Australian Securities and Investments Commission v Dawson
[2020] FCA 1144
•7 August 2020
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v Dawson [2020] FCA 1144
File number: VID 521 of 2020 Judgment of: ANASTASSIOU J Date of judgment: 7 August 2020 Catchwords: CORPORATIONS – application by Australian Securities and Investments Commission following investigation – defendants allegedly obtaining ‘investment’ by masquerading under colours of legitimate businesses – application under s 1323 of the Corporations Act 2001 (Cth) – orders sought appointing receiver over property of the defendants, restraining dealings with that property and restraining the first defendant from leaving Australia without leave – orders granted Legislation: Australian Securities and Investments Commission Act 2001 (Cth), ss 13 and 102
Corporations Act 2001 (Cth), ss 911A, 911C, 1041E, 1041H and 1323
Crimes Act 1900 (NSW) ss 192E and 192G
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Number of paragraphs: 13 Date of hearing: 7 August 2020 Counsel for the Plaintiff: Ms C. van Proctor Solicitor for the Plaintiff: Australian Securities and Investments Commission ORDERS
VID 521 of 2020 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff
AND: LARRY JOHN DAWSON
First Defendant
PW KITT CO PTY LTD (ACN 635 767 047)
Second Defendant
ORDER MADE BY:
ANASTASSIOU J
DATE OF ORDER:
7 AUGUST 2020
THE COURT ORDERS THAT:
1.Until further order, pursuant to s 1323(1)(h)(ii) of the Corporations Act, Michael John Hill, Anthony Norman Connelly and Katherine Sozou of McGrathNichol (the Receivers) be appointed as Receivers and Managers to the property and assets of the First and Second defendant for the purpose of:
(a)identifying, collecting and securing the property of defendants;
(b)ascertaining the amount of investor funds received by the defendants;
(c)identifying any dealings with, payments of, or distributions by or uses made of investor funds by the defendants;
(d)identifying any property purchased or acquired with investor funds;
(e)recovering investor funds; and
(f)providing a report to the Court within 42 days in relation to the matters referred to in subparagraphs (a)-(e) above.
2.For the purpose of attaining the objectives for which the Receivers are appointed, the Receivers shall have the following powers:
(a)the powers set out in subs 420(1) and 420(2)(a), (e), (f), (k), (o), (p), (q) and (u) of the Corporations Act; and
(b)the power to apply to the Court for directions or further orders.
3.The Receivers shall, within 42 days of this Order, provide to the Court and to the Plaintiff a report as to the affairs of the First and Second Defendants, including:
(a)the identification of the assets and liabilities of the First and Second Defendants;
(b)an opinion as to the solvency of the First and Second Defendants;
(c)an opinion as to the value of the assets of the First and Second Defendants;
(d)the likely return to creditors, if the Second Defendant is wound up;
(e)an opinion as to whether the Second Defendant holds proper financial records;
(f)any other information necessary to enable the financial position of the First and Second Defendants to be assessed;
(g)any suspected contraventions of the Act by the Second Defendant; and
(h)any suspected contraventions of the Act by the First Defendant in his personal capacity and in his capacity as director of the Second Defendant.
4.The Defendants are to cooperate and provide all assistance required of them by the Receivers, including making available to the Receivers all books and records of the Second Defendant.
5.The Plaintiff is to provide to the Receivers all books and records in the Plaintiff’s possession that the Plaintiff considers relevant to the Receivers’ report as to the affairs of the First and Second Defendants.
6.Pursuant to sections 1323(1) and 1323(3) of the Act and/or section 23 of the FCA Act, until further order, each of the Defendants, by themselves and their servants, agents and employees or any other person on their behalf, be restrained from:
(a)removing, or causing or permitting to be removed any of the property (as defined in s 9 of the Corporations Act) or assets of, or held by, for, or in the name of, the Defendants, including, but not limited to, funds in bank accounts held by the Defendants;
(b)selling, charging, mortgaging or otherwise dealing with, disposing of and/or diminishing the value of any property or assets of or held by, for, or in the name of, the Defendants;
(c)without limiting the terms of sub-paragraphs (a) and (b) above, incurring new liabilities for the Defendants, including, without limitation, liabilities incurred either directly or indirectly, through the use of a credit card, a credit facility, a drawdown facility or a re-draw facility;
(d)causing or permitting the property or assets of the Defendants to be sold, charged, mortgaged or otherwise dealt with, disposed of, or diminished in value; and
(e)without limiting the terms of sub-paragraphs (a) to (d) above, withdrawing, transferring or otherwise disposing of or dealing with, any monies available to the Defendants in any account with any bank, building society or other financial institution in which the Defendants have any legal or equitable interest.
7.Paragraph 6 of this Order, shall not prevent:
(a)each of the Defendants from paying or otherwise incurring a liability for costs reasonably incurred in this proceeding and any criminal proceedings arising from the Plaintiff's investigation into the affairs of each of the Defendants;
(b)any bank, building society or financial institution from exercising any right of set-off which it may have in respect of a facility afforded by it to each of the Defendants prior to the date of this order.
(c)the First Defendant from dealing with his assets for the following purposes:
(i)the payment of ordinary living expenses not exceeding $800 per week;
(ii)the payment of reasonable legal expenses; and
(iii)dealings and dispositions in the discharge of obligations bona fide and properly incurred under a contract entered into by the First Defendant before these orders were made.
(d)the Second Defendant from dealing with its assets for the following purposes:
(i)the payment of reasonable legal expenses;
(ii)dealings and dispositions in the ordinary and proper course of the Second Defendant’s business, including paying business expenses bona fide and properly incurred; and
(iii)dealings and dispositions in the discharge of obligations bona fide and properly incurred under a contract entered into by the Second Defendant before these orders were made.
8.Pursuant to section 1323(1)(k) of the Act, until further order, the First Defendant be restrained from leaving or attempting to leave Australia without the consent of the Court.
9.Service of the Originating Process and the supporting affidavits be dispensed with.
10.Service of this Order, the Originating Application, the supporting affidavit and the Plaintiff’s submissions dated 7 August 2020 be effected on the Defendants as soon as possible.
11.The matter be listed for case management at 2:15 pm on 13 August 2020.
12.Liberty to apply.
13.Costs reserved.
14.The Plaintiff has leave to give notice of this Order to any:
(a)relevant authorities that record, control and regulate the ownership of real property, motor vehicles and maritime vessels; and
(b)bank, building society or other financial institution through which, to the best of the Plaintiff's belief, the Defendants may operate any account; and
(c)any other person or entity, holding or controlling property, which, to the best of the Plaintiff's belief, may belong to the Defendants.
15.For the purpose of this Order:
(a)“dealing” includes:
(i)causing, procuring, assisting or permitting any property in the possession or under the control of the Defendants (as applicable) to be removed from Australia or from the jurisdiction of this Court; and/or
(ii)transferring, selling, charging, mortgaging, encumbering, securing, diminishing, disposing of, parting with possession, making any declaration of trust in relation to, exercising any power to vary or modify any trust deed or any interest under any trust in relation to the Defendants’ property;
(b)“property” means all real or personal property, assets or interests in property of any kind (including cryptocurrency), within or outside Australia including, by virtue of subsection 1323(2A) of the Act, any property held otherwise than as sole beneficial owner.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(delivered ex tempore)ANASTASSIOU J
By originating process dated 6 August 2020 the Plaintiff, the Australian Securities and Investments Commission (ASIC), seeks certain ex parte orders against the First and Second Defendants, being Mr Larry John Dawson and a company he is the sole director and shareholder of, PW Kitt Co Pty Ltd. In summary, the originating process seeks orders appointing Receivers over the property of Mr Dawson and PW Kitt Co who shall report to the Court within 42 days of the appointment on the financial positions of the Defendants, injunctions restraining dealings with that property, and an order restraining Mr Dawson from leaving Australia, as well as other ancillary orders.
For the reasons that follow, relief substantially in the form sought by ASIC is granted.
ALLEGED CONDUCT
The application is supported by affidavits of Ms White and Ms Guanlao of the same date. Ms White and Ms Guanlao are both ‘authorised delegates of ASIC’ pursuant to s 102 of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), have been delegated certain functions and powers, including the functions and powers under Part 3 of the ASIC Act which relate to ASIC’s investigation and information gathering powers. The White affidavit at [11] and [12] summarises the bases for the application as follows:
11. … ASIC is concerned that the Defendants have obtained funds from Australian investors (who appear to be unsophisticated investors) by using the same or substantially similar company and business names to a legitimate business and an Australian financial services (AFS) licence number of another company, and by holding themselves out as being licensed or authorised to deal in financial products, when in fact the Defendants (a) have no connection with these legitimate companies/businesses and (b) hold no licence or authority to deal in financial products or services.
12. ASIC believes that almost $7 million has been raised by the Defendants from Australian investors and that, of those funds, more than $2 million has been transferred overseas and more than $3 million has been used to purchase cryptocurrencies. ASIC believes that the Defendants have raised funds by cold-calling Australian consumers and through websites which are still operative. ASIC is concerned that if the relief sought in the Originating Process is not granted, the Defendants may continue to raise funds based on misleading representations and may continue to transfer overseas or otherwise misappropriate investor funds.
On 1 July 2020 ASIC commenced an investigation pursuant to s 13 of the ASIC Act into suspected contraventions by the defendants of ss 911A, 911C, 1041E and 1041H of the Corporations Act 2001 (Cth), ss 12DA and 12DB of the ASIC Act and ss 192E and 192G of the Crimes Act 1900 (NSW) (described herein as the Investigation). In furtherance of the Investigation ASIC has caused searches to be conducted of national databases maintained by the Australian Securities and Investments Commission, issued statutory notices on certain non-parties for production of documents, and communicated with certain investors in the investment scheme allegedly operated by Mr Dawson.
As a result of the matters uncovered by the Investigation Ms White deposes that she is “concerned” that Mr Dawson and PW Kitt Co may have engaged in certain fraudulent conduct to induce investors to provide them funds. The fraudulent conduct alleged is that Mr Dawson and PW Kitt Co, through websites and entities they control, have masqueraded in the colours of a legitimate financial services business to dupe the investors. The Defendants are not AFS Licensees or authorised representatives.
The legitimate businesses are SMSF Advisory Services Pty Ltd (ACN 097 808 145) (SMSF Advisory) and SMSF Super Advisory Pty Ltd (ACN 167 051 470) (SMSF Super), the holder of AFS licence 450822. Persons associated with those businesses relevant to the alleged conduct of Mr Dawson and PW Kitt Co are one of SMSF Advisory’s directors and shareholders Mr Peter William Kitt, and the directors of SMSF Super, Mr Tony Zulli and Mr Neil Schafer.
The masquerading is alleged to have occurred by the following means. Mr Dawson and PW Kitt Co are suspected of having operated two websites: “smsfadvisory.com” (SMSF Advisory website) and “pwkittco.com” (PW Kitt website). Screengrabs of the websites taken by Ms White contain representations that services are provided under AFS licence number 450822 (White affidavit at [30]-[31] and [45]). This is the AFS licence held by SMSF Super. Paragraph [34] of the White affidavit deposes that “I do not believe that [Mr] Kitt or SMSF Advisory are in any way associated with the SMSF Advisory website, and I am not aware of any person associated with the SMSF Advisory website who holds a [AFS] licence or authorisation.” At [64] she deposes “I believe that Kitt is not involved in the SMSF Advisory website or PW Kitt website or the receipt of investor funds into the PW Kitt Co bank accounts, and he is not connected to Dawson or PW Kitt Co.”
Further, a Brochure is available for download from the SMSF Advisory website which purports to contain two documents, an ‘Investment Menu’ and a ‘Product Disclosure Statement’ (the purported PDS). The purported PDS appears to be materially identical to the product disclosure statement of an unrelated financial services business.
In early May 2020 the conduct described above appears to have come to the attention of Mr Zulli. Exhibited to the White affidavit was a series of emails between Mr Zulli and members of ASIC concerning the misuse of the SMSF Super AFS licence number (White affidavit at [53]). Mr Schafer subsequently attended at the office listed on the SMSF Advisory website and attempted to speak with someone to no avail.
In early July 2020 Ms White spoke with Mr Kitt. Mr Kitt stated that he is a director of SMSF Advisory, that it does not hold an AFS Licence, and that it does not have a website. Mr Kitt further explained he previously operated a business P W Kitt & Co Pty Ltd, but that it was deregistered (White affidavit at [62]). A company search confirmed this.
As noted above, ASIC caused notices to produce be served on certain non-parties. In particular, ASIC obtained records from banks who held accounts in the names of Mr Dawson and PW Kitt Co (Guanlao affidavit at [8]). The Guanlao affidavit deposes to these searches in detail and exhibits the documents returned. ASIC identified certain investors who had made deposits into the accounts controlled by Mr Dawson and PW Kitt Co, and made contact with them (White affidavit at [65]).
For the reasons that have been given by ASIC in its written submissions, I am satisfied based on the material I have summarised in brief above, that it is appropriate to make the orders on an interim and ex parte basis. The matter will be listed for a case management hearing on 13 August 2020 at 2:15 pm, at which time the Defendants, if so advised, will be at liberty to apply to set aside or vary the orders.
As I have indicated in the course of discussion with counsel for ASIC, I have requested that the Defendants, upon being served with the material, be informed that should they make an urgent application prior to the case management hearing on 13 August 2020 to vary or set aside the orders, they should contact the Court and urgent arrangements will be made to hear and determine it.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Anastassiou. Associate:
Dated: 7 August 2020
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