Australian Prudential Regulation Authority v Gray

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FEDERAL COURT OF AUSTRALIA

Australian Prudential Regulation Authority v Gray [2024] FCA 79

File number: NSD 1097 of 2023
Judgment of: SHARIFF J
Date of judgment: 13 February 2024
Catchwords:  BANKING AND FINANCIAL INSTITUTIONS – application by Australian Prudential Regulation Authority (APRA) to permanently restrain respondent from conducting ‘banking business’ within the meaning of the Banking Act 1959 (Cth) (Banking Act) – application to permanently restrain respondent from assuming or using restricted words – where respondent associated with various non-legal ‘banking’ entities – where entities controlled by respondent carrying on ‘banking business’ without authorisation under the Banking Act – permanent injunctions granted
Legislation:

Constitution ss 51(xiii), 51(xx)

Australian Prudential Regulation Authority Act 1998 (Cth)

Banking Act 1959 (Cth) ss 5, 5(1), 7, 7(1), 8, 8(1), 9(3), 65A, 65A(2), 65A(3), 65A(6)(a), 65A(11), 65A(12), 66, 66(1), 66(1AC), 66(4)(a), 66(4)(c), 66A(1)

Federal Court of Australia Act 1976 (Cth) ss 11, 23

Reserve Bank Act 1959 (Cth) s 44

Federal Court Rules 2011 (Cth) rr 8.05, 8.06, 10.01, 10.24, 41.06
Cases cited:

Australian Prudential Regulation Authority v Garrett [2023] FCA 956

Australian Prudential Regulation Authority v Siminton (No 6) [2007] FCA 1608
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 64
Date of hearing: 13 February 2024
Counsel for the Applicant: Ms S Foda
Solicitor for the Applicant: Dentons
Counsel for the Respondent: The respondent did not appear

ORDERS

NSD 1097 of 2023
BETWEEN:

AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

Applicant
AND:

ROBERT BRUCE GRAY

Respondent

ORDER MADE BY:

SHARIFF J

DATE OF ORDER:

13 FEBRUARY 2024

Penal Notice

TO: ROBERT BRUCE GRAY

IF YOU:

A.REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR

B.DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING,

YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.

THE COURT ORDERS THAT:

1.For the purposes of these orders, ‘purported bank’ means ‘Commercial Development Bank’, ‘Creditnet Bank Internationale’, any derivations thereof, or any other body, whether incorporated or not, described as a ‘bank’ which body:

(a)Does not have the consent of the applicant under s 66 of the Banking Act 1959 (Cth) (Banking Act); or

(b)Is not in possession of an authority under s 9 of the Banking Act to carry on banking business; or

(c)Is not otherwise the subject of an order by the applicant pursuant to s 11 of the Banking Act that determines that subsection 66(1) of the Banking Act does not apply.

2.The respondent be permanently restrained and prohibited under s 65A of the Banking Act, whether by himself, his servants or agents or otherwise, from orally or in any written or electronic form:

(a)Carrying on any banking business (as defined in s…

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Details
Case
[2024] FCA 79
Decision Date

CaseChat Overview and Summary

The Australian Prudential Regulation Authority (APRA) sought to permanently restrain Mr. Gray from conducting banking business in contravention of the Banking Act 1959 (Cth) and from using restricted terms such as "bank" and "banking" without authorisation. Mr. Gray was associated with entities, Commercial Development Bank (CDB) and Creditnet Bank Internationale (Creditnet), which were engaged in activities that appeared to be banking but were not authorised under the Banking Act. The court had to decide whether Mr. Gray and the entities were in contravention of the Banking Act and if the requested injunctions were warranted. The court found that CDB and Creditnet were not authorised deposit-taking institutions and were not listed in APRA's register, making them unauthorised to conduct banking business in Australia. Additionally, these entities had been using restricted terms without APRA's consent and had been engaging in activities such as issuing international bills of exchange and bank guarantees. The court concluded that Mr. Gray, as the person operating these entities, was in contravention of the Banking Act and granted the permanent injunctions sought by APRA to restrain Mr. Gray from conducting banking business and using restricted terms. The court also ordered Mr. Gray to pay APRA's costs of the proceedings.

Orders

Orders of the court

1. For the purposes of these orders, ‘purported bank’ means ‘Commercial Development Bank’, ‘Creditnet Bank Internationale’, any derivations thereof, or any other body, whether incorporated or not, described as a ‘bank’ which body:

(a) Does not have the consent of the applicant under s 66 of the Banking Act 1959 (Cth) (Banking Act); or

(b) Is not in possession of an authority under s 9 of the Banking Act to carry on banking business; or

(c) Is not otherwise the subject of an order by the applicant pursuant to s 11 of the Banking Act that determines that subsection 66(1) of the Banking Act does not apply.

2. The respondent be permanently restrained and prohibited under s 65A of the Banking Act, whether by himself, his servants or agents or otherwise, from orally or in any written or electronic form:

(a) Carrying on any banking business (as defined in s 5 of the Banking Act) in Australia in contravention of s 7 of the Banking Act;

(b) Assuming or using the words ‘bank’, ‘banker’, ‘banking’ or any words or phrases of like import (whether or not in English) in relation to any purported bank, business or purported business in contravention of s 66 of the Banking Act;

(c) Advertising, representing or stating that any purported bank, business or purported business will carry on banking business;

3. The respondent be permanently restrained and prohibited under s 23 of the Federal Court of Australia Act 1976 (Cth), whether by himself, his servants or agents or otherwise, from carrying on any activities incidental to carrying on a banking business, including but not limited to issuing any bill or note for the payment of money payable to bearer on demand and intended for circulation, or which purports to be a bill or note for the payment of money payable to bearer on demand and intended for circulation, in contravention of s 44 of the Reserve Bank Act 1959 (Cth);

4. Orders 2 and 3 above carry an endorsement in accordance with r 41.06 of the Federal Court Rules 2011 (Cth); and

5. The respondent pay the applicant’s costs of the proceedings.

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

Background

Background to the litigation

I will make the orders sought by APRA. These are my reasons for doing so.BACKGROUNDThe role of APRA APRA is an independent statutory authority that supervises institutions across the banking, insurance and superannuation industries. APRA is tasked with promoting the stability of the financial system in Australia and is constituted under the Australian Prudential Regulation Authority Act 1998 (Cth). APRA is responsible for establishing and enforcing prudential standards and practices designed to ensure that, under all reasonable circumstances, financial promises made by banks and other entities it supervises are met within a stable, efficient and competitive financial system. Authorised deposit-taking institutions (ADIs) are entities that have been granted authority by APRA under the Banking Act to carry on a banking business in Australia. They are regulated by APRA in accordance with the Banking Act and are listed in APRA’s register of ADIs (ADI Register). Given the importance that ADIs play in the provision of financial services to the community, as well as their role in the broader economy, ADIs are subject to strict standards, including being subject to, among other things, a prudential framework intended to manage the risks of banking activities, and ongoing supervision by APRA.Relevant entities Commercial Development Bank (CDB) and Creditnet Bank Internationale (Creditnet) are business names associated with Mr Gray. Mr Gray purports to be the Bank Governor and Chairman of the Board of Governors of CDB, and Bank Governor, Chairman of the Board of Governors and Managing Trustee of Creditnet. Searches undertaken by APRA show that Mr Gray has been associated with Creditnet since at least 2004 and CDB since at least 2006. As at the present time, the CDB website (located at (CDB website) provides that the registered domicile of CDB is Australia and lists contact details for an Australian mailing address in Broadbeach, Queensland. The CDB website is operational and contains the following statements:•Commercial Development Bank’s mission is to provide its Clients with a competitive banking environment which encourages growth and fosters prosperity in a secure partnership that enables the aims and objectives of both the Bank and the Client to be achieved;•Commercial Development Bank provides Private and Retail banking services for discerning individuals. We provide a comprehensive range of specialist services tailored to your individual wealth goals;•We are pleased to announce the successful accreditation of Commercial Development Bank to the United Nations (“UN”), with Commercial Development Bank becoming an accredited United Nations Global Marketplace Organization that has been registered with 25 major United Nations Organizations and Divisions. Commercial Development Bank has been assigned the registration number: UNGM 531297;•[CDB is an] International Business Corporation [IBC] acting as Trustee on behalf of an International Business Trust Organization.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Subsection 65A(12) provides that these powers are conferred in addition to and do not derogate from any of the Court’s other powers including, relevantly, the general power conferred by s 23 of the FCA Act.CONSIDERATION This Court has jurisdiction to hear and determine the present application: Garrett at [64]. The Court’s jurisdiction is attracted by a matter arising under a law made by the Parliament, being the Banking Act: Garrett at [64]. As Lee J reasoned in Garrett, the power to make the orders sought is to be exercised judicially but is not rendered subject to the same principles which apply to the grant of equitable injunctions: see also Siminton at [62]. Among the considerations which the Court must take into account are whether the injunction would have utility or would serve some purpose within the contemplation of the Banking Act: Siminton at [64]. I am satisfied that the orders sought by APRA should be made, and that I have the jurisdiction both under the Banking Act and the FCA Act to make those orders. I am satisfied that neither CDB nor Creditnet are APRA regulated entities. They are neither authorised nor licensed to carry on a banking business pursuant to subsection 9(3) of the Banking Act. Nor has APRA made any determinations pursuant to s 11 of the Banking Act that the prohibitions in ss 7, 8 and s 66(1) of that Act do not apply to these entities. The evidence establishes that CDB and Creditnet have been carrying on a banking business (which purports to be an authorised banking business), including by issuing, or seeking to issue, financial instruments. The evidence establishes that, for instance, CDB and Creditnet have issued or sought to issue international bills of exchange and bank guarantees. There are also instances of foreign financial institutions and businesspeople advising APRA or the RBA of attempts by CDB and Creditnet to engage in banking business with them or their clients. Accordingly, I am satisfied that CDB and Creditnet are acting in contravention of ss 7 and 8 of the Banking Act. The evidence also establishes that CDB and Creditnet have used the words ‘bank’, ‘banker’ or ‘banking’, or variants of those terms, in their advertising and promotional material on their website and elsewhere. I refer to the materials extracted above at [10]-[11]. APRA has not consented to CDB or Creditnet assuming or using these terms. Accordingly, I am satisfied that CDB and Creditnet are acting in contravention of s 66(1) of the Banking Act. That is because I am satisfied that CDB and Creditnet are carrying on a financial business in Australia and elsewhere and in doing so have assumed and used restricted words without APRA’s consent and without a relevant determination in force under s 11 that this prohibition does not apply. On all of the evidence adduced before me, I am also satisfied that Mr Gray is the person who relevantly operates CDB and Creditnet. Mr Gray is the person who has communicated with APRA in relation to various matters over a period of approximately 20 years. I am satisfied that he is a person who has made relevant decisions and engaged in various acts and omissions in respect of CDB and Creditnet carrying on as banks or as apparent banking businesses. The orders made by the Court should be directed to Mr Gray, noting also that on the materials before me, CDB and Creditnet are not incorporated bodies in Australia.