FEDERAL COURT OF AUSTRALIA
Australian Prudential Regulation Authority v Siminton (No 6) [2007] FCA 1608
CONSTITUTIONAL LAW – Where interlocutory injunction imposed preventing Respondent from dealing with his funds and property – Whether freezing order constitutes an acquisition of property by the Commonwealth other than on just terms
REMEDIES – Injunctions – Whether appointment of receiver appropriate – Parties to file submissions on appropriate terms of orders consistent with reasons for judgment
WORDS AND PHRASES – “banking business”
Australian Prudential Regulation Authority Act 1998 (Cth) s 8
Australian Securities and Investment Commission Act 1989 (Cth) s 12GD
Banking Act 1959 (Cth) ss 7, 11, 65A, 66, 69E
Constitution ss 51, 80
Corporations Act 2001 (Cth) s 1324
Customs Act 1901 (Cth) s 243E
Federal Court of Australia Act 1976 (Cth) ss 23, 57
Financial Sector Legislation Amendment Act (No 1) 2000 s 20
Judiciary Act 1903 (Cth) s 78B
Trade Practices Act s 80
Australian Prudential Regulation Authority v Siminton (No 2) [2006] FCA 336 cited
Australian Prudential Regulation Authority v Siminton (No 5) [2006] FCA 1340 cited
Australian Securities and Investments Commission v Mauer-Swisse Securities Limited (2002) 42 ACSR 605 discussed
Australian Independent Distributors Ltd v Winter (1964) 112 CLR 443 referred to
Australian Securities and Investment Commission v Burke [2000] NSWSC 694 cited
Australian Federal Police v Cox (1986) 78 ALR 509 referred to
Commissioner of State Savings Bank of Victoria v Permewan, Wright & Company Limited (1914) 19 CLR 457 referred to
Medibank Private Limited v Cassidy (2002) 124 FCR 40 referred to
Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 referred to
Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617 referred to
R v Smithers; Ex parte McMillan (1982) 152 CLR 477 discussed
Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 discussed
R v Kirby; Ex parte Boilermakers Society of Australia (1956) 94 CLR 254 cited
Sterling v Trade Practices Commission (1981) 51 FLR 1 referred to
The University of Western Australia v Gray (No 6) [2006] FCA 1825 referred to
Trade Practices Commission v Mobil Oil Australia Limited (1985) 4 FCR 296 referred to
Trade Practices Commission v Sterling (1980) 28 ALR 497 referred to
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY v DAVID ROBERT SIMINTON
VID 1607 OF 2005
TRACEY J
26 OCTOBER 2007
MELBOURNE
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
VID 1607 OF 2005 |
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BETWEEN: |
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY Applicant
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AND: |
DAVID ROBERT SIMINTON Respondent
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TRACEY J |
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DATE OF ORDER: |
26 OCTOBER 2007 |
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WHERE MADE: |
MELBOURNE |
THE COURT ORDERS THAT:
1. The proceeding be listed for mention on 7 November 2007.
2. On or before 5 November 2007 the applicant file and serve draft minutes of any order for the appointment of a receiver which it contends should be made by the Court.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
VID 1607 OF 2005 |
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BETWEEN: |
AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY Applicant
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AND: |
DAVID ROBERT SIMINTON Respondent
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JUDGE: |
TRACEY J |
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DATE: |
26 OCTOBER 2007 |
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PLACE: |
MELBOURNE |
REASONS FOR JUDGMENT
1 In this proceeding the Australian Prudential Regulation Authority (“APRA”) seeks various forms of relief including injunctive orders against the respondent (“Mr Siminton”). APRA alleges that Mr Siminton has engaged in a number of contraventions of the Banking Act 1959 (Cth) (“the Act”). These contraventions are said to have occurred in the course of the implementation of a scheme, devised by Mr Siminton, under which a “country”, the Principality of Camside, was established and that country became host to a “bank” called the Terra Nova Cache. Members of the public were encouraged to make deposits in the “bank” in return for high interest payments. Deposits were solicited at public meetings, through material placed on the internet and by other means. It will be necessary, later in these reasons, to examine the activities of Mr Siminton and some of his associates in greater detail.
2 It is necessary first to examine the legislative provisions, on which APRA relies, to support its application. Most of the relevant provisions are to be found in the Act.
3 Section 7 makes it a criminal offence for a natural person to carry on any banking business in Australia unless APRA, acting under s 11, by order, determines that s 7 does not apply to a particular person. Section 5 relevantly defines “banking business” to mean “a business that consists of banking within the meaning of paragraph 51(xiii) of the Constitution.”
4 Section 66 of the Act makes it an offence for a person who “carries on a financial business” to assume or use the word “bank” in relation to such a business. Two definitional provisions should be noted. Section 66(4)(b) of the Act provides that:
“(b) A reference to a word or expression being assumed or used includes the reference to the word or expression being assumed or used:
(i) as part of another word or expression; or
(ii) in combination with other words, letters or other symbols …”
Section 66(4)(c) provides that, in s 66,
“a reference to a financial business is a reference to a business that:
(i) consists of, or includes, the provision of financial services; or
(ii) relates, in whole or in part, to the provision of financial services.”
5 Section 65A of the Act confers power on this Court to grant certain forms of injunctive relief where a person has engaged, is engaging or proposing to engage, in conduct that constitutes, constituted or would constitute a contravention of ss 7 and 66 of the Act. Section 65A(6)(a) confers standing on APRA to apply to the Court for the granting of injunctions. Certain specific provisions deal with the nature and extent of the Court’s power to grant injunctions and other relief under s 65A. Sub-sections (2), (3) and (11) of s 65A provide:
“(2) The injunction:
(a) may restrain the person from engaging in the conduct; and
(b) may also require that person to do a particular act or thing, if the Court thinks it desirable to do so.
The Court may grant an injunction on such terms as it thinks appropriate.
(3) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised:
(a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind; and
(b) whether or not the person has previously engaged in conduct of that kind; and
(c) whether or not there is an imminent danger or substantial damage to any other person if the person engages in conduct of that kind.
…
(11) If the Court has power under this section to grant an injunction restraining a person from engaging in particular conduct, or requiring a person to do a particular act or thing, the Court may, either in addition to or in substitution for the grant of the injunction, order that person to pay damages to any other person.”
6 By section 65A(12) it is provided that these powers are conferred in addition to and do not derogate from any of the Court’s other powers. These other powers include the wide general power, conferred by s 23 of the Federal Court of Australia Act 1976 (Cth), to make such orders as it thinks appropriate and the power to appoint a receiver which is provided for in s 57(1) of that Act.
Constitutional Issues
7 Mr Siminton made a preliminary objection to the constitutional validity of s 65A of the Act. His defence did not contain any assertion that any provision of the Act, on which APRA relied, was invalid for constitutional reasons. Nonetheless, at a number of directions hearings, counsel appearing for him contended that s 65A of the Act was constitutionally invalid. I directed that, if this contention was to be persisted with, the defence was to be amended and the notice, required by s 78B of the Judiciary Act 1903 (Cth), should be given to Attorneys-General. Eventually these steps were taken. No Attorney-General intervened in the proceeding.
8 Mr Siminton argued that s 65A of the Act was “unconstitutional” and could not be relied on by APRA. He contended that:
· Insofar as s 65A of the Act relates to breaches of ss 7 and 66 “which are criminal offences, there is no head of power in the Constitution enabling proceedings for a breach of such sections to be conducted as civil proceedings rather than criminal proceedings”;
· Insofar as s 65A of the Act “purportedly authorises the making of [a] ‘Freezing Order’ then the same is unconstitutional as constituting the acquisition by [APRA] and/or the Commonwealth of property without just terms contrary to the Constitution s 51(xxxi)”;
· “The trying of the breach of an indictable offence, in particular [s 7 of the Act], purportedly pursuant to [s 65A of the Act], without a jury, is a breach of the Constitution s 80”;
· “The powers granted to the Federal Court, purportedly pursuant to [s 65A of the Act] is (sic) a breach of Chapter 3 (sic) of the Constitution in that, it purports, contrary to the Separation of Powers as therein contained, to grant to the Court legislative and executive powers”; and
· “In particular, s 65A, sub-section 11, insofar as it purports to grant to the Court, upon the application of [APRA], the power to make an award of damages to third persons, is made without any head of constitutional power, the power purportedly granted to the Court to so act being in the nature of a collection service or solicitor acting on behalf of such third persons, and not within the constitutional power with respect to banking or properly incidental thereto.”
9 Civil Proceedings Relating to Criminal Offences. Mr Siminton accepted that provisions such as ss 7 and 66 of the Act were constitutionally valid: they were an exercise of the incidental power and were adopted to secure compliance with laws made under the banking power. Section 65A was not, it was argued, an exercise of the incidental power. Rather it was part of what was described as “a two step criminal proceeding” in which the first step under s 65A deprived those against whom orders were sought of the protection accorded those facing criminal charges.
10 This contention must fail. It is a matter for the Parliament to determine which measures it will adopt in order to secure compliance with legislation which is enacted pursuant to one of the heads of power conferred by s 51 of the Constitution. Parliament may determine to visit contraventions of an Act with criminal sanctions. It may also provide for civil remedies. It may determine to do both. In R v Smithers; Ex parte McMillan (1982) 152 CLR 477 the High Court dealt with a challenge to the validity of provisions of the Customs Act 1901 (Cth) which enabled certain office-holders to apply to this Court for an order that a person, who had been involved in the importation of narcotic substances, pay a pecuniary penalty to the Commonwealth. The application could be made whether or not the person had been charged or convicted of any offence under the Customs Act. The Customs Act also made importation of such substances a criminal offence. The Court held (at 485) that:
“It would be a legitimate exercise of the power[s 51(i) of the Constitution when read with s 51(xxxix)] – and this is conceded – to make it an offence to engage in dealing in narcotic goods, being prohibited imports, that have been imported in contravention of the Act and to impose severe penalties in respect of that offence. Similarly it would be a legitimate exercise of the power to make that conduct the occasion for liability to a civil action for penalties of the traditional kind. Section 243B, in providing for the imposition of pecuniary penalties of the class provided for in Div. 3, stands in no different position. It penalises dealings in narcotic goods that have been imported in contravention of the Act. In so doing it constitutes a deterrent to importation in breach of the statutory provisions and provides a further sanction with a view to ensuring compliance with the statutory provisions governing importation. Its importance in this respect is that it seeks to deprive the dealing in narcotic goods of the considerable financial rewards which are the chief inducement for importing them into Australia and for dealing in them.”
11 Sections 7 and 66 of the Act form part of a legislative scheme, protective of members of the public, which regulates the conduct of banking in Australia. Only approved persons may conduct banking businesses. Persons providing other forms of financial services may not adopt the title “bank” and thereby mislead the public as to their status. People may thereby be induced to deposit funds with the “bank”. If conduct which contravenes the Act is discovered charges may be laid. The prosecution of criminal charges, however, will do nothing to protect depositors’ funds. Nor will a pending trial prevent the defendant continuing to advertise that he or she is conducting a banking business. Section 65A fills this void. It enables this Court to grant immediate and long term relief where contraventions of the Act have occurred, are occurring or, it is proposed, should occur. Injunctions may issue restraining persons from engaging in contravening conduct and may require such persons to take remedial action. Such provisions are, in my opinion, incidental to the enforcement of the regulatory regime which falls squarely within the banking power.
12 Acquisition Of Property Other Than On Just Terms. The “freezing order” to which Mr Siminton refers was made by Gray J on 10 January 2006 under s 65A of the Act. There were, in fact, multiple orders. Those orders prevented Mr Siminton from dealing with funds and property held by him including deposits held in the Terra Nova Cache. Mr Siminton argues that, under the order of Gray J, the Commonwealth has acquired his property, namely his money and other assets. He has effectively been deprived of that property while the order remains in force. This, he submits, involved a contravention of s 51(xxxi) of the Constitution.
13 Section 51(xxxi) empowers the Parliament to make laws with respect to the “acquisition of property on just terms from any … person for any purpose in respect of which the Parliament has power to make laws.” Power to acquire property is thereby conferred on the Parliament but the power may not validly be exercised unless the relevant law provides for just terms. This restraint is recognised in s 69E of the Act which provides that any acquisition of property which other provisions of the Act might effect must be on just terms.
14 The first questions which arise, for present purposes, are whether s 65A of the Act empowered Gray J to make an order which had the effect of acquiring Mr Siminton’s property and whether His Honour’s orders, in fact, had that effect.
15 The words “acquisition of property” in s 51(xxxi) of the Constitution are not to be read in isolation. In Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 at 285, Deane and Gaudron JJ observed that:
“[T]he power conferred by s 51(xxxi) is one with respect to “acquisition of property on just terms”. That phrase must be read in its entirety and, when so read, it indicates that s 51(xxxi) applies only to acquisitions of a kind that permit of just terms. It is not concerned with laws in connection with which “just terms” is an inconsistent or incongruous notion. Thus, it is not concerned with the law imposing a fine or penalty, including by way of forfeiture, or a law effecting or authorising seizure of the property of enemy aliens or the condemnation of prize. Laws of that kind do not involve acquisitions that permit of just terms and, thus, they are not laws with respect to “acquisition of property”, as that expression is used in s 51(xxxi).”
In Lawler the Court held that a provision of the Fisheries Management Act 1991 (Cth), which empowered a Court, which convicted a person who had engaged in unlicensed commercial fishing in Australian Waters, also to order forfeiture of the boat used to undertake the fishing. The statutory power to order forfeiture was held not to be a law with respect to the acquisition of property within the meaning of s 51(xxxi).
16 In Smithers the High Court also upheld the constitutional validity of s 243E(2)(c)(i) of the Customs Act which empowered this Court to direct the Official Trustee to take control of specified property of a person if there existed reasonable grounds for the belief that the person had engaged in narcotics dealing and derived benefits therefrom. The Court held that s 51(xxxi) had no application because it did not involve an acquisition of property by the Commonwealth, much less an acquisition on just terms. The property was placed under the control of the Official Receiver in order to ensure that the pecuniary penalty provisions in s 243B could not be rendered nugatory by disposition of property. In Commissioner of Australian Federal Police v Cox (1986) 78 ALR 509 at 514-515 Pincus J held that the same reasoning supported the validity of s 243E(2)(c)(ii) which empowered the Court to make an order directing the Official Trustee to take control of all of the property of the person involved in narcotic dealings.
17 The “freezing order” made by Gray J was made under s 65A of the Act. It did not, in terms or in effect, cause the Commonwealth to acquire anything. His Honour’s orders prevented Mr Siminton from dealing with certain identified property pending the hearing and determination of this proceeding or until further order of the Court. No alteration to the ownership of the property was effected. What will happen to it will depend on the outcome of this proceeding. Control of the property has not passed to any other person; nor has title. Under the orders Mr Siminton could obtain access to some funds in order to meet living and legal expenses.
18 This contention is without substance.
19 The Section 80 Point. Mr Siminton contends that, in substance, although not in form, an application under s 65A of the Act which is founded on the allegation that a person has engaged in conduct which would constitute a contravention of s 7 of the Act, is to be equated with a criminal prosecution under s 7. Mr Siminton contends that s 7 creates an indictable offence and that, therefore, any proceeding against him must take the form of a trial by jury. This, he says, is mandated by s 80 of the Constitution.
20 The hearing of an application, made under s 65A of the Act, is not a trial on indictment of any offence against a law of the Commonwealth and, in particular, of an offence against s 7 of the Act: cf Sterling v Trade Practices Commission (1981) 51 FLR 1 at 8. The application does not place Mr Siminton in jeopardy of a conviction for any offence or the imposition of any criminal penalty.
21 The Separation of Powers Point. It will be convenient to deal with the final two arguments advanced by Mr Siminton together. They allege that s 65A of the Act confers legislative and executive power on the Court contrary to the implied limitation recognised in R v Kirby; Ex parte Boilermakers Society of Australia (1956) 94 CLR 254.
22 As I understood the argument advanced by Mr Siminton it was that s 65A of the Act confers very wide powers on the Court. It is said that these powers are wide enough to enable the Court to act as a Royal Commission or Board of Inquiry, to award damages without the assistance of guiding criteria and to act as a surrogate or “collection service” for third persons who may wish to obtain damages from Mr Siminton.
23 Section 65A of the Act was inserted in 2000, see Financial Sector Legislation Amendment Act (No 1) 2000, s 20. Under the former legislation, ss 7 and 66 of the Act contained penalty provisions only. The inclusion of s 65A was designed to allow APRA, subject to Court approval, to act pre-emptively to stop undesirable activities rather than simply acting to impose punishment after the damage had occurred: see Explanatory Memorandum, Financial Sector Legislation Amendment Act (No 1) 2000. Many of its sub-sections are drafted in the same or substantially the same terms as provisions to be found in other Commonwealth legislation. Comparisons can be drawn with s 80 of the Trade Practices Act 1974 (Cth), s 12GD of the Australian Securities and Investment Commission Act 1989 (Cth), and s 1324 of the Corporations Law 1989 (Cth). The constitutional validity of these equivalent provisions has been upheld by Court decisions spanning many years. Section 80(1) of the Trade Practices Act, which corresponds with s 65A(1) was held by Lockhart J to be a valid law of the Commonwealth Parliament in Trade Practices Commission v Sterling (1980) 28 ALR 497 at 517-9. An appeal from his Honour’s decision was dealt with by a Full Court. The appellant did not, on appeal, seek to argue that his Honour’s decision as to the validity of s 80(1) was wrong. It was, however, argued that sub-ss (4) and (5) of s 80 which contained provisions equivalent to those to be found in s 65A(3) were invalid, being beyond constitutional power. These submissions were rejected by the Full Court: see Sterling v Trade Practices Commission (1981) 51 FLR 1 at 7-9.
24 Save for its first word s 65A(11) is in the same terms as s 1324 of the Corporations Law 1989 (Cth) (now s 1324 of the Corporations Act 2001 (Cth)). As the Full Court noted in Medibank Private Limited v Cassidy (2002) 124 FCR 40 at 50-51, provisions of this kind can be traced back to the Chancery Amendment Act 1858 (UK) ( Lord Cairns Act). The purpose of such provisions is expressly to empower a Court to award damages to persons who have suffered as a result of conduct which contravenes legislative requirements whether or not a curial power to grant a mandatory injunction might also support such an order. The exercise of the power is conditioned on the existence of a power to grant an injunction. That power is conferred by s 65A(1) which is a valid provision. In my opinion there is no reason, in principle, to distinguish between the power to grant injunctions and the power to require a respondent to pay damages occasioned by the same conduct which might justify the granting of an injunction. The granting of such relief does not cast the Court in the role of a “collection service” acting on behalf of third parties. It involves a judicial act in aid of a legislative purpose. Sections 65A(11) is valid law of the Commonwealth.
ABUSE OF PROCESS
25 At the outset of the trial Mr Siminton sought an order that APRA’s application should permanently be stayed or struck-out as an abuse of process. No notice of motion seeking such an order had been filed but Mr Siminton had, prior to trial, filed and served a notice of preliminary objections which included a summary of the submissions which he desired to make in support of the strike-out application. Counsel appearing for APRA did not object to the application being made or argued in advance of the trial proper.
26 Mr Siminton submitted that the proceeding was an abuse of process because it had been brought for the collateral purpose of seeking information and evidence to substantiate or justify allegations that Mr Siminton had committed criminal offences under ss 7 and 66 of the Act. He said that the Court should so conclude because:
· APRA had failed to accept an offer by Mr Siminton to agree to certain forms of injunction;
· APRA’s statement of claim failed to plead any cause of action for damages;
· APRA had conceded that it lacked evidence of lending by Mr Siminton and, therefore, that he had engaged in “banking”;
· Of the fact that no charges had been laid against Mr Siminton;
· Of the alleged paucity of evidence linking Mr Siminton to any alleged breach of s 66;
· Of APRA’s claim for certain interlocutory orders which Gray J had declined to make;
· Of the commencement of contempt proceedings against Mr Siminton which were heard before the trial of the present proceeding;
· Of APRA’s attempt to use and rely on discovery, its seeking of particulars of Mr Siminton’s defence and its application that directions be made requiring Mr Siminton to file witness statements in advance of trial; and
· Of what was said to be the “linking of APRA’s release of frozen funds for legal expenses to the provision of information.” (I take this to be a reference to the terms of order 2 of the orders made by Gray J on 10 January 2006 under which Mr Siminton was given liberty to apply on notice in writing to APRA, supported by affidavit evidence of his means, for an order that he be permitted to withdraw monies for living and legal expenses).
27 I refused Mr Siminton’s application. Similar strike-out applications had been made to Merkel J on 30 March 2006 and to me on 18 October 2006. Those applications had been supported by substantially the same arguments and, in both cases had been rejected: see Australian Prudential Regulation Authority v Siminton (No 2) [2006] FCA 336; Australian Prudential Regulation Authority v Siminton (No 5) [2006] FCA 1340. There was no substance to the argument advanced in support of the permanent stay applications when they were first made. It was not improved by repetition.
THE EVIDENCE
28 APRA filed a large number of affidavits in support of its application. Most of the deponents were private citizens who had had dealings with Mr Siminton, associates of Mr Siminton and/or the Terra Nova Cache. There were also detailed affidavits from a Senior Analyst employed by APRA and the Managing Director of a company, Technocash Pty Ltd, which provides an internet based service to facilitate money transfers both within Australia and internationally. None of the deponents was required to attend for cross-examination. The evidence is, therefore, largely uncontroversial. It will not be necessary to recount the experiences of each of the persons who was induced to make contributions to the Terra Nova Cache. The stories which they recount have much in common. Examples will suffice.
29 Before embarking on a summary of the evidence I should note that, on the eve of the trial, on 4 June 2007, Mr Siminton’s solicitor filed a document containing what were described as “preliminary objections” to APRA’s application. That document contained, amongst other things, various complaints about the adequacy of the statement of claim filed by APRA. The principal deficiency alleged related to an absence of particulars of allegations made by APRA. I refused to postpone the commencement of the trial while APRA made good the alleged deficiencies in its statement of claim. I did so for a number of reasons. In accordance with pre-trial directions the bulk of the affidavit material on which APRA proposed to rely at trial had been filed and served on 28 February 2007. On 21 May 2007 APRA filed and served its outline of submissions. The outline restated the various elements of its claim and, in a series of detailed footnotes, it referred to the paragraphs in the various affidavits on which it relied to make good those claims. Mr Siminton could have been in no doubt as to how the case was being put. At no stage did he seek further and better particulars of any of the allegations contained in the statement of claim. The deponents of the affidavits were not subsequently required to attend for cross-examination. Two further affidavits were filed late in May 2007. These were affidavits from two more depositors which did no more than provide additional evidence to support claims already made and supported by evidence given by the depositors whose affidavits had been earlier filed and served. In addition, there were some pleading points which amounted to a contention that the statement of claim had failed to plead certain essential elements which were necessary for APRA to succeed. I deferred ruling on these points until I had heard final addresses. Having done so I have concluded that APRAs statement of claim pleads all elements necessary to support the case it advances against Mr Siminton.
30 On 15 January 2002 Mr Siminton registered a business name under Victorian legislation. That business name was “Principality of Camside”. He was identified as the only person who was carrying on the business at that time. The registered address of the business, its mailing address and the address of Mr Siminton was, in each case, given as “189/199 Toorak Road, South Yarra 3141.” This was not the address of a unit within a complex situated at 199 Toorak Road. Rather it was a post box number (189) held at commercial premises which were situated at 199 Toorak Road.
31 There was no equivalent business name registration effected for the Terra Nova Cache.
32 Not long after the business name of the Principality of Camside was registered, on 5 March 2003, the Principality, under its “Great Seal” made what it described as a “Formal Declaration of War” against the Commonwealth of Australia. Mr Siminton was one of the signatories to the declaration. In a charade reminiscent of the screenplay in “The Mouse that Roared”, the declaration was duly ignored by the Commonwealth government. It had, however, apparently, the effect desired by Mr Siminton. The website of the Principality thereafter contained an entry headed “Contacting Her Majesty’s Government of Camside” and, on its first page, referred to “Dr David R Siminton” as “Governor – State of Sherwood HM Government of Camside 189/199 Toorak Road, South Yarra 3141 Victoria, Australia.” This website entry recorded that:
“…on 6 March 2003, due to the successful Declaration of War declared on the Commonwealth of Australia, by the Principality of Camside, the succession of these lands was overridden by the fact that the Principality of Camside, by default, won that war, due to the Commonwealth of Australia not turning up to battle.
The law relating to the Declaration of War, state, that if the country on which war has been declared fails to turn up to battle, the country that declared war (Principality of Camside), is declared the winner. For this legal reason the “spoils of war”, namely the Australian National Estate, Crown Land, roads and freeways, are now the property and responsibility of the Principality of Camside.
…
The Principality of Camside is now be (sic) legally referred to as Her Majesty’s Government of Camside, as another of the consequences of the Principality of Camside having won by default, the war …”
33 In the course of 2005, if not earlier, the website maintained by the Principality of Camside had on the left hand side of its home page a link labelled “banking”. That link contained the following statements under the heading “HM Government of Camside Banking Facilities”:
“On 1st December 2003, HM Government of Camside opened “stage one” of its new banking facilities.
Camside’s new bank will be known by the name – “Terra Nova Cache.”
…
It has been a challenging time for us since January 2002, in preparing and planning the “first stage” opening of Terra Nova Cache.
We often found ourselves having to remind ourselves, that the planning of our new bank’s future operations should not be based upon banking laws standards. Otherwise, this would have caused us to duplicate the current world banking behavioural rules, rather than offering our Citizens a new and legal banking alternative.
Terra Nova Cache will rapidly become known world wide, as it sets the first precedent for a bank of its type, in the history of our planet. …
So what’s new about Terra Nova Cache?
Below is a brief summary of the revolutionary benefits of banking with Terra Nova Cache. Greater detail with respect to each benefit will gradually become available behind new buttons that will be added to the left of this web page.
…
01. Depositors automatically become owners of the bank.
02. Depositor’s funds are guaranteed repayable to them at any time they call upon them, regardless of any “financial crash” that may be in progress.
03. Depositor’s funds will be backed by a 100% equivalent value of precious metals.
04. Terra Nova Cache will not engage in fractionalize banking practices.
05. Terra Nova Cache will not engage in lending funds in excess of its legitimate deposit asset holdings.
06. Terra Nova Cache will not charge interest, account or transaction fees.
07. As depositor’s funds are cleared into Terra Nova Cache, these funds or precious metal equivalents will be stored outside any existing world bank or financial institution facilities.
08. Owner/Depositors will receive pro-rata profit share on the distributable profit earnings of Terra Nova Cache.
09. Terra Nova Cache will not affiliate with any other banks or financial institutions, and will report its trading activities to only HM Government of Camside.
10. All accounts held with Terra Nova Cache will be numbered accounts, which will not carry any account name details.
11. Soon Terra Nova Cache will be offering an opportunity to be trained and employed as Bank Treasury Traders. This business opportunity will offer Citizens, financial freedom, and a tax free home income earning business employment opportunity with the bank.
12. It is envisaged that the next stage of Terra Nova Cache’s development, once deposits are established, profitably traded and fully precious metal backed, that the bank will be offering interest free loans to its depositor/owners.
Terra Nova Cache will not be affiliated with any other bank in the world.
Our bank will not enter into any transactional relationship with any other bank.
We will not report our bank’s trading activities to any Reserve Bank, International Monetary Fund or Federal Reserve authority.
HM Government of Camside is the only government structure, to whom our bank will report its financial activities and with whom it will co-distribute its profits.
There will be no reporting facilities of individual client’s bank account activities to any authority.
All accounts held within our bank will be number-identified accounts, details of which will also never be shared with any other banking authority.
Anyone in the world can bank with Terra Nova Cache, and they may feel safe that none of their private trading/banking information will be disclosed to any government or taxation authority.
Most banking transactions will be authorised, by way of the account holder providing their account number and signature, along with Internet computer IP and password confirming codes on any transactions.
Only Camside “In The Truth” Court orders are legally binding on HM Government of Camside or its bank, Terra Nova Cache, and therefore all records, at all indicative times, will be highly encrypted (stored as unreadable data to unauthorised parties). The matching of account names to account numbers is not intended to be a need for either bank executives or its employees.”
34 Under the heading “Deposits” the website contained the following entries:
“Any Camside Citizen can open any number of numbered accounts with Terra Nova Cache, keeping in mind that as a subsequent owner of the bank, you are entitled to only one vote per Citizen on bank trading matters.
There is no minimum amount that needs to be deposited, or held on deposit, in order to establish, or keep an account open with Terra Nova Cache.
We ask you to understand, that Terra Nova Cache in its first stage of operation, is not operating as a trading bank.
Initially, any funds offered for long term deposit, must be retained for a minimum 12 month period. These funds will attract a 10% p.a profit share, calculated on the value of the actual accounts deposited value. This profit share will be paid progressively as one/twelve of the 10% profit share p.a rate per month, into an account nominated by the depositor/owner.
…
The calculation of Terra Nova Cache profit share, and the prior calculation of daily deposit balance history, commences upon the clearance of deposit funds into Terra Nova Cache, and continued until such time as all funds may be withdrawn by the depositor.
Deposits in excess of $10,000 may attract higher profit sharing arrangements.
These special larger deposits may earn annual profit share ranging up to 30% per annum. All profit share returns are paid to the depositor monthly, and for this reason, at this stage do not compound in their deposit accounts.”
35 Under the heading “Profit Sharing Arrangements” the website continued:
“Terra Nova Cache is a HM Government of Camside run bank, and eventually the bank trading profits will be shared with HM Government of Camside and all of the bank’s owners.
It should be noted, that the bulk distribution of bank trading profits will be payable to HM Government of Camside, so that the government structure may grow, without the need to have any form of taxation of its Citizens.
…
Regardless of the value of a depositor’s funds, or the number of accounts that any one depositor has with the bank, each person has only one vote with respect of having their voice heard re the running of the bank.
This is one of the many major history-establishing differences with Terra Nova Cache, compared with any other bank in the world.
For years, other banks have used their depositor’s funds to trade, without the depositor’s knowledge, and without sharing the consequent trading profits with anyone other than the bank’s shareholders.
Now every profit earning opportunity engaged in by Terra Nova Cache’s Treasury is to be the profitable distributable benefit of those that choose to safely keep their savings with Terra Nova Cache.”
36 Under the heading “Owners of the Bank” the website says:
“As soon as a Citizen becomes a depositor of Terra Nova Cache, they will also be recognised as an owner of the bank.
Only Citizens of HM Government of Camside can bank with Terra Nova Cache.
…
Terra Nova Cache will at all times be a Camside Government run bank, and is therefore equally answerable to the Camside Government, as it is to its depositor owners for its trading and performance.
…
All bank assets will be kept securely in Terra Nova Cache’s direct control at all times. No bank assets will be kept in any existing bank or financial institutions control, premises or facilities.”
37 The website also provided an interesting insight into the reason for adopting the name “Terra Nova Cache” for the “new banks name”. The website explains:
“Initially we selected the name Royal Bank of Australia, until Citizens reminded us of how many non Australians are on our citizenship register. The Citizens that have helped us build out new bank’s concept, were also worldly enough to realise, that what we have created is going to be of world wide appeal.
We also started to think bigger than just Australia wide banking facilities, and as you read through what we have planned for you with our bank, we are sure that you will agree, that Camside may well become the most sought after banking facilities in the world.
That is why Citizens came up with the first two words Terra Nova.
Terra meaning “land” and Nova meaning “bright star – with a burst of bright light”, with both words together, Terra Nova, also meaning “new land”, also shown in some dictionaries as “New, Bright Idea!”.
…
In pursuit of a replacement name for the word bank one of our Citizens found the name Cache, which means a “secure place to store valuables”.”
38 Initially, the evidence suggests that potential investors were attracted to the Terra Nova Cache through personal contact with Mr Siminton. Mr Andrew Vella was an early depositor. He had had discussions with Mr Siminton about the establishment of the bank. On 29 January 2004 he made a payment of $100,000 to the credit of a Commonwealth Bank account held in the name of the Principality of Camside. The deposit was subsequently acknowledged in letters, written on Terra Nova Cache letterhead, and signed by Mr Siminton. In about August or September 2004 Mr Vella sought to recover the funds he had invested. He was unsuccessful.
39 Most of the later depositors who gave evidence traced their involvement with the Terra Nova Cache to local meetings which they had been invited to attend. One such depositor was Mr William Ketelhohn. In about August or September 2004 he attended a meeting at the CWA Hall in Bundaberg. He had been invited to attend by two friends. Mr Siminton addressed the meeting. He invited those present to become citizens of Camside and to deposit money with him and earn high interest rates. Mr Siminton introduced Ms Karen Holzheimer and told those present that she was going to handle all of the financial matters. About a month later Mr Ketelhohn paid a $200 membership fee for citizenship of the Principality of Camside. On 31 July 2005 he attended another meeting at the Bundaberg CWA Hall. The meeting was addressed by Mr Siminton and proceeded along the same lines as the meeting which Mr Ketelhohn had attended in 2004. Mr Siminton spoke about making deposits into the Terra Nova Cache and said that interest could be earned at rates up to 50% per annum. Mr Ketelhohn understood from what Mr Siminton said that the Terra Nova Cache was a bank owned by the depositors. (I interpose here that others who attended these meetings had a specific recollection of Mr Siminton referring to the Terra Nova Cache as a bank set up by the Principality of Camside. One of these deponents was Mr Bernard Barry who attended a meeting at the Bundaberg CWA Hall on 30 July 2005. Ms Christine Bosch was present at three meetings in Bundaberg which were addressed by Mr Siminton. At all of them she recalls Mr Siminton saying that the Terra Nova Cache was a banking system run by Camside). Ms Holzheimer was again present and Mr Siminton told those attending that they could contact her should they wish to make deposits. Ms Holzheimer wrote her contact details on a whiteboard and also wrote down details of the bank account into which deposits could be paid. As he left the meeting Mr Ketelhohn picked up a document which contained substantially the same information which appeared in the extract from the Principality of Camside website and which is set out above at [33]-[37]. Mr Ketelhohn decided to make a deposit of $3,000 in the Terra Nova Cache. He contacted Ms Holzheimer by telephone and she provided him with account details for an account in the name of Technocash Pty Ltd. He made the deposit at his local National Australia Bank on 1 August 2005. He received an acknowledgement of the deposit on Terra Nova Cache letterhead signed by Mr Siminton. The address on the letterhead was 189/199 Toorak Road South Yarra 3141. Adjacent to the address was the Principality of Camside’s website details. The letter was addressed to Mr Ketelhohn and dated 24 November 2005. It is typical of letters which were received by other depositors. Relevantly, it read:
“Your last months deposit of $3,000 which earns a pre-agreed 40% per annum profit share, payable monthly, is calculated using a daily rate of profit share, of $3.29 per calendar day.
Upon receipt of each monthly payment, always be careful to avoid paying your funds into any conventional banking or financial institution, so as to avoid any monitoring or recording of your income, by any of the various illegal Australian authorities.
As best you can, we also suggest that you make payments against regular bills such as utility services in cash, using these creditor’s payments centers. In most cases, utility accounts such as electricity, gas, telephones etc, can be made via any Post Office at which you may choose to pay by cash, or at which you may also have chosen to cash your money order/s.
It is a good idea to also vary the Post Office locations at which you cash any money orders.
For regular fixed monthly payments amounts, may we suggest that you cancel any direct debit arrangements which you may have in place with your bank, and provide us with the details, so that we may make the monthly payment/s on your behalf, thereafter providing you with a monthly profit share payment, net of these monthly creditor payments.
…
Monthly payments will vary from month to month depending on the number of calendar days in each month, as we have your money working for you, seven days a week, 365 days a year.
Please let us know if you need any further details or clarification as to how Terra Nova Cache calculates your monthly profit share.”
40 The second page of the letter was headed “A Banking Institution of HM Government of Camside”. Attached to the letter, again on Terra Nova Cache letterhead, was an account statement for the period 2 August 2005 to 30 September 2005. Mr Ketelhohn received two postal notes each for the value of $98.63 which were said to be for interest earned on his deposit in August 2005 and September 2005. He did not receive any other interest payments. In 2006 he rang Mr Siminton three or four times asking about his account. On each occasion Mr Siminton said he couldn’t help Mr Ketelhohn.
41 As already mentioned Mr Bernard Barry attended another meeting addressed by Mr Siminton at the Bundaberg CWA Hall on 30 July 2005. Mr Barry recalls Mr Siminton saying that the Terra Nova Cache was a bank set up by the Principality of Camside and that citizens of Camside could deposit their funds with the bank. The Terra Nova Cache was owned by its depositors. All profits would be distributed to the depositors. Mr Siminton advised the 15 or so people present that interest rates paid by the Terra Nova Cache would vary but that all those present could obtain a fixed rate of 40% regardless of how much they deposited. The offer was to be open for three weeks only. Mr Siminton said that deposits were for a minimum term of 30 days and that, after that, a deposit could be withdrawn. Withdrawals would be subject to a small administration fee. Mr Siminton continued that, in the near future, the Terra Nova Cache would be able to make loans to Camside citizens and he said that the interest rates on these loans would be between 0.5% and 1% to cover administration costs. After the meeting Mr Barry paid Mr Siminton $200 in cash to become a citizen of the Principality of Camside. On 8 August 2005 Mr Barry decided to make a deposit in the Terra Nova Cache. He obtained a money order worth $1,000 and then attended the house of a Ms Faye McGarry, the person who had invited him to attend the meeting. He gave her the money order in an envelope which he had addressed to the Terra Nova Cache post box. Ms McGarry told him that she would forward the envelope to Mr Siminton. This occurred and Mr Barry received a letter on Terra Nova Cache letterhead dated 28 September 2005 acknowledging receipt of the $1,000 on 15 August 2005. The first page of the letter was in substantially the same terms of that received by Mr Ketelhohn (above at [39]) down to the paragraph which concluded with the words “illegal Australian authorities.” Mr Barry subsequently received two profit share statements on Terra Nova Cache letterhead. The first covered the period between 15 and 31 August 2005 and the second the month of September 2005. The first was accompanied by a money order for $18.63 and the second by a money order for $32.88. The second statement was accompanied by a letter on Terra Nova Cache letterhead dated 24 November 2005 and signed by Mr Siminton. That letter was, apart from particulars peculiar to Mr Barry, in the same terms as the letter received by Mr Ketelhohn which is extracted above at [39]. Thereafter Mr Barry received no further interest payments. His deposit has not been recovered.
42 Mr Ketelhohn’s experience and that of Mr Barry were similar to that of a score of other depositors who invested their funds with the Terra Nova Cache and who have filed evidence in this proceeding. In sum their deposits exceeded $1 million. All depositors have not been traced by APRA.
43 Some of the depositors reported making unsuccessful attempts to withdraw some or all of the funds which they had deposited in the Terra Nova Cache. Most were unsuccessful. An exception was Ms Janet English. Like Mr Ketelhohn she had attended a meeting at the Bundaberg CWA Hall which had been addressed by Mr Siminton. She was induced to purchase citizenship of the Principality of Camside and then to make a series of small deposits totalling $1,900 between September 2004 and February 2005. She received interest payments until February 2005 when they stopped. In September or October 2005 she was planning a trip to England. She telephoned Mr Siminton and asked to withdraw $600 to assist with her travel expenses. Mr Siminton told her he would look into it but he did not return her call. A money order for $600 arrived by post after she had left Australia in early December 2005.
44 The Technocash account into which Mr Ketelhohn and others made their deposits was held under the name “Dr David Siminton” and had a recorded trading name of “Terra Nova Cache” until at least 21 December 2005. At some time thereafter the account name was changed to “Lionsgate Savings and Loans”.
45 Although, at the meetings which he conducted, Mr Siminton spoke about making loans available to citizens of Camside there was no evidence that loans had been made to those who had become depositors of the Terra Nova Cache. The Terra Nova Cache did, however, on one occasion lend money to Technocash Pty Ltd. This occurred in November 2005 when Technocash was in need of a short term loan to assist it in developing a business opportunity in Western Australia. In an email to Mr Paul Monsted, the Managing Director of Technocash, on 15 November 2005, Mr Siminton (who “signed” the email “Dr David R Siminton, President – Terra Nova Cache”) offered a short term loan of $100,000 to Technocash. That offer was accepted by Mr Monsted two days later. $100,000 was transferred from the Terra Nova Cache account to a Technocash account on 18 November 2005. Interest of 180% per annum was charged on the loan. The loan funds were later ‘frozen’ by an order of this Court and remain in the Technocash account.
46 Moneys deposited with the Terra Nova Cache in the early months of its existence were transferred to the account of a trader, a Mr Giuseppe Guglielmino who traded under the name of Overseas Investment Group. One of the earlier depositors, Mr Andrew Vella gave evidence that, in January 2004, he had placed $100,000 in the Terra Nova Cache and that this sum had been placed by Mr Siminton with the Overseas Investment Group. Mr Vella also gave evidence of a falling out between Mr Siminton and Mr Guglielmino in late 2004 or early 2005. When this happened depositors funds were withdrawn from the Overseas Investment Group and placed with Silverstone Global Investments Pty Ltd, a Queensland based company. In 2005 Mr Brook Monahan was a Director and Secretary of the company. In the course of 2005 Mr Vella spoke to Mr Monahan who told him that Mr Siminton “had an account with him (Mr Monahan) of six figures.”
REMEDIES
47 APRA contends that, in these circumstances, Mr Siminton can be identified as a person who had engaged in conduct and had proposed to engage in conduct that constituted contraventions of ss 7 and 66 of the Act and that it is entitled to the relief which it seeks in its application.
48 Section 7. Section 7(1) of the Act provides:
“(1) A person is guilty of an offence if:
(a) the person carries on any banking business in Australia; and
(b) the person is not a body corporate; and
(c) there is no order enforced under s 11 determining that this
sub-s does not apply to the person.”
Plainly, Mr Siminton is not a body corporate. There is no order in force under s 11 of the Act which determines that s 7(1) does not apply to Mr Siminton.
49 The critical question is whether Mr Siminton can be said to have carried on any banking business at relevant times. “Banking business” is defined in s 5 of the Act to mean “a business that consists of banking within the meaning of paragraph 51(xiii) of the Constitution.” Section 51(xiii) does not contain the phrase “business of banking”. It confers power on the Commonwealth Parliament to make laws with respect to “banking”. This word, has, however, been treated by the High Court as referring to “the business of banking”. In Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 at 69 Starke J said:
“Banking, within the meaning of the Constitution, relates to the business of a banker and covers all those various functions which a banker undertakes. But his main functions appear to be the taking of deposits and current accounts, the issue and payment of bills and cheques drawn on him and the collection of bills and cheques for his customers.”
Williams J (at 97) held that the legislation authorised by s 51(xiii) “is legislation with respect of the business of banking.” Rich J (at 64-5) referred to and relied on the construction placed on the word “banking” by Isaacs J in Commissioner of State Savings Bank of Victoria v Permewan, Wright & Company Limited (1914) 19 CLR 457:
“While the word ‘banking’ is sometimes used in a colloquial and crude sense to mean the payment of money to the credit of a customer’s account at a bank, the word in its normal and ordinary signification denotes the business of banking. Some assistance in defining ‘banking’ can be obtained from the Bills of Exchange Act 1909-1936. In this Act the word banker includes a body of persons, whether incorporated or not, who carry on the business of banking, and though banking is not defined in this Act it seems reasonable to believe that one legislative interpretation of the word would be the business carried on by a banker. In the case of Commissioners of State Savings Bank of Victoria v Permewan, Wright & Company Limited Isaacs J … said: ‘the fundamental meaning of the term’ (banking) ‘is not, and never has been, different in Australia from that obtaining in England. Various writers attempt various definitions, more or less discordant and many of them referring to functions that are now very common and convenient, and even prominent, as if they were indispensable attributes. The essential characteristics of the business of banking are, however, all that are necessary to bring the appellants within the scope of the enactments’ (s 83 of the Victorian Instruments Act 1980 and s 88 of the Bills of Exchange Act 1909) ‘and these may be described as the collection of money by receiving deposits upon loan, repayable when and as expressly or impliedly agreed upon, and the utilisation of the money so collected by lending it again in such sums as are required. These are the essential functions of a banker as an instrument of society.’
50 In Australian Independent Distributors Ltd v Winter (1964) 112 CLR 443 the High Court was called on to determine whether a friendly society was carrying on “the business of banking” contrary to s 7 of the Act. The Court quoted the passage from the judgment of Isaacs J in Permewan Wright which Rich J had incorporated in his reasons in Melbourne Corporation. The Court treated what Isaacs J had said as constituting a “definition” of the “business of banking” (at 455). The Court continued:
“If that definition is applied to the present case, as we think it should be, it is apparent that the second of these essential characteristics is absent. The power to lend money conferred on the Society by Rule 7 was limited to the making of loans to its members to enable them to acquire land or buildings to be used for residential or business and residential purposes and in fact none of the Society’s moneys was used for the making of loans for that or any other purpose.”
The second essential characteristic which was found to be absent was the lending function. The society had not made any loans. For this reason, the Court held that the trial judge had been correct to hold that the society had not carried on the business of banking and had not, therefore, contravened s 7 of the Act.
51 Mr Siminton created the “Principality of Camside” by registering it as a business name. He was the person who was instrumental in establishing the entity known as the “Terra Nova Cache” which he described as “Camside’s new bank” in addresses at meetings and on the Principality of Camside’s website. Mr Siminton solicited deposits in the Terra Nova Cache. In particular, he addressed public meetings in which he urged those present to make deposits. When they did he acknowledged receipt of those deposits in writing. He assured the depositors that they would receive a monthly payment, described as a “profit share”, calculated as a percentage of the amount contributed. He offered contributors bill paying services. Depositors who had queries about their accounts and who telephoned the number given on the Terra Nova Cache letterhead were answered by Mr Siminton. The postal address for the Terra Nova Cache was a postal box maintained by Mr Siminton. Mr Siminton solicited and collected deposits from at least 22 persons. He did so between early in 2004 and December 2005.
52 Mr Siminton maintained accounts for each depositor and arranged for some payments in the nature of interest (although called “profit share”) to be paid to the depositors by money order.
53 Most of the funds provided to the Terra Nova Cache by depositors was placed with third parties for investment, presumably in the hope that those investments would yield sufficient returns to pay the high rates of interest which the Terra Nova Cache had promised to its depositors. The only lending of depositor’s funds about which evidence was given was the $100,000 loan made to Technocash. That loan was negotiated by Mr Siminton on behalf of the Terra Nova Cache. It was also Mr Siminton who caused the transfer of those funds from the Terra Nova account to a Technocash account.
54 Counsel for Mr Siminton, relying on what was said by Isaacs J in Permewan Wright and by the Full Court in Winter, submitted that Mr Siminton could not be found to have carried on a banking business because the Terra Nova Cache did not make loans on a regular basis. It is true that the evidence disclosed only one loan, albeit a substantial loan made by the Terra Nova Cache under Mr Siminton’s direction. It is to be noted, in this context, that the decision in Winter turned on the fact that the society had not loaned members’ funds to anybody. In any event, the Court is empowered, by s 65A of the Act, to grant relief where a person is proposing to engage in conduct which would constitute a contravention of s 7. When addressing meetings, at which he solicited deposits, Mr Siminton told those present that, once the Terra Nova Cache was established, loans could be made to citizens of the Principality of Camside. Point 12 on the information sheet which was made available at the meetings and in the Principality of Camside’s website under the heading “HM Government of Camside Banking Facilities” advised readers that:
“12. It is envisaged that the next stage of Terra Nova Cache’s development, once deposits are established, profitably traded and fully precious metal backed, that the bank will be offering interest free loans to its depositors/owners.”
Even if no regular practice of making loans had been established prior to APRA commencing this proceeding it is clear that Mr Siminton proposed to offer loans to “citizens” of Camside once the Terra Nova Cache had become established.
55 For these reasons I conclude that Mr Siminton was a person who carried on and was proposing to carry on the business of banking in Australia. He had engaged and was proposing to engage in conduct which constituted or would constitute a contravention of s 7 of the Act.
56 Section 66. Section 66(1) of the Act makes it an offence for a person who “carries on a financial business” to use the words “bank” or “banking” in relation to such a business. A “financial business” is defined in s 66(4)(c) to refer to a business that consists of, or includes, the provision of financial services or relates, in whole or part, to the provision of financial services. The term “financial services” is not defined. The words should be accorded their ordinary and natural meaning. They comprehend the provision of services of a financial nature.
57 APRA submits that the following categories of conduct on the part of Mr Siminton, when considered either individually or cumulatively, constitute the provision of financial services within the meaning of s 66:
· advertising and encouraging people to participate in the depositing of money for which interest would be paid, or a profit or return on an investment given;
· the receipt of moneys from persons;
· the holding of moneys for such persons;
· the dealing in moneys deposited by such persons; and
· the payment of interest on those moneys and/or the payment of some kind of financial return on those moneys.
58 Not all of the conduct identified by APRA can, in my opinion, be regarded as the provision of financial services by Mr Siminton. The encouragement of people to deposit funds in a financial institution does not, without more, involve the provision of a service. On the other hand, I consider that the receipt of deposits, the holding of those deposits on account and the payment of interest on the moneys deposited is, collectively, conduct involving the provision of financial services. For reasons already given Mr Siminton engaged in such conduct.
59 The material on the website (above at [33]-[37]) and that part of it which was distributed as an information sheet at meetings conducted by Mr Siminton were replete with references to the Terra Nova Cache being a “bank” and there was also a reference to “banking with Terra Nova Cache”. Mr Siminton referred to the Terra Nova Cache as a “bank” during his presentations at the meetings.
60 APRA did not give Mr Siminton consent to use the words “bank” or “banking” and it made no determination under s 11 of the Act that s 66(1) did not apply to him.
61 Accordingly, I conclude that Mr Siminton engaged in conduct which contravened s 66 of the Act.
RELIEF – INJUNCTIONS
62 Section 65A(1) provides for the granting of statutory injunctions where a person has engaged, is engaged or proposes to engage in conduct which contravenes the Act. This power is conferred in wide terms. While the power must be exercised judicially, the exercise of the power is not rendered subject to the same principles which apply to the grant of equitable injunctions.
63 In Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617 Gibbs J dealt with s 90AA of the Trade Practices Act 1965-1971 (Cth) (the forerunner of the present s 80 of that Act). His Honour said (at 651):
“In my opinion s 90AA does not confer on the Court a discretion of an arbitrary kind. It appears from the section that the object of granting an injunction is to restrain a person who has already engaged in unlawful practice from again engaging in that practice. To acquire, rather than permit, the Court to grant an injunction once the condition precedent to its grant has been established would deny the Court the power to adapt a remedy of the needs of a case and would lead to an injustice; moreover, an injunction is in its nature a discretionary remedy. Since the discretion is conferred on a court and is to be exercised in proceedings inter partes, it must be concluded, when there is no indication in the Act to the contrary, that it is to be exercised judicially. The existence of the discretion does not alter the conclusion that the power conferred by s 90AA is a judicial power.”
64 As already noted, s 65A of the Act is in substantially similar terms to those of s 1324 of the Corporations Act 2001 (Cth). In Australian Securities and Investments Commission v Mauer-Swisse Securities Limited (2002) 42 ACSR 605 at 613-614 Palmer J, having reviewed a number of authorities on the construction and operation of s 1324 continued:
“[36] At the risk of some repetition, I summarise the principles which I draw from the presently applicable authorities:
· the jurisdiction which the court exercises under [the Corporations Act] s 1324 is a statutory jurisdiction, not the court’s traditional equity jurisdiction;
· Parliament has made it increasingly clear by successive statutory enactments that the court, in exercising its statutory jurisdiction under s 1324, is not to be confined by the considerations which would be applicable if it were exercising its traditional equity jurisdiction;
· among the considerations which the court must take into account in an application for an injunction under [Corporations Act] s 1324 are the wider issues referred to by Austin J … and by Davies AJ …; they may be gathered under the broad question whether the injunction would have some utility or would serve some purpose within the contemplation of the Corporations Act;
· these considerations are to be taken into account regardless of whether the application is for a permanent injunction under s 1324(1) or for a interim application under s 1324(4);
· where an application under s 1324(4) is made by ASIC rather than a private litigant the court is more likely to give greater weight to the broad question whether the injunction would serve a purpose within the contemplation of the Corporations Act;
· where there is an appreciable – that is, not fanciful – risk of particular future contraventions of the Corporations Act by a defendant, it would serve a purpose within the contemplation of the Corporations Act that the court grant not only a permanent injunction, but, in an appropriate case, an interim injunction restraining such conduct. Section 1324 evinces an intention that the possibly severe consequences and the relatively promptness of proceedings for contempt of court be added to criminal prosecutions as a deterrent to contraventions of the Corporations Act …”
In my view these principles have application to the construction of s 65A of the Act. The principle contained in the penultimate bullet point in the passage quoted in this paragraph has equal force where application is made for a permanent injunction.
65 By s 8 of the Australian Prudential Regulation Authority Act 1998 (Cth) APRA is established, inter alia, for the purpose of regulating bodies in the financial sector in accordance with other laws of the Commonwealth, such as the Banking Act, that provide for prudential regulation. Section 65A of the Act is one of many provisions in the Act which enable APRA to take action designed to protect the interests of depositors and to promote the stability of Australia’s financial system. Those objectives are to be borne in mind in exercising the discretion which is conferred on the Court by s 65A.
66 Mr Siminton has deliberately embarked on a course of conduct which has involved contraventions of the Act. He has established what he calls a “bank” and, with others, has been successful in encouraging a considerable number of people to make deposits in the “bank”. They were promised high interest rates. They were told that interest payments would be made in ways which would facilitate evasion of income taxation payment obligations. Some depositors received some of the promised interest payments but then the payments ceased. Others received no interest. Some, who sought repayment of their deposits, were unsuccessful.
67 Mr Siminton has not acknowledged that any of his conduct has been unlawful. Nor has he expressed any willingness to desist from future conduct which would constitute a contravention of the Act.
68 In my view this is a case which requires the granting of injunctions which will restrain Mr Siminton from any repetition of his past misconduct. There is an appreciable risk that, unless restrained, Mr Siminton will resume the course of conduct which caused APRA to make this application. The granting of an injunction is also warranted as a means of marking the Court’s disapproval of the flagrant breaches of the Act which had been perpetrated by Mr Siminton; see Trade Practices Commission v Mobil Oil Australia Limited (1985) 4 FCR 296 at 300.
69 Mr Siminton should be restrained from:
· Receiving money from members of the public by way of deposit in the Terra Nova Cache or the Principality of Camside;
· Assuming or using the words “bank”, “banker” or “banking”, or any words or phrases of like import, in relation to his business; and
· Advertising, representing or stating that he will carry on banking business.
The injunction should also prevent him undertaking such activities through servants or agents. Mr Siminton should also be required to publish and maintain on the first page that any user views on relevant websites, a notice warning them that neither the Terra Nova Cache nor the Principality of Camside are entities which may lawfully conduct a banking business in Australia.
OTHER RELIEF
70 APRA also seeks orders under s 65A(11) of the Act requiring Mr Siminton to pay damages to depositors in the Terra Nova Cache and an order, under s 57 of the Federal Court of Australia Act, appointing a receiver to deal with the funds which are subject to the Mareva Orders made by Gray J on 10 January 2006.
71 APRA proposed that any order under s 65A(11) should be made in favour of the depositors who gave evidence in the proceeding. The sum of the damages payable in each case would correspond with the principal sum of the deposit plus interest. In the circumstances I do not consider that it is appropriate to make orders under s 65A(11). APRA accepts that it is likely that there exist additional depositors who have yet to be identified. The evidence suggests that Mr Siminton, from time to time, drew on the depositors’ funds for his own purposes. The precise extent of those drawings is not disclosed. Some of the depositors’ funds were placed with Silverstone Global Investments Pty Ltd (“Silverstone Global”) which, in turn, invested them in overseas entities. Reports to investors by Silverstone Global and some of its associated entities suggest that these investments may have significantly depreciated in value. There is, therefore, a considerable risk that the funds which have been “frozen” pursuant to the orders made by Gray J may not be sufficient to make the payments proposed to the known depositors. Even were they to be paid on a pro rata basis, no funds would remain which could be used to make payments to other depositors, who are presently unknown to APRA, but who may come forward.
72 Subject to hearing the parties I consider that the better course would be to appoint a receiver to deal with the funds which are subject to Gray J’s order. This would seem to be an appropriate case for the appointment of a receiver, if not under s 57(1) of the Federal Court of australia Act, under s 23 of that Act: see The University of Western Australia v Gray (No 6) [2006] FCA 1825 at [71]. This case bears many of the features which led Austin J, in Australian Securities and Investment Commission v Burke [2000] NSWSC 694, to appoint a receiver. His Honour said (at [8]):
“Without wishing to lay down any general rules, it appears to me that the extraordinary step of appointing a receiver may be justified, even though Mareva Orders are in place, in a case where there is real doubt about the existence and location of assets such as investments, and about the number and identity of claimants and the nature of their claims, and additionally the defendants are engaged in business activities which entail that any Mareva Orders must allow assets to be turned over in the course of business. Where these circumstances exist in combination, and especially where there are allegations of serious fraud involved, the Court may conclude, as I do in this case, that the Mareva Orders are not enough to ensure that the assets are preserved and protected, and indeed identified and brought in for the benefit of investors.”
73 There are further considerations which militate in favour of the appointment of a receiver. Were an order to be made under s 65A(11) requiring Mr Siminton to make payments, by way of damages, to individual depositors, the task of identifying, realising and bringing in the funds necessary to satisfy the orders would fall on Mr Siminton. Having regard to his conduct in dealing with the funds of depositors prior to the intervention of this Court, I cannot harbour any confidence as to his capacity to undertake these tasks in a manner which will best serve the interests of the depositors. I doubt also that he would have the business acumen and resources to do that which is required.
74 Another matter of importance is the fact that Mr Siminton is an undischarged bankrupt. He has failed, over the past six years, to submit a statement of affairs to his trustee in bankruptcy. He has been unwilling to co-operate with his trustee.
75 For these reasons it is my present view that a receiver should be appointed and charged with the responsibility of seeking to identify all those who have made deposits in the Terra Nova Cache, the getting in of the funds which are the subject of Gray J’s order and any additional funds contributed by depositors and to provide for an orderly and equitable distribution of those funds to depositors.
76 I will hear the parties as to the nature of any additional relief and the terms of appropriate orders once they have had the opportunity of considering these reasons. The matter will be listed for mention at 10:15 am on 7 November 2007. On or before 5 November 2007 APRA is to file and serve draft minutes of any order for the appointment of a receiver which it contends should be made by the Court.
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I certify that the preceding seventy-six (76) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice TRACEY . |
Associate:
Dated: 26 October 2007
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Counsel for the Applicant: |
Ms D Mortimer S.C & Mr S Hibble |
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Solicitor for the Applicant: |
Australian Prudential Regulation Authority |
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Counsel for the Respondent: |
Mr D Sharp |
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Solicitor for the Respondent: |
Erhardt & Associates |
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Date of Hearing: |
4-7 June 2007 |
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Date of Judgment: |
26 October 2007 |
