Australian Securities and Investments Commission v Elm Financial Services Pty Ltd

[2005] NSWSC 1020

Reported Decision: 55 ACSR 411

New South Wales

Supreme Court

CITATION:	ASIC v Elm Financial Services Pty Ltd & Ors [2005] NSWSC 1020
HEARING DATE(S):	06/10/05
JUDGMENT DATE :	11 October 2005
JURISDICTION:	Equity Division Corporations List
JUDGMENT OF:	Barrett J
DECISION:	Declarations of contravention and disqualification orders made; undertakings accepted (see paragraph 12 and First Schedule and paragraph 13 and Second Schedule)

CATCHWORDS:	CORPORATIONS - application by ASIC for declarations of contravention of various investor protection provisions - court invited to make orders by consent on basis of statements of agreed facts - whether agreed facts warrant making of declarations - whether court should give effect to parties' agreement as to penalty
LEGISLATION CITED:	Corporations Act 2001 (Cth), ss.206C(1), 206E(1), 1317E
CASES CITED:	Australian Prudential Regulation Authority v Derstepanian [2005] FCA 1121 Australian Securities and Investments Commission v Rich (2004) 50 ACSR 500 Australian Securities and Investments Commission v Vizard (2005) 54 ACSR 395 Minister for Industry Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] ATPR 41-993 NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 Re One.Tel Ltd; Australian Securities and Investments Commission v Rich (2003) 44 ACSR 682
PARTIES:	Australian Securities and Investments Commission - Plaintiff Elm Financial Services Pty Ltd - First Defendant Andrew Terracini - Ninth Defendant Howard Young - Twelfth Defendant
FILE NUMBER(S):	SC 2313/04
COUNSEL:	Mr D.R. Stack - Plaintiff Mr A.M. McMurran, Solicitor - Ninth Defendant Mr T.R. Castle, Solicitor - Twelfth Defendant
SOLICITORS:	Mr Kim Turner, Solicitor for Australian Securities and Investments Commission - Plaintiff Heidtman & Co - Ninth Defendant Gilbert + Tobin - Twelfth Defendant

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BARRETT J

TUESDAY, 11 OCTOBER 2005

2313/04 AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v ELM FINANCIAL SERVICES PTY LTD & 11 ORS

JUDGMENT

1 The plaintiff, Australian Securities and Investments Commission, has instituted proceedings in which contraventions of various statutory provisions are alleged against five individuals in relation to activities of a group of companies sufficiently described, for present purposes, as the Elm Group.

2 I am about to begin the hearing of those proceedings. First, however, I must deal with two applications, one by ASIC and the ninth defendant (Mr Andrew Dennis Terracini) and the other by ASIC and the twelfth defendant (Mr Howard Young). The application is, in each case, an application that orders be made by consent disposing of the proceedings as they affect the particular defendant. The orders include, in each case, several declarations of contravention of provisions of the Corporations Act 2001 (Cth) by the particular defendant, an order pursuant to ss.206C(1) and 206E(1) that that defendant be disqualified from managing corporations for a stated period (seven years from the making of the orders in Mr Terracini’s case and five years from the making of the orders in Mr Young’s case), orders that the proceedings be dismissed as they affect Mr Terracini and Mr Young and orders that the parties bear their own costs.

3 As is made clear by, in particular, the decision of Bryson J in Re One.Tel Ltd; Australian Securities and Investments Commission v Rich (2003) 44 ACSR 682 and that of White J in Australian Securities and Investments Commission v Rich (2004) 50 ACSR 500, a declaration of contravention under s.1317E of the Corporations Act, being a declaration on a matter relating to public or analogous rights, should not be made by consent of ASIC and the person against whom ASIC has proceeded unless the court has a basis for being satisfied by evidence (including agreed facts) that the statutory conditions for the making of the declarations have been fulfilled.

4 A statement of facts agreed by Mr Terracini and ASIC (Exhibit T1) has been tendered, as has a statement of facts agreed by Mr Young and ASIC (Exhibit Y1). The first runs to 47 pages and the second to 31 pages. Each deals with a number of events and circumstances bearing upon the allegations against the particular defendant in the proceedings. Those exhibits (and Exhibits T2 and Y2, being copies of s.93AA undertakings given to ASIC) will be retained as part of the court record.

5 The detailed content of the exhibits need not be rehearsed here. In respect of Mr Terracini, it is sufficient to say that the agreed facts show to the requisite degree that he

(a) contravened s.727(1) on one occasion;

(b) contravened s.945A(1) on nine occasions;

(c) contravened s.946A(1) on three occasions;
(d) contravened ss.1041E(1), 1041F(1)(a) and 1041H on five occasions;
(e) caused Elm Financial Services to commit several related contraventions of provisions of the Corporations Act ; and
(f) contravened ss.180(1) and 181(1) by failing to prevent related contraventions by Elm Financial Services.

6 In respect of Mr Young, the agreed facts show to the requisite degree that he

(a) contravened s.727(1) on one occasion;

(b) contravened s.601ED(5) on one occasion;

(c) contravened s.945A(1) on two occasions;

(c) contravened ss.1041E(1), 1041F(1)(a) and s.1041H(1) on five occasions;

(d) contravened s.946A(1) on one occasion;

(e) caused Elm Financial Services to commit several related contraventions of the Corporations Act; and

(g) contravened ss.180(1) and 181(1) by failing to prevent the contraventions by Elm Financial Services.

7 All the contraventions involved apparently deliberate failure to observe fundamental statutory rules directed towards protection of investors. The legislation proceeds on the clear basis that persons should be invited to invest in financial products only if statutory specifications concerning product structure and materials for decision making are met and if advice given or solicitations made are honest, frank and fairly based. Both Mr Terracini and Mr Young failed in material and serious ways to abide by these rules and, in so doing, also failed in the duties owed by them as company officers. The agreed facts cause the court to be satisfied that the statutory conditions for the making of the declarations of contravention have been satisfied.

8 So far as consequences are concerned, the parties have, in each case, agreed a period of disqualification, with the disqualification being imposed through an order under s.206C so that s.206A(1) operates to impose criminal sanctions if activities of the kind described in the latter section are engaged in during the term of the disqualification.

9 The parties have, in each case, agreed the duration of the disqualification. That, however, does not absolve the court of its duty to consider the appropriateness of the penalty in the light of the agreed facts and the surrounding circumstances. This is made clear by the decisions of the Full Federal Court in NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 and, more recently, Minister for Industry Tourism and Resources v Mobil Oil Australia Pty Ltd [2004] ATPR 41-993 (and see, in the present statutory context, Australian Securities and Investments Commission v Vizard (2005) 54 ACSR 395). In the Mobil Oil case (at [51]) the following propositions were seen as emerging from the reasoning in NW Frozen Foods:

“(i) It is the responsibility of the Court to determine the appropriate penalty to be imposed under s 76 of the TP Act in respect of a contravention of the TP Act.
(ii) Determining the quantum of a penalty is not an exact science. Within a permissible range, the courts have acknowledged that a particular figure cannot necessarily be said to be more appropriate than another.
(iii) There is a public interest in promoting settlement of litigation, particularly where it is likely to be lengthy. Accordingly, when the regulator and contravenor have reached agreement, they may present to the Court a statement of facts and opinions as to the effect of those facts, together with joint submissions as to the appropriate penalty to be imposed.
(iv) The view of the regulator, as a specialist body, is a relevant, but not determinative consideration on the question of penalty. In particular, the views of the regulator on matters within its expertise (such as the ACCC’s views as to the deterrent effect of a proposed penalty in a given market) will usually be given greater weight than its views on more “subjective” matters.
(v) In determining whether the proposed penalty is appropriate, the Court examines all the circumstances of the case. Where the parties have put forward an agreed statement of facts, the Court may act on that statement if it is appropriate to do so.
(vi) Where the parties have jointly proposed a penalty, it will not be useful to investigate whether the Court would have arrived at that precise figure in the absence of agreement. The question is whether that figure is, in the Court’s view, appropriate in the circumstances of the case. In answering that question, the Court will not reject the agreed figure simply because it would have been disposed to select some other figure. It will be appropriate if within the permissible range.”

10 There has been some criticism of this approach as involving “platitudes”: see per Weinberg J in Australian Prudential Regulation Authority v Derstepanian [2005] FCA 1121. And in Vizard (above), the court imposed a higher penalty than that agreed by the partiers and sought by the regulator.

11 It is clear that the court is in no way constrained by the parties’ agreement and that, having made the declaration of contravention, it must exercise its discretion as to penalty. In the present case, the factual background does not, to my mind, indicate that the respective periods of disqualification proposed by the parties are inadequate. Mr Terracini’s culpability can be seen to be greater than Mr Young’s but in saying that, I do not intend to suggest that either is undeserving of a significant period of disqualification having regard to the financial damage inflicted upon innocent people. Each has, however, acknowledged the error of his ways and has volunteered to vacate the relevant field of activity for a significant period. I am satisfied that the periods of disqualification are appropriate.

12 In relation to Andrew Dennis Terracini (the ninth defendant), the court makes by consent the declarations and orders set out in the First Schedule to these reasons and notes and accepts the undertaking set out in that First Schedule.

13 In relation to Howard Young (the twelfth defendant) the court makes by consent the declarations and orders set out in the Second Schedule to these reasons and notes and accepts the undertaking in that Second Schedule.

First Schedule

With the consent of the Plaintiff (“ ASIC ”) and the 9th Defendant (“ Andrew Terracini ), THE COURT:

1. Declares from about July 1995, Andrew Terracini was a “providing entity” within the meaning of sections 945A and 946A of the Corporations Act.

2. Declares from about June 2002, Andrew Terracini was an “officer” of the 1st Defendant (“Elm Financial Services”) within the meaning of sections 9, 180, 181 and 182 of the Corporations Act.

3. Declares that by promoting and causing the issue of the Elm Nominee Debentures, as pleaded in paragraphs 46 to 47 of the Amended Statement of Claim (“the Claim”), Elm Financial Services contravened (“the Elm Nominee Debenture Contravention”) section 727 (1) of the Corporations Act.

4. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Elm Nominee Debenture Contravention.

5. Declares that by promoting and causing the issue of the Elm Property Debentures, as pleaded in paragraphs 54 to 55 of the Claim, Elm Financial Services contravened (“the Elm Property Debenture Contravention”) section 727 (1) of the Corporations Act.

6. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Elm Property Debenture Contravention.

7. Declares that by promoting and causing the issue of units in the Elm Unit Trust, as pleaded in paragraphs 62 to 65 of the Claim, Elm Financial Services contravened (“the Elm Unit Trust Contravention”) section 601ED (5) of the Corporations Act.

8. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Elm Unit Trust Contravention.

9. Declares that promoting and causing the issue of the Ann Street Offer, as pleaded in paragraphs 70 to 73 of the Claim, Elm Financial Services contravened (“the Ann Street Contravention”) section 601ED (5) of the Corporations Act.

10. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Ann Street Contravention.

11. Declares that by making the Breen Recommendation, as defined in paragraph 86 of the Claim, Andrew Terracini:

(a) contravened section 945A(1) of the Corporations Act ; and
(b) caused Elm Financial Services to contravene (“ the Breen Contravention ”) section 945A(1) of the Corporations Act .

12. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Breen Contravention.

13. Declares that by making the 1st Wilkinson Recommendation, as defined in paragraph 92 of the Claim, Andrew Terracini:

(a) contravened section 945A(1) of the Corporations Act ; and
(b) caused Elm Financial Services to contravene (“ the 1st Wilkinson Contravention ”) section 945A(1) of the Corporations Act .

14. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 1st Wilkinson Contravention.

15. Declares that by making the 2nd Wilkinson Recommendation, as defined in paragraph 96 of the Claim, Andrew Terracini:

(a) contravened section 945A(1) of the Corporations Act ; and

(b) caused Elm Financial Services to contravene (“ the 2nd Wilkinson Contravention ”) section 945A(1) of the Corporations Act .

16. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 2nd Wilkinson Contravention.

17. Declares that by making the Ryan Recommendation, as defined in paragraph 102 of the Claim, Andrew Terracini:

(a) contravened section 945A(1) of the Corporations Act ; and

(b) caused Elm Financial Services to contravene (“ the Ryan Contravention ”) section 945A(1) of the Corporations Act .

18. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Ryan Contravention.

19. Declares that by making the Ryan Snr. Recommendation, as defined in paragraph 108 of the Claim, Andrew Terracini:

(a) contravened section 945A(1) of the Corporations Act ; and

(b) caused Elm Financial Services to contravene (“ the Ryan Snr. Contravention ”) section 945A(1) of the Corporations Act .

20. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Ryan Snr. Contravention.

21. Declares that by making the 1st Bellamy Recommendation, as defined in paragraph 115 of the Claim, Andrew Terracini:

(a) contravened section 945A(1) of the Corporations Act ; and

(b) caused Elm Financial Services to contravene (“ the 1st Bellamy Contravention ”) section 945A(1) of the Corporations Act .

22. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 1st Bellamy Contravention.

23. Declares that by making the 2nd Bellamy Recommendation, as defined in paragraph 115 of the Claim, Andrew Terracini:

(a) contravened section 945A(1) of the Corporations Act ; and

(b) caused Elm Financial Services to contravene (“ the 2nd Bellamy Contravention ”) section 945A(1) of the Corporations Act .

24. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 2nd Bellamy Contravention.

25. Declares that by making the Garnett Super Recommendation, as defined in paragraph 126 of the Claim, Andrew Terracini:

(a) contravened section 945A(1) of the Corporations Act ; and

(b) caused Elm Financial Services to contravene (“ the 1st Garnett Super Contravention ”) section 945A(1) of the Corporations Act .

26. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 1st Garnett Super Contravention.

27. Declares that by making the Garnett Recommendation, as defined in paragraph 132 of the Claim, Andrew Terracini:

(a) contravened section 945A(1) of the Corporations Act ; and

(b) caused Elm Financial Services to contravene (“ the 1st Garnett Contravention ”) section 945A(1) of the Corporations Act .

28. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 1st Garnett Contravention.

29. Declares that by failing to issue a Statement of Advice in respect of the 2nd Bellamy Recommendation, as defined in paragraph 119 of the Claim, Andrew Terracini and Elm Financial Services contravened (“the 3rd Bellamy Contravention”) section 946A (1) of the Corporations Act.

30. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 3rd Bellamy Contravention.

31. Declares that by failing to issue a Statement of Advice in respect of the Garnett Super Recommendation, as defined in paragraph 126 of the Claim, Andrew Terracini and Elm Financial Services contravened (“the 2nd Garnett Super Contravention”) section 946A (1) of the Corporations Act.

32. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 2nd Garnett Super Contravention.

33. Declares that by failing to issue a Statement of Advice in respect of the Garnett Super Recommendation, as defined in paragraph 132 of the Claim, Andrew Terracini and Elm Financial Services contravened (“the 2nd Garnett Contravention”) section 946A (1) of the Corporations Act.

34. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 2nd Garnett Contravention.

35. Declares that by permitting the issue of the Stirling Extension Offer, as defined in paragraph 162 of the Claim, which contained the 2nd Stirling Statements, as defined in paragraph 164 of the Claim, Andrew Terracini and Elm Financial Services, contravened (“the Stirling Contravention”):

(a) section 1041E (1) of the Corporations Act ;

(b) section 1041F (1) (a) of the Corporations Act ; and

(c) section 1041H (1) of the Corporations Act .

36. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Stirling Contravention.

37. Declares that by making of the O’Connor Statements, as defined in paragraph 217 of the Claim, Andrew Terracini and Elm Financial Services contravened (“the O’Connor Contravention”):

(a) section 1041E (1) of the Corporations Act ;

(b) section 1041F (1) (a) of the Corporations Act ; and

(c) section 1041H (1) of the Corporations Act .

38. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the O’Connor Contravention.

39. Declares that by making the Wilkinson Statements, as defined in paragraph 229 of the Claim, Andrew Terracini and Elm Financial Services contravened (“the 3rd Wilkinson Contravention”):

(a) section 1041E (1) of the Corporations Act ;

(b) section 1041F (1) (a) of the Corporations Act ; and

(c) section 1041H (1) of the Corporations Act .

40. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the 3rd Wilkinson Contravention.

41. Declares that by making the Blinman Statements, as defined in paragraph 238 of the Claim, Andrew Terracini and Elm Financial Services contravened (“the Blinman Contravention”):

(a) section 1041E (1) of the Corporations Act ;

(b) section 1041F (1) (a) of the Corporations Act ; and

(c) section 1041H (1) of the Corporations Act .

42. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Blinman Contravention.

43. Declares that by making the Elm Property Statements, as defined in paragraph 249 of the Claim, Andrew Terracini and Elm Financial Services contravened (“the Elm Property Contravention”):

(a) section 1041E (1) of the Corporations Act ;

(b) section 1041F (1) (a) of the Corporations Act ; and

(c) section 1041H (1) of the Corporations Act .

44. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Elm Property Contravention.

45. Declares that between June 2002 and April 2004, Elm Financial Services contravened (“the Training Contravention”) section 912A (1) (f) of the Corporations Act by failing to ensure that its authorised representatives were trained or properly trained and were otherwise compotent to provide financial services in respect of the following:

(a) the Elm Nominees Offers, as defined in paragraph 46 of the Claim;

(b) the Elm Property Offers, as defined in paragraph 54 of the Claim;

(c) the Elm Unit Trust Offers, as defined in paragraph 62 of the Claim; and

(d) the Ann Street Offers, as defined in paragraph 70 of the Claim.

46. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Training Contravention.

47. Declares that between June 2002 and April 2004, Elm Financial Services contravened (“the Port Heritage Disposal Contravention”) section 912A (1) (a) of the Corporations Act by:

(a) failing to ensure that the Port Heritage Funds, as defined in paragraph 39 of the Claim, were paid to Port Heritage Developer, as defined in paragraph 38 of the Claim; and

(b) failing to prevent the expenditure of the Port Heritage Funds on matters unrelated to the development and construction of the Port Heritage Resort, as defined in paragraph 38 of the Claim.

48. Declares that Andrew Terracini, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Port Heritage Disposal Contravention.

49. Declares that by reason of the facts, matters and circumstances giving rise to the declarations in paragraphs 1, 2, 4, 6, 8, 10 to 44, 46 and 48 above, Andrew Terracini, in contravention of section 180 (1) of the Corporations Act, failed to exercise his powers and discharge his duties as an officer of Elm Financial Services, with the requisite degree of care and diligence.

50. Declares that by reason of the facts, matters and circumstances giving rise to the declarations in paragraphs 1, 2, 4, 6, 8, 10 to 44, 46 and 48 above, Andrew Terracini, in contravention of section 181 (1) of the Corporations Act, failed to exercise his powers and discharge his duties as an officer of Elm Financial Services, in good faith in the best interests of that corporation and for a proper purpose.

51. Orders, pursuant to sections 206C (1) and 206E (1) of the Corporations Act, that Andrew Terracini be disqualified from managing corporations for a period of seven (7) years commencing on the date when this Order is made.

52. Orders that these Proceedings, so far as they concern ASIC and Andrew Terracini, be dismissed.

53. Orders that each of ASIC and Andrew Terracini pay their own costs.

54. Orders that all other orders predating the Orders set out herein be set aside, dissolved and discharged.

AND THE COURT NOTES AND ACCEPTS THE UNDERTAKING GIVEN TO IT BY AND ON BEHALF OF ANDREW TERRACINI THAT:

55. Andrew Terracini will comply with the terms of the undertaking given by him to ASIC pursuant to section 93AA of the Australian Securities and Investments Commission Act, a copy of which is Exhibit T2.

Second Schedule

With the consent of the Plaintiff (“ ASIC ”) and the 12th Defendant (“ Mr Young ”), THE COURT:

1. Declares that between about July 2001 and October 2004, Mr Young was:

(a) an “officer” of the 1st Defendant (“ Elm Financial Services ”) within the meaning of sections 9, 180, 181 and 182 of the Corporations Act ; and

(b) a “providing entity” within the meaning of sections 945A and 946A of the Corporations Act .

2. Declares that by promoting and causing the issue of the Elm Nominee Debentures, as pleaded in paragraphs 46 to 47 of the Amended Statement of Claim (“ the Claim ”), Elm Financial Services contravened (“ the Elm Nominee Debenture Contravention ”) section 727 (1) of the Corporations Act .

3. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Elm Nominee Debenture Contravention.

4. Declares that by promoting and causing the issue of the Elm Property Debentures, as pleaded in paragraphs 54 to 55 of the Claim, Elm Financial Services contravened (“ the Elm Property Debenture Contravention ”) section 727 (1) of the Corporations Act .

5. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Elm Property Debenture Contravention.

6. Declares that by promoting and causing the issue of units in the Elm Unit Trust, as pleaded in paragraphs 62 to 65 of the Claim, Elm Financial Services contravened (“the Elm Unit Trust Contravention”) section 601ED (5) of the Corporations Act.

7. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Elm Unit Trust Contravention.

8. Declares that promoting and causing the issue of the Ann Street Offer, as pleaded in paragraphs 70 to 73 of the Claim, Elm Financial Services contravened (“the Ann Street Contravention”) section 601ED (5) of the Corporations Act.

9. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Ann Street Contravention.

10. Declares that by making the Jeffery Recommendation, as defined in paragraph 80 of the Claim, Mr Young:

(a) contravened section 945A(1) of the Corporations Act ; and

(b) caused Elm Financial Services to contravene (“ the Jeffery Contravention ”) section 945A(1) of the Corporations Act .

11. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Jeffery Contravention.

12. Declares that by making the 2nd Wilkinson Recommendation, as defined in paragraph 96 of the Claim, Mr Young:

(a) contravened section 945A(1) of the Corporations Act ; and

(b) caused Elm Financial Services to contravene (“ the Wilkinson Contravention ”) section 945A(1) of the Corporations Act .

13. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Wilkinson Contravention.

14. Declares that by failing to issue a Statement of Advice in respect of the Spanhel Recommendation, as defined in paragraph 139 of the Claim, Elm Financial Services contravened (“the Spanhel Contravention”) section 946A (1) of the Corporations Act.

15. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Spanhel Contravention.

16. Declares that by participating in the issue of the Stirling Extension Offer, as defined in paragraph 162 of the Claim, which contained the 2nd Stirling Statements, as defined in paragraph 164 of the Claim, Mr Young:

(a) contravened:


(i) section 1041E (1) of the Corporations Act ;

(ii) section 1041F (1) (a) of the Corporations Act ; and

(iii) section 1041H (1) of the Corporations Act .
(b) caused Elm Financial Services, to contravene (“ the Stirling Contravention ”):

(i) section 1041E (1) of the Corporations Act ;

(ii) section 1041F (1) (a) of the Corporations Act ;

(iii) section 1041H (1) of the Corporations Act ;

17. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Stirling Contravention.

18. Declares that by making the O’Connor Statements, as defined in paragraph 217 of the Claim, Elm Financial Services contravened (“the O’Connor Contravention”):

(a) section 1041E (1) of the Corporations Act ;

(b) section 1041F (1) (a) of the Corporations Act ; and

(c) section 1041H (1) of the Corporations Act .

19. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the O’Connor Contravention.

20. Declares that by making the Wilkinson Statements, as defined in paragraph 229 of the Claim, Mr Young:

(a) contravened:

(i) section 1041E (1) of the Corporations Act ;

(ii) section 1041F (1) (a) of the Corporations Act ; and

(iii) section 1041H (1) of the Corporations Act .
(b) caused Elm Financial Services, to contravene (“ the Second Wilkinson Contravention ”):

(i) section 1041E (1) of the Corporations Act ;

(ii) section 1041F (1) (a) of the Corporations Act ;

(iii) section 1041H (1) of the Corporations Act ;

21. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Second Wilkinson Contravention.

22. Declares that by making the Blinman Statements, as defined in paragraph 238 of the Claim, Elm Financial Services contravened (“the Blinman Contravention”):

(a) section 1041E (1) of the Corporations Act ;

(b) section 1041F (1) (a) of the Corporations Act ; and

(c) section 1041H (1) of the Corporations Act .

23. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Blinman Contravention.

24. Declares that by creating and issuing the Revised Bellamy Advice, as defined in paragraph 274 of the Claim, Elm Financial Services contravened (“the Bellamy Contravention”) section 946A (1) of the Corporations Act.

25. Declares that Mr Young, whilst being an officer of Elm Financial Services, failed to take reasonable steps to prevent the Bellamy Contravention.

26. Declares that by reason of the facts, matters and circumstances giving rise to the declarations in paragraphs 1, 3, 5, 7, 9, 10, 11, 12, 13, 15, 16, 17, 19, 20, 21, 23 and 25 above, Mr Young, in contravention of section 180 (1) of the Corporations Act, failed to exercise his powers and discharge his duties as an officer of Elm Financial Services, with the requisite degree of care and diligence.

27. Declares that by reason of the facts, matters and circumstances giving rise to the declarations in paragraphs 1, 3, 5, 7, 9, 10, 11, 12, 13, 15, 16, 17, 19, 20, 21, 23 and 25 above, Mr Young, in contravention of section 181 (1) of the Corporations Act, failed to exercise his powers and discharge his duties as an officer of Elm Financial Services, in good faith in the best interests of that corporation and for a proper purpose.

28. Orders, pursuant to sections 206C (1) and 206E (1) of the Corporations Act, that Mr Young be disqualified from managing corporations for a period of five (5) years commencing on the date when this Order is made.

29. Orders that these Proceedings, so far as they concern ASIC and Mr Young, be dismissed.

30. Orders that each of ASIC and Mr Young pay their own costs.

31. Orders that all other orders relating to Mr Young predating the Orders set out herein be set aside, dissolved and discharged.

AND THE COURT NOTES AND ACCEPTS THE UNDERTAKING GIVEN TO IT BY AND ON BEHALF OF MR YOUNG THAT:

32. Mr Young will comply with the terms of the undertaking given by him to ASIC pursuant to section 93AA of the Australian Securities and Investments Commission Act, a copy of which is Exhibit Y2.