Australian Securities and Investments Commission v Frasers - the Project Managers Pty Ltd

[2008] FCA 541

FEDERAL COURT OF AUSTRALIA

Australian Securities and Investments Commission v Frasers – The Project Managers Pty Ltd [2008] FCA 541

CORPORATIONS – unregistered managed investment scheme – ex parte interim injunction sought – alleged breach of undertakings given to Australian Securities and Investments Commission – serious issues to be tried – balance of convenience favours grant if interim relief.

Corporations Act 2001 (Cth), ss 9, 601ED(1)(a), (b), 601ED(5), 601EE(2), 1324(1), (4)

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v FRASERS - THE PROJECT MANAGERS PTY LTD, MORAG HEATHER MCLEAN FRASER, KENNETH ANDREW NEWBIGGING FRASER, THE PRJECT AT BALDIVIS PTY LTD, SABRINA DEVELOPMENTS AT BALDIVIS PTY LTD, TAJBOASE HOLDINGS PTY LTD, FRASER PROJECTS PTY LTD and RCF INVESTMENTS PTY LTD

WAD 55 OF 2008

GILMOUR J

10 APRIL 2008

PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 55 OF 2008

BETWEEN:

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff

AND:

FRASERS - THE PROJECT MANAGERS PTY LTD
(ACN 114 445 500)
First Defendant

MORAG HEATHER MCLEAN FRASER
Second Defendant

KENNETH ANDREW NEWBIGGING FRASER
Third Defendant

THE PRJECT AT BALDIVIS PTY LTD (ACN 124 328 070)
Fourth Defendant

SABRINA DEVELOPMENTS AT BALDIVIS PTY LTD
(ACN 125 564 801)
Fifth Defendant

TAJBOASE HOLDINGS PTY LTD (ACN 126 447 443)
Sixth Defendant

FRASER PROJECTS PTY LTD (ACN 120 787 822)
Seventh Defendant

RCF INVESTMENTS PTY LTD (ACN 126 645 412)
Eighth Defendant

JUDGE:	GILMOUR J
DATE OF ORDER:	10 APRIL 2008
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.Until further order the first, second and third defendant each be restrained whether by their servants, agents, officers, employees or otherwise from:

1.1promoting, offering interests in, or distributing application forms or Expressions of Interest in respect of any the Schemes set out in Annexure A hereto;

1.2receiving, depositing, paying, transferring or otherwise dealing with, any moneys received from any person as consideration for acquiring an interest or becoming a member or investor in, or a purchaser in connection with any of the Schemes;

1.3dealing whether directly or indirectly with any of the real property set out in Annexure A hereto;

1.4entering into any agreement or arrangement concerning, or in respect of any of the Schemes;

1.5disposing of, destroying, amending, altering, parting with possession of, removing from the present location, directly or indirectly any books, papers, records, books of accounts, ledgers, journals, banking records, computer records or any other documents of any other type whatsoever recording or evidencing any dealings of any of the defendants in relation to any of the Schemes other than for the purpose of complying with an order of this Court;

1.6from facilitating or holding meetings or investors or distributing information to members or investors of any of the Schemes.

2.Until further order in respect of the scheme described as the Project at Baldivis in Annexure A hereto the fourth and fifth defendants be restrained whether by its servants, agents, officers, employees or otherwise from:

2.1promoting, offering interests in, or distributing application forms or Expressions of Interest in respect of the Scheme;

2.2receiving, depositing, paying, transferring or otherwise dealing with, any moneys received from any person as consideration for acquiring an interest or becoming a member or investor in, or a purchaser in connection with the Scheme;

2.3dealing whether directly or indirectly with any of the real property the subject of the Scheme listed in Annexure A hereto;

2.4entering into any agreement or arrangement concerning, or in respect of the Scheme;

2.5disposing of, destroying, amending, altering, parting with possession of, removing from the present location, directly or indirectly any books, papers, records, books of accounts, ledgers, journals, banking records, computer records or any other documents of any other type whatsoever recording or evidencing any dealings of any of the defendants in relation to the Scheme other than for the purpose of complying with an order of this Court;

2.6from facilitating or holding meetings or investors or distributing information to members or investors of the Scheme.

3.Until further order in respect of the scheme described as the Mundijong Project in Annexure A hereto, the sixth defendant be restrained whether by its servants, agents, officers, employees or otherwise from:

3.1promoting, offering interests in, or distributing application forms or Expressions of Interest in respect of the Schemes;

3.2receiving, depositing, paying, transferring or otherwise dealing with, any moneys received from any person as consideration for acquiring an interest or becoming a member or investor in, or a purchaser in connection with any of the Schemes;

3.3dealing whether directly or indirectly with any of the real property the subject of the Schemes;

3.4entering into any agreement or arrangement concerning, or in respect of any of the Schemes;

3.5disposing of, destroying, amending, altering, parting with possession of, removing from the present location, directly or indirectly any books, papers, records, books of accounts, ledgers, journals, banking records, computer records or any other documents of any other type whatsoever recording or evidencing any dealings of any of the defendants in relation to any of the Schemes other than for the purpose of complying with an order of this Court;

3.6from facilitating or holding meetings or investors or distributing information to members or investors of any of the Schemes.

4.Until further order in respect of the schemes described as the 10 Holmes Forrestfield Development Project and 3 Anderson Forrestfield Development in Annexure A hereto, the seventh defendant be restrained whether by its servants, agents, officers, employees or otherwise from:

4.1promoting, offering interests in, or distributing application forms or Expressions of Interest in respect of the Schemes;

4.2receiving, depositing, paying, transferring or otherwise dealing with, any moneys received from any person as consideration for acquiring an interest or becoming a member or investor in, or a purchaser in connection with any of the Schemes;

4.3dealing whether directly or indirectly with any of the real property the subject of the Schemes;

4.4entering into any agreement or arrangement concerning, or in respect of any of the Schemes;

4.5disposing of, destroying, amending, altering, parting with possession of, removing from the present location, directly or indirectly any books, papers, records, books of accounts, ledgers, journals, banking records, computer records or any other documents of any other type whatsoever recording or evidencing any dealings of any of the defendants in relation to any of the Schemes other than for the purpose of complying with an order of this Court;

4.6from facilitating or holding meetings or investors or distributing information to members or investors of any of the Schemes. 

5.Until further order in respect of the scheme described as The Project on Fifty at Baldivis in Annexure A hereto, the eighth defendant be restrained whether by its servants, agents, officers, employees or otherwise from:

5.1promoting, offering interests in, or distributing application forms or Expressions of Interest in respect of the Schemes;

5.2receiving, depositing, paying, transferring or otherwise dealing with, any moneys received from any person as consideration for acquiring an interest or becoming a member or investor in, or a purchaser in connection with any of the Schemes;

5.3dealing whether directly or indirectly with any of the real property the subject of the Schemes;

5.4entering into any agreement or arrangement concerning, or in respect of any of the Schemes;

5.5disposing of, destroying, amending, altering, parting with possession of, removing from the present location, directly or indirectly any books, papers, records, books of accounts, ledgers, journals, banking records, computer records or any other documents of any other type whatsoever recording or evidencing any dealings of any of the defendants in relation to any of the Schemes other than for the purpose of complying with an order of this Court;

5.6from facilitating or holding meetings or investors or distributing information to members or investors of any of the Schemes.

6.There be liberty to apply on 48 hours’ notice.

7.Costs be reserved.

ANNEXURE A

Scheme	Description of Land in Western Australia	Certificate of Title
“The Project at Baldivis”	Lot 515 Sabrina Road Baldivis Lot 41 Sabrina Road Baldivis	Volume 2132 Folio 860; Lot 515 on Deposited Plan 202741
“The Reserve Development”	(Lots 7 & 65) 20 & 22 Lake Road Westfield	Volume 1284 Folio 204; Lot 65 on Plan 2706
“The Mundijong Project”	Lot 348 Kiernan Street Mundijong	Volume 1684 Folio 70; Lot 17 on Diagram 66810
“The Station at Thornlie”	(Lots 16, 18 & 19) 100, 104 & 106 Spring Road Thornlie	Volume 1757 Folio 378; Lot 18 on Plan 8723 Volume 24 Folio 218A; Lot 19 on Plan 8723 Volume 2225 Folio 799; Lot 16 on Plan 8723
“The Project on Fifty at Baldivis”	26 & 34 Fifty Road Baldivis	Volume 1644 Folio 618 Lot 9 on Diagram 64561 Volume 1292 Folio 125; Lot 3 on Diagram 30934
“10 Holmes Forrestfield Development”	(Lot 10) 334 Holmes Road Forrestfield	Volume 1192 Folio 250; Lot 10 on Diagram 18794
“The Yate Development at Baldivis”	(Lot 144) 23 Yate Close Baldivis	Volume 1709 Folio 7373; Lot 144 on Plan 15233
“The Yate Development at Baldivis”	(Lot 139) 28 Yate Close Baldivis	Volume 1709 Folio 732; Lot 139 on Plan 15233
“3 Anderson Forrestfield Development”	(Lot 3) 17B Anderson Road Forrestfield	Volume 2612 Folio 620; Lot 2 on Survey/Strata Plan 47231

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 55 OF 2008

BETWEEN:

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Plaintiff

AND:

FRASERS - THE PROJECT MANAGERS PTY LTD
(ACN 114 445 500)
First Defendant

MORAG HEATHER MCLEAN FRASER
Second Defendant

KENNETH ANDREW NEWBIGGING FRASER
Third Defendant

THE PRJECT AT BALDIVIS PTY LTD (ACN 124 328 070)
Fourth Defendant

SABRINA DEVELOPMENTS AT BALDIVIS PTY LTD
(ACN 125 564 801)
Fifth Defendant

TAJBOASE HOLDINGS PTY LTD (ACN 126 447 443)
Sixth Defendant

FRASER PROJECTS PTY LTD (ACN 120 787 822)
Seventh Defendant

RCF INVESTMENTS PTY LTD (ACN 126 645 412)
Eighth Defendant

JUDGE:	GILMOUR J
DATE:	10 APRIL 2008
PLACE:	PERTH

REASONS FOR JUDGMENT

1. These are the reasons given ex tempore by me on 10 April 2008 edited to a small extent but not so as to in any way affect the substance of the reasons given.

2. The present proceedings have been brought by the Australian Securities and Investments Commission (“ASIC”) by an originating process dated 20 March 2008.  Today before me ASIC seeks, on an ex parte basis, interim injunctive relief against each of the defendants.  Reliance is placed upon the affidavits of Mr Bryan Anthony Watson, sworn 19 March 2008, Mr Timothy Boase, sworn 4 April 2008 and a further affidavit of Mr Watson, sworn on 8 April 2008.  I have before me, a minute of proposed orders, date 9 April 2008 and it is in respect of those orders that interim relief is sought.  

3. ASIC contends that there are a number of managed investment schemes, as that is defined within s 9 of the Corporations Act 2001 (Cth) (“the Act”). They are as follows:

Scheme	Description of Land in Western Australia	Certificate of Title
1. 2.	“The Project at Baldivis”	Lot 515 Sabrina Road Baldivis Lot 41 Sabrina Road Baldivis	Volume 2132 Folio 860; Lot 515 on Deposited Plan 202741
3.	“The Reserve Development”	(Lots 7 & 65) 20 & 22 Lake Road Westfield	Volume 1284 Folio 204; Lot 65 on Plan 2706
4.	“The Mundijong Project”	Lot 348 Kiernan Street Mundijong	Volume 1684 Folio 70; Lot 17 on Diagram 66810
5.	“The Station at Thornlie”	(Lots 16, 18 & 19) 100, 104 & 106 Spring Road Thornlie	Volume 1757 Folio 378; Lot 18 on Plan 8723 Volume 24 Folio 218A; Lot 19 on Plan 8723 Volume 2225 Folio 799; Lot 16 on Plan 8723
6.	“The Project on Fifty at Baldivis”	26 & 34 Fifty Road Baldivis	Volume 1644 Folio 618 Lot 9 on Diagram 64561 Volume 1292 Folio 125; Lot 3 on Diagram 30934
7.	“10 Holmes Forrestfield Development”	(Lot 10) 334 Holmes Road Forrestfield	Volume 1192 Folio 250; Lot 10 on Diagram 18794
8.	“The Yate Development at Baldivis”	(Lot 144) 23 Yate Close Baldivis	Volume 1709 Folio 7373; Lot 144 on Plan 15233
9.	“The Yate Development at Baldivis”	(Lot 139) 28 Yate Close Baldivis	Volume 1709 Folio 732; Lot 139 on Plan 15233
10.	“3 Anderson Forrestfield Development”	(Lot 3) 17B Anderson Road Forrestfield	Volume 2612 Folio 620; Lot 2 on Survey/Strata Plan 47231

1. ASIC submits that the managed investment schemes, which I have identified, were required to be registered pursuant to the provisions of subsection 601ED(1) of the Act, as each had more than 20 members and/or investors or that it was promoted by a person who was in the business of promoting managed investment schemes; s 601ED(1)(a) and s 601ED(1)(b) of the Act respectively. In respect of the first, second, third and fourth schemes, which are identified, ASIC contends that each was required to be registered as it was a managed investment scheme which had morel than 20 members. In respect of those managed investment schemes alleged by ASIC and which I set out numbered 5 to 10 above, ASIC contends that they were required to be registered as they were managed investment schemes promoted by a person or persons who or which were in the business of promoting managed investment schemes.

2. Without such registration pursuant to subsection 601ED(1) of the Act, a person must not operate the managed investment scheme; that is by virtue of subsection 601ED(5). As a fact, none of the managed investments schemes, which I have referred to, is registered as required by the Act. The interim relief sought by ASIC, in terms of the minute of proposed orders is sought pursuant to subsection 1324(4) of the Act to preserve the position where relevant, pending the determination of its substantive application for permanent orders pursuant to subsection 1324(1), together with subsection 601EE(2) of the Act.

3. The definition of managed investment scheme in s 9 of the Act has three features. In considering these, and whether there is a scheme, it is important to note that a scheme may start off not having each of the three features required by the definition, but may be varied over time, so that the scheme does, at some point in time, have the three required features. By s 9 a managed investment schemes means:

   (a)       a scheme that has the following features:

   (i)people contribute money and money’s worth as consideration to acquire rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not);

   (ii)any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders);

   (iii)the members do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions); and

   relevantly also under subsection (e) a scheme in which all the members are bodies corporate that are related to each other and to the body corporate that promotes the scheme.

4. I have had the benefit of very lengthy and detailed submissions filed on behalf of ASIC.  I am satisfied, on the evidence before, me that the matters which are set out between paragraph 23 and 41 inclusive of the outline of submissions, filed by ASIC, have to the requisite degree, for an application such as this, been established to my satisfaction.  I have taken illustratively the position in relation to the Lot 515, Sabrina Road, Baldivis scheme and applied the relevant evidence and the law to the other schemes mutatis mutandis.  Each of the other schemes is considered in detail in those submissions. 

5. On 8 February this year, written undertakings were given in relation to the schemes by each of the defendants with the exception of the sixth and eighth defendants.  A copy of the undertakings may be found in the affidavit of Mr Bryan Anthony Watson sworn on 19 March 2008 at pages 931 and 932 (annexure BAW132).  The undertakings are given variously by Morag Heather McLean Fraser on her own behalf and in respect of certain of the defendants and by Kenneth Andrew Newbigging Fraser, who I understand to be her husband, in respect of himself and some other defendants. 

6. The terms of the undertaking are not as extensive as the orders which are sought in the minute of proposed orders filed by ASIC but in essence reflect the same relief which is sought before me today.  In particular, the relevant defendants undertook:

   1.        . . .

   2.        to refrain from to publishing, distributing, disseminating or otherwise circulating any “EOI” or any other document in furtherance of the scheme save for information to investors about the terms of this undertaking and the foreshadowed application by ASIC to wind up the schemes.  I understand from counsel that “EOI” is an abbreviation for “Expressions of Interest”;

   3.        until further agreement with ASIC, that each scheme manager would refrain, whether by themselves or their officers, servants, employees, agents or otherwise howsoever from receiving, soliciting, disposing, or causing to be paid or transferred any funds in connection with or further to the schemes.

   4.        . . .

   5.        not to encumber or otherwise deal directly or indirectly with any real or personal property of or funds held by a schemes manager for or in connection with the schemes. 

   6.        . . .

7. Counsel for ASIC has directed my attention to a number of instances, where I am satisfied again to the requisite degree, given the nature of the present application, that there is a serious concern that a number of those undertakings may have been breached.  There is a concern as to whether the investors have been kept informed and perhaps even misinformed.  I refer, for example, to the position in relation to communications by the first defendant concerning the installation of sewerage at Lot 515 Sabrina Road, Baldivis and the position which is reflected in a letter from the Water Corporation in reply to Mr Boase, who had written concerning that matter, having received a letter from the first defendant which had given him cause for suspicion.  The letter, which appears at page 941 of Mr Watson’s affidavit and which is dated 19 February 2008, on its face, may well be a breach of undertakings numbers 2 and 5. 

8. Then, in the West Australian Newspaper for 15 March 2008, there appeared an advertisement by Ron Farris Real Estate Pty Ltd in relation to the sale of 35-38 residential lots of the land at 13 Sabrina Road, Baldivis.  I was advised that this was the street address for the Land at Lot 515 Sabrina Road, Baldivis.  Furthermore, a printed brochure seeking expressions of interest in relation to that land was provided by Ron Farris Real Estate to Mr Boase on 18 March this year.  Individually, or in combination, those, it would appear, may well be breaches of undertaking number 5. 

1. There were other examples of possible breaches in the undertakings to which I was taken by counsel for ASIC. It is unnecessary, presently, to go to each of these for the purposes of the application before me. Nonetheless, generically, the court does have a very real concern, not only that some of the written undertakings given by those defendants who gave them may well have been breached but also that Mr Ken Fraser, it would appear, and putting it no higher at this stage, has made statements which are at odds with the content of other documents, including, for example, whether or not the first defendant is involved in one of the schemes or not. So, I am well satisfied that, by reference to the criteria contained in s 9 of the Act as to what constitutes a managed investment scheme, in each case a serious issue has been demonstrated by the applicant, that they are unregistered managed investment schemes.

2. I have no hesitation in concluding that, on the balance of convenience, the orders ought to be made to preserve the position in relation to each of the schemes. The scheme of the Act concerning managed investment schemes includes, necessarily and obviously, provision for the regulation of those schemes and to thereby confer appropriate protection for investors in the schemes. The Court simply does not know what damage, if any, or what loss, if any, investors may or may not have been occasioned by their investment in these unregistered schemes. When I say that, I say that provisionally, of course, on the basis of this being an ex parte interlocutory application.

3. I will, subject to some minor amendments, make orders in terms of ASIC’s minute of proposed orders for 10 April 2008 forming part of which is annexure A which sets out the several schemes to which the orders in the minute refer.  

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.

Associate:

Dated:        22 April 2008

Counsel for the Plaintiff:	Mr M D Howard
Solicitor for the Plaintiff:	Australian Securities and Investments Commission

Date of Hearing:	10 April 2008
Date of Judgment:	10 April 2008