FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Union Standard International Group Pty Ltd [2020] FCA 603

ORDERS

THE COURT ORDERS THAT:

1.    Order 5(b) of the orders made by Justice Jagot on 12 December 2019, as varied by Justice Gleeson on 17 December 2019 and Justice Wigney on 28 February 2020 and 4 March 2020, is varied to insert the following subparagraph (viiia) following subparagraph (viii):

(viiia) in the case of the Second Defendant, any withdrawal of $50,000 or more may only be made following a request in writing to the Plaintiff to make the withdrawal and receipt of the Plaintiff’s approval;

2.    Order 5(b)(x)(vii) of the orders made by Justice Jagot on 12 December 2019, as varied by Justice Gleeson on 17 December 2019 and Justice Wigney on 28 February 2020 and 4 March 2020, is varied to replace the words “related parties” with the words “related entities, and the extent to which the payee (or payees) and Addnet Solutions Pty Ltd are related entities, and the extent to which the payee (or payees) and Maxiflex Ltd are related entities”.

3.    The Second Defendant pay the Plaintiff’s costs of, and relating to, the interlocutory application.

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

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from transcript)

WIGNEY J:

1    The question raised by the interlocutory application which has been filed by the plaintiff in this matter, the Australian Securities and Investments Commission (ASIC), is whether asset restraint or preservation orders which have been made pursuant to s 1323 of the Corporations Act 2001 (Cth) should be further varied. The answer to that question turns on whether the proposed variation is necessary or desirable for the purposes of protecting the interests of persons to whom the relevant defendant may be liable.

ASIC’s investigation

2    Up until fairly recent times, the second defendant in this proceeding, Maxi EFX Global AU Pty Ltd (EuropeFX), conducted a financial services business as the Corporate Authorised Representative (CAR) of the first defendant, Union Standard International Group Pty Ltd (USG). In July 2019, ASIC commenced an investigation pursuant to s 13 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) into USG, EuropeFX and other CARs of USG. In December 2019, that investigation was expanded to include directors, officers and employees of USG and its CARs, including EuropeFX. The fifth defendant, Mr Pedro Sasso, is the sole director of EuropeFX.

The December 2019 freezing orders

3    On 12 December 2019, ASIC successfully applied ex parte for freezing orders against USG, EuropeFX and others pursuant to s 1323 of the Corporations Act. Those orders included an order which had the effect of restraining the defendants, including EuropeFX, from withdrawing or transferring money which was available to them in various specified bank accounts. The defendants were not, however, prevented from withdrawing amounts to pay trade creditors of the defendants:

… bona fide and properly incurred as agreed between [ASIC] and any Defendant, where the withdrawal is made following a request in writing to [ASIC] to withdraw funds from the bank account of one or more of the [Defendants] and receipt of [ASIC’s] approval.

4    The orders made on 12 December 2019 have been varied on a number of occasions. Relevantly for present purposes, the order which effectively required EuropeFX to seek and obtain ASIC’s agreement prior to paying trade creditors was varied on 17 December 2019, such that EuropeFX was permitted to pay trade creditors without seeking ASIC’s prior agreement, provided that the payments were:

… bona fide, made in the ordinary course of business and for amounts which are due and payable ...

5    EuropeFX was also required to notify ASIC:

… by 5pm on the Tuesday of each week (or on the next business day if a Tuesday is a public holiday) of details of the payments made in the previous 7 days and provide supporting documentation.

6    It would appear that the main reason for the variation to the original orders was a concern that the requirement to obtain ASIC’s consent could delay EuropeFX’s repayment of its customers. As will be explained in more detail later, that can no longer be a matter of concern as EuropeFX effectively no longer has any customers.

7    Putting that issue to one side for the moment, the regime put in place by the variation to the orders — whereby EuropeFX was permitted to pay trade creditors without ASIC’s agreement and to subsequently provide details of those payments — has proved to be contentious, if not unworkable. Disputes repeatedly arose between ASIC and EuropeFX’s solicitors about whether sufficient details of past payments had been provided and whether EuropeFX was required to provide ASIC with copies of documents relating to the payments. ASIC contended that the limited detail that had been provided to it by EuropeFX or its solicitors effectively prevented it from determining whether the payments which had been made were bona fide payments to trade creditors in the ordinary course of EuropeFX’s business. ASIC’s concerns in that regard were exacerbated by the fact that EuropeFX had paid many millions of dollars to various overseas entities in the two weeks from 17 to 31 December 2019.

The 4 March 2020 variation to the freezing orders

8    The impasse between ASIC and EuropeFX concerning the provision of detail about the payments ultimately led to an application by ASIC on 14 February 2020 for a further variation to the orders. That application was opposed by EuropeFX. Ultimately, however, the orders were varied on 4 March 2020 by including a requirement that, upon request by ASIC, EuropeFX was required to provide, within three business days of the request, relevant documentation concerning the payments which were the subject of the request. The documents which were required to be produced were documents which contained detail or evidence concerning, amongst other things: the particular goods or services which were provided to EuropeFX and to which the payments related; the date that those goods or services were provided to EuropeFX; the person or entity who supplied those goods and services; the contract or purchase order pursuant to which the goods or services had been provided; the invoices recording the supply and payment; detail about how the amount of the payment was calculated; and the extent to which the payee or payees and EuropeFX were related parties. The varied orders also provided that if the documents relating to the payments which were required to be provided by EuropeFX did not include the necessary level of detail, EuropeFX was then required within seven days of ASIC’s request to provide an affidavit sworn or affirmed by a director of EuropeFX which provided that detail.

9    Regrettably, but perhaps predictably, the regime that was put in place by the 4 March 2020 variation has proved to be equally as contentious and productive of disputes as the previous regime. ASIC contended that EuropeFX had repeatedly failed to properly comply with its requests to provide documents which included the necessary level of detail and evidence relating to the payments, either within the required timeframe or at all. ASIC also alleged that EuropeFX had also failed to provide the affidavit evidence which was required to make up for the deficient documentation.

10    ASIC’s complaints concerning EuropeFX’s compliance with the disclosure regime put in place on 4 March 2020 ultimately led it to file a further interlocutory application on 2 April 2020 seeking a further variation to the orders. It is that interlocutory application that must now be considered and determined.

The application for a further variation

11    The main variation sought by ASIC was to again require EuropeFX to seek ASIC’s permission to pay any trade creditor in excess of $50,000. It should be noted in this context that the evidence relied on by ASIC in support of the interlocutory application showed that EuropeFX has paid over $14 million to various entities overseas since the original asset restraint or preservation orders were first made. Many of those payments were very large payments, some in the millions or many millions of dollars, to entities in such far flung places as Belize, Cyprus and Israel.

12    EuropeFX opposed the variation sought by ASIC. It disputed, or at least did not concede, that there had been any material non-compliance with the existing disclosure regime. It also contended that the requirement that it seek and obtain ASIC’s approval before making payments to trade creditors exceeding $50,000 had the potential to cause it material prejudice.

13    EuropeFX did, however, propose an alternative or compromise variation to the existing regime. That alternative variation involved EuropeFX giving ASIC five business days’ notice of the proposed payments, along with certain information concerning those payments. That was said to then give ASIC the opportunity to restrain EuropeFX from making any of the notified payments if it did not consider them to be within the ordinary course of business or bona fide.

14    Before addressing the adequacy of the existing regime and any appropriate variation to it, it is necessary to briefly address the nature of EuropeFX’s ongoing business, the overseas payments it has made, and the information it has provided to ASIC in relation to those payments.

EuropeFX’s business

15    As noted earlier, EuropeFX was one of USG’s CARs. USG held an Australian Financial Services License. EuropeFX’s business involved offering various financial products on behalf of USG as its CAR. It would appear, however, that EuropeFX’s conduct of that business gave rise to complaints from its customers or clients. Those complaints no doubt form part of ASIC’s ongoing investigation.

16    Those complaints also led ultimately to the termination of the CAR agreement between USG and EuropeFX. That termination became effective as at 31 January 2020. Since that time, EuropeFX has had no customers. Its existing customers have been effectively transferred to USG. Nor can EuropeFX effectively have any new customers, at least as USG’s CAR. There is no suggestion, let alone any evidence, that EuropeFX conducts any other financial services business.

17    The structure of EuropeFX’s business and the management of that business is also, to say the least, somewhat unusual. Some of the peculiarities in the business only became apparent once EuropeFX filed an affidavit from its director, Mr Sasso, and Mr Sasso was in due course cross-examined. As has already been noted, Mr Sasso was the sole director of EuropeFX. The sole shareholder of EuropeFX was Addnet Solutions Pty Ltd. Mr Sasso was the sole director and shareholder of Addnet Solutions. One might reasonably expect that, in those circumstances, Mr Sasso would be intimately involved in the management of EuropeFX and the conduct of its business. That, however, was ultimately shown not to be the case.

18    Mr Sasso held his share or shares in Addnet Solutions on trust for a company previously named Maxiflex Global Investments Limited, but now named Maxiflex Limited. Maxiflex, it would appear, is a company registered in Cyprus. One of Maxiflex’s directors was a man named Mr Roy Almagor. Mr Sasso believed that there were or may have been other directors of Maxiflex; however, he did not know who they were. Mr Sasso has never met nor spoken with Mr Almagor. Mr Almagor apparently lives in Israel.

19    It would also seem that, despite being the sole director of EuropeFX, Mr Sasso effectively took his instructions in relation to the conduct and management of the business of EuropeFX from a gentleman by the name of Mr Gal Amar. Mr Amar certainly appeared to be the man who had negotiated many of the contracts with third parties in relation to the conduct of EuropeFX’s business. Mr Amar then instructed Mr Sasso to sign the contracts which were the products of those negotiations.

20    Mr Sasso’s knowledge concerning many of the main ongoing payments and contractual obligations was almost exclusively obtained from Mr Amar. Mr Amar was not a director or officer of Maxiflex. He was said to be its external financial adviser, or so Mr Sasso believed, apparently on the basis of what he had been told by Mr Amar himself.

21    Another interesting aspect of EuropeFX’s business is that it appears to have effectively outsourced all, or virtually all, of its operations to third party service providers in Belize, Cyprus and Israel. Indeed, EuropeFX seemed to do nothing in Australia other than pay bills. Its only presence in Australia appeared to be Mr Sasso, who appeared to do little other than do what he was told to do by someone said to be a financial adviser to an offshore company which was said to beneficially own the shares in EuropeFX’s parent company.

22    It is the ongoing payments to various offshore service providers which appears to be the main bone of contention between ASIC and EuropeFX.

Past payments and the information which has been provided in relation to them

23    A number of the large payments which have been made by EuropeFX since 23 December 2019 and the making of the original asset restraint orders had been made to four entities.

24    The first of those entities was a company named XYX Media Technologies Limited. XYX Media Technologies is apparently a company incorporated in Israel which is said to provide call centre services to EuropeFX.

25    EuropeFX has made the following payments to XYX Media Technologies since 23 December 2019: a payment of $950,000 on 23 December 2019; a payment of $975,250 on 31 December 2019; a payment of $1,100,000 on 3 February 2020; a payment of $1,166,292 on 26 February 2020; and a payment of $2,167,329 on 19 March 2020. The invoices which have been provided to ASIC in respect of those payments simply describe the payments as being for “sale services” or “technology service”.

26    The second company to which significant payments have been made is a company called Baff Affiliate Networks Limited. Baff is apparently a company incorporated in Cyprus which is said to provide “affiliate platform software services” to Europe FX.

27    EuropeFX has made the following payments to Baff since 23 December 2019: a payment of $551,744 on 23 December 2019; a payment of $1,192,504 on 23 January 2020; a payment of $288,503 on 7 February 2020; and a payment of $275,240 on 5 March 2020. The invoices that have been provided to ASIC in relation to those payments described the services referable to the payments as “technology platform service[s]”.

28    The third company to which significant payments have been made is a company called Antelope Systems Limited. Antelope Systems is apparently a company incorporated in Cyprus which provides services described as “customer relationship management interfaces”.

29    EuropeFX has made the following payments to Antelope Systems since 23 December 2019: a payment of $638,030 on 31 December 2019; a payment of $692,770 on 23 January 2020; a payment of $1,124,109 on 4 February 2020; and a payment of $210,505 on 5 March 2020.

30    The fourth company to which EuropeFX has made large payments since 23 December 2019 is a company called Global Win Solution Ltd. Global Win is apparently a company registered in Belize.

31    EuropeFX has made the following payments to Global Win since 23 December 2019: a payment of $459,200 on 23 January 2020; a payment of $324,165 on 26 February 2020; and a payment of $356,728 on 19 March 2020. The services said to have been provided by Global Win have been described as “consulting management and sales services”.

32    There have been other large payments made by EuropeFX during the relevant period, including to a company called AffiliMedia Global Ltd. Payments made to that company included a payment made on 23 December 2019 of $848,961 and a payment of $769,263 made on 31 December 2019.

33    EuropeFX’s solicitors have provided some details concerning the payments to those companies. They have provided, for example, copies of the invoices rendered by those companies to EuropeFX. As has already been indicated, those invoices provide very little detail concerning the exact nature of the services provided by those companies to EuropeFX. EuropeFX’s solicitors have, however, also provided copies of the contracts pursuant to which those services were said to have been provided. In some cases they also provided schedules which were said to explain how the invoice amounts were calculated pursuant to the contracts.

34    It would perhaps be an understatement to say that ASIC was not content with the detail and evidence that was provided on behalf of EuropeFX in relation to what were, on any view, very large payments to somewhat mysterious offshore entities.

35    On 11 March 2020, ASIC wrote to EuropeFX’s solicitors. The letter enclosed a schedule which contained the basic details of 17 payments that had been made by EuropeFX since 23 December 2019. ASIC requested EuropeFX to provide documents which contained the detail and evidence about those 17 payments which was required by the orders as varied on 4 March 2020. The payments to XYX Media Technologies, Baff, Antelope Systems and Global Win, to which reference was made earlier, were included within the schedule. All but two of the 17 payments were made before the variation of the orders on 4 March 2020.

36    On 16 March 2020, EuropeFX’s solicitors replied to ASIC’s letter of 11 March. It would perhaps not be unfair to say that the response to ASIC’s request was not entirely helpful or forthcoming.

37    EuropeFX’s solicitors indicated that the information requested in relation to all of the payments made before 4 March 2020 would not be provided. The basis of the refusal to provide documents in relation to those payments was said to be that the variations made to the orders on 4 March 2020 did not apply to any payments made prior to the variations. The argument advanced by the solicitors in that regard, whatever one may think of its merits, was manifestly demonstrative of the rather combative and unhelpful approach that had been taken in relation to ASIC’s requests for information from the outset. The letter did provide some basic information concerning two of the payments in the schedule, being a payment to Baff of $275,240 on 5 March, and a payment to Antelope Systems on the same day in the amount of $210,505. The only documentation which was provided, however, was a document said to be an addendum to the service agreement between Antelope Systems and EuropeFX.

38    Perhaps not surprisingly, ASIC was not content with that response to its request for further information. On 25 March 2020, it again wrote to EuropeFX’s solicitors and identified what it said were the deficiencies in the response. It is unnecessary to detail ASIC’s contentions in that regard. Suffice it to say that, two days later, on 27 March 2020, EuropeFX’s solicitors replied to ASIC’s letter and bluntly denied that their response to ASIC’s initial inquiries was in any way inadequate. No further information or documentation of substance was provided. It was, however, foreshadowed that Mr Sasso would be providing an affidavit on about 6 April 2020. It was said that Mr Sasso’s affidavit would provide some further information in relation to the payments which were the subject of ASIC’s request for further information.

39    ASIC wrote to EuropeFX’s solicitors yet again on 27 March 2020. That letter, amongst other things, requested information and detail concerning two further payments, being the payment of $2,162,329 to XYX Media Technology on 23 March 2020, and the payment of $356,728 to Global Win made on the same day.

40    Mr Sasso’s affidavit was ultimately filed or provided to ASIC on 7 April 2020.

Mr Sasso’s evidence

41    It would be fair to say that Mr Sasso’s affidavit does provide some further detail and evidence concerning the payments which were the subject of ASIC’s request. What is, however, perhaps somewhat surprising, and certainly was surprising to ASIC, was that it is readily apparent from Mr Sasso’s affidavit that much of his knowledge concerning the relevant payments was second-hand knowledge; that is, knowledge which was based entirely on what he had been told by Mr Amar. Another perhaps surprising feature of Mr Sasso’s evidence is that it disclosed that the contractual relationships or contracts between EuropeFX and the four companies to which reference has already been made — XYX Media Technologies, Baff, Antelope Systems and Global Win — had all been the subject of variations in late January and early February 2020; that is, around the time that the CAR agreement as between USG and EuropeFX had been terminated.

42    It is unnecessary, for present purposes, to discuss the contractual variations in great detail. The general effect of the variations was to either extend the term of the contracts or, in some cases, to provide for the ultimate termination of the contractual relations, but with an extended termination period; that is, extending the length of the notice that EuropeFX had to give before terminating the contractual relationship. The overall effect was that EuropeFX was required to make more payments under the contracts, as varied, than would otherwise have been the case.

43    As has already been indicated, Mr Sasso’s knowledge of the negotiations that led to the variations to the contracts with each of those companies was derived entirely from Mr Amar. His evidence was, in effect, that Mr Amar conducted those negotiations and that, in due course, Mr Amar directed him to sign the agreements or addendums that varied the contracts. Mr Sasso’s evidence concerning those contractual variations was rather unsatisfactory. While he maintained that he turned his mind to whether the signing of those variations was in the best interests of EuropeFX, he appeared not to have turned his mind to the monetary implications of those contractual variations.

ASIC’s submissions

44    ASIC contended that the existing notification regime as regards the significant payments that have been made by EuropeFX since 23 December 2019 has been inadequate. In relation to the payments made prior to 4 March 2020, ASIC submitted that the position taken by EuropeFX’s solicitors was unsustainable and that the relevant information should have been provided pursuant to the orders, as varied on 4 March 2020. The information in relation to those payments ultimately was not provided to ASIC until the provision of Mr Sasso’s affidavit, some number of weeks after ASIC’s request of 11 March 2020. In relation to the payments made after the variation of the orders on 4 March 2020, ASIC contended that the documents which had been provided by EuropeFX’s solicitors did not provide sufficient detail or evidence concerning the nature of the payments as required by the orders, as varied on 4 March 2020.

45    Perhaps more importantly, ASIC contended that, in circumstances where the detail and evidence provided by the documents was insufficient, Mr Sasso’s affidavit should have been provided significantly earlier than it was. In that regard, it may be recalled that the orders, as varied on 4 March 2020, provided that the affidavit was required to be given to ASIC within seven days of ASIC’s request.

46    Finally, ASIC contended that, upon close analysis, at least one significant payment that had been made by EuropeFX in the relevant period since 23 December 2019 had not been fully disclosed in the material that had been provided to it. That payment was a payment of $288,503 made on 7 February 2020. Mr Sasso’s evidence in cross-examination was that that payment was made to Maxiflex. Whilst EuropeFX’s solicitors provided a document which revealed that a payment of $288,503 had been made on 7 February 2020, the details of that payment suggested that it had been made to a company called Moneynetint Limited. Another report provided by the solicitors seemed to suggest that the payment was made to Baff; however, that appears to have been in error.

EuropeFX’s submissions

47    EuropeFX maintained that the orders as varied on 4 March 2020 did not require it to provide further information or documentation in respect of payments made before the date of the variation. It submitted that, in any event, the orders were eventually complied with and the required information and documentation was provided to ASIC by the filing and service of Mr Sasso’s affidavit on 7 April 2020. EuropeFX noted that Mr Sasso’s affidavit also supplied the necessary information relating to the payments made after 4 March 2020.

48    Perhaps more significantly, EuropeFX submitted that ASIC’s application demonstrated a misunderstanding on the part of the regulator. That misapprehension was said to be that ASIC is not “the verifier” of whether payments are bona fide and can be made. Rather, in its submission, if ASIC has any doubts that any payments that EuropeFX proposed to make were not bona fide, the onus should be on it to bring an application before the Court to contest the legitimacy of those payments. ASIC’s proposed variation to the orders, which effectively allowed ASIC to decide if a payment was to be made, with the onus on EuropeFX to seek an order from the Court allowing for the payment to proceed, were accordingly said to be “juridically … odd”. It was primarily on this basis that EuropeFX submitted that its proposed variation to the existing regime was preferable to ASIC’s proposed variation.

49    EuropeFX also pointed out, in this context, that ASIC had not provided any evidence disproving the bona fide or legitimate nature of the payments that had been made, other than to note that the entities concerned were in “exotic” locations.

Should the orders be varied and if so how?

50    Having considered all of the evidence adduced in relation to the interlocutory application, I am of the view that ASIC’s contentions concerning the sufficiency of the information provided by EuropeFX in response to ASIC’s requests has some merit. Perhaps more significantly, however, what the evidence clearly demonstrates is that the existing regime which has been in place since 4 March 2020 is plainly inadequate and likely to continue to give rise to disputes between ASIC and EuropeFX or its solicitors in relation to the adequacy of information provided in relation to future payments. In my view, that alone justifies some variation to the existing orders with a view to avoiding those ongoing disputes.

51    The question, then, is which of the proposed variations to the existing orders will better serve the overarching statutory purpose of orders made under s 1323 of the Corporations Act: the variation proposed by ASIC, which would provide or require EuropeFX to seek and obtain ASIC’s agreement or approval before making any payments to trade creditors in excess of $50,000; or the variation proposed, without admission, by EuropeFX, which would require EuropeFX to give ASIC advance notice of payments it intends to make, along with sufficient information to enable ASIC to determine the bona fides of those payments.

52    In my view, in all the circumstances, the variation proposed by ASIC is the preferable and more appropriate variation to the existing orders. The evidence demonstrates that the existing regime is unworkable and that the variation proposed by ASIC is necessary and desirable for the purposes of protecting persons who may in due course be found to be entitled to compensation from EuropeFX. I doubt that the same could be said of the variation proposed by EuropeFX. In particular, I doubt that the variation proposed by EuropeFX will make the regime workable such that it will provide the necessary or desirable level of protection for prospective claimants.

53    The following considerations support that view.

54    First, EuropeFX has paid a very large amount of money, exceeding $14 million, to mostly overseas entities since the initial orders were made in mid-December 2019. It has, however, been slow to provide adequate or compelling documentary support for the bona fides of those payments. ASIC’s concerns in relation to those past payments were reasonable in all the circumstances having regard to the size of the payments, the nature of the entities receiving them, and the paucity of the information concerning the services for which the payments were said to be made.

55    Second, there is reason to believe that EuropeFX will continue to make very large payments to mostly offshore entities in the future, including significant payments to the four companies who have been the main recipients of the payments to date: Antelope Systems, Baff, Global Win, and XYX Media Technologies. While EuropeFX has now provided the contracts that it has entered into with those companies pursuant to which the payments are said to be made, the terms of those contracts are, on their face and without further explanation, somewhat surprising. That is particularly the case with the terms which provide for the calculation of the payments that must be made for the relevant services. To give but one example, the fees payable to Global Win appear to be calculated on the basis of the entire fixed and variable operating costs of Global Win’s office. Without further explanation, the size of the monthly fees payable to these various offshore entities seem excessive in all the circumstances. More will be said about the contractual variations later.

56    Third, the witness called by EuropeFX, Mr Sasso, was unable to provide cogent or reliable evidence concerning those very large past and anticipated future payments or EuropeFX’s contractual relationships with the main recipients of those payments. Mr Sasso’s evidence was unreliable because it soon became readily apparent that he had no first-hand knowledge about the payments or the relevant contractual relationships. His evidence was at best second-hand knowledge based on what had been told by an overseas-based financial adviser whom he had never met. Mr Sasso appeared to do little more than make payments that he was told to make. He conceded in cross-examination that he had no real way of verifying the accuracy of the information concerning the payments that had been given to him by that financial adviser.

57    Fourth, there would appear to be good reasons to doubt, or at least question, the bona fides of the future payments that EuropeFX is likely to make to Antelope Systems, Baff, Global Win, and XYX Media Technologies. The legitimate concerns in relation to those payments arise from the relatively recent variations to the contracts between EuropeFX and those companies. As has already been noted, the variations would appear to have had the effect that EuropeFX’s liability to continue to make payments for services under the contracts was increased or extended into the future, despite the fact that on and from 31 January 2020 its business effectively ceased and it no longer has any customers. In the absence of some cogent explanation, it is difficult to see how it could have been in the best interests of EuropeFX to extend its contractual relationships in all the circumstances. Mr Sasso was unable to give any cogent explanation. That is because he effectively had little or no direct knowledge concerning EuropeFX’s contractual relationships. The negotiations concerning the variations were all conducted by Mr Amar.

58    Fifth and significantly, the evidence concerning any potential prejudice to EuropeFX, should the variation proposed by ASIC be made, was heavily qualified and somewhat speculative. Mr Sasso’s evidence concerning potential prejudice was as follows:

The orders that ASIC seeks have the potential to prejudice Europe FX. If Europe FX is required to seek permission from ASIC each time it needs to make a payment over $50,000 any delay by ASIC in approving a payment, could place Europe FX in breach of the terms of its contract with third parties and may expose Europe FX to legal action in relation to those contracts for delay or failure to pay pursuant to the terms of those third party contracts.

59    It can be seen that the potential prejudice postulated by Mr Sasso hinges on the suggestion that there may be some delay by ASIC in approving a payment or any payments made pursuant to the regime. There is, however, no reason to believe that in the circumstances, ASIC, as a model litigant, would, or would have any reason to, unreasonably delay approving a payment if adequate and sufficient information concerning the payment was provided. Even if there was some delay, it is also somewhat doubtful in the circumstances that any such delay would give rise to any real prejudice to EuropeFX, unless the delay was so extensive as to cause the relevant trade creditors to either commence court or arbitration proceedings against EuropeFX in relation to those payments. If that eventuated, it would be open to EuropeFX to have the matter relisted before the Court and to make an application in relation to the approval of those payments.

60    Even putting those matters to one side, I would in any event give little, if any, weight to Mr Sasso’s evidence concerning the risk of prejudice. That is because it was readily apparent that Mr Sasso had little real involvement in, or knowledge of, EuropeFX’s business, let alone its relationships with its trade creditors.

61    The relevant principles in relation to the making of orders under s 1323 of the Corporations Act were not in dispute between the parties. Orders under s 1323 are essentially intended to preserve the status quo pending the outcome of ASIC’s investigations: Australian Securities and Investments Commission v Carey (No 3) (2006) 232 ALR 577; FCA 433 at [25] (per French J).

62    As has already been indicated, it is common ground that the key criteria for the making of orders under s 1323 of the Corporations Act is whether the proposed orders are necessary or desirable for the purposes of protecting the interests of persons to whom the company may ultimately become liable. The making of appropriate orders under s 1323 involves an “element of risk assessment and risk management”: Carey (No 3) at [26]. The same principles no doubt apply when consideration is given to the variation of orders under s 1323. My assessment of the relevant risks involved in all the circumstances of this case is that they are most appropriately managed by requiring EuropeFX to seek ASIC’s consent or agreement in relation to future payments which exceed $50,000.

Conclusion and disposition

63    For the reasons stated, I propose to make the variation to the orders sought by ASIC. There is an additional variation to the orders which has been sought by ASIC that is not contentious. That involves the correction of what is said to have been an error in the formulation of the variation made on 4 March 2020. That error was the reference to “related parties” as opposed to “related entities”. The orders should be varied to correct that error.

64    ASIC also sought its costs of this interlocutory application on the basis that costs should follow the event. EuropeFX opposed ASIC’s position, requested that the parties be permitted to put on submissions in relation to costs, and ultimately contended that costs should be reserved. EuropeFX’s submission, in that regard, was that ASIC’s application did not concern an “actual cause of action’”. Rather, it simply involved a variation to existing orders under s 1323 of the Corporations Act. That is hardly a persuasive submission. The fact is that ASIC applied for a variation of orders, EuropeFX opposed that application, and ASIC succeeded. I am unable to see any reason why the costs of that application should not follow the event.

65    Accordingly, the final orders are as follows:

1.    Order 5(b) of the orders made by Justice Jagot on 12 December 2019, as varied by Justice Gleeson on 17 December 2019 and Justice Wigney on 28 February 2020 and 4 March 2020, is varied to insert the following subparagraph (viiia) following subparagraph (viii):

(viiia) in the case of the Second Defendant, any withdrawal of $50,000 or more may only be made following a request in writing to the Plaintiff to make the withdrawal and receipt of the Plaintiff's approval;

2.    Order 5(b)(x)(vii) of the orders made by Justice Jagot on 12 December 2019, as varied by Justice Gleeson on 17 December 2019 and Justice Wigney on 28 February 2020 and 4 March 2020, is varied to replace the words “related parties” with the words “related entities, and the extent to which the payee (or payees) and Addnet Solutions Pty Ltd are related entities, and the extent to which the payee (or payees) and Maxiflex Ltd are related entities”.

3.    The Second Defendant pay the Plaintiff’s costs of, and relating to, the interlocutory application.

Associate:

Dated:    14 April 2020

SCHEDULE OF PARTIES