FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Ostrava Equities Pty Ltd (Penal Notice) [2024] FCA 1056

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application is granted.

2.    An amended form of the Court’s orders made on 1 September 2016 be entered in the terms attached in Annexure A of these orders.

3.    The orders made on 1 September 2016, as varied, be personally served on the fourth and fifth defendants.

4.    There be no order as to costs.

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

ANNEXURE A

Federal Court of Australia

District Registry: Victoria

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

Plaintiff

OSTRAVA EQUITIES PTY LTD AND OTHERS NAMED IN THE SCHEDULE

Defendants

ORDER

THE COURT NOTES THAT:

1.    The endorsement containing the penal notice attached to this order immediately below was added pursuant to the order of the Court made on 12 September 2024.

THE COURT ORDERS THAT:

1.    The Court declares that the First Defendant contravened:

(a)    sections 911A and 911B of the Corporations Act 2001 (Cth) (“the Corporations Act”) during the period June 2009 to May 2015 by providing managed discretionary account services to its clients (including Rodney Bonsack, Douglas Lapthorne, Daniel Hoff, Jean Walsh, Richard Stringer, Client BT, Shannon Milligan and William Tobin) without holding an Australian financial services licence or authorisation from the holder of an Australian financial services licence.

(b)    section 941B of the Corporations Act during the period 2009 to May 2015 by providing financial services to at least 26 retail clients (including Rodney Bonsack, Douglas Lapthorne, Daniel Hoff, Jean Walsh and Shannon Milligan) without providing a financial services guide.

(c)    section 942C of the Corporations Act by:

(i)    providing Richard Stringer in February 2014 and William Tobin in 2010 with financial services guides that were not dated as required by s 942C(5); and

(ii)    providing a financial services guide to clients WP and KE in January 2014 that was not dated as required by s 942C(5), did not provide the level of detail required by s 942C(3), and was not worded in a clear, concise and effective manner as required by s 942C(6A);

(d)    sections 946A and 946C of the Corporations Act during the period 2009 to February 2014 by giving personal advice to Rodney Bonsack, Daniel Hoff, Jean Walsh and Shannon Milligan, who were retail clients, without providing a Statement of Advice;

(e)    section 1041G of the Corporations Act by engaging in dishonest conduct in relation to financial products and/or services by:

(i)    during the period July 2012 to June 2015, purporting to charge and recovering unauthorised fees from the PR Associates Super Fund, the Stringer Super Fund and the Milligan Super Fund; and

(ii)    during the period August 2014 to May 2015, overstating the value of the Tobin Super Fund and representing to William Tobin that the value of the Tobin Super Fund’s shareholdings in the Seventh, Ninth and Tenth Defendants represented their purchase price;

(f)    section 1041H of the Corporations Act and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (“the ASIC Act”), by engaging in misleading and deceptive conduct, and s 12DB of the ASIC Act, by making false and misleading representations, during the period June 2013 to May 2015 by overstating the value of the PR Associates Super Fund, the Lapthorne Super Fund, the Stringer Super Fund, the Tobin Super Fund and the Gordon Super Fund;

(g)    section 1041H of the Corporations Act and s 12DA of the ASIC Act, by engaging in misleading and deceptive conduct, and s 12DB of the ASIC Act, by making false and misleading representations, by representing to William Tobin in 2010 that it would not invest funds in unlisted investments promoted by the First Defendant;

(h)    section 1041H of the Corporations Act and s 12DA of the ASIC Act by engaging in misleading and deceptive conduct during the period November 2015 to January 2016 by causing funds from the Walsh Super Fund to be transferred to and received by the Eleventh Defendant without the authorisation or consent of Jean Walsh;

(i)    section 29 of the National Consumer Credit Protection Act 2009 (Cth) by lending the sum of $38,000 to client JM in April 2014 and thereby engaging in unlicensed credit activity;

(j)    regulation 7.7.09C of the Corporations Regulations 2001 (Cth) by failing to retain a Statement of Advice provided to clients KW and MT and the MT Superannuation Fund in April 2009; and

(k)    section 286 of the Corporations Act by failing to keep for a period of seven years written financial records that correctly recorded and explained its transactions, financial position and performance and would enable true and fair financial statements to be prepared and audited.

2.    The Court declares that the First Defendant was knowingly concerned in the Fifth Defendant’s contravention of s 961Q of the Corporations Act referred to in paragraph 7(a) below.

3.    The Court declares that the Second Defendant contravened s 911A of the Corporations Act during the period April 2012 to May 2015 by carrying on a financial services business and providing financial services to Douglas Lapthorne, Daniel Hoff, Jean Walsh, Richard Stringer and Shannon Milligan without holding an Australian financial services licence.

4.    The Court declares that the Third Defendant contravened s 952E of the Corporations Act in September 2015 by giving Jean Walsh a defective financial services guide in circumstances where the financial services guide:

(a)    was not dated as required by s 942B(5) of the Corporations Act;

(b)    did not provide the level of detail that a person would reasonably require for the purpose of making a decision whether to acquire financial services from Ostrava Securities as a retail client, as required by s 942B(3) of the Corporations Act;

(c)    was not worded or presented in a clear, concise and effective manner, as required by s 942B(6A) of the Corporations Act.

5.    The Court declares pursuant to s 1317E of the Corporations Act that the Fourth Defendant contravened s 180 of the Corporations Act as a director of the First to Third Defendants during the period 2009 to January 2016 by:

(a)    failing to take reasonable steps to prevent the First Defendant from committing the contraventions referred to above of sections 286, 911A, 911B, 941B; 942C, 946A, 946C,·1041G and 1041H of the Corporations Act; sections 12DA and 12DB of the ASIC Act; s 29 of the National Consumer Credit Protection Act 2009 (Cth); and regulation 7.7.09C of the Corporations Regulations;

(b)    failing to take reasonable steps to prevent the Second Defendant from committing the contraventions of s 911A of the Corporations Act referred to above; and

(c)    failing to take reasonable steps to prevent the Third Defendant from committing the contravention of s 952E of the Corporations Act referred to above.

6.    The Court declares that the Fifth Defendant contravened:

(a)    sections 911A and 911B of the Corporations Act during the period June 2009 to May 2015 by providing managed discretionary account services to clients of the First Defendant (including Rodney Bonsack, Douglas Lapthorne, Daniel Hoff, Jean Walsh, Richard Stringer, Client BT, Shannon Milligan and William Tobin) without holding an Australian financial services licence or authorisation from the holder of an Australian financial services licence;

(b)    section 941B of the Corporations Act during the period 2009 to May 2015 by providing financial services to at least 26 retail clients (including Rodney Bonsack, Douglas Lapthorne, Daniel Hoff, Jean Walsh and Shannon Milligan) without providing a financial services guide;

(c)    section 942C of the Corporations Act by providing Richard Stringer in February 2014 with an undated financial services guide;

(d)    sections 946A and 946C of the Corporations Act during the period 2009 to February 2014 by giving personal advice to Rodney Bonsack, Daniel Hoff, Jean Walsh and Shannon Milligan, who were retail clients, without providing a Statement of Advice;

(e)    section 1041G of the Corporations Act during the period July 2012 to June 2015 by engaging in dishonest conduct in relation to financial products and/or services by purporting to charge and recovering unauthorised fees from the PR Associates Super Fund, the Stringer Super Fund and the Milligan Super Fund;

(f)    section 1041G of the Act during the period August 2014 to May 2015 by engaging in dishonest conduct in relation to financial products and/or services by overstating the value of the Tobin Super Fund and representing to William Tobin that the value of the Tobin Super Fund’s shareholdings in the Seventh, Ninth and Tenth Defendants represented their purchase price;

(g)    section 1041H of the Corporations Act and s 12DA of the ASIC Act, by engaging in misleading and deceptive conduct, and s 12DB of the ASIC Act, by making false and misleading representations, during the period June 2013 to May 2015 by overstating the value of the PR Associates Super Fund, the Lapthorne Super Fund, the Stringer Super Fund, the Tobin Super Fund and the Gordon Super Fund; and

(h)    section 1041H of the Corporations Act and s 12DA of the ASIC Act during the period November 2015 to January 2016 by engaging in misleading and deceptive conduct by causing funds from the Walsh Super Fund to be transferred to and received by the Eleventh Defendant without the authorisation or consent of Jean Walsh.

7.    The Court declares pursuant to s 1317E of the Corporations Act that the Fifth Defendant contravened:

(a)    section 961Q of the Corporations Act by:

(i)    not acting in the best interests of, and not providing appropriate advice to, Shannon Milligan in February 2014 by advising her to establish a SMSF in contravention of sections 961B and 961G of the Corporations Act in circumstances where it was uneconomic for Ms Milligan to establish and operate an SMSF having regard to the starting balance of the SMSF, the costs likely to be incurred in administering the SMSF and Ms Milligan’s personal financial circumstances; and

(ii)    not acting in the best interests of, and not providing appropriate advice to, three other clients of the First Defendant during the period February 2014 to August 2014 to establish SMSFs in contravention of sections 961B and 961G of the Corporations Act in circumstances where it was uneconomic for those clients to establish and operate an SMSF having regard to the starting balance of the SMSF and the costs likely to be incurred in administering the SMSF;

(b)    section 180 of the Corporations Act as a director of the First Defendant during the period 2009 to January 2016 by:

(i)    providing managed discretionary account services to clients of the First Defendant (including Rodney Bonsack, Douglas Lapthorne, Daniel Hoff, Jean Walsh, Richard Stringer, Client BT, Shannon Milligan and William Tobin) during the period June 2009 to May 2015 without holding an Australian financial services licence or authorisation from the holder of an Australian financial services licence in contravention of sections 911A and 911B of the Corporations Act;

(ii)    providing financial services to at least 26 retail clients (including Rodney Bonsack, Douglas Lapthorne, Daniel Hoff, Jean Walsh and Shannon Milligan) during the period 2009 to May 2015 without providing a financial services guide in contravention of s 941B of the Corporations Act;

(iii)    providing Richard Stringer with an undated financial services guide in February 2014 in contravention of s 942C of the Act;

(iv)    giving personal advice to Rodney Bonsack, Daniel Hoff, Jean Walsh and Shannon Milligan, who were retail clients, during the period 2009 to February 2014 without providing a Statement of Advice in contravention of sections 946A and 946C of the Corporations Act;

(v)    engaging in dishonest conduct in relation to financial products and/or services during the period July 2012 to June 2015 in contravention of s 1041G of the Corporations Act by purporting to charge and recovering unauthorised fees from the PR Associates Super Fund, the Stringer Super Fund and the Milligan Super Fund;

(vi)    engaging in dishonest conduct in relation to financial products and/or services during the period August 2014 to May 2015 in contravention of s 1041G of the Corporations Act by overstating the value of the Tobin Super Fund and representing to William Tobin that the value of the Tobin Super Fund’s shareholdings in the Seventh, Ninth and Tenth Defendants represented their purchase price;

(vii)    engaging in misleading and deceptive conduct in contravention of s 1041H of the Corporations Act and s 12DA of the ASIC Act and making false and misleading representations in contravention of s 12DB of the ASIC Act during the period June 2013 to May 2015 by overstating the value of the PR Associates Super Fund, the Lapthorne Super Fund, the Stringer Super Fund, the Tobin Super Fund and the Gordon Super Fund;

(viii)    engaging in misleading and deceptive conduct in contravention of s 1041H of the Corporations Act and s 12DA of the ASIC Act during the period November 2015 to January 2016 by causing funds from the Walsh Super Fund to be transferred to and received by the Eleventh Defendant without the authorisation or consent of Jean Walsh;

(ix)    not acting in the best interests of, and providing advice that was inappropriate to, Shannon Milligan in February 2014 and clients of the First Defendant between February 2014 and August 2014, in contravention of s 961Q of the Corporations Act;

(x)    failing to keep accurate records relating to its management and conduct of the Gordon Super Fund;

(xi)    charging and withdrawing fees from the Gordon Super Fund between November 2012 and November 2013 without authorisation or permission;

(xii)    selling 220,000 shares in World Reach Limited on behalf of the Lapthorne Super Fund in March 2015 contrary to the express instructions of Douglas and Lynette Lapthorne; and

(xiii)    charging and withdrawing fees from the Hoff Super Fund during the period 8 August 2012 to 31 October 2014 without authorisation or permission of Daniel Hoff or the Hoff Super Fund;

(xiv)    causing funds to be transferred from the SMSF cash management accounts of clients of the First Defendant during the period December 2013 to June 2014 to the Ostrava Fund for the purpose of acquiring shares in CGR and CGO and failing to transfer the shares from the Ostrava Fund to clients of the First Defendant;

(xv)    permitting and failing to take reasonable steps to prevent the First Defendant from committing the contraventions referred to above of sections 286, 911A, 911B, 941B, 942C, 946A, 946C, 1041G and 1041H of the Corporations Act; sections 12DA and 12DB of the ASIC Act; s 29 of the National Consumer Credit Protection Act 2009 (Cth); and regulation 7.7.09C of the Corporations Regulations; and

(xvi)    being knowingly concerned in the First Defendant’s contraventions of sections 286, 911A, 911B, 941B, 942C, 946A, 946C, 1041G and 1041H of the Corporations Act; sections 12DA and 12DB of the ASIC Act; s 29 of the National Consumer Credit Protection Act 2009 (Cth); and regulation 7.7.09C of the Corporations Regulations;

(c)    sections 181 and 182 of the Corporations Act as a director of the First Defendant by:

(i)    purporting to charge and recovering unauthorised fees from the PR Associates Super Fund, the Stringer Super Fund and the Milligan Super Fund during the period July 2012 to June 2015;

(ii)    overstating the value of the PR Associates Super Fund, the Lapthorne Super Fund, the Stringer Super Fund and the Tobin Super Fund during the period August 2013 to May 2015;

(iii)    representing to William Tobin in February 2014 that the value of the Tobin Super Fund’s shareholdings in the Seventh, Ninth and Tenth Defendants represented their purchase price;

(d)    section 182 of the Corporations Act as a director of the First Defendant during the period September 2011 to October 2012 by investing funds from the PR Associates Super Fund, the Lapthorne Super Fund and the Tobin Super Fund in the Ostrava Fund without notifying and obtaining the consent of Rodney Bonsack, Douglas Lapthorne and William Tobin;

(e)    sections 181 and 182 of the Corporations Act as a director of the First and Eleventh Defendants during the period November 2015 to January 2016 by causing funds from the Walsh Super Fund to be transferred to and received by the Eleventh Defendant without the authorisation or consent of Jean Walsh;

(f)    section 180 of the Corporations Act as a director of the Second Defendant during the period April 2012 to May 2015 by:

(i)    permitting and failing to take reasonable steps to prevent the Second Defendant from committing contraventions of s 911A of the Corporations Act; and

(ii)    being knowingly concerned in the Second Defendant’s contraventions of s 911A of the Corporations Act;

(g)    section 180 of the Corporations Act as a director of the Third Defendant in September 2015 by:

(i)    permitting and failing to take reasonable steps to prevent the Third Defendant from committing the contravention of s 952E of the Corporations Act; and

(ii)    being knowingly concerned in the Third Defendant’s contravention of s 952E of the Corporations Act;

(h)    section 180 of the Corporations Act as a director of the Eighth Defendant during the period July 2012 to October 2015 by permitting or failing to prevent the Eighth Defendant from failing to obtain or retain application forms or any other record of consent for the acquisition by shareholders of shares in Prometheus Capital; and

(i)    sections 181 and 182 of the Act as a director of the Eleventh Defendant by causing the Eleventh Defendant to pay $25,000 to the provisional liquidators in November 2015 purportedly in accordance with the terms of a funding deed in circumstances where:

(i)    the funds paid to the provisional liquidators had been transferred to the Eleventh Defendant by clients of the First Defendant; and

(ii)    those clients had not consented to contributing equity to the Eleventh Defendant and were not aware that the Eleventh Defendant had made a payment to the provisional liquidators.

8.    The Court declares that the Eleventh Defendant was involved in contraventions by the First and Fifth Defendants of s 1041H of the Corporations Act and s 12DA of the ASIC Act during the period November 2015 to January 2016 by:

(a)    causing funds from the Walsh Super Fund to be transferred to it without authorisation or consent; and

(b)    receiving funds from the Walsh Super Fund without authorisation or consent.

9.    The First, Second, Third, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh Defendants be wound up pursuant to ss 461(1)(k) and 464 of the Corporations Act.

10.    Leanne Chesser and Craig Shepard of KordaMentha, Level 24, 333 Collins Street, Melbourne in the State of Victoria be appointed joint and several liquidators for the purposes of winding up the First, Second, Third, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh Defendants.

11.    The Fourth and Fifth Defendants be restrained for a period of 10 and 20 years respectively, whether by themselves, their servants, agents and employees or otherwise, from:

(a)    carrying on a business related to, concerning or directed to financial products or financial services within the meaning of s 761A of the Corporations Act;

(b)    providing any of the following services:

(i)    providing financial product advice within the meaning of s 761A of the Corporations Act;

(ii)    dealing in financial products within the meaning of s 761A of the Corporations Act;

(c)    in any way holding themselves out as doing the things in (a) or (b) above.

12.    The Fourth Defendant be disqualified pursuant to sections 206C and 206E of the Corporations Act from managing corporations for a period of 7 years.

13.    The Fifth Defendant be disqualified pursuant to sections 206C and 206E of the Corporations Act from managing corporations for a period of 15 years.

14.    Paragraph 3 of the Order dated 18 December 2015 be varied from the date hereof as follows:

(a)    The injunction does not apply to the income derived from the legal practice conducted by the Fourth Defendant; and

(b)    There be no further deductions by the Fourth Defendant for reasonable living expenses from the funds held in trust with Neill Ogge Lawyers, pursuant to paragraph 1 of the Order dated 10 December 2015 whilst the injunction remains in place.

15.    Paragraph 3 of the Order dated 18 December 2015, as varied by paragraph 14 of this Order, is to remain in place until 1 November 2016.

16.    The trial listed for hearing commencing 12 September 2016 (on an estimate of five days) be vacated.

17.    The order of costs against the Plaintiff made on 23 October 2015 be vacated.

18.    No further order, as to costs.

SCHEDULE

No: VID201/2015

Federal Court of Australia

District Registry: Victoria

Division: General

REASONS FOR JUDGMENT

HESPE J:

1    By interlocutory application dated 22 February 2024, the plaintiff (ASIC) has applied for orders which seek to have an endorsement placed on orders against the fourth and fifth defendants. Those orders were made by the Court by consent on 1 September 2016 (Orders).

2    The plaintiff relies upon two affidavits:

(a)    An affidavit of Mr Miriklis, sworn on 22 February 2024. Mr Miriklis is a solicitor and employee of the plaintiff who has been the solicitor on the record for the plaintiff since the commencement of the present proceedings.

(b)    An affidavit of Ms Seddon, affirmed on 27 February 2024. Ms Seddon is an employee of the plaintiff and a senior manager in one of the plaintiff’s investigation and enforcement action teams.

3    For the reasons set out below, notwithstanding the extraordinary length of time since the Orders were made, the application will be granted.

Background

4    The plaintiff commenced proceedings in April 2015 seeking orders against the first to fifth defendants pursuant to s 1323 of the Corporations Act 2001 (Cth). The history and nature of those proceedings can be found in the Court’s reasons for judgment in Australian Securities and Investments Commission v Ostrava Equities Pty Ltd [2016] FCA 1064. The orders sought were in aid of an investigation which ASIC had commenced pursuant to s 13 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) in relation to possible contraventions of the Corporations Act, and the ASIC Act by the defendants in respect of the provision of financial services in connection with self-managed superannuation funds.

5    In June 2016 an agreed statement of facts and admissions was filed jointly on behalf of the plaintiff and the fourth, fifth and eleventh defendants. On the basis of that agreed statement of facts and admissions, the plaintiff sought and the fourth, fifth and eleventh defendants consented to:

(a)    declarations that inter alia, the fourth and fifth defendants had contravened and/or were involved in contraventions of various provisions of the Corporations Act, the ASIC Act, the National Consumer Credit Protection Act 2009 (Cth) and/or the Corporations Regulations 2001 (Cth);

(b)    orders for the winding up of each of the corporate defendants;

(c)    injunctions preventing the fourth and fifth defendants from:

(i)    carrying on a business related to, concerning or directed to financial products or financial services within the meaning of s 761A of the Corporations Act;

(ii)    providing any of the following services:

(A)    providing financial product advice within the meaning of s 761A of the Corporations Act;

(B)    dealing in financial products within the meaning of s 761A of the Corporations Act;

(iii)    in any way holding themselves out as doing the things in (i) or (ii) above for a period of 10 years and 20 years respectively; and

(d)    orders disqualifying the fourth and fifth defendants from managing corporations for a period of 7 years and 15 years respectively.

6    By the Orders, the Court made declarations of contraventions by, inter alia, the fourth and fifth defendants. The declarations made with respect to the fourth defendant related to failures to take reasonable steps to prevent other defendants from committing contraventions. The declarations made with respect to the fifth defendant included declarations relating to the engagement by the fifth defendant in dishonest conduct in relation to financial products and in misleading and deceptive conduct. Order 11 of the Orders is in the following terms:

11.     The Fourth and Fifth Defendants be restrained for a period of 10 and 20 years respectively, whether by themselves, their servants, agents and employees or otherwise, from:

(a)    carrying on a business related to, concerning or directed to financial products or financial services within the meaning of s 761A of the Corporations Act;

(b)     providing any of the following services:

(i)     providing financial product advice within the meaning of s 761A of the Corporations Act;

(ii)     dealing in financial products within the meaning of s 761A of the Corporations Act;

(c)     in any way holding themselves out as doing the things in (a) or (b) above.

7    The Orders were not endorsed with a penal notice pursuant to r 41.06 of the Federal Court Rules 2011 (Cth), and no request was made by the plaintiff for any such endorsement.

8    At the time the Orders were made, the Court’s Enforcement, Endorsement and Contempt Practice Note (GPN-ENF, 25 October 2016) had not been published.

9    It would appear from the evidence that at the time the Orders were made, the failure to seek the endorsement of a penal notice on the Orders was an oversight by those in the plaintiff’s employment responsible for the carriage of this proceeding. As Mortimer J (as her Honour then was) observed in Director of Consumer Affairs Victoria v Gibson (No 4) [2018] FCA 1868 at [12]:

An oversight is a very human occurrence, and everyone (including judges) may be found to have made them.

10    The plaintiff became aware of the oversight in or around July 2023, approximately four months after it was brought to the attention of Mr Miriklis that ASIC was investigating certain matters concerning the fourth and fifth defendants and their potential involvement in businesses trading as “Third Party Claims” or “TP Claims”.

11     The website for TP Claims as at 28 March 2023 contained the following text:

… What to do if you have said the wrong thing and your claim has been denied … you can contact our Melbourne office for advice regarding the best way to move forward – your claim may be affected, but only partially;

…

What to do if your car insurer is investigating you in Victoria … Assuming you are not committing insurance fraud, it’s important to take a deep breath, and contact us for advice so you don’t make any missteps

…

How third party claims can help you with your car insurance claim … If your insurance company is taking too long or you want to lodge a dispute over a decision, you can contact our Melbourne office for advice.

…

How third party claims advocates for you … Third Party Claims is a no-win no-fee third party recoveries company – if you have a good case, we’ll go into battle for you. We can help you prepare documentation for an Ombudsman dispute, to put your best foot forward for the best result possible in your favour. We can provide advice on escalating your case if necessary

12    By letter dated 20 February 2024, the plaintiff informed the fifth defendant’s legal representatives that:

ASIC considers that, to the extent your client may be advising on, or assisting clients with, claims against their own insurers, [the fifth defendant] may be carrying on a business related to, concerning, or directed to financial products within the meaning of s 761A of the Corporations Act, specifically insurance products, in breach of paragraph 11(a) of the Orders.

Further, such conduct on [the fifth defendant’s] part may constitute providing financial product advice within the meaning of s 761A of the Corporations Act, in breach of paragraph 11(b)(i) of the Orders (s 766B(1) of the Corporations Act).

Finally, ASIC is concerned that the enclosed website pages hold out that the TP Claims business does the things identified in paragraphs 11(a) and (b) of the Orders. Given your client’s apparent involvement in the TP Claims business, ASIC considers that this potentially evidences a breach by [the fifth defendant] of paragraph 11(c) of the Orders.

The conduct outlined above, if engaged in by [the fifth defendant], may breach the Orders or at least place him at risk of breaching the Orders.

13    ASIC also stated in that letter that it proposed to apply to the Court for a penal endorsement to the Orders.

14    The fifth defendant swore an affidavit on 11 May 2024 by which he deposed that TP Claims is a vehicle accident claims management business and that it does not act for clients involved in disputes with their own insurance companies. The fifth defendant’s evidence was that since 2020 TP Claims has not accepted claims that involve disputes between an insured and their own insurer. The evidence from the fifth defendant was that he had given instructions in 2020 to the consultant managing the business’s website to put a notice on the site to the effect that TP Claims did not manage insurance claims and only managed tortious claims and that he had received an email from the consultant confirming such a notice had been placed on the website in February 2021. In around 2023, the fifth defendant was informed by the consultant that in the process of moving the hosting of the website from one host to another, the website had been deleted and a backup version of the website had been uploaded. The fifth defendant took over the management of the website in 2024 and effected the removal of some old content. The website as at May 2024 states that TP Claims does not manage insurance claims or disputes between insurers and their insured.

15    The evidence from Ms Seddon was that the website of TP Claims on 16 February 2024 contained the same text as that quoted above at [11].

The parties’ contentions

16    Written submissions were filed on behalf of the plaintiff and the fourth and fifth defendants, and counsel for the applicant and the fourth and fifth defendants also made oral submissions at the hearing.

17    The plaintiff submitted that on the evidence it is at least arguable that TP Claims’ business has involved advising or assisting individuals with claims against their insurer and TP Claims has held out as providing such advice or assistance.

18    Order 11 prohibited the fifth respondent from carrying on a business related to, concerning or directed to financial products or financial services within the meaning of s 761A of the Corporations Act. As at the date of the Orders, s 761A of the Corporations Act relevantly provided:

financial product has the meaning given by Division 3.

Note:     References in this Chapter to financial products have effect subject to particular express exclusions for particular purposes—see e.g. sections 1010A and 1074A.

financial product advice has the meaning given by section 766B.

…

financial service has the meaning given by Division 4.

19    The general definition of “financial product” is set out in s 763A of the Corporations Act and at the date of the Orders relevantly included:

763A     General definition of financial product

(1)     For the purposes of this Chapter, a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following:

…

(b)     manages financial risk (see section 763C);

…

20    Section 763C of the Corporations Act relevantly provided that:

For the purposes of this Chapter, a person manages financial risk if they:

 (a)     manage the financial consequences to them of particular circumstances happening; or

…

Note 1: Examples of actions that constitute managing a financial risk are:

(a)     taking out insurance; or

…

21    Section 764A of the Corporations Act relevantly provided:

764A     Specific things that are financial products (subject to Subdivision D)

 (1)     Subject to Subdivision D, the following are financial products for the purposes of this Chapter:

…

(d)     a contract of insurance that is not a life policy, or a sinking fund policy, within the meaning of the Life Insurance Act 1995…

22    It was submitted that as the fifth defendant carries on the business trading as TP Claims, it is arguable that the fifth defendant has engaged in conduct that is contrary to the terms of the Orders by carrying on a business that was related to financial products in the form of insurance.

23    The plaintiff’s submissions in relation to the conduct of the fourth defendant were more vague. The affidavit evidence of the fourth defendant was that she was not an officer, decision maker, owner, employee or contractor, or in any other way involved in the management or control of TP Claims. The fourth defendant practises as a solicitor. The plaintiff submitted that there is evidence that “suggests the absence of a wholly arms [sic] length relationship between [the fourth defendant] and TP Claims”. The lack of an arm’s length relationship was said to make it “appropriate that the [fourth defendant] be formally warned of the penal consequences of failing to comply with the Court’s injunction”. The lack of an arm’s length relationship was said to be supported by the email address associated with the registration of the TP Claims website, based on a search conducted on 28 March 2023. Reliance was also placed on “certain customer reviews of TP Claims posted on Google Search” which as at 16 February 2024 appeared to refer to the fourth defendant. There was no evidence of how those reviews came to appear as a response to a query entered on Google Search.

24    The plaintiff accepted that the principle of finality in litigation weighs against the grant of the application. The plaintiff contended that that consideration was outweighed by the following:

(1)    The nature of the Orders was of the utmost seriousness, having regard to the nature of the contravening conduct which supported the making of those Orders. Varying the Orders would bring clarity to the potential consequences of non-compliance and it is in the interests of the administration of justice that the Orders should be capable of enforcement through contempt proceedings should the circumstances justify such an application in the future.

(2)    The time for compliance with the Orders has not expired.

(3)    It is at least arguable that the fifth defendant has failed to comply with the Orders and the lack of an arm’s length relationship between the fourth defendant and TP Claims made it appropriate for the fourth defendant to be formally warned of the penal consequences of non-compliance.

(4)    The fourth and fifth defendants may be said to currently enjoy a possible benefit from the absence of the endorsement in that they may be less readily exposed to prosecution for contempt if they fail to comply and there is no justice in the Court preserving that benefit.

(5)    The failure to seek the endorsement at the time the Orders were made was a matter of simple oversight and since becoming aware of the need to vary the Orders, the plaintiff has acted promptly.

25    The fourth and fifth defendants submitted that the application should be refused for the following reasons:

(1)    The extent of the delay of over 7 years disrupts the principle of finality in litigation.

(2)    The Orders were made by consent and absent setting aside the settlement agreement, should not be re-opened. There was no basis for setting aside the settlement agreement.

(3)    There was an absence of evidence that either the fourth or fifth defendant had breached the Orders. This is discussed further below.

(4)    The proposed endorsement lacks utility when there are enforcement mechanisms that otherwise remain open to the plaintiff under Part 41 of the Federal Court Rules.

26    The fourth and fifth defendants submitted that in contending that the Orders had potentially been breached the plaintiff had failed to take account of r 7.1.33 of the Corporations Regulations as in force when the Orders were made.

27    At the time the Orders were made, r 7.1.33(1) of the Corporations Regulations provided the following as a circumstance in which a person was taken not to provide a financial service:

For paragraph 766A(2)(b) of the Act, a circumstance in which a person is taken not to provide a financial service within the meaning of paragraph 766A(1)(a) of the Act is the giving of advice that consists only of a recommendation or statement of opinion provided in the course of, and as a necessary or incidental part of, either or both of:

(a)    the handling of claims or potential claims in relation to an insurance product; and

(b)    the settlement of claims or potential claims in relation to an insurance product.

28    At the time the Orders were made, r 7.1.33(1) provided the following as a circumstance in which a person was taken not to provide a financial service:

For paragraph 766A(2)(b) of the Act, a circumstance in which a person is taken not to provide a financial service within the meaning of paragraph 766A(1)(b) of the Act is a dealing in an insurance product that is a necessary or incidental part of either or both of:

(a)    the handling of claims or potential claims in relation to that product; and

(b)    the settlement of claims or potential claims in relation to that product.

29    At the time the Orders were made, s 766A of the Corporations Act relevantly provided:

766A     When does a person provide a financial service?

General

(1)    For the purposes of this Chapter, subject to paragraph (2)(b), a person provides a financial service if they:

(a)    provide financial product advice (see section 766B); or

(b)    deal in a financial product (see section 766C); or

…

(2)     The regulations may set out:

…

(b)    the circumstances in which persons are taken to provide, or are taken not to provide, a financial service.

Consideration

30    It was not disputed that the Court has discretionary power to make the orders sought by the plaintiff. Reference was made to r 1.32 and rr 39.05(f) and (h) of the Federal Court Rules.

31    Rule 39.05 of the Federal Court Rules relevantly provides:

39.05 Varying or setting aside judgment or order after it has been entered

The Court may vary or set aside a judgment or order after it has been entered if:

..

(f)    the party in whose favour it was made consents; or

…

(h)    there is an error arising in a judgment or order from an accidental slip or omission.

32    Rule 1.32 of the Federal Court Rules provides:

1.32     Court may make any order it considers appropriate in the interests of justice

The Court may make any order that the Court considers appropriate in the interests of justice.

Note:    See sections 23 and 28 of the Act.

33    It was also accepted that the power to vary an order after entry is to be exercised with caution and in exceptional circumstances.

34    As Mortimer J observed in Gibson at [25], the process of placing an endorsement on orders requires the issue of a new version of the Orders, thus replacing the Orders as made and as entered.

The purpose of an endorsement of a penal notice on an order

35    Rule 41.06 of the Federal Court Rules provides:

41.06 Endorsement on order

If an order requires a person to do, or not to do, an act or thing, whether within a certain time or not, and the consequences of failing to comply with the order may be committal, sequestration or punishment for contempt, the order must carry an endorsement that the person to be served with the order will be liable to imprisonment, sequestration of property or punishment for contempt if:

(a)    for an order that requires the person to do an act or thing—the person neglects or refuses to do the act or thing within the time specified in the order; or

(b)    for an order that requires the person not to do an act or thing—the person disobeys the order.

36    The purpose of an endorsement was described by Wheelahan J in O’Neill v Deputy Commissioner of Taxation [2021] FCA 322 at [32]:

The purpose of an endorsement under r 41.06 is to give notice to parties served with an order requiring that a person is not to do an act or thing, of the consequences of disobedience of the order where those consequences may be committal, sequestration or punishment for contempt. However, this purpose is to be considered in the context of r 41.07(2), which provides that personal service of an order mentioned in r 41.06 is not required if the person was present when the judgment was pronounced or the order made, or if the person was notified of the terms of the order orally, by telephone, or electronically.

37    In a detailed consideration of the authorities, Mortimer J in Gibson observed that there are some differences in the authorities about whether compliance with the terms of r 41.06 is a necessary precondition to a contempt prosecution, or whether compliance can be waived at the direction of the Court. In Mason v MWREDC Limited [2012] FCA 1083 at [49], in a passage with which Mortimer J in Gibson agreed, Greenwood J observed that providing an individual with the “benefit” of having her or his mind focused on the consequences of neglect or failure to comply with an order may later serve a purpose as a “material matter” to be taken into account in the exercise of the Court’s discretion in any application for punishment of a contended contempt.

Applicability of r 39.05

38    In Gibson, Mortimer J (at [63]-[67]) accepted that to endorse an order with a penal notice is a “variation” to the order, thereby engaging the power in r 39.05 of the Federal Court Rules. Her Honour was satisfied that the word “order” in r 39.05 means the whole of the document which constitutes the Court’s record of the orders made by the Court, and so the power to “vary” includes a power to vary any part of the document constituting the order of the Court, including but not limited to the text which constitutes the exercise of judicial power. I respectfully agree.

39    Both parties referred to the considerations informing the exercise of the discretion, set out by McKerracher J in Australian Competition and Consumer Commission v True Alliance Trading Pty Ltd (formerly, Reebok Australia Pty Ltd) (No 2) [2017] FCA 990 at [12] and adopted in Gibson at [68] (Mortimer J). McKerracher J referred to the following as considerations relevant to the exercise of the discretion:

(a)    the scope of the power to vary or set aside an order or judgment after entry is more circumscribed than that provided for in relation to the pre-entry situation. It should be exercised with caution and in exceptional circumstances, mindful of the overarching principle of the finality of litigation: Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 4) [2013] FCA 318 at [6] (Gordon J);

(b)    the discretion to vary an order under r 39.05 of the Federal Court Rules is not confined, but must be exercised judicially and the Court must have regard to all the evidence and arguments before it at the time of the application: Campaign Master (UK) Limited v Forty Two International Pty Ltd (No 4) [2010] FCA 398 at [68] (Yates J);

(c)    the power conferred under r 39.05 of the Federal Court Rules must be exercised in a way that best promotes the overarching purpose identified in s 37M of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), of facilitating the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible; and

(d)    the Court must also consider the rights and interests of third parties. Orders may be varied or set aside where the party in whose favour the order was made consents, provided that doing so will not detrimentally affect the rights or interests of third parties: Australian Securities and Investments Commission v Yandal Gold [2003] FCA 77 at [23] (Merkel J); Perre v Apand Pty Ltd [2004] FCA 1220 at [10]-[11] (Selway J).

40    As the plaintiff conceded, its application tends against the overarching principle of finality in litigation: De L v Director-General, New South Wales Department of Community Services (No 2) [1997] HCA 14; 190 CLR 207 at 215 (Toohey, Gaudron, McHugh, Gummow and Kirby JJ); Gibson at [69] (Mortimer J). Particularly having regard to the extraordinary length of time that has elapsed since the Orders were made, it is a consideration weighing in favour of refusing the application.

41    Although I do not make any findings that the Orders have been breached, much less wilfully breached, there is a basis for some concern in relation to the recent past conduct of the fifth defendant, having regard to the terms of the injunctions. First, the carve out provided for in r 7.1.33 of the Corporations Regulations ceased to apply from 19 February 2021. If the Orders are properly interpreted as having ambulatory effect, the carve out would not apply to conduct engaged in after that date. Second, the Orders refer to carrying on a business related to, concerning or directed to “financial products” as well as “financial services”. It is arguable that r 7.1.33 may not limit the meaning of “financial products”. Thirdly, it is not clear whether the advice provided by TP Claims consisted only of the kind specified in r 7.1.33.

42    It is relevant to consider whether exercising the power in r 39.05(f) of the Federal Court Rules to apply an endorsement advances the overarching objective in s 37M of the Federal Court Act. It may be accepted that there are enforcement mechanisms that otherwise remain open to the plaintiff under Part 41 of the Federal Court Rules. However, I am satisfied that varying and re-issuing the Orders will bring more clarity to the potential consequences of non-compliance with those Orders and may assist in their enforcement through contempt proceedings.

43    If the fourth and fifth defendants do enjoy some possible benefit flowing from the absence of the endorsement due to an oversight by the plaintiff, there is no justice in the Court preserving that possible benefit.

44    I do not accept that an endorsement would lack utility, given that the time for compliance with the Orders has not elapsed (cf Gibson).

45    Although the delay has been extraordinarily long, the nature of the Orders related to very serious contraventions, particularly in respect of the fifth defendant. The Orders relate to contraventions of laws that are intended to protect the interests of the public. It is in the interests of the administration of justice that the Orders should be as clearly as possible capable of enforcement through contempt proceedings if the circumstances which would justify such an application arise. As Mortimer J observed in Gibson at [79]:

Exercises of judicial power are intended to be effective: that is one of the foundations of the rule of law.

46    I accept that for the purposes of r 39.05(f), it is the plaintiff who must consent to the variation. As it is the plaintiff who has filed the interlocutory application seeking the variation, I infer that the plaintiff does so consent. As Merkel J observed in Australian Securities and Investments Commission v Yandal Gold [2003] FCA 77 at [20], in comments equally apposite to the Corporations Act:

ASIC sought and obtained the trial orders in its own right and not in a representative capacity. In seeking and obtaining the orders ASIC was performing the functions and exercising the powers conferred upon it under the Australian Security [sic] and Investments Commission Act 1989 (Cth) (“ASIC Act”). The orders were sought by ASIC in the public interest in pursuance of the objects and the aims set out in s 1 of the ASIC Act. As a regulator charged with responsibility, inter alia, to administer the Corporations Law, when ASIC sought and obtained declarations and orders in pursuance of that function those declarations and orders are properly to be regarded as orders made in ASIC’s favour. The fact that ASIC may not receive a financial benefit from those orders does not have the consequence that the orders are not made in its favour. In that regard I do not accept that the words “in whose favour the order was made” are to be treated as synonymous with “for whose benefit the order was made”.

47    I also accept that r 39.05(h) is a source of power applicable in the present circumstances. The omission of the endorsement was an accident.

48    I do not consider that the fact that the Orders were made by consent prevents the discretion being exercised or requires a re-opening of any settlement agreement. The parties may have agreed the terms on which they considered judicial power ought to have been exercised. I do not accept that the parties agreed the form of the document in which that exercise of power was to be recorded, including whether the form of the document should contain an endorsement required by the Federal Court Rules. The variation sought is not a variation of the terms of the text which constitutes the exercise of judicial power. An example of the exercise of the power to vary by the inclusion of an endorsement to orders made by consent is to be found in O’Neill (Wheelahan J).

49    I consider that the case for the endorsement of the orders made against the fifth defendant to be stronger than the case for the endorsement of the orders made against the fourth defendant. The evidence of what might be described as concerning conduct in so far as the fourth defendant is concerned is weak. However, although very finely balanced, I am satisfied that the Orders should be varied. In particular, I consider that there is utility in varying the Orders given the time for compliance has not expired and that any possible benefit that the fourth defendant would enjoy from the accidental omission of the endorsement is not a benefit that ought to be protected in the interests of justice.

Rule 1.32

50    In the alternative, I am also satisfied that for the purposes of r 1.32 it is just and appropriate that a penal notice be endorsed onto the Orders. Given the time for compliance with the Orders has not expired, it is desirable that, going forward, there should be as little doubt as possible that proceedings for contempt could be prosecuted.

Disposition

51    The application will be granted. The Orders will be varied so that they are endorsed with a penal notice, expressed prospectively from the date that the endorsed order is made and the varied copy of the Orders will be entered. Orders will also be made requiring personal service of the Orders as varied on the fourth and fifth defendants.

52    Quite appropriately, the plaintiff has not sought costs. It is appropriate that no costs order be made on the application in circumstances where although the plaintiff has succeeded, the application was necessitated by the plaintiff’s oversight.

Associate:

Dated:    12 September 2024

SCHEDULE OF PARTIES