FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v M101 Nominees Pty Ltd (in liq) (No 6) [2023] FCA 1276

ORDERS

THE COURT ORDERS THAT:

1.    The leave granted by O’Callaghan J by order made on 9 December 2022 to the Australian Securities and Investments Commission (ASIC) to file and serve an amended originating process be revoked.

2.    ASIC file a further amended originating process within 21 days.

3.    The parties file and serve written submissions not exceeding 3 pages on the question of costs within 7 days.

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

REASONS FOR JUDGMENT

O’CALLAGHAN J

Introduction

1    On 31 March 2023, the Australian Securities and Investments Commission (ASIC) filed an amended originating process in this proceeding.

2    That document was filed pursuant to leave given on 9 December 2022, after the proceeding had been remitted by a Full Court, and then allocated to my docket. The remittal followed Mr Mawhinney’s successful appeal against orders made by Anderson J in Australian Securities and Investments Commission v M101 Nominees Pty Ltd (No 3) [2021] FCA 354; (2021) 153 ACSR 230.

3    Mr Mawhinney submitted that the leave granted to file the amended originating process must be revoked because it makes allegations that impermissibly extend beyond the scope of the Full Court’s remittal order, and are thus necessarily beyond the scope of the leave granted to file an amended originating process.

4    The remittal order was expressed in these terms:

The matter be remitted for hearing and determination by a judge other than the primary judge on the basis of:

a.    such further evidence and submissions the parties wish to adduce and put respectively;

b.    such further case management orders as the judge to whom the matter is remitted thinks fit.

5    The principal issue now in dispute is how that remittal order is properly to be construed.

6    Mr Mawhinney submitted that the amendments made to the originating process, if allowed to stand, would result in ASIC making a new case against him “in the guise of a remitter, rather than the continuation of the original proceeding on the basis envisaged by the Full Court” and it “would place [him] in significantly greater jeopardy than in the first trial contrary to the foundation of the remitter expressly articulated by the Full Court”.

7    ASIC submitted, to the contrary, that the amended originating process is properly within the scope of the remittal order and that the Full Court “plainly intended for ASIC not to be confined to the case which ASIC had pursued before Anderson J”.

8    Mr Mawhinney also submitted that even if the amended originating process is properly within the scope of the remittal order, I should decline to permit ASIC to make the new allegations because it has not explained, sufficiently or at all, why those allegations were not contended for before the primary judge.

9    For the reasons that follow, Mr Mawhinney’s submissions must be accepted, and the leave given on 9 December 2022 to ASIC to file an amended originating process will be revoked.

The relevant facts

10    On 10 August 2020, ASIC filed an originating application seeking the winding up of M101 Nominees Pty Ltd, the first defendant, and an order that Mr Mawhinney, pursuant to ss 1101B(1) and 1324(1) of the Corporations Act 2001 (Cth) and/or s 23 of the Federal Court of Australia Act 1976 (Cth), be restrained from, in effect, advertising, promoting or marketing any financial product, and/or soliciting or receiving funds in connection with any financial product.

11    ASIC also sought the same relief on an interlocutory basis against Mr Mawhinney.

12    The originating application was not accompanied by pleadings, either in the form of a statement of claim or a concise statement.

13    On 13 August 2020, Anderson J made ex parte orders appointing provisional liquidators to M101 Nominees Pty Ltd, and granting the interlocutory injunctions against Mr Mawhinney.

14    On 29 January 2021, Anderson J ordered that M101 Nominees Pty Ltd be wound up.

15    His Honour heard the proceeding in February and March 2021.

16    On 19 April 2021, his Honour made orders that Mr Mawhinney be restrained for a period of 20 years from:

(1)    soliciting funds in connection with any financial product (as defined in Div 3 of Ch 7 and s 9 of the Corporations Act);

(2)    receiving funds in connection with any financial product;

(3)    advertising, promoting or marketing any financial product; and

(4)    without a court order, removing or transferring from Australia any assets acquired directly or indirectly with funds received in connection with any financial product.

(the restraining order).

See Australian Securities and Investments Commission v M101 Nominees Pty Ltd (No 3) [2021] FCA 354; (2021) 153 ACSR 230.

17    Mr Mawhinney appealed those orders to a Full Court on 29 grounds.

18    The appeal was allowed, on one ground only, namely that Mr Mawhinney was denied procedural fairness in circumstances where:

(1)    ASIC had not alleged or sought any findings of either:

(a)    contraventions of ss 911A(1) and 1041H of the Corporations Act and/or ss 12DA(1), 12DB(1)(a) and (1)(e) of the Australian Securities and Investments Act 2001 (Cth) (ASIC Act); or

(b)    Mr Mawhinney being involved in any such contraventions within the meaning of s 79(c) of the Corporations Act and/or s 12GB(1)(d) of the ASIC Act,

      but,

(2)    the primary judge made and relied on such findings in making the restraining order.

See Mawhinney v Australian Securities and Investments Commission (2022) 294 FCR 375 (Jagot, O’Bryan and Cheeseman JJ) (J).

19    It is necessary to understand how that came to be.

20    At trial, ASIC submitted that the grant of an injunction pursuant to s 1324 of the Corporations Act does not require an applicant to establish a contravention of the Act. It also said that s 1101B of the Corporations Act empowers the court to make orders (including granting injunctions) in respect of contraventions of Ch 7 of the Corporations Act if, in the opinion of the court, it is desirable to do so. See J at 381 [16].

21    The problem was that the cases, including the cases cited by ASIC to the learned trial judge, “[did] not support ASIC’s apparent proposition that an injunction under s 1324 or an order under s 1101B of the Corporations Act might be granted without proof of an actual or proposed contravention of the Act”. See J at 385 [24].

22    As the Full Court explained at 386 [26]-[27]:

The seeds of a problem had been sown – ASIC appeared to be maintaining that it could obtain an injunction under s 1324 and/or an order under s 1101B of the Corporations Act without establishing an actual or prospective contravention of the Act at all.

To the contrary, however, s 1324(1) permitted the grant of an injunction restraining the person who had engaged in or was proposing to engage in conduct that constituted, constitutes or would constitute a contravention of the Corporations Act or the proscribed conduct described in paragraphs (b) to (f) which depend upon a contravention or a prospective contravention. Section 1101B permitted the making of an order restraining a person if it appeared to the Court that a person has contravened a provision of Ch 7 of the Corporations Act or any other law relating to dealing in financial products or providing financial services, but only if satisfied that the order would not unfairly prejudice any person.

23    On appeal, ASIC accepted that ss 1101B and 1324 operate in that way. See J at 387 [32].

24    It is necessary to set out briefly what Anderson J said about ASIC’s claims made under ss 1101B and 1324 of the Corporations Act.

25    At 323-24 [404]-[405], his Honour said the following about the claims brought under s 1101B (emphasis in original):

As to s 1101B, a precondition to making an order under s 1101B(1) is that, “on the application of ASIC, it appears to the Court that a person ... has contravened a provision of [Chapter 7], or any other law relating to dealing in financial products or providing financial services” (underlining added). There is no controversy that ASIC has made the relevant application, so that criterion is satisfied. In addition, on the basis of the findings which I have detailed earlier in these reasons, I am satisfied that:

(a)    IPO Capital contravened s 911A(1) of the Corporations Act, which is a provision of Chapter 7;

(b)    M101 Nominees and M101 Holdings have contravened s 1041H of the Corporations Act (which is a provision in Chapter 7) and ss 12DA(1), 12DB(1)(a) and 12DB(1)(e) of the ASIC Act (which are “law[s] relating to dealing in financial products or providing financial services”);

(c)    M101 Holdings’ dealings with Mr Donald were a contravention of the provisions of Chapter 7 concerning the provision of financial services to “retail clients”;

(d)    Mayfair Wealth Partners Pty Ltd (which eventually changed its name to Australian Income Solutions Pty Ltd), in its dealings concerning the Australian Property Bonds and Mr Rouse, contravened s 1041H of the Corporations Act and s 12DA(1), 12DB(1)(a) and 12DB(1)(e) of the ASIC Act;

(e)    Mr Mawhinney is a person that “has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention[s]” by IPO Capital, M101 Nominees, M101 Holdings and Mayfair Wealth Partners Pty Ltd: see findings made above and s 79(c) of the Corporations Act and s 12GBCL(b) of the ASIC Act.

In these circumstances, I am satisfied that the jurisdictional precondition in s 1101B(1) is satisfied and jurisdiction to make orders under s 1101B(1) is enlivened.

26    At 324 [406]–[407], his Honour said this about the claims under s 1324:

As to s 1324 of the Corporations Act, for the reasons stated in relation to s 1101B and on the basis of the findings made above, I am satisfied that Mr Mawhinney is “a person” who “has engaged ... in conduct that constituted ... being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of [the Corporations Act]”: Corporations Act, s 1324(1)(e). I am therefore satisfied that the jurisdictional precondition in s 1324 has been enlivened and, as a result, the Court has power to:

... grant an injunction, on such terms as the Court thinks appropriate, restraining [Mr Mawhinney] from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.

Finally, I should note that I reject Mr Mawhinney’s submission that, if Mr Mawhinney is to be the subject of orders based on investors incurring losses, then the Court should make factual determinations about what actual loss has been incurred, and what has caused those losses. That submission should not be accepted because there is no indication in ss 1101B or 1324 to the effect that a court must assess loss as a jurisdictional precondition to making orders under those provisions. The relevant jurisdictional precondition relates to contravention, not the ascertainment of the quantum or cause of actual loss.

27    On appeal, ASIC “abandoned any reliance on s 1324”. It said that it accepted that s 1324 did not supply power to make the injunctions made below, “[p]resumably … because s 1324 required the Court to have found that Mr Mawhinney himself had engaged in or was proposing to engage in conduct that constituted, constitutes or would constitute a contravention of the Corporations Act or, relevantly, had been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of the Corporations Act, when ASIC had sought no such finding”. See J at 398 [85(1)].

28    ASIC also “abandoned the whole of the case it put below about the proper construction of s 1101B of the Corporations Act, saying that the ‘jurisdictional basis for orders under s 1101B in the circumstances of this case is a finding that there has been at least a contravention by someone …’”. See J at 398 [85(2)].

29    It also “accepted that it had never sought any finding that Mr Mawhinney was involved in contraventions within the meaning of s 79(c) of the Corporations Act (which must also include the equivalent s 12GBCL(b) of the ASIC Act)”. See J at 398 [85(3)].

30    The Full Court then went on to reject a number of submissions made by ASIC as to why Anderson J’s orders did not involve a denial of procedural fairness, and concluded at 403 [97]:

No citation of authority is required. Having run one case (it needed to prove only apparent contraventions), ASIC could not succeed on a case that it had repeatedly disavowed (that it had proved contraventions by a person and that Mr Mawhinney was involved in those contraventions). The making of the restraining order based on that other case, never put and disavowed, involves a fundamental denial of procedural fairness to Mr Mawhinney. The primary judge’s orders cannot stand.

31    The trial miscarried because “ASIC put a legally incorrect case and the primary judge made orders based on a legally correct case not put (and, indeed, disavowed by ASIC)”. See J at 403 [100].

32    The Full Court then turned to the question “[w]hat should happen now?”

33    Their Honours commenced by observing at 403 [101] that “an order for remittal would be futile if ASIC is bound by the case it ran before the primary judge. An order for remittal would not be futile if this is an exceptional case in which ASIC is not bound by the case it ran below”. Their Honours then referred to a number of cases, which stand for the proposition that in “very exceptional circumstances” a party’s omission to put at trial a case formulated on appeal may not be conclusive against it. See Water Board v Moustakas (1988) 180 CLR 491 at 498 (Mason CJ, Wilson, Brennan and Dawson JJ); University of Wollongong v Metwally (No 2) [1985] HCA 28; (1985) 59 ALJR 481 at 483 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ); and Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 at 1608 [51] (Gleeson CJ, McHugh and Gummow JJ).

34    Their Honours expressed the view that this was a “very exceptional” case and “that the interests of justice overall require that the proceeding be remitted for another hearing”.

35    Because the parties are at odds about what the Full Court intended by their reasons to convey about scope of the remittal order, I will set out the relevant reasons in full:

We consider that the present case is “very exceptional”, and that the interests of justice overall require that the proceeding be remitted for another hearing.

First, when the High Court referred to “no prejudice” being a condition of permitting a party to assert a new case on remittal in Moustakas at 498, it must be understood to have meant no prejudice incapable of effective (even if imperfect) amelioration. This must follow from the fact that no order can ameliorate the effect of the worry, inconvenience and interference with personal and business affairs which all litigation involves, yet the interests of justice may still dictate that a hearing on a different basis from that put below is required in an exceptional case.

Secondly, while no order can ameliorate the worry, inconvenience and interference with personal and business affairs which all litigation involves, that kind of impact on Mr Mawhinney must be considered along with all other relevant circumstances. Mr Mawhinney’s position in the appeal was that any order for remittal would be futile, not that he would suffer some prejudice not able to be ameliorated by costs orders, different from the general effect of the worry, inconvenience and interference with personal and business affairs which all litigation involves. If Mr Mawhinney wished to raise any such matter, he should have done so as part of the case he put in the appeal (given that the order he sought was dismissal of the proceeding below). As discussed, the remittal would be futile if ASIC was held to the legal case it put below. The discretion to permit ASIC not to be held to the legal (or evidentiary) case it put below exists in exceptional circumstances. Further, and as explained in the fifth point below, the worry, inconvenience and interference with personal and business affairs which all litigation involves will be no different for Mr Mawhinney now than it would have been had he been given procedural fairness below.

Thirdly, ASIC is not a private individual or entity seeking to vindicate some private right. It is a public body (s 8 of the ASIC Act) having the functions conferred on it by statute (ss 11 to 12A of the ASIC Act). The legislation under which ASIC performs functions regulates corporate and financial activity in Australia. The present proceeding was brought by ASIC in the public interest and with the objective of protection of the public. The character of ASIC, the functions it performs, and the nature of this litigation are relevant to the issues of the exceptional circumstances and the interests of justice. This matter involves issues concerning the need for protection of the public from potentially serious harm.

Fourthly, this is not a case in which ASIC was bound to fail below if the primary judge had rejected ASIC’s case as put. Had the primary judge notified the parties that he was going to reject ASIC’s case that it had to prove only apparent contraventions of the Corporations Act, the primary judge would have had a discretion available to him. The primary judge could have dismissed the case as counsel for Mr Mawhinney had proposed, but on the basis the case was premature and ASIC could later seek declarations of contraventions and such other orders as warranted by the evidence then existing. This proposition involved a realistic and reasonable appreciation by Mr Mawhinney’s counsel below that this was the best outcome which Mr Mawhinney could obtain, and that once the liquidations were complete or sufficiently advanced, ASIC would be able to make a case for permanent injunctions against Mr Mawhinney. The primary judge could have adjourned the matter for subsequent hearing enabling ASIC and Mr Mawhinney to adduce further evidence once the liquidations were further advanced or completed. The primary judge could have invited ASIC to discontinue the proceeding. The primary judge could have dismissed the proceeding on a summary basis. Had Mr Mawhinney been given procedural fairness, what was unlikely in the extreme was an outcome in which ASIC was somehow prevented from seeking permanent injunctions against Mr Mawhinney based on a proper legal and evidentiary foundation.

Fifthly, if Mr Mawhinney had been afforded procedural fairness below, then whatever the path the primary judge might have taken, Mr Mawhinney would have remained subject to the interlocutory injunctions made by the primary judge on 13 August 2020. This is the fact on which Mr Mawhinney’s counsel (sensibly) relied in support of his argument that ASIC pressing for permanent injunctions was premature in the circumstances and that the public interest was and would be effectively protected by the continuation of the interlocutory injunctions. Accordingly, the best realistic outcome Mr Mawhinney could have hoped for below (as his counsel below rightly recognised) was that Mr Mawhinney would continue to be subject to the interlocutory injunctions until the liquidations were sufficiently advanced for ASIC to determine if it could prove contraventions of the Corporations Act by some person sufficiently relevantly connected to Mr Mawhinney (or, relevantly, involving Mr Mawhinney), to the requisite civil standard of proof as provided by s 140 of the Evidence Act 1995 (Cth) (the Evidence Act). That is the same position as Mr Mawhinney would now be in, if orders are made remitting the matter for hearing on the proper legal and evidentiary basis. In this regard, in order 2 of the orders made on 19 April 2021 the primary judge vacated paragraphs 5, 6 and 7 of the orders dated 13 August 2020. These are the interlocutory injunctions. But for the making of the restraining order, the primary judge would not have vacated the interlocutory injunctions. It follows that the primary judge’s order vacating the interlocutory injunctions must also be set aside.

Sixthly, there can be no suggestion that ASIC’s position below was in any way intended to secure some kind of forensic advantage. ASIC was acting under what it now accepts to be a mistaken view as to the law. While ASIC was represented at the hearing below by junior counsel, we do not overlook the fact that it is apparent that senior counsel was otherwise involved in ASIC’s case. Indeed, ASIC’s written opening and closing submissions disclose that they were prepared by junior and senior counsel. With hindsight, it is easy to see where things went wrong and the different course which should have been taken. But what is relevant now is that it is clear ASIC did not act to obtain a forensic advantage and no such forensic advantage is apparent.

Seventhly, the ameliorative effect of costs orders the Court can make should not be underestimated. We acknowledge that ASIC ran one case and now will have to run another. We recognise that ASIC having done so caused the hearing below to miscarry and caused this appeal to be necessary (albeit that the appeal could and should have been confined to the ground of procedural fairness). We recognise that ASIC positively disavowed the legal position it now accepts applies, and that this may well mean that further evidence is required to be adduced at the further hearing by both parties. We consider that the costs prejudice to Mr Mawhinney must be ameliorated by orders that ASIC pay Mr Mawhinney’s costs below on an indemnity basis. This is the price ASIC must pay for the remittal. Given that Mr Mawhinney’s appeal was not properly focused on the real issue of denial of procedural fairness, we consider that each of Mr Mawhinney and ASIC should bear their own costs of the appeal, but will hear the parties further in this regard if necessary.

Eighthly, we consider it clear that the remitted matter should not be heard by the primary judge. The primary judge has already made findings of contraventions which cannot stand given the denial of procedural fairness. The primary judge has also made adverse credit findings against Mr Mawhinney in Australian Securities and Investments Commission v Mayfair Wealth Partners Pty Ltd [2021] FCA 1630 at [64]. The principle that justice must not only be done but must be seen to be done requires the matter to be remitted to a judge other than the primary judge.

Finally, despite it being clear from what we have said above, we should record our view that this is a very exceptional case in which ASIC should be permitted to depart from the legal and evidentiary position it adopted below. In order to ensure procedural fairness, and given the nature of the permanent injunctions which ASIC seeks, the case requires ASIC to give clear notice and proper particulars of each contravention it alleges and of the connection between Mr Mawhinney and each such contravention, either by way of his involvement in the contravention (in the sense described in Yorke v Lucas) or otherwise. Beyond saying this, the proper case management of the remitted matter is for the relevant judge to decide.

See J at 405-7 [107]-[116].

36    The Full Court was critical of the fact that the appellant sought to advance 28 grounds of appeal other than the ground upon which he succeeded, describing them as “spurious” and “baseless”. See J at 379 [6].

37    None of what their Honours said about those grounds has any bearing on this application, other than grounds 25 and 26.

38    Their Honours dealt with ground 25, which concerned the court’s power to make orders under s 1101B of the Corporations Act, at some length (J at 416-20 [150]-[164]), “because the issue raised will affect the further hearing of the proceeding on remitter”. See J at 416 [150].

39    Relevantly, their Honours said the following at 416 [151]:

By ground 25, Mr Mawhinney contends that, insofar as the restraining order was made pursuant to s 1101B(4)(a) of the Corporations Act, the order was beyond power as it was not proved that Mr Mawhinney had persistently contravened, or was continuing to contravene, provisions of Ch 7 of the Corporations Act. The ground as stated in the notice of appeal is misconceived because s 1101B(4) is not, in itself, a source of power for the Court to make orders. The relevant source of power is s 1101B(1). As stated in its chapeau, s 1101B(4) merely gives examples of orders the Court may make under s 1101B(1). Accordingly, the detail which we now provide about s 1101B should not be understood as suggesting that ground 25 has any greater merit than the other grounds we reject.

40    Their Honours also dealt with an equally meritless ground 26 about s 1324, as follows at 420 [165]:

Ground 26 asserts that insofar as paragraph 1 of the final order made on 19 April 2021 was made pursuant to s 1324 of the Corporations Act, the order was beyond power as it does not enjoin the appellant from engaging in conduct that would constitute a contravention or attempted contravention of the Act or make him liable as an accessory for such a contravention. ASIC abandoned s 1324 as a relevant source of power for the orders. From that moment onwards, ground 26 became moot.

41    It is also necessary to refer to what the Full Court said separately about costs. By that time, Jagot J had been appointed to the High Court of Australia, so Allsop CJ sat in her place. See Mawhinney v Australian Securities and Investments Commission (No 2) [2022] FCAFC 205 (CJ).

42    The Full Court, so comprised, and as a result of consideration of submissions filed after the Full Court had made orders about costs, varied its original costs orders, in a way that is immaterial for present purposes. The parties did, however, seek to rely on certain words used by their Honours as being relevant to the task of characterising the remittal order. Justices O’Bryan and Cheeseman said this at [19]:

The Court made orders upholding the appeal, setting aside the orders of the primary judge and remitting the matter for hearing and determination by a judge other than the primary judge on the basis of such further evidence and submissions that the parties wish to adduce and put respectively and such further case management orders as the judge to whom the matter is remitted thinks fit. By order 6(2), the Court ordered ASIC to pay Mr Mawhinney’s costs of and in connection with the hearing before the primary judge on 16 February 2021 and 9 March 2021 on an indemnity basis. In respect of the remittal order and the indemnity costs order, the Court observed that:

(a)    the costs prejudice to Mr Mawhinney (from the remitter) must be ameliorated by orders that ASIC pay Mr Mawhinney’s costs of the trial on an indemnity basis, being the price ASIC must pay for the remittal (AJ [114]); and

(b)    this is an exceptional case in which ASIC should be permitted to depart from the legal and evidentiary position it adopted below (AJ [116]).

43    At CJ [62], their Honours posed the “real question” before them in this way:

The real question that arises is whether, in circumstances where:

(a)    the appellant was successful on the appeal on the ground of a denial of procedural fairness;

(b)    the denial of procedural fairness arose from the manner in which ASIC conducted the trial below; and

(c)    the Court has determined that it is in the interests of justice for the proceeding to be remitted for retrial,

ASIC should be required to pay the appellant’s costs of the appeal and should do so on an indemnity basis, notwithstanding the Court’s view that the appeal was not properly confined to the issue of procedural fairness and raised many spurious grounds of appeal.

44    Chief Justice Allsop said that he agreed “with most” of what O’Bryan and Cheeseman JJ said, and added at [6]-[7]:

As to the variation to [costs] order 8, I would make a different, albeit probably similar order in practical effect. The order originally made reflected the view of the Full Court of the lack of merit (to understate the matter) of much of what had been argued by the appellant on appeal, other than the powerful and determinative procedural fairness issue. I do not intend to qualify those views of the Full Court at all. Those views were also expressed in the context of deciding whether the most exceptional circumstances existed to relieve ASIC of the “elementary” proposition that it should be bound by the conduct of its case below: Metwally v University of Wollongong [1985] HCA 28; 60 ALR 68 at 71; Water Board v Moustakas [1988] HCA 12; 180 CLR 491 at 498. The consequences of so being bound would have had the proceedings below dismissed, leaving ASIC to face a res judicata or Anshun argument consequential upon dismissal.

The price of having the proceedings remitted for a full re-pleading and the running of a new case should be that Mr Mawhinney, within reason, be held harmless and made whole from the consequences of the first failed attempt by ASIC…

Remitter – legal principles

45    Section 28(1)(c) of the Federal Court Act permits the Full Court on an appeal to “set aside the judgment appealed from, in whole or in part, and remit the proceeding to the court from which the appeal was brought for further hearing and determination, subject to such directions as the Court thinks fit”.

46    Sub-sections 28(1) and (2) of the Federal Court Act provide:

28    Form of judgment on appeal

(1)    Subject to any other Act, the Court may, in the exercise of its appellate jurisdiction:

(a)    affirm, reverse or vary the judgment appealed from;

(b)    give such judgment, or make such order, as, in all the circumstances, it thinks fit, or refuse to make an order;

(c)    set aside the judgment appealed from, in whole or in part, and remit the proceeding to the court from which the appeal was brought for further hearing and determination, subject to such directions as the Court thinks fit;

(d)    set aside a verdict or finding of a jury, and enter judgment notwithstanding any such verdict or finding;

(f)    grant a new trial in any case in which there has been a trial, either with or without a jury, on any ground upon which it is appropriate to grant a new trial; or

(g)    award execution from the Court or, in the case of an appeal from another court, award execution from the Court or remit the cause to that other court, or to a court from which a previous appeal was brought, for the execution of the judgment of the Court.

(2)    It is the duty of a court to which a cause is remitted in accordance with paragraph (g) of subsection (1) to execute the judgment of the Court in the same manner as if it were its own judgment.

(Emphasis added).

47    In Community and Public Sector Union v Telstra Corporation Ltd (No 2) (2001) 112 FCR 324 at 329 [17] (CPSU v Telstra), Finkelstein J said that “[t]he better view appears to me to be that an order under s 28(1)(c) does not result in a new trial. Accordingly, the ‘further hearing’ will be conducted on the basis that it is a continuation of the first trial, where the parties can only mend their hand or change course in accordance with well known rules.”

48    That view was quoted with approval in Fernando v Commonwealth (2014) 231 FCR 251 at 262-63 [52]-[53] (Besanko and Robertson JJ, with whom Barker J agreed) and in Harvard Nominees Pty Ltd v Tiller (No 4) [2022] FCA 105; (2022) 403 ALR 498 at 514 [43] (Jackson J).

49    It seems to me therefore that, as in Harvard Nominees at 514 [44], “the present remitter is to be approached as a continuation of the original trial”. It follows, as Jackson J observed in that case at 515 [47], that “the primary court, on remitter, cannot go outside the scope of what is remitted … unless it determines in accordance with ordinary principles that it is in the interests of the administration of justice to give leave to reopen”. See too R v Carroll (2010) 77 NSWLR 45 at 52 [27] (Allsop P and Johnson J) (“It is undoubted that the scope of the authority of a court to which a matter is remitted under s 37 [of the Judiciary Act 1903 (Cth)] is confined by the terms of the remitter and that such court can make no order nor undertake any task inconsistent with the remitter order”).

50    As Allsop P and Johnson J said in that case at 52 [28], “[i]t is crucial, therefore, to understand what was remitted”.

51    As Jackson J also said in Harvard Nominees at 515 [50]:

… it important for this Court on remitter to understand the precise scope of what has been remitted, as well as to understand the meaning and effect of the appellate court’s judgment more generally. It is within the authority of this Court on remitter to determine the controversy between the parties as to what was and was not decided by the Full Court… And the parties here accept the elementary proposition that it is to be determined as a matter of objective construction of the orders made and the reasons expressed in the Appeal Judgment, in all the relevant context. The parties also accept that relevant context includes at least the grounds of appeal, the submissions on appeal, and the primary judgment.

The amended originating process

52    ASIC’s first originating process relevantly sought an order against Mr Mawhinney under ss 1101B(1) and 1324(1) of the Corporations Act and/or s 23 of the Federal Court Act restraining him from:

(1)    receiving or soliciting funds in connection with any financial product, including but not limited to products known as the “M Core Fixed Income Notes” (Core Notes), the “M+ Fixed Income Notes” (M+ Notes) and the “Australian Property Bonds”;

(2)    advertising, promoting or marketing any financial product, including but not limited to the Core Notes, M+ Notes and the Australian Property Bonds; and

(3)    removing or transferring from Australia any assets acquired directly or indirectly with funds received in connection with any financial product, including but not limited to the Core Notes, the M+ Notes and the Australian Property Bonds,

(the original restraints).

53    ASIC seeks the following relief against Mr Mawhinney in its amended originating process:

(1)    declarations under s 21 of the Federal Court Act and/or s 12GBA of the ASIC Act that Mr Mawhinney was knowingly concerned in or party to or involved in contraventions of various provisions of the Corporations Act and the ASIC Ac;

(2)    the original restraints but now relying on s 1101B(1) of the Corporations Act and/or s 12GD(1) of the ASIC Act rather than ss 1101B and/or 1324 of the Corporations Act;

(3)    an order pursuant to s 1324(1)(e) of the Corporations Act, s 12GD(1)(e) of the ASIC Act and/or s 23 of the Federal Court Act that Mr Mawhinney be restrained from engaging in the conduct the subject of the declarations now sought by ASIC;

(4)    an order pursuant to ss 206D and/or 206E of the Corporations Act and/or s 12GLD of the ASIC Act disqualifying Mr Mawhinney from managing corporations for a period the court considers appropriate; and

(5)    an order pursuant to s 12GBB of the ASIC Act that Mr Mawhinney pay pecuniary penalties for the conduct the subject of the declarations sought by ASIC that concern contraventions of civil penalty provisions of the ASIC Act.

54    As ASIC said in its written submissions, the differences between the relief originally sought, and the relief it now seeks, are these:

(1)    ASIC no longer relies on s 1324(1) of the Corporations Act or s 23 of the Federal Court Act to support the original restraints sought (and still sought);

(2)    ASIC now relies on s 1324(1) of the Corporations Act, s 12GD(1)(e) of the ASIC Act and s 23 of the Federal Court Act to support injunctive relief which is narrower in scope than the original restraints in that, if granted, the order would restrain Mr Mawhinney from engaging in the conduct the subject of the declarations sought (rather than the broader dealings in financial products sought in the original restraints);

(3)    ASIC now seeks banning orders under ss 206D and/or 206E of the Corporations Act and/or s 12GLD of the ASIC Act, which is a form of relief not previously sought; and

(4)    ASIC now seeks pecuniary penalties against Mr Mawhinney, which is a form of relief not previously sought.

Consideration

55    It is true, as Mr Mawhinney submitted, that there is no reference on the face of the remittal order to the possibility of further relief being sought, or to further allegations being made beyond those that were made at the first trial. It is equally true, as ASIC submitted, that no restrictions on the scope of the remitter are expressed in terms.

56    Despite the fact that both parties said that the position for which they contended was obvious, the remittal order is ambiguous. As the cases make clear, resort may thus be had, in aid of its true interpretation, to the surrounding circumstances – here, the reasons for judgment.

57    Although the Full Court did not say which provision of the Federal Court Act it had in mind, it is to be assumed that the remittal order was made pursuant to s 28(1)(c) – that is, that “the proceeding” (which the Full Court called “the matter” in the remittal order) was remitted “for further hearing and determination’, not a new trial (compare s 28(1)(f)). The remittal order referred to “hearing and determination” not “further hearing and determination”, but once it is apparent that the Full Court must have had s 28(1)(c) in mind, and accepting that the word “matter” was used as a synonym for “proceeding” (and was not used in a constitutional sense), the Full Court must be taken to have intended that “the proceeding be remitted for further hearing and determination”.

58    It follows, as Finkelstein J said in CPSU v Telstra at 329 [17], that such an order does not result in a new trial, and that further hearing is a continuation of the first trial, “where the parties can only mend their hand or change course in accordance with well known rules”.

59    Mr Mawhinney placed reliance on the decision of the Full Court in Repatriation Commission v Nation (1995) 57 FCR 25.

60    In that case, the only issue raised by the claim related to the chain of causation from the nasal operation to the existing disease of obsessive compulsory neurosis. The first Tribunal’s decision was set aside by the Court, which ordered that “the matter be remitted to the Tribunal to be heard and determined according to law after admitting such further evidence as it considered appropriate”.

61    At the second hearing before the Tribunal, the Repatriation Commission withdrew previous admissions that the respondent’s sinusitis was a war-caused disease. The Tribunal held that, while the surgery for sinusitis was a substantial contributing cause of the respondent’s neurosis, the material did not raise a reasonable hypothesis connecting his sinusitis with his war service, and it affirmed the refusal of the claim.

62    The respondent again appealed to the Federal Court. Justice Northrop set aside the Tribunal’s decision, reasoning as follows:

The order remitted ‘the matter’ to the tribunal. The word ‘matter’ means all things in dispute between the parties. In the Federal Court, the things in dispute were limited to the issue of causation from the nasal operation to the existing disease of obsessive compulsory neurosis. That was the matter remitted to the Tribunal to be heard and determined. Nothing else was remitted. To use the terminology of Gray J [in Blackman v Commissioner of Taxation (1993) 43 FCR 449 at 455-56], the order of the court limited the ambit of the issues with which the Tribunal was to deal with upon the matter being remitted to the Tribunal.

…

That authority is not directly applicable to the facts of the present case. Here, the claim by the applicant in February 1988 was for a special rate of pension under s 24 ... At all times, the only issue raised by the claim before the commission, the ... Board, the first review before the tribunal and the Federal Court related to the ‘chain of causation from the nasal operation to the existing disease of obsessive compulsory neurosis’. That was the ‘matter’ in issue. I have concluded that that was the ‘matter’ remitted to the tribunal for hearing and determination [and]… the only ‘matter’ to be heard and determined by the tribunal and that accordingly the tribunal, on the remittal, could not consider other matters and in particular the matter of whether the bilateral maxillary sinusitis was a war-caused disease.

See Nation v Repatriation Commission (No 2) [1994] FCA 1038; (1994) 37 ALD 63 at 68-9.

63    On appeal, Beaumont J (with whom Black CJ and Jenkinson J agreed) reasoned as follows in dismissing the appeal at 33-34:

As has been seen, the orders made by the Court in its first judgment included an order that “the matter” be remitted to the Tribunal to be heard and determined according to law after admitting such further evidence as it considered appropriate.

…

The … question is whether, upon its true construction, the order should have been read down, as Northrop J has now held, so as to have remitted to the Tribunal only that part of the claim as was concerned with the alleged sequela, that is, the question whether the neurosis was war-caused.

…

It follows from the ambiguity of the order of remitter that resort may be had, in aid of its true interpretation, to the surrounding circumstances. Those circumstances included, of course, the reasons for judgment. When regard is had to those reasons, it appears clearly that the meaning to be given to “matter” in the present context is the more restricted one, that is, the sequela question. That was the only issue tendered for determination by the Court. There was no issue that the sinusitis was war-caused.

It follows that I agree with Northrop J that the Tribunal went beyond its jurisdiction in embarking upon the sinusitis issue.

64    Mr Pearce SC, who appeared with Mr Aleksov and Mr Donovan for Mr Mawhinney, submitted that, adopting a similar approach in this case:

… the matter that [was] before Anderson J and before the Full Court, was [the] question whether Mr Mawhinney should be permanently restrained from dealing with financial products because of the conduct of companies with which he was associated. That was the matter before – that was a matter raised by the originating process. The matter that was agitated before Anderson J and agitated before the Full Court. It was no part of that matter whether Mr Mawhinney might also be disqualified from managing corporations under 206D or 206E, or whether he might be subject to pecuniary penalties under the ASIC Act.

65    Although the meaning of the word “matter” is bound to take its meaning from the context in which it is used, here, in my view the context – the reasons of the Full Court – supports the proposition contended for by Mr Mawhinney in this case.

66    In my view, the most obvious indication that the Full Court did not intend to remit anything other than what remained of ASIC’s case after it abandoned reliance on s 1324(1) of the Corporations Act, and did not intend it to be able to bring a new case seeking penalties and disqualification orders, is found in this passage of its reasons at 405 [109]:

The discretion to permit ASIC not to be held to the legal (or evidentiary) case it put below exists in exceptional circumstances. Further, and as explained in the fifth point below, the worry, inconvenience and interference with personal and business affairs which all litigation involves will be no different for Mr Mawhinney now than it would have been had he been given procedural fairness below.

67    As Mr Pearce submitted, and I agree:

Now, your Honour, that cannot be correct if, on the remitter, Mr Mawhinney is now subject to these additional penalties. He won’t be in the same position he was in at the first trial, and clearly, that is the clearest indication that the Full Court did not envisage that on the remitter, any further relief could be sought against Mr Mawhinney.

68    I do not agree with ASIC’s submission that when the Full Court said at 407 [114] that “[w]e acknowledge that ASIC ran one case and now will have to run another”, it meant that it could on remitter make not just “a second attempt at the case already formulated, articulated and pleaded, but a new case – a new case trying issues not litigated at the first trial”. It seems to me if the Full Court had intended such a result, it would have said so, and ordered a retrial under s 28(1)(f), not made a remittal order under s 28(1)(c).

69    The words in 407 [114] of the Full Court’s reasons upon which ASIC sought to fasten must be read in their context. The paragraph relevantly reads:

We acknowledge that ASIC ran one case and now will have to run another. We recognise that ASIC having done so caused the hearing below to miscarry and caused this appeal to be necessary (albeit that the appeal could and should have been confined to the ground of procedural fairness). We recognise that ASIC positively disavowed the legal position it now accepts applies, and that this may well mean that further evidence is required to be adduced at the further hearing by both parties.

70    In my view, the “further evidence” to which the Full Court referred in that passage, and in the remittal order, was a reference to the evidence that it must adduce on the remittal in support of the case that Mr Mawhinney has contravened the Corporations Act within the meaning of s 1101B(1) – not some new case involving different provisions of that Act and the ASIC Act, directed to different relief (that is, penalties and disqualification).

71    ASIC also now seeks to bring a case under s 1324 of the Corporations Act. In my view, having abandoned reliance on that provision before the Full Court, the remittal order, on its proper construction, does not permit it to resuscitate the claim in that way. It seems to me tolerably clear that the Full Court envisaged that the remitted proceeding would involve a trial about s 1101B – and that is why their Honours dedicated 15 paragraphs of their reasons to explaining (as considered obiter dicta) how the provision is intended to operate (and said very little about s 1324). See J at 416-20 [150]-[164].

72    ASIC also submitted that I should take into account in construing the remittal order two observations made in the Full Court’s separate reasons about costs. The first one was the statement made by O’Bryan and Cheeseman JJ at [62] that “the Court has determined that it is in the interests of justice for the proceeding to be remitted for retrial”. The second was Allsop CJ’s statement at [7] that “[t]he price of having the proceedings remitted for a full re-pleading and the running of a new case should be that Mr Mawhinney, within reason, be held harmless and made whole from the consequences of the first failed attempt by ASIC” (emphasis added).

73    Both observations are, if one is to be strictly literal about it, inaccurate. The Full Court did not order a retrial, as I have explained (see paragraph [57] above). And there were no pleadings at the trial. But in any event, the principal reasons must govern the position, otherwise it would be a case of the tail wagging the dog.

74    In his oral submissions, Mr Borsky KC, who appeared with Mr Tran and Mr Congram for ASIC, sought to rely on a contention that the new pleaded case involves “substantially the same conduct” as that relied on before Anderson J. Even accepting, without deciding, that that is so, it seems to me to have little relevance to the question of the proper construction of the remittal order.

75    For all those reasons, it follows that I accept Mr Mawhinney’s submission that ASIC is confined on remittal to a case for permanent injunctions under s 1101B(1) of the Corporations Act, and that for the reasons I have given, it may not on remittal:

(1)    resurrect the case for relief under s 1324(1) of the Corporations Act;

(2)    seek declarations that concern contraventions of ss 911A and 1041H of the Corporations Act or ss 12DA or 12DB of the ASIC Act;

(3)    seek injunctions pursuant to s 12GD of the ASIC Act or s 23 of the Federal Court Act;

(4)    seek orders that Mr Mawhinney be disqualified from managing corporations under ss 206D and 206E of the Corporations Act or s 12GLD of the ASIC Act;

(5)    make claims under s 12GBB of the ASIC Act (or s 21 of the Federal Court Act) that Mr Mawhinney pay pecuniary penalties for the conduct the subject of the declarations sought by ASIC that concern contraventions of civil penalty provisions of the ASIC Act.

76    Mr Mawhinney submitted that a further reason that the amendments to the originating process should not be allowed was that, even if they are within the scope of the remittal order, they do not conform with the well-known rules to which Finkelstein J referred in CPSU v Telstra.

77    In this case, it was submitted, those rules include the rules relating to an amendment of a party’s claim. Because the remitter is the continuation of a trial that has already begun, the same rules apply as if they were sought part-way through a trial.

78    Whether to permit amendments in such circumstances is a matter of discretion, but relevant factors telling against allowing them include where they are sought at a late stage in the proceeding, and where there is no sufficient explanation for the delay. See, for example, Aon Risk Services Australia Pty Ltd v Australian National University (2009) 239 CLR 175 at 214-15 [102] (Gummow, Hayne, Crennan, Kiefel and Bell JJ).

79    Here, as Mr Mawhinney submitted, the amendments are sought to be made at a late stage of the proceeding, after an initial trial has been conducted and an appeal heard.

80    ASIC has not explained why it did not raise the “new” claims which I have held do not fall within the scope of the remitter. Nor has it explained why it abandoned its claim under s 1324(1) of the Corporations Act, but now seeks to reinstate it.

81    ASIC instead submitted that the new claims are “a logical extension” of the “legally correct” case it now seeks to bring (that is, that contraventions are required to be proved), and that they largely “arise out of the matters that were before Anderson J”.

82    I do not agree. The claims are distinct and would, as was submitted, place Mr Mawhinney in significantly greater jeopardy. Absent some sensible explanation as to why they were not made at the first trial (or even mentioned on appeal), that they not now be allowed.

83    ASIC also contended that the public functions of ASIC should in some fashion weigh in the balance in the exercise of discretion whether to permit late made amendments, absent any explanation for the delay. Again, at least on the facts here, I see no reason why those functions are relevant to the question whether leave should be granted to bring the new claims.

Disposition

84    Mr Pearce submitted that the only orders I should make in the event that I acceded to his submissions (as I have) is to revoke the leave given to ASIC to file an amended originating process and give it leave to file a further such document that is consistent with these reasons. Such orders will be made.

85    Mr Borsky said that ASIC intends to file a statement of claim. I therefore ask that the parties agree on timetable for pleadings, so that the proceeding can progress towards a hearing as expeditiously as possible.

86    I will also hear the parties about costs.

Associate:

Dated:    25 October 2023