Federal Court of Australia

Australian Securities and Investments Commission v Oak Capital Mortgage Fund Limited (in liq) [2026] FCA 1056

ORDERS

THE COURT NOTES THAT:

A.    The Plaintiff hereby provides an undertaking to the Court not to take steps, without further leave of the Court, to enforce:

a.    any pecuniary penalties imposed on the Defendants; and/or

b.    any costs order made by the Court as against the Defendants.

THE COURT ORDERS THAT:

1.    Pursuant to section 500(2) of the Corporations Act 2001 (Cth), the Plaintiff be granted leave to proceed with this proceeding against the Defendants, on the condition that the Plaintiff does not enforce any monetary relief without further leave of the Court.

Combined Hearing

2.    Order 1 of the Orders of the Honourable Justice Anderson dated 6 December 2024 be vacated.

Pleadings

3.    By 4.00pm on 6 November 2026, the Plaintiff is to file and serve any second further amended originating process.

Evidence on penalty

4.    By 4.00pm on 6 November 2026, the Plaintiff is to file and serve any evidence (documents, affidavits and expert reports) on which it intends to rely on penalty.

Court Book

5.    By 4.00pm on 4 December 2026, the Plaintiff is to file a Court Book in electronic form, which complies with GPN-eBOOKS.

Opening Submissions

6.    By 4.00pm on 11 December 2026, the Plaintiff is to file and serve its written opening submissions.

Hearing on liability

7.    The matter be fixed for a hearing on liability and penalty with an estimate of 3 days, commencing at 9:30am on 8 February 2027.

Other

8.    There be liberty to apply.

9.    Costs be reserved.

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

REASONS FOR JUDGMENT

ANDERSON J:

introduction

1    On 29 October 2024, the plaintiff (ASIC) commenced this proceeding against the defendants, Oak Capital Mortgage Fund Limited and Oak Capital Wholesale Fund Pty Limited (together, Oak Capital).

2    The proceeding is now well advanced. Pleadings have closed, the parties’ evidence in respect of liability has been filed, and ASIC has progressed the preparation of its case for trial. The case is ready to be set down for trial. Indeed, at a case management hearing before me on 8 May 2026, ASIC and Oak Capital (then represented) agreed that the only outstanding steps were the preparation of written opening submissions and other trial preparation steps, and the parties submitted proposed consent orders to that effect. I indicated to the parties that I would set the matter down for a trial of ten days upon receiving mutually acceptable dates.

3    However, on 22 May 2026, at extraordinary general meetings of the respective members of each of the defendants, the members resolved that each defendant be wound up under s 491(1) of the Corporations Act 2001 (Cth) (Corporations Act) and that W. Roland Robson and Bill Cotter of Robson Cotter Insolvency Group be appointed joint and several liquidators (Liquidators). In the circumstances, ASIC requires leave of the Court, pursuant to s 500(2) of the Corporations Act, to continue the proceeding.

4    By interlocutory application dated 4 June 2026, ASIC seeks that leave. It does so principally on the basis that:

(a)    there is a public interest in ASIC proceeding with litigation commenced under the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) seeking relief for alleged civil penalty contraventions;

(b)    ASIC has already expended significant resources in investigating Oak Capital, and conducting the litigation, including preparing for trial;

(c)    the relief sought by ASIC can only be obtained by order of the Court;

(d)    continuing the proceeding will not interfere with the liquidation or prejudice Oak Capital’s creditors, as any pecuniary penalties will not be provable as debts (by reason of s 553B of the Corporations Act), and the Liquidators have indicated that they do not intend to take an active role in Oak Capital’s defence of the proceeding at this stage;

(e)    the Liquidators neither consent nor oppose the continuation of the proceeding; and

(f)    ASIC proffers an undertaking that it will not seek to enforce any penalty or costs orders, without the leave of the Court, while Oak Capital remains in liquidation.

5    ASIC relies on the affidavit of John Fogarty affirmed 4 June 2026 in support of its application (Fogarty Affidavit).

6    There was no appearance from Oak Capital, the Liquidators having been made aware of the hearing.

LEAVE UNDER S 500(2): RELEVANT LEGAL PRINCIPLES

7    Section 500(2) of the Corporations Act provides that, after the passing of a resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes.

8    The automatic stay of a proceeding under s 500(2) reflects the statutory policy informing voluntary liquidation, being to prevent a company’s assets being dissipated by a multiplicity of, and potentially unnecessary, litigation: see Clean Energy Regulator v E Connect Solar & Electrical Pty Ltd (2023) 171 ACSR 216; [2023] FCA 1082 at [10]-[11] (Derrington J) and the cases there cited.

9    The grant of leave is discretionary. Generally, the Court must be satisfied that, for the particular claim in dispute, a departure from the usual procedure of lodging a proof of debt in the liquidation is justified. As Perry J said in Australian Competition and Consumer Commission v Birubi Art Pty Ltd (No 2) [2018] FCA 1785 at [8(f)]:

It is impossible to state in an exhaustive manner all of the circumstances in which leave to proceed may be appropriate, … those circumstances have been said to include factors such as the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved and the stage to which the proceedings, if already commenced, may be progressed.

10    Where, as here, a regulator, pursuing pecuniary penalties and declarations (and adverse publicity orders), seeks leave to proceed against a company in liquidation, there are further distinctive matters which inform the exercise of the Court’s discretion. In Clean Energy, Justice Derrington, in considering the question of leave pursuant to s 471B of the Corporations Act to proceed against a company being wound up, set out the following convenient summary of those factors (citations omitted):

(a)    Whether the applicant has established that there is a serious question to be tried. An applicant must generally establish that it has a good claim with a solid foundation, but it is perhaps unnecessary to establish a prima facie case. It follows that the applicant need not prove every element of the claim that it wishes to make out, though mere assertion will not suffice.

(b)    Whether the relief sought is not otherwise available in the liquidation process, particularly by the lodging of a proof of debt. The inability to obtain relief by that process, including the imposition of pecuniary penalties and the grant of declarations and injunctions, is a significant factor favouring the grant of leave to proceed.

(c)    Whether there is a public interest in enforcing compliance with, and preventing conduct that is in contravention of, a statutory scheme. If there is, this may favour the grant of leave to proceed, though the weight to be afforded to this factor will turn upon a consideration of all of the circumstances of the particular case.

(d)    Whether there is a public interest in allowing the applicant to fulfil a statutory duty, particularly for the purpose of obtaining orders that give effect to the objective of general deterrence.

(e)    The stage to which the proceedings have progressed, and the extent to which the applicant has expended time, effort and money in prosecuting its claim. The nearer the proceedings are to completion, and the greater the expenditure on them, the more appropriate the grant of leave to proceed may be on the balance of convenience.

(f)    Whether the claims in the proceedings raise complex questions of fact that are more appropriate for determination by the Court rather than under a proof of debt procedure. It must be borne in mind, however, that requiring a liquidator to engage in complex litigation has the potential to distract inappropriately from the liquidation process and reduce the funds available to meet the claims of creditors. This outcome would seem to run contrary to the purpose intended to be served by the requirement of leave to proceed, as explained in Re Gordon Grant & Grant [Pty Ltd [1983] 2 Qd R 314; (1983) 7 ACLR 669] and other cases.

(g)    The potential for creditors of the company to suffer prejudice. This prejudice can be alleviated by an undertaking not to enforce any relief without the Court’s leave. However, it should not be thought that the giving of such an undertaking materially advances the case for leave to proceed; it is typical for courts to condition the grant of leave by imposing on the applicant a requirement that such an undertaking be provided.

(h)    Finally, the fact that the company has no ability to pay a penalty sought in the proceedings does not weigh against the grant of leave. As explained below, there may still be utility in a regulator progressing claims for pecuniary penalties and other relief against a company in liq where to do so would advance the objective of general deterrence.

11    These considerations are not a “shopping list” to be worked through. Rather, each application must ultimately turn on its own facts, with a degree of judgment being brought to the task of deciding what ought and ought not be considered.

12    Further, I must be satisfied, and I am so satisfied for the reasons that follow, that there is utility in the proceeding continuing against Oak Capital. As Justice Mortimer (as her Honour then was) said in Australian Competition and Consumer Commission v Artorios Ink Co Pty Ltd [2013] FCA 753 at [13]:

It is by no means automatic that leave will be granted, and the court must be satisfied there is utility in the proceeding continuing against the corporation: Australian Competition and Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 794 at [58] per Gray J. In Leahy Petroleum, Gray J found, in the circumstances of a proceeding with a large number of corporate and individual respondents, there was no utility in the ACCC being given leave to seek declaratory relief against the first respondent, Leahy Petroleum. His Honour was also not persuaded that the “trouble and expense” of seeking pecuniary penalties against Leahy Petroleum had utility, where there was little or no prospect of those penalties being collected. His Honour’s reasons, and the other authorities to which I have referred, demonstrate the importance of considering the circumstances of the particular proceeding in which leave is sought, the nature of the relief sought by the regulator and the circumstances of other parties to that proceeding.

APPLICATION OF THE LEGAL PRINCIPLES TO ASIC’S APPLICATION FOR LEAVE TO COMMENCE

13    I am satisfied, for the reasons that follow, that the present circumstances justify granting ASIC leave to proceed.

Serious question to be tried

14    ASIC’s claims against Oak Capital are set out in its Further Amended Statement of Claim filed on 13 March 2026 (FASOC) and are particularly serious. The FASOC is detailed (running to some 185 pages with a schedule of some 200 odd pages), but in summary, and as set out in ASIC’s concise statement, ASIC alleges that between 2019 and 29 October 2024 the defendants engaged in unconscionable conduct in connection with financial services in contravention of s 12CB(1) of the ASIC Act by implementing and maintaining systems for the purpose of avoiding regulation under the National Credit Code (being Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth) (Credit Act)) when providing home loans. In so doing, ASIC alleges that Oak Capital implemented systems that, in essence, sought to deprive home loan applicants of the protections provided by the Credit Act and the Credit Code.

15    Whilst the defendants have admitted various factual allegations made by ASIC (in their defence of some 90 odd pages), many allegations (including the breaches of the ASIC Act) are denied. The conduct in question occurred over an almost six-year period and involved a large number of loans. ASIC relies on 47 ‘illustrative loans’, totalling more than $37 million and in respect of which, Oak Capital charged fees and interest exceeding $5.3 million. There exists a serious question to be tried.

Relief not otherwise available

16    ASIC’s only avenue to obtain declarations and civil penalties is by order of the Court. As was held by the Full Court in Vagrand Pty Ltd (In Liq) v Fielding (1993) 41 FCR 550 at 553 (Wilcox, Burchett and Beazley JJ), “[t]he question of leave is always a matter of discretion. But the circumstance that relief is not otherwise available to an applicant must always be a significant factor in favour of leave”. If leave were to be refused, ASIC could not obtain declarations and orders for penalties for conduct which it considers to be unlawful and contrary to the public interest.

The proceeding, and relief sought, is in the public interest

17    I am satisfied that there are strong public interest reasons for granting ASIC leave to continue this proceeding:

(a)    first, the purpose of the statutory powers to seek declarations, civil penalties and adverse publicity orders is primarily, if not wholly, protective in promoting the public interest in compliance by signalling the Court’s disapproval of conduct that contravenes standards of conduct set by Parliament, and performs the important public function of general deterrence: Australian Competition and Consumer Commission v Australian Institute of Professional Education Pty Ltd (in liq) [2017] FCA 521 at [26(a)] (Bromwich J), Commonwealth v Director, Fair Work Building Industry Inspectorate [2015] HCA 46; (2015) 326 ALR 476 at 490 [55]. Senior counsel for ASIC, Meg O’Sullivan KC, submitted that the industry (being second and third-tier lending) is a large industry with many participants, a factor which weighs in favour of granting ASIC leave, given the potential impact on general deterrence.

(b)    second, the Court’s reasons for deciding whether a contravention has occurred will better inform the regulator, regulated persons and the public, whose interests the regulatory scheme protects, about the meaning and scope of the alleged contravening conduct and the statutory scheme.

(c)    third, the alleged contravening conduct is serious and extensive. As I have said, over a period of almost six years, Oak Capital provided 47 loans totalling more than $37 million and charged consumers more than $5.3 million in fees and interest. ASIC alleges these loans either should, or likely should, have only been made subject to the application of the Credit Code or should not have been made at all.

18    In bringing proceedings such as this, ASIC is performing important regulatory functions under the ASIC Act. It will be recalled that pursuant to s 1(2) of the ASIC Act, ASIC, in performing its functions and exercising its powers, must strive to (inter alia):

(a)    maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy;

(b)    promote the confident and informed participation of investors and consumers in the financial system; and

(c)    take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it.

19    This proceeding is precisely the type of proceeding that fulfils those obligations.

20    Further, where, as here, a company is in liquidation, it may still be appropriate to order that it pay penalties as a measure of the Court’s disapproval of the contraventions and as a measure of the seriousness in which they are regarded, including for the purposes of general deterrence: Australian Institute of Professional Education at [26(3)], and see Australian Securities and Investments Commission v Union Standard International Group Pty Ltd (No 2) [2020] FCA 1871 at [7] (Wigney J). In Birubi Art, Justice Perry held at [14] that the fact that the respondent was in liquidation and may not be able to pay any penalties imposed was “irrelevant” to consideration of the grant of leave. Her Honour continued:

To the contrary in a case such as the present where the ACCC seeks to enforce civil penalty provisions, there is a strong public interest in the proceedings continuing so as to enable the Court to order appropriate relief.

21    Each of these observations is applicable to this case. Further, regulatory bodies have a real interest in seeking declaratory and other relief to vindicate a public right.

22    For these reasons, there is an important public interest in the continuation of the proceeding against the defendants.

Progress of the proceeding

23    ASIC’s case is in the advanced pre-trial stage, with significant resources already expended. Pleadings have closed, the parties’ evidence as to liability has been filed and ASIC’s submissions are well underway.

24    Relevantly, the Liquidators have indicated that they neither consent to nor object to ASIC’s application for leave to proceed against the defendants, and that they do not intend to take an active role in the proceeding.

25    I am satisfied that the progress of the proceeding, both in terms of the costs incurred by ASIC and the minimal further cost to Oak Capital, weighs strongly in favour of the grant of leave.

The impact on the administration and creditors

26    The final factor is the potential for creditors of the company to suffer prejudice.

27    As noted, any pecuniary penalties imposed are “not admissible to proof against an insolvent company”: Australian Competition and Consumer Commission v Nonchalant Pty Ltd (in liq) [2013] FCA 605 at [48] (Gordon J). As to costs, given the Liquidators’ indication as to their intention not to take an active role in this proceeding, the case is ASIC’s to run and prove, with next to no input from, or impact on, Oak Capital. As for ASIC’s costs which may be ordered against Oak Capital, the undertaking not to seek to enforce those costs without leave of the Court is proffered.

DISPOSITION

28    For the above reasons, it is appropriate that leave be granted to continue the proceeding to trial.

Associate:

Dated:    3 August 2026