FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Superannuation Warehouse Australia Pty Ltd [2015] FCA 1167

BY CONSENT THE COURT DECLARES THAT:

Pre-disclaimer Representations

1.    The defendant (SWA), during the period from 22 January 2014 to 5 August 2014 (pre-disclaimer period), in trade or commerce, engaged in conduct 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) by publishing advertisements of “Free SMSF Setup” on the home and application form pages of the following websites:

(a)    http://www.superannuationwarehouse.com.au (Website 1); and

(b)    http://www.smsfwarehouse.com.au (Website 2)

(collectively referred to as the Websites)

contained in the following statements:

(a)    “Free SMSF Setup”; and

(b)    “Superannuation Warehouse is offering free setup of SMSF’s (Self Managed Superannuation Funds). Clients can apply to have a FREE SMSF setup below. Once we receive your application, Superannuation Warehouse will contact you regarding processing your application”;

and thereby represented that:

(a)    SWA would set up an SMSF at no cost;

(b)    SWA was prepared to set up an SMSF without requiring the applicant to agree to any conditions;

(c)    SWA was prepared to set up an SMSF without requiring the applicant to agree to pay a fixed monthly fee; and

(d)    SWA had reasonable grounds for believing and holding the opinion that the set up of an SMSF was unconditional

when in fact:

(a)    SWA charged a fee of $950 to set up an SMSF with a corporate trustee;

(b)    SWA’s online application form could not be submitted without authorising SWA to be the fund administrator for which there was a fixed monthly administration fee;

(c)    SWA, upon setting up the SMSF, requested by email(s) that the applicant put in place a payment plan for monthly payments for administration services; and

(d)    SWA charged a fixed monthly fee (in arrears) for administration services performed for an SMSF

which matters were not clearly or as prominently stated on the Websites.

2.    SWA, in the pre-disclaimer period, in trade or commerce, in connection with the supply or possible supply of financial services and in connection with the promotion of the supply or use of financial services made a false or misleading representation:

(a)    concerning the existence, exclusion, or effect of a condition or right, in contravention of s 12DB(1)(i) of the ASIC Act; and

(b)    that the services were of a particular value, in contravention of s 12DB(1)(a) of the ASIC Act;

by publishing advertisements of “Free SMSF Setup” on the home and application form pages of the Websites contained in the following statements:

(a)    “Free SMSF Setup”; and

(b)    “Superannuation Warehouse is offering free setup of SMSF’s (Self Managed Superannuation Funds). Clients can apply to have a FREE SMSF setup below. Once we receive your application, Superannuation Warehouse will contact you regarding processing your application”;

and thereby represented that:

(a)    SWA would set up an SMSF at no cost;

(b)    SWA was prepared to set up an SMSF without requiring the applicant to agree to any conditions;

(c)    SWA was prepared to set up an SMSF without requiring the applicant to agree to pay a fixed monthly fee; and

(d)    SWA had reasonable grounds for believing and holding the opinion that the set up of an SMSF was unconditional

when in fact:

(a)    SWA charged a fee of $950 to set up an SMSF with a corporate trustee;

(b)    SWA’s online application form could not be submitted without authorising SWA to be the fund administrator for which there was a fixed monthly administration fee;

(c)    SWA, upon setting up the SMSF, requested by email(s) that the applicant put in place a payment plan for monthly payments for administration services; and

(d)    SWA charged a fixed monthly fee (in arrears) for administration services performed for an SMSF

which matters were not clearly or as prominently stated on the Websites.

Post-Disclaimer Representation

3.    SWA, during the period from 5 August 2014 to 8 May 2015 (post-disclaimer period), in trade or commerce, engaged in conduct 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 by publishing advertisements of “Free SMSF Setup” on the home and application form pages of the Websites contained in the following statements:

(a)    “Free SMSF Setup*”;

(b)    “* Free SMSF Setup is when using Individual Trustees”;

(c)    “Free SMSF Setup”;

(d)    “The free SMSF set up is for Individual Trustees when we set up the SMSF. If Trustees want to use a Corporate Trustee to be set up, we do charge $950 for the Pty Ltd Company set up with ASIC. Note the SMSF setup with the ATO is always free. Most funds are set up using Individual Trustees. For the advantages of using a Corporate Trustee, see the page explaining the pros and cons of using a Corporate Trustee”; and

(e)    “Superannuation Warehouse is offering free setup of SMSF’s (Self Managed Superannuation Funds). Clients can apply to have a FREE SMSF setup below. Once we receive your application, Superannuation Warehouse will contact you regarding processing your application”;

and thereby represented that:

(a)    SWA would set up an SMSF with an individual trustee at no cost;

(b)    SWA was prepared to set up an SMSF with an individual trustee without requiring the applicant to agree to any conditions;

(c)    SWA was prepared to set up an SMSF with an individual trustee without requiring the applicant to agree to pay a fixed monthly fee; and

(d)    SWA had reasonable grounds for believing and holding the opinion that the set up of an SMSF with an individual trustee was unconditional

when in fact:

(a)    SWA’s online application form could not be submitted without authorising SWA to be the fund administrator for which there was a fixed monthly administration fee;

(b)    SWA, upon setting up the SMSF, requested by email(s) that the applicant put in place a payment plan for monthly payments for administration services; and

(c)    SWA charged a fixed monthly fee (in arrears) for administration services performed for an SMSF

which matters were not clearly or as prominently stated on the Websites.

4.    SWA, in the post-disclaimer period, in trade or commerce, in connection with the supply or possible supply of financial services and in connection with the promotion of the supply or use of financial services made a false or misleading representation:

(a)    concerning the existence, exclusion, or effect of a condition or right in contravention of s 12DB(1)(i) of the ASIC Act; and

(b)    that the services were of a particular value in contravention of s 12DB(1)(a) of the ASIC Act;

by publishing advertisements of “Free SMSF Setup” and “Free SMSF Setup is when using an Individual Trustee” on the home and application form pages of the Websites contained in the following statements:

(a)    “Free SMSF Setup*”;

(b)    “* Free SMSF Setup is when using Individual Trustees”;

(c)    “Free SMSF Setup”;

(d)    “The free SMSF set up is for Individual Trustees when we set up the SMSF. If Trustees want to use a Corporate Trustee to be set up, we do charge $950 for the Pty Ltd Company set up with ASIC. Note the SMSF setup with the ATO is always free. Most funds are set up using Individual Trustees. For the advantages of using a Corporate Trustee, see the page explaining the pros and cons of using a Corporate Trustee”; and

(e)    “Superannuation Warehouse is offering free setup of SMSF’s (Self Managed Superannuation Funds). Clients can apply to have a FREE SMSF setup below. Once we receive your application, Superannuation Warehouse will contact you regarding processing your application”;

and thereby represented that:

(a)    SWA would set up an SMSF with an individual trustee at no cost;

(b)    SWA was prepared to set up an SMSF with an individual trustee without requiring the applicant to agree to any conditions;

(c)    SWA was prepared to set up an SMSF with an individual trustee without requiring the applicant to agree to pay a fixed monthly fee; and

(d)    SWA had reasonable grounds for believing and holding the opinion that the set up of an SMSF with an individual trustee was unconditional

when in fact:

(a)    SWA’s online application form could not be submitted without authorising SWA to be the fund administrator for which there was a fixed monthly administration fee;

(b)    SWA, upon setting up the SMSF, requested by email(s) that the applicant put in place a payment plan for monthly payments for administration services; and

(c)    SWA charged a fixed monthly fee (in arrears) for administration services performed for an SMSF

which matters were not clearly or as prominently stated on the Websites.

AND BY CONSENT OF THE PARTIES THE COURT ORDERS THAT:

Injunction

5.    Pursuant to s 12GD(1)(a) of the ASIC Act, until it has completed the requirements set out in Annexure A to these Orders or until 31 May 2016 (whichever is earlier) or otherwise until further order of the Court, SWA, whether by itself, its servants or agents, be restrained from publishing or causing to be published, advertisements or representations for services which refer to “Free SMSF Setup” when the set up of a self managed superannuation fund (SMSF) by SWA is not free by reason that the setup requires:

(a)    authorisation for SWA to act as administrator of the SMSF and to charge administration fees; and/ or

(b)    applicants to agree to pay fees, of any kind, to SWA.

Non-punitive order — probation order

6.    Pursuant to s 12GLA(2)(b) of the ASIC Act, SWA, at its own expense, will establish a Compliance, Education and Training Program (Compliance Program) in accordance with Annexure A to these Orders.

Corrective advertising

7.    Pursuant to ss 12GLA(2)(c) and 12GLB(1) of the ASIC Act, SWA, at its own expense will:

(a)    within 7 days of the date of these Orders, place a notice on the homepage of the Websites as set out in Annexure B, notifying readers of the declarations and orders made, such notice to remain on the Websites for a period of one month;

(b)    within 14 days of the date of these Orders, send by email or, if SWA does not have the email address, by pre-paid ordinary post, to each applicant who, during the pre-disclaimer period, applied through the Websites to SWA for free SMSF setup, a notice substantially in the form of that set out in Annexure C; and

(c)    within 14 days of the date of these Orders, send by email or, if SWA does not have the email address, by pre-paid ordinary post, to each applicant who, during the post disclaimer period, applied through the Websites to SWA for free SMSF setup with an individual trustee, a notice substantially in the form of that set out in Annexure D.

8.    SWA, within 21 days from the date of these Orders, provide to the plaintiff written confirmation of the steps taken to comply with order 7.

9.    No order as to costs.

AND THE COURT ORDERS THAT:

Pecuniary Penalty

10.    Pursuant to s 12GBA of the ASIC Act, SWA pay to the Commonwealth a pecuniary penalty of $25,000.

ANNEXURE A

Requirements for Compliance, Education and Training Program

Superannuation Warehouse Australia Pty Ltd (ACN 141 409 449) (SWA) will establish a Compliance, Education and Training Program (Compliance Program) that complies with each of the following requirements:

1.    General

(a)    SWA will pay all of its own costs associated with implementing the Compliance Program, including but not limited to the appointment of the Consultant (defined below at paragraph 3.1).

2.    Appointments — Compliance Officer

(a)    Within seven (7) days of the date of the Order of the Court dated 30 October 2015 (Court Order), SWA will appoint a director or senior manager of the business to be responsible for the development, implementation and maintenance of the Compliance Program (Compliance Officer).

(b)    After the appointment of the Compliance Officer in accordance with paragraph 2.1, SWA must take all reasonable steps to ensure that, for the duration of the Court Order there is a director or senior manager with responsibility for ensuring that the Compliance Program is effectively established, maintained and administered in accordance with the Court Order.

3.    Appointments - External Consultant

(a)    Within seven (7) days of the date of the Court Order, SWA will engage a suitably qualified, independent external compliance consultant (Consultant) whose:

(i)    terms of appointment are to be based on the matters set out at paragraphs 4 and 9 below; and

(ii)    whose appointment and terms of appointment are to be approved by the plaintiff in writing, such approval not to be unreasonably withheld.

4.    Initial review

(a)    SWA will instruct the Consultant to conduct an initial review and risk assessment in accordance with 4.2.1 to 4.2.3 below (Initial Review) and prepare the report referred to in 4.4, to be completed within two (2) months of the Court Order or such further time as the Consultant requires, with any extension of time to be approved by the plaintiff, such approval not to be unreasonably withheld.

(b)    The Initial Review must:

(i)    identify areas where SWA is at risk of breaching Part 2 of Division 2 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) having regard to, amongst other things, ASIC Regulatory Guide 234 - Advertising financial products and services (including credit);

(ii)    identify where there may be gaps in SWA’s existing policies, procedures and systems for managing these risks; and

(iii)    provide recommendations for action having regard to the assessment.

(c)    SWA will provide all reasonable assistance to the Consultant to enable the Consultant to complete the Initial Review.

(d)    The Consultant will prepare a written report setting out:

(i)    a description of the methodology, parameters and limitations applicable to the review, including evidence gathered and examined;

(ii)    the findings of the review; and

(iii)    recommendations made as a consequence of the Initial Review.

(e)    SWA will provide a copy of the report prepared in accordance with paragraph 4.4 above to the plaintiff within three (3) days of receiving it from the Consultant.

5.    Compliance Policy

(a)    Within three (3) months of the date of the Court Order, SWA will issue a compliance policy (Compliance Policy) that:

(i)    is written in plain language;

(ii)    contains a statement of commitment to compliance with Part 2 of Division 2 of the ASIC Act;

(iii)    contains a strategic outline of how commitment to ASIC Act compliance will be realised within SWA;

(iv)    incorporates all recommendations made by the Consultant in the Initial Review;

(v)    contains a requirement for all staff to report any Compliance Program related issues and ASIC Act compliance concerns to the Compliance Officer; and

(vi)    contains a clear statement that SWA will take action internally against any persons who are knowingly or recklessly concerned in a contravention of the ASIC Act and will not indemnify them.

6.    Complaints Handling System

(a)    SWA will ensure that the Compliance Program includes an ASIC Act complaints handling system appropriate for the company's circumstances and that staff and clients are made aware of the complaints handling system.

7.    Education & Training

(a)    SWA will ensure that the Compliance Program provides for regular (at least once a year) and practical training for all directors, officers, employees and representatives of SWA.

(b)    SWA must ensure that the training is designed and conducted by a suitably qualified compliance professional or legal practitioner with expertise in the ASIC Act (Compliance Trainer).

(c)    SWA must provide to the Compliance Trainer, for the purposes of conducting the training, copies of:

(i)    the Court Order;

(ii)    the Compliance Policy;

(iii)    the complaints handling system; and

(iv)    all reports prepared by the Consultant as at the date the training is scheduled.

(d)    SWA will ensure that the Compliance Program includes a requirement that awareness of the Compliance Policy, complaints handling system and ASIC Act compliance issues form part of the induction of all new directors, officers, employees and representatives of SWA.

8.    Supply of the Compliance Program Documents to the Applicants

(a)    Within three (3) months of the date of the Court Order, SWA will provide the plaintiff with copies of each document constituting the Compliance Program.

9.    Compliance Reviews

(a)    SWA will instruct the Consultant to conduct a further review of the Compliance Program (Compliance Review) to be carried out in accordance with paragraphs 9.2.1 to 9.2.5 below and prepare the Compliance Review Report (defined in paragraph 9.4 below) by 31 May 2016.

(b)    The Compliance Review must:

(i)    review the extent to which the Compliance Program includes all of the requirements detailed in paragraphs 2 to 8 above;

(ii)    review the extent to which the Compliance Program adequately addresses the matters identified and recommendations made in the Initial Review or any subsequent review;

(iii)    review the effectiveness of the ASIC Act training;

(iv)    review the effectiveness of the complaints handling system; and

(v)    make recommendations for rectifying any deficiencies in 9.2.1 to 9.2.4 above that the Consultant considers are reasonably necessary to ensure that SWA maintains and continues to implement the Compliance Program in accordance with the Court Order.

(c)    SWA will provide all reasonable assistance to the Consultant to enable the Consultant to complete the Compliance Review.

(d)    The Consultant will prepare a written report (Compliance Review Report) setting out:

(i)    a description of the methodology, parameters and limitations applicable to the review, including evidence gathered and examined;

(ii)    the findings of the review; and

(iii)    recommendations and actions made to ensure the continuing effectiveness of the Compliance Program.

(e)    SWA will provide a copy of the Compliance Review Report to the plaintiff within three (3) days of receiving it from the Consultant.

10.    Recommendations

(a)    SWA shall implement promptly and with due diligence any recommendations made by the Consultant or required by the plaintiff that are reasonably necessary to ensure that SWA maintains and continues to implement the Compliance Program in accordance with the Court Order.

(b)    If requested by the plaintiff, SWA shall, at its own expense, provide the plaintiff with copies of documents and information in respect of matters that are the subject of the Compliance Program.

(c)    SWA will, in the event that the Compliance Review Report identifies any recommendations or actions that have not been implemented provide ASIC with a written plan (Remedial Action Plan) setting out the:

(i)    action SWA proposes to take to ensure that those recommendations and actions are implemented; and

(ii)    specific timeframe(s) within with such action will be taken.

(d)    SWA will provide the Remedial Action Plan to the plaintiff within seven (7) days of the Compliance Review Report being provided to the plaintiff.

(e)    SWA will implement any Remedial Action Plan within the timeframe specified in paragraph 10.3.2 above, except that if the plaintiff requires any reasonable modifications to any Remedial Action Plan then SWA will implement the Remedial Action Plan as so modified.

ANNEXURE B — NOTICE ON HOMEPAGE

[In the usual form of the Defendant’s notice to customers. 25% of homepage. For a period of 1 month from date of order.]

MISLEADING STATEMENT ABOUT FREE SMSF SETUP

    On 30 October 2015, the Federal Court of Australia found and declared that statements on our websites offering “Free SMSF Setup” were false, misleading and deceptive because in fact we required an applicant to also authorise us to act as administrator of the SMSF, for which there is a fixed monthly fee. This was not clearly and prominently disclosed.

    A copy of the Court’s judgment and orders is available here <insert>.

    If you have any questions or concerns about your application, please contact <insert complaints manager’s name>.

What was the advertisement?

Between 22 January 2014 and 8 May 2015 we made statements offering “Free SMSF Setup” on the homepages of our websites:

    http://www.superannuationwarehouse.com.au; and

    http://www.smsfwarehouse.com.au.

Why was it false, misleading and deceptive?

In a court proceeding brought by ASIC the Federal Court found that the statements on our websites offering “Free SMSF Setup” was false, misleading and deceptive because it represented that we would set up an SMSF with an individual as trustee at no cost. In fact, the free SMSF setup service required an applicant to:

    authorise SWA to act as administrator of the SMSF; and

    as a result of that appointment, agree to pay SWA's monthly administration fees.

In addition, between 22 January 2014 and 5 August 2014 applications for SMSF set up with a corporate trustee required a payment of $950 to be made to us, without this fact being clearly and prominently stated on the websites where we advertised “Free SMSF Setup”.

Does this affect me?

You may have relied on these statements in deciding to apply to set up your SMSF with us. If you have any queries or complaints regarding an application to set up an SMSF or any other aspect of SWA’s service to you in relation to your SMSF, please contact <insert complaints manager’s name> on [insert address] or [insert telephone number].

ANNEXURE C — EMAIL TO EACH CLIENT

[In the usual form of email or on letterhead of defendant]

MISLEADING STATEMENT ABOUT FREE SMSF SETUP

    We are writing to you about your application to Superannuation Warehouse Australia Pty Ltd (ACN 141 409 449) (SWA) to set up your self-managed superannuation fund (SMSF).

    On 30 October 2015, the Federal Court of Australia found and declared that statements on our websites offering “Free SMSF Setup” were false, misleading and deceptive because in fact we required you to also authorise us to act as administrator of the SMSF, for which there is a fixed monthly fee. This was not clearly and prominently disclosed.

    A copy of the Court’s judgment and orders is available here <insert>.

    If you have any questions or concerns about your application, please contact <insert complaints manager’s name>.

What was the advertisement?

Between 22 January 2014 and 5 August 2014 we made statements offering “Free SMSF Setup” on the homepages of our websites:

    http://www.superannuationwarehouse.com.au; and

    http://www.smsfwarehouse.com.au.

Why was it false, misleading and deceptive?

In a court proceeding brought by ASIC the Federal Court found that the statement offering “Free SMSF Setup” was false, misleading and deceptive because it represented that we would set up an SMSF with an individual as trustee at no cost. In fact, the free SMSF setup service required you to:

    authorise SWA to act as administrator of the SMSF; and

    as a result of that appointment, agree to pay SWA’s monthly administration fees.

In addition an application to set up an SMSF with a company as the trustee also required a payment of $950 to SWA without this fact being clearly and prominently stated on the websites where we advertised “Free SMSF Setup”.

Does this affect me?

You may have relied on these statements in deciding to apply to set up your SMSF with us. If you have any queries or complaints regarding an application to set up an SMSF or any other aspect of SWA’s service to you in relation to your SMSF, please contact <insert complaints manager’s name> on [insert address] or [insert telephone number].

ANNEXURE D — EMAIL TO EACH CLIENT

[In the usual form of email or on letterhead of defendant]

MISLEADING STATEMENT ABOUT FREE SMSF SETUP

    We are writing to you about your application to Superannuation Warehouse Australia Pty Ltd (ACN 141 409 449) (SWA) to set up your self-managed superannuation fund (SMSF).

    On 30 October 2015, the Federal Court of Australia found and declared that statements on our websites offering “Free SMSF Setup” were false, misleading and deceptive because in fact we required you to also authorise us to act as administrator of the SMSF, for which there is a fixed monthly fee. This was not clearly and prominently disclosed.

    A copy of the Court’s judgment and orders is available here <insert>.

    If you have any questions or concerns about your application, please contact <insert complaints manager’s name>.

What was the advertisement?

Between 5 August 2014 and 8 May 2015 we made statements offering “Free SMSF Setup” on the homepages of our websites:

    http://www.superannuationwarehouse.com.au; and

    http://www.smsfwarehouse.com.au.

Why was it false, misleading and deceptive?

In a court proceeding brought by ASIC the Federal Court found that the statement offering “Free SMSF Setup” was false, misleading and deceptive because it represented that we would set up an SMSF with an individual as trustee at no cost. In fact, the “Free SMSF Setup” service required you to:

    authorise SWA to act as administrator of the SMSF; and

    as a result of that appointment, agree to pay SWA's monthly administration fees.

Does this affect me?

You may have relied on these statements in deciding to apply to set up your SMSF with us. If you have any queries or complaints regarding an application to set up an SMSF or any other aspect of SWA’s service to you in relation to your SMSF, please contact <insert complaints manager’s name> on [insert address] or [insert telephone number].

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    On 28 April 2015 the plaintiff (ASIC) commenced this proceeding against the defendant (SWA) by filing and serving an originating process alleging that SWA was liable for conduct in contravention of ss 12DA(1), 12DB(1)(a) and 12DB(1)(i) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

2    The conduct alleged related to representations made by SWA of “Free SMSF Setup” on the two websites it owned and operated, being:

(a)    http://www.superannuationwarehouse.com.au; and

(b)    http://www.smsfwarehouse.com.au.

3    The contraventions comprised a single course of conduct that can be conveniently divided into distinct time periods, being from 22 January 2014 to 5 August 2014 (pre-disclaimer period) and, following a change to the websites, from 6 August 2014 to 8 May 2015 (post-disclaimer period), when SWA consented to an interim injunction that I then made in this proceeding.

4    SWA has admitted liability for all of the contraventions alleged in the originating process. The form of the declarations consists of four declarations, representing separate declarations for contraventions under each of s 12DA(1) of the ASIC Act and s 12DB(1)(a) and (i) of the ASIC Act for each of the pre-disclaimer period and post-disclaimer period.

5    The following relief has been agreed between the parties:

    declarations in an agreed form;

    an injunction extending the current interim injunction until successful completion of a compliance program or until 30 June 2016 (whichever is the earlier) (s 12GD(2));

    a probation order in the form of a compliance program as agreed (s 12GLA(2)(b));

    corrective advertising to be published on the websites and distributed by email, or by post, to clients in the form agreed (s 12GLA(2)(c) and (d)).

6    ASIC has also sought a pecuniary penalty against SWA pursuant to s 12GBA in relation to the conduct in contravention of s 12DB (but not s 12DA, by reason of a relevant carve out in s 12GBA). In accordance with current authority, the parties have not agreed a figure or range for the quantum of any penalty and nor has ASIC separately submitted such a figure or range.

7    Accordingly, a contested hearing was held yesterday to determine the appropriate penalty. In my view, for the reasons that follow, the penalty should be fixed in the sum of $25,000.

8    I should also note that ASIC is not seeking its costs as part of the agreement between the parties.

Factual background

9    A Statement of Agreed Facts has been made jointly by ASIC and SWA for the purposes of s 191 of the Evidence Act 1995 (Cth). It has also been supplemented by affidavits filed by the parties, all of which I have considered but only to the extent that they are not inconsistent with the content of the Statement.

10    The Statement sets out details of:

(a)    conduct that took place between 22 January 2014 to 5 August 2014, in relation to representations made by SWA of “Free SMSF Setup” on the two websites it owns and operates being:

(i)    http://www.superannuationwarehouse.com.au (Website 1); and

(ii)    http://www.smsfwarehouse.com.au (Website 2),

(collectively the websites);

(b)    conduct that took place between 5 August 2014 to 8 May 2015, in relation to representations made by SWA of “Free SMSF Setup”* — and also “Free SMSF Setup” — where the asterisk (*) in the footer stated that “Free SMSF Setup was only available to individual trustees”;

(c)    admissions by SWA that it contravened s 12DA(1), s 12DB(1)(a) and s 12DB(1)(i) of the ASIC Act; and

(d)    conduct by SWA subsequent to the contraventions.

11    SWA at all material times:

(a)    engaged in trade or commerce within Australia;

(b)    engaged in the business of providing services including by online means, associated with the establishment and administration of self-managed superannuation funds (SMSFs). In response to a notice dated 5 August 2014 issued by ASIC pursuant to s 19(2)(a) of the ASIC Act, Mr Johan Heinrich Preller (Mr Preller) described SWA as a “public practice accounting firm operating mainly online” (collectively referred to as the SWA Business); and

(c)    was the registered owner of the websites.

12    In its conduct of the SWA business, SWA provided a financial service within the meaning of Part 2 of Division 2 of the ASIC Act for the reason that an SMSF is a financial product within the meaning of s 12BAA(7)(f) of the ASIC Act and SWA provided services otherwise supplied in relation to a financial product by operation of s 12BAB(1)(g) of the ASIC Act.

13    SWA was registered on 10 January 2010. SWA operated from offices at 3 Keys Street Beaumaris, Victoria. Since incorporation it has had a sole director, secretary and shareholder, Mr Preller. Mr Preller is also a registered SMSF auditor. When SWA was first established, Mr Preller was also its only employee. SWA currently employs eight people including Mr Preller, other qualified accountants and support staff.

14    At all material times, SWA provided the following services:

(a)    SMSF set up with a corporate trustee;

(b)    SMSF set up with an individual trustee;

(c)    acting as fund administrator for SMSFs;

(d)    acting as tax agent for SMSFs; and

(e)    appointing an auditor for SMSFs.

15    At all material times, Mr Preller:

(a)    was responsible for the content and design of the websites; and

(b)    had some limited ability to edit text on the websites themselves.

16    Since incorporation to about 15 January 2015, SWA has facilitated the registration of approximately 1000 SMSFs. In the course of the SWA business, SWA currently provides:

(a)    administration services for approximately 800 SMSFs; and

(b)    auditing services for approximately 650 SMSFs.

(a)    Website 1 pre-disclaimer period

17    From at least 22 January 2014 until on or about 5 August 2014 (Website 1 pre-disclaimer period), SWA promoted and advertised the SWA business on Website 1, including by publishing or causing to be published:

(a)    hyperlink text entitled “Free SMSF Setup” in a bright blue box at the top of the homepage of Website 1; and

(b)    at the foot of that homepage in a black box with grey type (making it less prominent) the statement:

“Superannuation Warehouse is an independent Australian company providing specialist Self-Managed Superannuation Fund (SMSF) services. We are based in Melbourne and have clients throughout Australia.

We deliver our SMSF administration services in an efficient and paperless (as much as is possible) way. Efficient services means a competitive MONTHLY fixed fee to you.

Our free SMSF setup and low ongoing fees will enable you to take control of your Super and decide your own future.” (Website 1 pre-disclaimer footer)

18    During the Website 1 pre-disclaimer period, an applicant who clicked on the hyperlink text advertising “Free SMSF Setup” on the homepage of Website 1 was taken to a linked, separate page of Website 1 comprised of an online application form which included the following statement:

Superannuation Warehouse is offering free setup of SMSF’s (Self Managed Superannuation Funds). Clients can apply to have a FREE SMSF setup below. Once we receive your application, Superannuation Warehouse will contact you regarding processing your application.

19    Also during the Website 1 pre-disclaimer period, SWA published statements on separate pages of Website 1 as follows:

(a)    At the base of each webpage comprising Website 1, the Website 1 pre-disclaimer footer;

(b)    On the homepage, further hyperlink text including:

“Fixed monthly fees”

“From $39 – $79 per month”

“Free SMSF set-up”

“Fee Schedule” and “Monthly fees”;

(c)    The hyperlink text “From $39 – $79 per month” linked to a webpage that contained three text boxes each one identifying a distinct monthly fee option of $39, $59 and $79 that included the words “Individual Trustee — FREE SETUP” and below that the following:

What is included?

As part of the SMSF setup process, Superannuation Warehouse will apply for an ABN and a TFN. On an annual basis, we prepare your financial statements, take care of your SMSF tax return, and arrange your SMSF audit. All these functions are covered by your fixed monthly fee;

(d)    On a “Home / Setup / Monthly Fees” page, a schedule of fees for SWA’s SMSF services relevantly as follows:

Administration Fees payable to Superannuation Warehouse are paid on a monthly basis. The fixed monthly fee is $39, $59 or $79 per month, depending on the options you choose.

Set up for a new SMSF is free. The fixed monthly fee is payable monthly. The fixed fee is payable monthly. This is fairer and more equitable than charging annual lump sum fees. An SMSF established towards the end of the financial year would therefore benefit from this arrangement because the SMSF wouldn’t have to pay a full year’s administration fees. In addition, having a fixed fee in your SMSF limits your risk in terms of unexpected accounting and audit fees.

Superannuation Warehouse will set up a monthly debit order with your SMSF bank account. For example, if your SMSF is established on the 5th of the month, the monthly fee will be payable on the 5th of each month.

Tax Deduction

…

No lock-in contracts

Superannuation Warehouse is the first SMSF administrator to charge Fixed Monthly Fees. The Fees are not annual payments spread over 12 months — this is a truly monthly payment. If you should ever decide to close your SMSF, for any reason, you pay up to the end of the final month and that’s all. There are no lock in contracts and no exit fees. You are free to quit Superannuation Warehouse at any time.

(e)    On a “Home/ Setup / Fee Schedule” page, a schedule of fee packages for SWA’s SMSF services relevantly as follows:

The fees and charges at Superannuation Warehouse are simple and low. Efficiency is our watchword. Our fees are one low flat rate, irrespective of your SMSF balance or how many transactions you make.

Our fees schedule:

SMSF set-up with individual Trustees = FREE when going onto a monthly plan

Monthly charge, Basic (Cash investment option) = $39 per month

Monthly charge, Standard (HalifaxOnline option) = $59 per month

Monthly charge, Advanced (any provider and investment option) = $79 per month

Corporate Trustee set-up = $950 once-off fee

Existing SMSF take-on = $475 once-off fee

Bare Trust set-up when borrowing for investment property = $950 once-off fee

Audit only (i.e. you handle your own accounting & tax) = $450 max

Annual Fee for a Bare Trust and Corporate Trustee = NIL

Fee payable to ASIC for a Corporate Trustee = $41 annually

Super Levy Surcharge payable to the ATO = $200 for 2012 (was $180 in 2011)

Actuarial Certificate = $280

Set-up only (i.e. you handle your own accounting and tax) — $300

To close down a SMSF = $150

Consulting fees = $280 per hour, phone support and email is free.

Note on fees

Fees are payable monthly in arrears. All fees include GST. There are no exit or penalty fees if you decide that you no longer want Superannuation Warehouse to take care of your SMSF. Administration fees cover the annual preparation of accounts, tax return and audit (we appoint and pay the auditor). This is all you need to run your SMSF. The only possible additional expenses are such things as bank and brokerage fees.

If your SMSF is set up on the 12th of the month, we will set up a debit order be deducted from the SMSF bank account on the 12th of every month. And, don’t worry, we perfectly understand and take into account the fact that it can take some time to get a bank account set up and funds rolled over from your existing Superannuation Fund to the SMSF.

Fees are generally fixed, but if there’s incomplete information from trustees and significant re-work on accounting matters by us, we will have to pass on this cost to the trustee.

(f)    On the webpage entitled “SMSF’s FAQ’s”, that:

What does Superannuation Warehouse do?

We are accounting & taxation professionals specialising in SMSF’s. We set up SMSF’s for free and perform the annual accounting, tax and compliance duties for your SMSF.

What makes Superannuation Warehouse different?

We provide a premium service at a monthly low, fixed price. This enables you to run a SMSF with a relatively low balance. It also allows you to better budget for fees in your Fund as our fees are fixed.

(g)    On the webpage entitled “the right way to set up a SMSF | Superannuation Warehouse”, that:

To accommodate Trustees, we have different fee levels. If you only have cash and term deposits we charge a low $39 a month admin fee. This covers all your accounting, tax and audit functions for the SMSF. Paying a low fee will assist you to save more in your SMSF — Self Managed Super Funds. Remember you can also keep your retail fund open to have an exposure to shares. This will alleviate you from selecting stocks and you can ensure your Super earns a good interest rate at a bank of your choice.

For more information on our packages check our Superannuation Fees.

For technical guidance on how to set up a SMSF, there are 7 guides issued by ATO. See this page for a summary of these guides:

http:/www.superannuationwarehouse.com.au/information/ato-as-regulator/

(h)    On the webpage entitled “Minimum Balance”, the statement that:

Superannuation Warehouse makes SMSF’s available to many more individuals by keeping the set-up and monthly fees as low as possible.

The costs you’ll incur are as follows:

•    Audit costs — usually between $300 – $450 for an audit only, click here to get an audit quote

•    Note if you pay monthly the audit fee is included

•    Supervisory levy — around $200 payable annually with your SMSF tax liability

•    Administration costs for accounting, tax and audit — $39 for a complete monthly administration service with Superannuation Warehouse (or you can do this yourself for $NIL)

(i)    On the webpage entitled “SMSF Costs — Self Managed Super Fund Costs”, the statement that:

Fees and charges are an important factor when saving for your retirement.

One of the main reasons for setting up an SMSF, apart from control over assets, is to have transparency over fees charged.

…

At Superannuation Warehouse the philosophy is simple — if we can assist you in growing your Superannuation balance with the most efficient fee structure possible, while providing a professional service, we know you will remain as a client.

(b)    Website 2 pre-disclaimer period

20    From at least 5 June 2014 to on or about 5 August 2014 (the Website 2 pre-disclaimer period), SWA promoted and advertised the SWA business on Website 2, including by publishing or causing to be published:

(a)    hyperlink text entitled “Free SMSF Setup” including text contained in a bright orange box at the top of the homepage of Website 2; and

(b)    at the footer of the homepage, in a black box with grey type, a column headed “Popular Searches” underneath which was the statement “Free SMSF Setup” (Website 2 pre-disclaimer footer).

21    During the Website 2 pre-disclaimer period, a person who clicked on the hyperlinked text advertising “Free SMSF Setup” on the homepage or in the Website 2 pre-disclaimer footer was taken to a separate page of Website 2 that included the following statement:

Free SMSF Setup

Superannuation Warehouse is offering to set up your SMSF’s (Self Managed Super Fund) for free. To apply for your FREE SMSF setup, simply complete the form below, enter the captcha security code and click ‘send’. As soon as we receive your application, we’ll get in touch with you and begin the process.

22    During the Website 2 pre-disclaimer period, SWA published statements on separate pages of Website 2 as follows:

(a)    On the homepage, further hyperlink text including “SMSF Packages” and “Services”;

(b)    At the footer of the homepage in a black box with grey type a column headed “Popular Searches” and “SMSF” under which there was the hyperlinked text “SMSF Packages”;

(c)    The hyperlink text “SMSF Packages” linked to a webpage that contained three text boxes labelled “Basic $39”, “Standard $59” and “Advanced $79” each one stating “Individual Trustee — FREE SETUP” and which included the statement:

What is included?

As part of the SMSF setup process, Superannuation Warehouse will apply for an ABN and a TFN. On an annual basis, we prepare your financial statements, take care of your SMSF tax return, and arrange your SMSF audit. All these functions are covered by your fixed monthly fee.

Your annual SMSF audit is carried out by an auditor appointed and paid for on your behalf by Superannuation Warehouse. The audit fee is included in the monthly cost — no extra audit fee is charged. The cost to you is therefore a fixed monthly amount.

(d)    The hyperlink text “Services”, which included a drop down menu with an option to link to a further webpage that identified monthly fees and included the statement:

Monthly Fees

Administration Fees payable to Superannuation Warehouse are paid on a monthly basis. The fixed monthly fee is $39, $59 or $79 per month, depending on the option you choose.

Set-up for a new SMSF is Free. The fixed fee is payable monthly. This is fairer and more equitable than charging annual lump sum fees. An SMSF established towards the end of the financial year would therefore benefit from this arrangement because the SMSF wouldn’t have to pay a full year’s administration fees. In addition, having a fixed fee in your SMSF limits your risk in terms of unexpected accounting and audit fees.

Superannuation Warehouse will set up a monthly debit order with your SMSF bank account. For example, if your SMSF is established on the 5th of the month, the monthly fee will be payable on the 5th of each month.

For more info how [sic] we charge the monthly fees, please watch the video below, or alternatively please see here.

…

No Lock-in contracts

Superannuation Warehouse is the first SMSF administrator to charge Fixed Monthly Fees. The Fees are no annual payments spread over 12 months — this is a truly monthly payment. If you should ever decide to close your SMSF, for any reason, you pay up to the end of the final month and that’s all. There are no lock-in contracts and no exit fees. You are free to quit Superannuation Warehouse at any time …

(e)    On a webpage entitled “Setup Costs”, the statement:

Setup Costs

Fee Schedule

The fees and charges at Superannuation Warehouse are simple and low. Efficiency is our watchword. Our fees are one low flat rate, irrespective of your SMSF balance or how many transactions you make.

Our fees schedule:

•    SMSF set-up with individual Trustees — FREE when going onto a monthly plan

•    Monthly charge, Basic (Cash investment option) — $39 per month

•    Monthly charge, Standard (HalifaxOnline option) — $59 per month

•    Monthly charge, Advanced (any provider and investment option) — $79 per month

•    Monthly charge, Online Access (optional) — Fund package — $15 per month

•    Monthly charge, Online Access (optional) — Bank data package — $7.50 per month

•    Monthly charge, Online Access (optional) — Share data package — $7.50 per month

•    Corporate Trustee set-up — $950 one-off fee

•    Existing SMSF take-on — $475 one-off fee

•    Bare Trust set-up, when borrowing for investment property — $950 one-off fee

•    Additional Bare Trust set-up — $950 one-off fee

•    Audit only (i.e. you handle your own accounting and tax) — $450 (or less)

•    Annual Fee for a Bare Trust and Corporate Trustee — NIL

•    Fee payable to ASIC for a Corporate Trustee — $41 annually

•    Super Levy Surcharge payable to the ATO — $321 for 2013

•    Actuarial Certificate — $280 (if you’re already in receipt of a pension and this is applicable)

•    Set-up only (i.e. you handle your own accounting and tax) — $150

•    To close down a SMSF — $150

•    Consulting fees — $280 per hour, phone support and email is free.

Note on fees

Fees are payable monthly in arrears. All fees include GST. There are no exit or penalty fees if you decide that you no longer want Superannuation Warehouse to take care of your SMSF.

Administration fees cover the annual preparation of accounts, tax return and audit (we appoint and pay the auditor). This is all you need to run your SMSF. The only possible additional expenses are such things as bank and brokerage fees.

If your SMSF is set up on the 12th of the month, we will set up a debit order be deducted from the SMSF bank account on the 12th of every month. And, don’t worry, we perfectly understand and take into account the fact that it can take some time to get a bank account set up and funds rolled over from your existing Superannuation Fund to the SMSF.

Fees are generally fixed, but if there’s incomplete information from trustees and significant re-work on accounting matters by us, we will have to pass on this cost to the trustee;

(f)    On the webpage “FAQ SMSF Warehouse”, the statements that:

2. What is the difference between the $39, $59 and the $79 service and why is the price so low? Will I receive the normal standard of service?

The reason Superannuation Warehouse can offer the SMSF service at a lower price than many of our competitors is that our system is specifically written to pick up these files in electronic format. This enables us to do accounts and tax returns paperlessly. Thus saving time and money. We charge a lower accounting and administration fee for a simple fund (with just bank accounts) than we do for a more complex fund that’s investing in property, share derivatives and FX.

and

1. What does Superannuation Warehouse do?

We are accounting & taxation professionals who specialise in SMSFs. We set up SMSFs for free and perform the annual accounting, tax and compliance duties for your SMSF.

2. What makes Superannuation Warehouse different?

We provide a premium service at a low fixed monthly price that enables you to run your SMSF with a relatively low balance. Because our fees are fixed, budgeting for fees in your Fund is much easier.

(g)    On the webpage entitled “the right way to set up an SMSF”, the statement:

We have different fixed monthly fee levels depending on the options you choose. If you have only cash and term deposits, we charge a low $39 a month admin fee. This covers all the accounting, tax and audit functions for the SMSF. The lower the fee, the more you can save in your SMSF — Self Managed Super Funds. Remember, you can also keep your retail fund open to have an exposure to shares. This will relieve you of the necessity of selecting stocks and you can ensure your Super earns a good interest rate at a bank of your choice.

For more information on our packages check our Superannuation Fees.

23    During the Website 1 pre-disclaimer period and the Website 2 pre-disclaimer period (collectively referred to as the pre-disclaimer period) SWA’s online application form on the websites for “Free SMSF Setup” contained a default setting comprised of a tick box that stated: “As Trustee of the SMSF set out above, we request and authorise Superannuation Warehouse to be the administrator of the Fund, act as tax agent and appoint an auditor”.

24    The online application form for the free SMSF setup by SWA could only be submitted by an applicant if the default setting remained ticked in the box next to the statement set out in [23] above, and thereby authorised SWA to be the administrator of the fund and for which services SWA charged a fixed monthly fee.

25    During the pre-disclaimer period, the SWA homepage and online application form on the websites did not expressly state that fees or charges applied when appointing SWA to setup an SMSF and act as administrator of an SMSF with:

(a)    an individual trustee; and/or

(b)    a corporate trustee.

(c)    Post-disclaimer period

26    From on or about 5 August 2014 to 8 May 2015 (post-disclaimer period), SWA added a disclaimer to the websites when advertising SWA’s free SMSF setup. The actual words which comprised the disclaimer on the websites are set out in [27] below, and were referenced on each of the websites’ homepage by placing a “*” (an asterisk) at the end of the phrase “Free SMSF Setup”. The words which comprised the disclaimer were located at the bottom of the footer on the homepages of the websites.

27    During the post-disclaimer period, the disclaimer on the websites relevantly stated:

(a)    on the homepage footer of the websites:

“* Free SMSF Setup is when using Individual Trustees” (post-disclaimer footer)

(b)    on the application form pages of the websites in the first paragraph:

“The free SMSF set up is for Individual Trustees when we set up the SMSF. If Trustees want to use a Corporate Trustee to be set up, we do charge $950 for the Pty Ltd Company set up with ASIC. Note the SMSF setup with the ATO is always free. Most funds are set up using Individual Trustees. For the advantages of using a Corporate Trustee, see the page explaining the pros and cons of using a Corporate Trustee.” (post-disclaimer application)

28    The asterisk denoting the disclaimer was not used to qualify “Free SMSF Setup” whenever it was used on the websites’ homepage or application form. The asterisk was only placed beside the words “Free SMSF Setup” when it appeared:

(a)    in the header of Website 1;

(b)    in the footer of Website 2; and

(c)    just below the header when opening “SMSF Setup” of Website 2,

and did not appear on the homepage next to the words “Free SMSF Setup” in the Website 1 pre-disclaimer footer or where “Free SMSF Setup” appeared on the websites other than in the header or footer on various linked pages including the application form.

29    During the post-disclaimer period, the SWA advertising on the websites included the following statement below the post-disclaimer application when an applicant clicked on “Free SMSF Setup*” on the homepage of the websites:

Superannuation Warehouse is offering free setup of SMSF’s (Self Managed Superannuation Funds). Clients can apply to have a FREE SMSF setup below. Once we receive your application, Superannuation Warehouse will contact you regarding processing your application.

30    In the post disclaimer period, the websites otherwise remained substantively the same as the pre-disclaimer period. The matters concerning the online application form as referred to earlier were unchanged.

31    On or about 8 May 2015, following injunctions made in this proceeding, SWA removed all references to “Free SMSF Setup” from its websites.

(d)    SMSF set up

32    During the pre-disclaimer and post-disclaimer periods, SWA provided a service which was the set up or establishment of an SMSF on behalf of an applicant. As part of setting up an SMSF, a staff member of SWA would complete an online application with the Australian Business Register website (ABR registration process). The ABR registration process comprised:

(a)    a staff member of SWA entering in the SMSF name and other details on the ABR website in order for the Australian Business Number to be assigned; and

(b)    a tax file number being assigned to the SMSF.

33    Once an ABN and tax file number had been created for the SMSF, SWA prepared and provided to the applicant a set of documents which included:

(a)    an SMSF Trust Deed (generally a pro forma document);

(b)    investment strategy document for completion by the trustees of the SMSF;

(c)    minutes to be signed by the trustee;

(d)    trustee declaration to be signed; and

(e)    consent to act as trustee and member to be signed,

(collectively the setup documentation).

34    Once the setup documentation was signed by the relevant persons (being trustee and/or member) and returned to SWA, the SMSF became operative. The originals were to be retained by the applicant.

35    During the pre-disclaimer and post-disclaimer periods, SWA also provided information to the public on the websites of the steps that could be taken by them to set up their SMSFs. This is “do it yourself” or “DIY” SMSF set up. SWA provided this information and links to pro forma documents without charge.

(e)    SWA administration services

36    During the pre-disclaimer and post-disclaimer periods, SWA also offered ongoing administration services for SMSFs, being services which included:

(a)    preparation of annual financial accounts;

(b)    preparation and lodgement of the SMSF’s tax return;

(c)    preparation of minutes of trustee meetings; and

(d)    arranging for audit of the SMSF,

(collectively, the administration services).

37    During the pre-disclaimer and post-disclaimer periods, SWA charged a fixed monthly fee for the administration services for SMSFs. There were three different price options for the administration services being the $39, $59 or $79 monthly fee. In broad terms, the services provided by SWA for each fee were the same, namely the performance of all tasks required for the SMSF to remain compliant with the ATO and ASIC requirements. The fee charged was monthly usually paid by direct debit or some other payment method such as electronic funds transfer. Generally, an SMSF that ceased using SWA for administration services paid no more than that month’s fee.

(f)    Online application form

38    During the pre-disclaimer and post disclaimer periods, an applicant who applied to SWA to set up an SMSF could do so by submitting an online application form as contained on the websites.

39    During the pre-disclaimer and post-disclaimer periods, the advertisement of “Free SMSF Setup” on the websites was directly linked to the online application form.

40    An online application completed on either of the websites was forwarded as an email to the email address of SWA at admin@supperannuationwarehouse.com.au once it had been submitted by the applicant.

41    During the pre-disclaimer and post-disclaimer periods, the online application form contained several categories of drop down boxes that had to be completed as follows:

(a)    First, the applicant was required to provide the name of the SMSF and the applicant’s telephone and email contact information as well as residential and postal address details;

(b)    Second, the applicant was required to provide the names, tax file numbers, dates of birth of the trustees and beneficiaries;

(c)    Third, there were then a series of questions which related to the solvency, criminal and civil penalty record. Also included were questions about whether the prospective trustee had ever been disqualified by the ATO or APRA. The online form provided a series of drop-down boxes that were pre-populated to “No” but could be changed to “Yes” when the applicant was completing the form;

(d)    Fourth, there were also two pre-populated check boxes which contained a tick. Relevantly, the first said “As Trustees of the SMSF, as set out above, we request and authorise Superannuation Warehouse to be the administrator of the Fund, act as tax agent and appoint an auditor” (Administrator consent);

(e)    Finally, at the bottom there was a notes section which could be used by applicants who wanted to use a corporate trustee.

42    From the creation of the websites until at least 8 May 2015, the Administrator consent contained in the first pre-populated check box on the online application for the websites, as referred to in [41(d)] above, was a default setting. Importantly, the online application form for the websites could not be submitted if the box was unchecked.

(g)    SWA’s dealings with applicants

43    Upon receipt of an online application form, SWA would open a file and allocate a reference number to the application. A new fund checklist was printed out which allowed handwritten notes to be recorded and steps completed. Mr Preller would then contact the applicant by telephone to advise them that SWA has received their application and would answer any questions from the applicant. The checklist and any notes were then provided to an SWA staff member who would complete the ABR online application. A welcome email was then sent to the applicant along with the setup documentation and notice of the proposed arrangement to set up the monthly fee payment.

44    During the pre-disclaimer and post-disclaimer periods, if SWA did not receive a copy of the signed trust deed and the other documents attached to the welcome email, SWA would follow up the applicant by email a month or so later.

45    Six to eight weeks after the SMSF was established, a further email was sent out to the applicant which advised it that:

(a)    the SMSF was set up;

(b)    the next step was to set up payment of the monthly administration fee by one of three options; and

(c)    the date the first monthly payment was due.

46    In the event that a monthly payment system was not established, a further email was sent within two months of the previous email.

47    In response to a notice dated 5 August 2014 issued by ASIC pursuant to s 19(2)(a) of the ASIC Act, Mr Preller provided various documents, including a list of 40 SMSFs stated in the response to have been set up for free, with no fees received from the funds (Free Client List).

48    Where a SMSF had been set up, but did not yet hold any assets or was not active, SWA’s practice was still to seek payment of an administration fee. SWA provided copies of various email exchanges in the period 13 January 2012 to 23 July 2013 with at least seven clients/applicants from the Free Client List, which evidence instances where applicants refused to pay the monthly administration fee to SWA, in circumstances where they had declined to activate or use the SMSF set up on their behalf.

Assessment of penalties — principles

(a)    Factors relevant to assessment of penalty

49    Section 12GBA of the ASIC Act relevantly provides that where the Court is satisfied that a person has contravened a provision of Subdivision D (other than s 12DA), the relevant matters to be taken into account in determining the appropriate pecuniary penalty must include (s 12GBA(2)):

(a)    the nature and extent of the act or omission and of any loss or damage suffered as a result of the act or omission;

(b)    the circumstances in which the act or omission took place; and

(c)    whether the contravener has previously been found by the Court in proceedings under the relevant subdivision to have engaged in any similar conduct.

50    The additional considerations which have been of assistance in determining penalties under s 224 of the Australian Consumer Law (ACL) (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) (and s 76E of the Competition and Consumer Act 2010) may usefully be applied to the present context when determining pecuniary penalties under s 12GBA of the ASIC Act. Section 12DB(1)(a) and (i) are equivalent to the analogous elements of s 29(1) of the ACL.

51    Those additional considerations are:

(a)    the size of the contravening company;

(b)    the deliberateness of the contravention and the period over which it extended, including whether it was systematic or covert;

(c)    whether the contravention arose out of the conduct of senior management;

(d)    whether the contravener has a corporate culture conducive to compliance with the ASIC Act;

(e)    whether the contravener has shown a disposition to co-operate with ASIC in relation to its investigation and prosecution of the relevant contraventions; and

(f)    the contravener’s financial position.

52    The maximum penalty units for each act or omission in contravention of s 12DB are set out in s 12GBA(3). In the present case, the maximum pecuniary penalty that may be imposed on SWA for each act or omission is $1.7 million. Given that I consider there to be only one relevant course of conduct of SWA which was contravening, $1.7 million is the relevant realistic maximum in the present case.

(b)    The principal object — deterrence

53    The principal object of imposing a pecuniary penalty is deterrence, both the need to deter repetition of the contravening conduct by the contravener (specific deterrence) and to deter others who might be tempted to engage in similar contraventions (general deterrence) (Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at [65] per French CJ, Crennan, Bell and Keane JJ). This informs the assessment of the appropriate penalty to be imposed; see also Australian Securities and Investments Commission v GE Capital Finance Australia [2014] FCA 701 at [71] to [74] per Jacobson J and Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 at [125] and [126].

54    Deterrence, both specific and general, is the primary object of the imposition of pecuniary penalties under s 12GBA of the ASIC Act. Reference may be made to authorities in an analogous context.

55    In relation to both specific and general deterrence, French J (as he then was) stated in Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52,152:

The principal, and I think probably the only, object of the penalties imposed by s. 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravener and by others who might be tempted to contravene the [Trade Practices] Act.

56    The Full Federal Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (NW Frozen Foods) (1996) 71 FCR 285 at 294 to 295 stated:

The Court should leave no room for any impression of weakness in its resolve to impose penalties sufficient to ensure the deterrence, not only of the parties actually before it, but also of others who might be tempted to think contravention would pay …

57    There is a need to impose penalties of a sufficient quantum to deter businesses from weighing up the risks of a penalty being ordered as a strategic business cost. In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012) 287 ALR 249; [2012] FCAFC 20 at [62], the Full Federal Court reinforced the primacy of deterrence in the setting of a penalty:

There may be room for debate as to the proper place of deterrence in the punishment of some kinds of offences, such as crimes of passion; but in relation to offences of calculation by a corporation where the only punishment is a fine, the punishment must be fixed with a view to ensuring that the penalty is not such as to be regarded by that offender or others as an acceptable cost of doing business …

(c)    The methodology

58    The process to be applied in arriving at a particular penalty figure was considered in the context of criminal sentencing by the High Court in Markarian v The Queen (2005) 228 CLR 357. This process provides guidance as to how the Court may approach the assessment of pecuniary penalties in the present context. In Markarian, Gleeson CJ, Gummow, Hayne and Callinan JJ held the following:

(a)    Assessment of the appropriate penalty is a discretionary judgment based on all relevant factors (at [27]);

(b)    It will rarely be appropriate to start with the maximum penalty and to proceed by making a proportional deduction from that maximum (at [31]);

(c)    The Court should not adopt a mathematical approach of increments or decrements from a predetermined range, or assign specific numerical or proportionate value to the various relevant factors (at [37] citing Wong v The Queen (2001) 207 CLR 584 at 611 and 612 per Gaudron, Gummow and Hayne JJ);

(d)    It is not appropriate to determine an “objective” penalty and then adjust it by some mathematical value given to one or more factors such as a plea of guilty or assistance to authorities (at [37] citing Wong v The Queen at 611 and 612 per Gaudron, Gummow and Hayne JJ); and

(e)    The Court “may not add and subtract item by item from some apparently subliminally derived figure” to determine the penalty to be imposed (at [39]).

(d)    Course of conduct

59    The “course of conduct” principle was explained in Construction, Forestry, Mining and Energy Union v Cahill (2010) 269 ALR 1; [2010] FCAFC 39 at [39] and [41] by Middleton and Gordon JJ in the following terms:

The principle recognises that where there is an interrelationship between the legal and factual elements of two or more offences for which an offender has been charged, care must be taken to ensure that the offender is not punished twice for what is essentially the same criminality. That requires careful identification of what is “the same criminality” and that is necessarily a factual specific enquiry.

…

In other words, where two offences arise as a result of the same or related conduct that is not a disentitling factor to the application of the single course of conduct principle but a reason why a Court may have regard to that principle, as one of the applicable sentencing principles, to guide it in the exercise of the sentencing discretion. It is a tool of analysis which a Court is not compelled to utilise. [omitting citations]

60    In the present case, the facts and circumstances in relation to the contraventions justify dealing with those contraventions as a single course of conduct. I discuss this further at [72] below. I should also say that the separate principle addressing the “same conduct” question as expressly set out in s 12GBA(4) has no relevant application to the present case, contrary to SWA’s submissions.

(e)    Parity principle

61    The parity principle requires that when penalties are imposed “[t]here should not be such an inequality as would suggest that the treatment meted out has not been even-handed” (NW Frozen Foods Pty Ltd at 295). However, the Court has emphasised that caution needs to be exercised in comparing penalties imposed in different cases. It is trite to observe that every case turns on its own facts. In Singtel Optus Pty Ltd v Australian Competition and Consumer Commission, the Full Court observed at [60] that:

the court is not assisted by Optus’s citation of penalties imposed in other cases, where the combination of circumstances were different from the present, as if that citation is apt to establish a “range” of penalties appropriate in this case.

62    In the present case, the parties did not put before me any analogous cases where penalties were fixed which would have required me to apply this principle. Indeed, in answer to my enquiry on the point, the parties indicated that there was little if any such authority.

(f)    Totality principle

63    In determining the appropriate penalty, it is also appropriate to take account of the “totality principle”. The total penalty for each offence ought not to exceed what is proper for the entire contravening conduct. The totality principle operates as final check to ensure that the penalties to be imposed on a wrongdoer, considered as a whole, are just and appropriate. Goldberg J in Australian Competition and Consumer Commission v Australian Safeway Stores Pty Ltd (1997) 145 ALR 36 at 53 explained:

The totality principle is designed to ensure that overall an appropriate sentence or penalty is appropriate and that the sum of the penalties imposed for several contraventions does not result in the total of the penalties exceeding what is proper having regard to the totality of the contravening conduct involved. But that does not mean that a court should commence by determining an overall penalty and then dividing it among the various contraventions. Rather the totality principle involves a final overall consideration of the sum of the penalties determined …

(g)    Size of contravener and its financial position

64    It is important to have regard to the contravener’s size and profitability. As Goldberg J observed in Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd (No 3) (2005) 215 ALR 301; [2005] FCA 265 at [39]:

The penalty imposed must be substantial enough that the party realises the seriousness of its conduct and is not inclined to repeat such conduct. Obviously the sum required to achieve this object will be larger where the court is setting a penalty for a company with vast resources.

Application of principles

65    It is appropriate to observe the following concerning the application of these principles.

(a)    Nature and extent of conduct

66    ASIC has contended that there are various facts concerning the nature of the representations during the pre-disclaimer period which are relevant to relief. In addition to the hyperlink text advertising “Free SMSF Setup” in a bright blue box or bright orange box found respectively at the top of Website 1 and Website 2 homepages, there was also a statement at the footer of the page which in summary stated that SWA provided specialist Self-Managed Superannuation Fund services by electronic means, as much as possible, and that the “free SMSF setup” and low monthly fees would enable the client to take control of his/her Super.

67    ASIC also pointed out that a person who clicked on the hyperlink text advertising “Free SMSF Setup” on the websites was taken directly to a linked separate page of the websites comprising an online application form. The online application form included further representations that SWA was offering free SMSF setup and that once SWA received the application it would contact the applicant about processing it.

68    It is said that the online application form was particularly significant, because it contained the administrator consent, and the webpages on which it was located on the websites contained no information about fees and conditions applicable to the SMSF setup, including the $950 charge by SWA for setting up a corporate trustee. Any SMSF to be set up by SWA with a corporate trustee would require payment of the $950 charge.

69    It is said that the administrator consent was significant because the pages of the websites hosting that form during the pre-disclaimer and post disclaimer periods contained a default authorisation by the applicant “requesting and authorising” SWA to be the administrator of the SMSF, and to act as tax agent and auditor. As ASIC pointed out, an application could at no relevant time be submitted without that authorisation and consent.

70    Clearly, it is the factual circumstance of the operation of the administrator consent and the resulting monthly fees which SWA charged in arrears for the services so authorised, which made the “Free SMSF setup” representation false or misleading in that:

(a)    the administrator consent was required for the “free SMSF setup”;

(b)    the administrator consent affected the cost of the “free SMSF setup”; and

(c)    monthly fees were required to be paid to SWA for its services.

In the circumstances the setup was not “free”.

71    The websites operated in a similar way during the period 6 August 2014 to 8 May 2015 (post disclaimer period) except that the representation of “Free SMSF setup” had a disclaimer added, denoted by an asterisk after the phrase, when used in certain places, but not in others. The disclaimer simply stated: “*Free SMSF Setup is when using Individual Trustees”.

72    The inconsistent use of the disclaimer, as well as the inadequacy of the actual words comprising the disclaimer, are significant facts which in one sense distinguish the post-disclaimer period. But contrary to ASIC’s contentions, I do not consider that this converts the post-disclaimer period into a separate course of conduct. Rather, it seems to me that there was one course of conduct over both the pre-disclaimer period and the post-disclaimer period, but with that latter period involving less egregious conduct than the former period.

73    In relation to the contravening conduct of SWA, it can in one sense be described as serious. The relevant advertising was published online and available worldwide for applicants looking for SMSF set-up in this jurisdiction. The use of the attractive word “free”, which was targeted to arrest the attention of the target audience and give rise to the erroneous belief engendered by the general thrust of the dominant message that the SMSF set-up was free, was apt to induce its audience to enter into negotiation with SWA rather than one of its competitors.

74    The post-disclaimer period perpetuated the contravention through the selective and inconsistent use of the disclaimer.

75    SWA has also contended the following in relation to characterising the conduct.

76    SWA points out that one important aspect of the conduct is that it is not a case of SWA failing to provide relevant information to potential clients, but rather failing to provide information in a clear and prominent manner. I agree with this submission to some extent. Information concerning the cost of SMSF setup with a corporate trustee was available on the websites, albeit not in a clear and prominent manner. But it was not highlighted that there was an additional cost for setup with a corporate trustee. Further, Mr Preller stated that SMSF setup with a corporate trustee involved direct contact between himself and the client, and that it was his practice to separately raise the additional cost of creating the corporate trustee. To some extent therefore, the cost of using a corporate trustee was disclosed before the SMSF was established. A client could then choose not to proceed if the cost was a concern. That is an ameliorating factor of course, but it does not deny that contraventions occurred.

77    Moreover, SWA points out that fees for ongoing monthly administration services were displayed on the websites. It was said by SWA that it was part of the marketing strategy of SWA that it had an all in monthly fee for those services, and that there was no ongoing obligation to continue the services. Clients were free to come and go as they pleased. Again, I accept this to be so to a large extent.

78    SWA disclosed that the “Free SMSF Setup” was when a client “went onto a monthly plan”. The linkage between the SMSF set up and monthly administration services was to some extent disclosed. But again this was not done in a clear and prominent way.

79    I accept that Mr Preller is not a lawyer and that he did not have his website content reviewed by a lawyer beforehand. But he was responsible for the website content. Apparently, he now appreciates that more could have been done to ensure that the statement “free SMSF setup” was properly and appropriately explained on the websites, and that the information on the websites could have been adequately linked together. I accept that it was not his intention to mislead prospective clients. As was pointed out, SWA was promoting a service where there was no long-term obligation for SMSF administration. The administration services were monthly and could have been ended at any time. Moreover, where a customer did not wish to continue or use SWA to provide administration services, and this was made known to SWA, it did not pursue monthly fees.

(b)    The deliberateness of the contravention and period of conduct

80    ASIC submits that the conduct was deliberate. Of course, the set up and operation of the websites was deliberate. The deliberate conduct involved SWA publishing on the websites the advertisement of “free SMSF setup” as the magnet or hook to “get clients in”. But I do not draw the inference that a positive intention was formed to deliberately mislead.

(c)    Consequences of conduct

81    There is no evidence that the conduct of SWA has caused loss or damage to clients or prospective clients. ASIC contends that the effects or consequences of the conduct are difficult to assess. That may be so in a strict sense, but I am not satisfied that any loss was likely to have been caused. Moreover, ASIC was provided with client lists. Further, it was provided with the list of 40 clients who had SMSFs set up but did not pay monthly fees. It expressly sought and was provided with contact details for those 40 clients. There is no affidavit material from those clients complaining of loss or damage suffered as a result of the representations on the website.

82    Further, Mr Preller’s evidence is that to his knowledge no client of SWA has ever complained to any regulatory authority including ASIC or the ATO about the fees charged by SWA.

83    Further, Mr Preller’s evidence is that where a client has contacted SWA regarding fees or charging, this has usually been resolved between them. Further, in cases where clients have notified SWA that they no longer wish to continue with administration services, SWA has not pursued fees. SWA has never issued proceedings or pursued legal claims to recover fees.

84    Further, any client concerned about fees or ongoing administration services were free to take their business elsewhere. They were not locked into long-term arrangements. The risk of significant and ongoing financial loss was low.

85    In summary, I am not satisfied that any person suffered or was likely to have suffered significant loss or damage arising from the contravening conduct.

(d)    The involvement of senior management

86    Mr Preller at all relevant times has been the sole director and shareholder of SWA and has admitted involvement as set out above. Mr Preller admits that he was responsible for the content and design of the websites.

(e)    Size of company

87    SWA is a small business. It has one owner. It employs eight staff. It is not a large accounting practice, or a large retail or industry superannuation business with extensive resources. It provides administration services to approximately 800 SMSFs. Its position as a provider of services to SMSFs is modest.

(f)    Corporate culture of compliance

88    There is no evidence that SWA had a compliance program prior to commencement of this proceeding.

(g)    Prior contravention

89    SWA has not been found to have contravened the ASIC Act previously.

(h)    Infringement notice

90    On 10 April 2014, ASIC issued an infringement notice to SWA pursuant to s 12GXA in respect of the advertisement “Free SMSF Setup” on the SWA homepage for Website 1. As I have indicated, Website 1 did not specify that:

(a)    conditions were attached to the “Free SMSF Setup”;

(b)    to be eligible, consumers had to agree to pay a monthly administration fee of either “$39, $59 or $79”; or

(c)    a corporate trustee was not eligible for the “Free SMSF Setup” but was required to pay at least $950 in fees.

91    The infringement notice was issued on the basis that ASIC had reasonable grounds to believe that SWA had contravened s 12DB(1)(i).

92    SWA responded to the infringement notice on 22 April 2014 by requesting that ASIC withdraw the notice, which request ASIC refused on 2 May 2014. SWA failed to pay the penalty specified in the infringement notice of $10,200.

93    Following SWA’s failure to pay the infringement notice, ASIC conducted an investigation and subsequently issued the proceeding before me.

94    It is relevant to the quantum of pecuniary penalty that before ASIC commenced this proceeding it had issued an infringement notice of $10,200 in relation to Website 1 only, for conduct in the pre-disclaimer period for a contravention of s 12DB(1)(i). The issue of that notice is some indication that ASIC considered the relevant conduct to be at the lesser end of the spectrum; I note that the notice was only in respect of one of the websites, but it was agreed between the parties that nothing turned on this. Further, the fact that SWA refused to pay the penalty specified in the infringement notice is a relevant factor that I have taken into account in determining the penalty.

95    Moreover, fixing a pecuniary penalty amount lower than the infringement notice would involve error. The principle of deterrence would not otherwise be adhered to. But as I have said, ASIC accepts that this contravention is at the lower end of offending.

96    Finally on this aspect, it is worth noting that in Australian Competition and Consumer Commission v Le Sands Restaurant and Le Sands Café Pty Ltd t/as Signature Brasserie [2011] FCA 105, Jagot J found that the $15,000 penalty agreed to by the parties was appropriate in circumstances where the infringement notice was $6,600. Similarly, in Australian Competition and Consumer Commission v AI Constructions (ACT) Pty Ltd [2010] FCA 1377 Stone J found that a civil penalty of $20,000 was appropriate in circumstances where an infringement notice for $6,600 was unpaid and where there was a lack of co-operation by the respondent. The relativity in each case between the amount stipulated in the infringement notice and the ultimate penalty imposed is not unhelpful to my consideration of the quantum that should be set in the present case relative to the infringement notice amount in the present case.

(i)    Financial position and ability to pay penalty

97    SWA has modest net income and a modest net asset balance.

98    The financial statements for the past three financial years disclosed the following:

99    SWA does not have significant free cashflow or assets capable of satisfying a large pecuniary penalty. According to Mr Preller, the imposition of a large fine would have a crippling effect on SWA’s business. He was not cross-examined by ASIC.

100    Mr Preller also has given evidence that he has to date funded the proceeding from his personal financial resources, and has refinanced his house to provide for funds to pay legal costs. If a large pecuniary penalty was imposed that was beyond the ability of SWA to pay, Mr Preller would either have to go into further personal debt to fund the pecuniary penalty, or alternatively SWA would not be able to continue. He has given evidence that this would have a severe impact on both himself and the staff of SWA. If the business was unable to continue, the staff would lose their jobs. I accept Mr Preller’s evidence on these aspects. ASIC has criticised the quality of some of the evidence adduced by SWA as to its financial position. But the reality is that this was the only evidence before me, which I have little choice but to accept.

101    Further, I accept that the ongoing compliance program agreed with ASIC will also have a significant cost to the business likely to be in the vicinity of tens of thousands of dollars.

102    Further, it is also unknown as to whether SWA will lose clients as a result of adverse publicity from these proceedings including the corrective advertising and correspondence to clients agreed with ASIC. Some clients may decide not to continue with SWA, which will have an impact on profitability and will be a form of penalty in and of itself.

(j)    Contrition

103    I accept that SWA and Mr Preller are now remorseful for the contraventions and indeed the consequent ASIC investigation and Court proceedings. Mr Preller has stated that he is now far more cautious with his business affairs, and that he will do everything in his power to ensure that there are no further contraventions of the ASIC Act. I accept that his professed intentions are genuine. Of course, the compliance program will assist in ensuring that the risk of further contravention is removed or at least significantly reduced.

(k)    Co-operation by SWA

104    I accept that SWA has co-operated to some extent with ASIC’s investigation, although I must say that its conduct in dealing with the infringement notice was less than exemplary. Further, it has not provided to ASIC all documents requested by ASIC as part of its investigation.

105    On 15 January 2015, in answer to ASIC’s notice dated 9 January 2015, SWA produced to ASIC only:

(a)    an excel document described as “Fund List” for the period up to and including 9 January 2015; and

(b)    correspondence relating to the 40 clients listed on the “Free Client” List whom Mr Preller identified as having received the SMSF set up services for free.

106    But SWA did not produce all the documents sought by ASIC in its notice.

Conclusion on penalty

107    The contraventions are at the lower end of offending. This is accepted by ASIC. As I have said, ASIC has acknowledged that this was an appropriate case in which to have issued an infringement notice.

108    The infringement penalty amount of $10,200 does provide some guide in the present case. SWA accepts that a lower penalty than $10,200 would be inappropriate.

109    In summary, taking into account all of the above considerations and applying the necessary intuitive synthesis to this inexact exercise, I consider that a penalty of $25,000 is appropriate in respect of the conduct that contravened s 12DB. First, it is close to the maximum amount that SWA has the capacity to pay. Second, it is two orders of magnitude lower than the maximum penalty. Third, it maintains the necessary relativity with the amount stipulated in the infringement notice. Fourth, it is consistent with the fact that there is unlikely to have been any loss or damage from the conduct. Fifth, the conduct is unlikely to be repeated. Sixth, and relatedly, SWA has agreed to a compliance program. Seventh, the penalty is also consistent with the totality principle; indeed, even if ASIC was correct and there were two courses of conduct rather than one, an application of the totality principle would still support the penalty that I have determined. But as I say, all of the factors discussed in these reasons have been taken into account and weighted accordingly in determining the ultimate figure.

Other Orders

110    In relation to the other orders sought by consent, I note the following:

(a)    There is no doubt that I have the power to make such orders.

(b)    I have independently scrutinised such orders and the settlement reached between the parties on the form thereof and consider them to be appropriate. The relevant orders are appropriately formulated.

(c)    The declarations are appropriate. They are specifically tailored to real issues and conduct rather than hypotheticals. Moreover, there has been a proper contradictor. Further, it is in the public interest for ASIC to have sought and obtained such declarations. Finally, it is appropriate to make the declarations as they record the Court’s disapproval of the contravening conduct and have, by such a record, appropriate deterrence force and effect.

(d)    Finally, the compliance training program has a sufficient connection to the admitted contraventions.

111    I will make the orders sought in addition to the order for a pecuniary penalty as I have determined concerning the conduct that contravened s 12DB.

Associate:

Dated:    30 October 2015