Australian Securities and Investments Commission v LGSS Pty Ltd

The Australian Securities and Investments Commission (ASIC) filed an application against LGSS Pty Ltd, the trustee of a superannuation fund, alleging that LGSS contravened sections 12DB(1)(a) and 12DF(1) of the Australian Securities and Investments Commission Act 2001 (Cth) by making false or misleading representations and engaging in conduct likely to mislead the public regarding investments, particularly in relation to what is known as "greenwashing." ASIC argued that LGSS made misleading representations that the superannuation fund would not invest in certain industries such as gambling, tobacco, oil tar sands, coal mining, or in Russia. The dispute centred around whether these representations were made in trade or commerce, whether LGSS engaged in conduct contrary to these representations, and whether an ordinary and reasonable member would interpret these claims in light of the fund's sustainable investment policy on its website.

The legal issues before the court included whether the representations were indeed made in trade or commerce, whether LGSS engaged in conduct contrary to these representations, and whether an ordinary and reasonable member would understand the fund's "overlay" process and draw distinctions between direct and indirect investments. Additionally, the court had to consider whether the representations were about future matters and whether LGSS had a reasonable basis for making them. The meaning of "gambling" and whether lotteries constitute a form of gambling were also examined.

The court found that it was misleading and deceptive for LGSS to state that it had ruled out investing in tobacco and that it specifically excluded investments in gambling and tobacco. The representations regarding Russia and oil tar sands were not found to be misleading. The court held that the representations about gambling were unequivocal and did not admit of the possibility of qualification by LGSS's "Sustainable and Responsible Investment Policy." The emphatic statements made in the representations did not contain any terms and conditions that would allow for exceptions. Consequently, the court concluded that ASIC was entitled to declarations of contraventions of the ASIC Act, except for those concerning the alleged tobacco representations and those regarding Russia and oil tar sands contained in the SRI Policy.

The court ordered that the matter be listed for further hearing to determine the appropriate form of declaratory relief. The costs of the proceeding to date were reserved to be considered after the conclusion of the proceeding, including ASIC's claims for pecuniary penalties, adverse publicity orders, and injunctive relief.