primary judge stated that the FSRC Transcript was not in evidence before him. We are left with the distinct impression that ASIC’s approach in the proceedings below was to leave it to the primary judge to wade through a mass of material to make good its case. It is not a position that the primary judge should been placed in.
Mr Jones’ first and second s 19(2) written responses to ASIC and his s 19(1) examination transcript
84 In our view, while the primary judge considered Mr Jones’s statements in his first and second s 19(2) responses to ASIC and his s 19(1) examination transcript, his Honour wrongly decided that evidence had little probative value.
85 On 20 March 2020 ASIC issued a notice to Mr Jones making a formal request for assistance pursuant to s 19(2) of the ASIC Act in relation to suspected contraventions of the ASIC Act by ACBF and ACBF Group. The notice defined the “relevant period” as the period from 1 January 2015 and ongoing and defined ACBF to mean the first respondent herein and Youpla to mean Youpla Group (formerly ACBF Group).
86 In a written response to that notice dated 23 March 2020, being the first s 19(2) response, Mr Jones provided the following answers to ASIC (as the primary judge noted at [67]):
6. In the Relevant Period, were any of the management positions occupied by Aboriginal or Torres Strait Islander persons? If so, specify the individual(s) and the role(s) held.
Yes, Isaac Simon (Former Director) and Jamal Idris (Current Director) are both employed in the business as managers and Directors. Isaac Simon has been a shareholder since November 2018. I do not believe from my searches that the former management contained any Aboriginal or Torres Strait Islander persons.
(Emphasis added.)
7. In the Relevant Period, were any of the directors or shareholders of Youpla or its subsidiaries Aboriginal or Torres Strait Islander persons? If so, specify the individual(s).
Yes, Isaac Simon (Former Director) and Jamal Idris (Current Director) are both employed in the business as managers and Directors. Isaac Simon has been a shareholder since November 2018. I do not believe from my searches that the former management contained any Aboriginal or Torres Strait Islander persons.
(Emphasis added.)
…
87 On 29 June 2020, Mr Jones was examined by ASIC officers under s 19(1) of the ASIC Act. Mr Jones gave sworn answers to the questions asked and on 17 September 2020 he certified the examination transcript as a true and accurate record of the examination record. Mr Jones gave the following answer (only the first of which was noted by the primary judge (at [68]))
(1)
Q. In terms of [the numbers of Aboriginal directors], were they different when you first started with the company?
A. Yes.
Q. How so?
A. There was, to my knowledge, there was no aboriginal management or ownership. (Emphasis added.)
(2)
Q. Are any of the Youpla companies, registered with [the Office of the Registrar of Indigenous Corporations] ORIC?
A. No.
Q. Why not?
A. We were making changes to the structure and wanted to make the remediated changes before going and registering so we were making changes to the reconciliation action plan and wanted to ensure all the changes within the company had been made by way of new products, and the transitioning from the old to the new before we did.
Q. To your knowledge, have any attempts been made previously to register with ORIC?
A. No, because previously there was no shareholding and no management. (Emphasis added.)
88 In a second written s 19(2) response dated 2 October 2020, Mr Jones provided the following answers to ASIC (as noted by the primary judge at [69]):
11. In your 24 March 2020 response to ASIC’s 20 March 2020 Notice, you stated in response to question 6 that “I do not believe from my searches that the former management contained any Aboriginal or Torres Strait Islander persons.” Describe the searches that you undertook in order to provide this response.
Speaking to the longest serving staff, the shareholders and other directors, I was told that there were Indigenous staff over the years, however I was never told that any held Management roles. This is not to say that management roles weren’t held by an Indigenous person.
89 Mr Jones provided those answers after the 30 November 2018 reorganisation, following which Mr Simon, an Aboriginal man, commenced to have a 50% ownership of ACBF Group (and thus of ACBF) and at a later point (the precise date of which is not clear) another Aboriginal man, Mr Idris took over that ownership share.
90 Mr Jones’ first s 19(2) response reflected that fact:
(a) in relation to the “management” of ACBF, Mr Jones’s reference to “former management” can only have been a reference to the management of ACBF Group and ACBF before the 30 November 2018 reorganisation. Mr Jones said, based on his searches, that the “former management” of ACBF did not include any Aboriginal person or persons; and
(b) in relation to the “ownership” of ACBF, Mr Jones said that Mr Simon had been a shareholder of ACBF Group and ACBF since 30 November 2018. That can only have been a reference to Mr Simon acquiring 50% ownership of ACBF Group and thus of ACBF, through the 30 November 2018 reorganisation.
91 Mr Jones said the same in his s 19(1) examination on 29 June 2020. There Mr Jones said that at that time Youpla Group (formerly ACBF Group) and ACBF had three directors. The current and historical ASIC company extracts in relation to ACBF and Youpla Group show those persons were Mr Jones, Ms Court and Mr Idris. Mr Jones said that one of the directors was Aboriginal which can only have been a reference to Mr Idris. That also carried the implication that neither Mr Jones nor Ms Court were Aboriginal.
92 Importantly, Mr Jones was asked how the position (in relation to Aboriginal ownership and management of ACBF) was different to the position that existed when he joined the ABCF group in September 2017. In response, he said “..to my knowledge, there was no Aboriginal management or ownership”.
93 Mr Jones was also asked whether ACBF had ever applied for registration with the Office of the Registrar of Indigenous Corporations (ORIC). He said that it had not done so because the organisation was undergoing changes and because “previously there was no shareholding and no management.” That can only be a statement that there was no previous Aboriginal shareholding or management of either ACBF Group or ACBF. The primary judge made no reference to this part of the evidence.
94 In his second s 19(2) response Mr Jones described the searches he undertook in order to provide those answers, in the following terms:
Speaking to the longest serving staff, the shareholders and other directors, I was told that there were Indigenous staff over the years, however I was never told that any held Management roles. This is not to say that management roles weren’t held by an Indigenous person.
95 The primary judge found (at [72(2)]) that the “searches” Mr Jones said he had undertaken did not establish that there were no Aboriginal persons in the former management, and also said that Mr Jones’s acknowledged “that there were Aboriginal staff who may have held management positions.” In our view, his Honour overstated the deficiencies in this aspect of Mr Jones’s statements.
96 The ACBF group was a small organisation. In his s 19(1) examination Mr Jones said that it had only 22 or 23 staff at the time he started there, and the evidence includes an application to ASIC for an Australian Financial Services Licence by Youpla Pty Ltd on 4 April 2020. In that application Youpla said that “[s]ome of Youpla’s staff have been employed by Youpla for over 15 years, so solutions have been tried, tested and passed on to newer employees.”
97 The s 19(1) examination transcript shows that Mr Jones was familiar with ACBF’s ultimate owners, Mr Pattenden and Mr Law, and that he personally knew all of the directors of the ACBF Group and ACBF, save for Ms McCallie. There was no great difficulty associated with Mr Jones making enquiries of the small number of long serving staff and/or long serving directors such as Mr Pattenden in order to ascertain whether any Aboriginal person had previously held a management role so as to provide the answers that he did in his first and second s 19(2) responses. It was not necessary for his enquiry to descend into the mists of time; it only concerned the period from 1 January 2015 to the date of the s 19(2) response which involved going back just five years. And it is relevant that Mr Jones’s enquiries did show that Dudley Duncan, an Aboriginal man, held a small number of shares in a different company in the ACBF group well before the Relevant Period. That is, his enquiries were effective.
98 It is plain from the s 19(1) examination transcript that based upon Mr Jones's review of company records and his enquiries of long serving staff and directors, he felt confident in stating the position that existed in relation to Aboriginal ownership and management in the ACBF group prior to joining the group in September 2017. He said, in effect, that ACBF did not have any Aboriginal ownership or management until the 30 November 2018 reorganisation.
99 At [72(2)] the primary judge made too much of Mr Jones’s remark that “[t]his is not to say that management roles weren’t held by an Indigenous person.” In saying that, Mr Jones merely accepted the possibility that some unidentified indigenous staff member in the past may have held a managerial role in ACBF at some point. That does not significantly reduce the weight of his evidence, and it should be kept in mind that Mr Jones also said in his s 19(1) examination that ACBF did not have any indigenous staff when he joined in September 2017.
100 Relatedly, at [72(1)] the primary judge also made too much of the fact Mr Jones did not join ACBF until September 2017, about two-thirds of the way through the Relevant Period. His Honour there said that there were obvious limitations regarding the weight to be given to Mr Jones’s statements as to the ownership and management of ACBF before September 2017.
101 We have no difficulty in accepting that Mr Jones’s statements in relation to the period before he joined ACBF in September 2017 carry less probative weight than his statements in relation to the period after that. But as we have said, save for Ms McCallie, he was familiar with all of the directors of ACBF Group and ACBF and he made enquiries of long serving directors and employees before stating that ACBF did not have any Aboriginal ownership or management until the 30 November 2018 reorganisation. We infer that, as CEO of ABCF Group and ACBF, providing answers to questions in a formal ASIC investigation, Mr Jones would not have made those statements unless he had a proper basis to do so. In our view those statements have real evidentiary value.
102 Further, and importantly, in deciding that Mr Jones’s statements had little probative value because he did not join ACBF until September 2017, his Honour failed to engage with the fact that whatever limitations existed in relation to the probative value of Mr Jones’s statements regarding the period from 1 January 2015 to September 2017, there could be no such limitation in relation to his statements regarding the approximately 11-12 month period from October/December 2017 to the 30 November 2018 reorganisation. During that period, he was the most senior officer in the ACBF group, being CEO of ACBF Group and ACBF, and a director of ACBF Group, ACBF, Aboriginal Community Benefit Fund, Aboriginal Community Benefit Fund No 2, ACBF Consultants, Community Funeral Plans, and ACBF Administration. In that period was in an excellent position to know whether any Aboriginal person or persons had an ownership interest or a management role in ACBF in that period, and he had faced cross-examination before the FSRC in relation to just that issue.
103 The primary judge did not refer to the significance of the fact that Mr Jones was CEO of ACBF Group from October 2017 and a director of ACBF Group and ACBF from December 2017 until the end of the Relevant Period, and his Honour provided no explanation as to why, at least in relation to that 11-12 month period Mr Jones’s statements to the effect that ACBF did not have Aboriginal ownership or management until the 30 November 2018 reorganisation were not probative of the falsity of the representation. In our view, his Honour failed to appreciate the significance of that fact.
104 Again, we note that the historical ASIC company extracts in relation to ACBF and ACBF Group, together with the Pringle compilation, show that the ownership of ACBF and of ACBF Group did not alter during the Relevant Period. Throughout that period:
(a) ACBF Group owned all of the shares in ACBF; and
(b) Just Solutions owned all of the shares in ACBF Group.
Therefore, even if Mr Jones’s statements to the effect that ACBF had no Aboriginal ownership are only accepted in relation to the period after October/December 2017, it follows that ACBF was not owned by an Aboriginal person or persons at any point during the Relevant Period.
105 Mr Jones’s statements in his first and second s 19(2) responses to ASIC and his s 19(1) examination are admissions against the respondents pursuant to s 87(1)(a) and (b) of the Evidence Act and for the purposes of s 81(1) of that Act. ASIC gave notice pursuant to s 79(1) of the ASIC Act that it intended to rely on certain aspects of the transcript of the examination of Mr Jones. ASIC now seeks to rely upon a broader range of Mr Jones’s statements than it did below, but in our view that does not mean that it is now taking a point that it did not take below. As admissions made with authority, against ACBF’s interests, Mr Jones’s statements in his s 19(1) examination and s 19(2) responses are admissible and highly probative of the falsity of the Aboriginal Ownership/Management Representation.
The contemporaneous emails
106 The third salient aspect of the evidence (to which the primary judge made no reference) are contemporaneous emails between Mr Jones and Mr Pattenden in October 2018. On 22 October 2018, Mr Jones sent an email to Mr Pattenden in which he referred to a proposed management buyout of the ACBF group so that the ACBF group had 50% Aboriginal ownership. Mr Jones’s email said:
…a management buyout with a 50/50 split Aboriginal ownership will completely change the message to these regulatory bodies and reduce our legal costs fighting frivolous claims, increase the retention from customers playing the "didn't know you weren't 'Aboriginal' card" and open sales opportunities with groups and bodies that just don't have the appetite to work with a company 'Notorious' to Regulators and media. The message has to change and the change of ownership will do this.
(Emphasis in original).
107 There is no reason for Mr Jones to express such concerns unless, at that point, ACBF did not have any Aboriginal ownership. If Mr Pattenden thought that Mr Jones was wrong in understanding that ACBF did not have any Aboriginal ownership we would expect him to have said so. He said nothing in response to indicate that Mr Jones’s statements were wrong. It is appropriate to infer that ACBF did not have Aboriginal ownership as at 22 October 2018. Again, it follows that ACBF was not owned by an Aboriginal person or persons at any stage in the Relevant Period.
108 As with other items of direct and circumstantial evidence going to the proof of falsity, our attention was not drawn to any part of the oral or written submissions in the proceedings below where ASIC specifically drew the primary judge’s attention to this email correspondence and its significance to its case on falsity.
Mr Jones’ statements regarding the AFCA complaints
109 The fourth salient aspect of the evidence (to which the primary judge made no reference) is Mr Jones’s statements in his s 19(1) examination where he said that ACBF had been the subject of a series of complaints to the Australian Financial Complaints Authority (AFCA) in relation to misleading conduct in the sale of ACBF funeral plans. In re-examination he was taken to a complaint by Coral King, an Aboriginal woman, to the effect that she had bought a funeral plan from ACBF because she thought it was an Aboriginal company. In relation to that and similar complaints, Mr Jones made no suggestion that the complaints had no basis because, in fact, ACBF was an Aboriginal company. Instead, by reference to the AFCA complaints and ACBF’s program of “community engagement”, he said that the complainants had been repeatedly told that ACBF was not “an Aboriginal company”, and that the great majority of them understood that fact.
110 In his s 19(1) examination Mr Jones said that to be recognised as an Aboriginal company a company had to be 50% Aboriginal owned and there had to be Aboriginal input into day-to-day management. Mr Jones’s statement in his s 19(1) examination that ACBF was not an Aboriginal company, and that the great majority of complainants to AFCA understood that fact, also strongly supports an inference that ACBF was not, during the Relevant Period, owned or managed by an Aboriginal person or persons, and that the Aboriginal Ownership/Management Representation is false.
The New Disclaimer
111 The fifth matter to which the primary judge made no reference is the relevance of the introduction of the New Disclaimer in September 2018 (although we note that ASIC did not press this argument below).
112 The New Disclaimer included the phrase “we are not an Aboriginal company” and in his first s 19(1) response Mr Jones said that from December 2017 the Board of ACBF approved ACBF’s marketing. Thus, as CEO and a director he was part of the Board that decided to publish the New Disclaimer which expressly stated that ACBF was not “an Aboriginal company” in circumstances where he understood that for it to be recognised as an Aboriginal company ACBF was required to have 50% Aboriginal ownership and Aboriginal input into the day-to-day management. By publishing a statement that ACBF was not an Aboriginal company ACBF was effectively stating that it was not owned or managed by an Aboriginal person or persons, which strongly supports an inference that the Aboriginal Ownership/Management Representation is false.
113 In the appeal, ASIC seeks to argue that the New Disclaimer amounts to an admission that ACBF was not, at that time, owned or managed by an Aboriginal person or persons. ASIC did not run that argument below, and it requires leave before it can do so on appeal. We consider it to be expedient and in the interests of justice to grant leave for ASIC to now run this argument because it has real merit; it raises a question of law and does not involve any factual controversy which could have been met by calling evidence below; and ACBF will not be prejudiced by ASIC now making the argument given that it did not participate in the hearing below and it has filed a submitting notice in the appeal.
114 In our view the New Disclaimer is an admission that, as at September 2018, ACBF did not have Aboriginal ownership or management. It is therefore an admission of the falsity of the representation, as at that time.
115 As we trust is abundantly clear from the above, the evidence clearly establishes that the Aboriginal Ownership/Management Representation is false. We consider that the primary judge erred in failing to so find.
CONCLUSION
116 We have accordingly made a declaration that by representing during the Relevant Period, in the course of offering, promoting and selling the Aboriginal Community Funeral Plan, that ACBF was owned or managed by an Aboriginal person or person, ACBF:
(a) engaged in conduct, in trade or commerce, in relation to financial services that was misleading or deceptive or likely to mislead or deceive in contravention of s 12DA(1) of the ASIC Act; and
(b) made, in trade or commerce, in connection with supply or possible supply or promotion of financial services, a false or misleading representation in contravention of s 12DB(1)(f) of the ASIC Act.
We have made orders to set aside the relevant part of the orders below, and to remit the matter to the primary judge for redetermination in relation to penalty.
117 In relation to costs, in our view the lion’s share of the points raised in the appeal were not put with appropriate clarity below. While the issue of costs does not loom large in this matter because ASIC cannot pursue its costs without leave of the Court, we do not consider it appropriate to order that ASIC have its costs of the appeal.
I certify that the preceding one hundred and seventeen (117) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Murphy, O’Bryan and Shariff. |
Associate:
