Australian Securities and Investments Commission v Maxwell - [2006] NSWSC 1052

Reported Decision:
59 ACSR 373
(2006) 24 ACLC 1308

New South Wales

Supreme Court

CITATION: Australian Securities & Investments Commission v Maxwell & ors [2006] NSWSC 1052
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 6 February 2006, 20 February 2006, 23 February 2006

JUDGMENT DATE :
10 October 2006

JURISDICTION: Equity Division

JUDGMENT OF: Brereton J

DECISION: Declarations of contravention pursuant to Corporations Act, s 1317E; pecuniary penalty orders pursuant to s 1317G, injunctive relief pursuant to s 1324; compensation orders pursuant to s 1317H; and banning orders pursuant to s 206C, 206D and 206E: see Schedules A to H.

CATCHWORDS: CORPORATIONS – Fundraising – Offers of securities – whether loan agreement was “debenture” within Corporations Act, s 9, and “security” for purposes of Chapter 7 - whether offer to enter into loan agreements was offer of securities for purposes of Part 6D.2 – whether offers to enter into loan agreements required disclosure under Part 6D.2 – conditions of availability of s 708(10) exemption - licensee’s satisfaction on reasonable grounds of matters in s 708(10)(b) is condition and requires that licensee sufficiently investigate experience of investor to form relevant opinion - whether advertisement of offers prohibited if disclosure not required by reason of s 708(1) – whether to make singular personal approach to acquaintance is to “publish” a statement referring to an offer – whether Corporations Act s 79 available to impose accessorial civil liability in respect of provisions which are not civil penalty provisions – Carrying on financial services business without a licence - “financial services business” - “financial service” - “financial product advice” – “financial product” – whether loan agreements were financial products - whether by issuing loan agreements, corporation issued, and thereby dealt in, financial products – whether corporation was carrying on a financial services business - whether licensee under old legislation pursuant to transitional provisions was to be treated as if it held an Australian Financial Services Licence under new legislation for purposes of s 708(10) - Misleading and deceptive conduct – where corporations engaged in misleading and deceptive conduct by publishing advertisements and distributing brochures – whether director “knowingly concerned” - where evidence does not implicate director in any relevant conduct after he is shown to have knowledge of matters which falsify representations - Directors duties – whether breached by director authorising, permitting or failing to prevent contraventions by corporation of provisions of Corporations Act (not being civil penalty provisions) – ss 180, 181 and 182 are not concerned with any general obligation owed by directors at large to conduct affairs of company in accordance with law generally or Corporations Act in particular, but with duties owed to company - relevant considerations – whether s 181 duty of good faith is contravened in absence of deliberate conduct known to be not in interests of company - where corporations were closely held proprietary companies in which interests of directors and shareholders were identical, director was young and inexperienced and his role was to provide building and construction expertise while others were responsible for fund-raising role and directors obtained legal and accounting advice - Disqualification orders – when operation of s 206D is attracted – Consent orders – effect of agreement of parties on Court’s discretionary powers – Injunctions – whether appropriate to make orders prohibiting respondent from engaging in conduct that is misleading or deceptive or which is likely to mislead or deceive – Declarations of contravention – duplicity - whether declarations of contravention should treat as a single contravention of s 180, and as another single contravention of s 181, whole course of conduct as director of Group of companies over period, rather than particular acts or omissions – whether appropriate to make declarations of involvement (under s 79) in contravention by corporations (being contraventions of provisions which are not civil penalty provisions and do not make provision for accessorial civil liability) – Disqualification orders – relevant considerations.

LEGISLATION CITED: (CTH) Australian Securities and Investments Commission Act 2001, ss 12DA(1), 12GD
(CTH) Corporations Act 2001, ss 9, 18, 19, 79, 181, 182, 183, 206B, 206C, 206D, 206E, Chapter 6D, ss 700, Part 6D.2, ss 706, 708, 727(1), 734, Chapter 7, ss 761A, 761E, 763A, 764A, 766A, 766B, 766C, 911A, 911B, 911D, 1041H, 1041I, 1317E, 1317G, 1317H, 1324, 1430, 1431, 1432.
(CTH) Trade Practices Act 1974, s 52
(NSW) Corporations Law 1989, ss 104, 786, 851

CASES CITED: ACCC v Frances [2004] FCA 487
Angas Law Services Pty Ltd (in liq) v Carabelas (2005) 53 ACSR 208
ASC v Gallagher (1993) 11 WAR 105; 10 ACSR 43; 11 ACLC 286
ASIC v Vines (2005) 55 ACSR 617
ASIC v Adler (2002) 41 ACSR 72
ASIC v Adler (2002) 42 ACSR 80; [2002] NSWSC 483
ASIC v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305
ASIC v Doyle (2001) 38 ACSR 606
ASIC v Elm Financial Services Pty Ltd (2005) 55 ACSR 411; [2005] NSWSC 1020
ASIC v Elm Financial Services Pty Ltd & Ors [2005] NSWSC 1033
ASIC v Elm Financial Services [2005] NSWSC 1065
Australian Growth Resources Corporation Pty Ltd v Van Reesema (1988) 13 ACLR 261
Australian Innovation Ltd v Petrovsky (1996) 21 ACSR 218
Biala Pty Ltd v Mallina Holdings Ltd (No 2) (1993) 11 ACSR 785; 11 ACLC 1082; (1994) 15 ACSR 1
BMW Australia Limited v ACCC (2004) 207 ALR 452
Byrne v Baker [1964] VR 443
Chew v R (1991) 5 ACSR 473
Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115
Compaq Computer Australia Ltd v Merry (1998) 157 ALR 1
Daniels (formerly practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438; 16 ACSR 607
Forge v ASIC (2004) 52 ACSR 1
Furs Ltd v Tomkies (1936) 54 CLR 583; 9 ALJ 419
Giorgianni v The Queen (1985) 156 CLR 473
Hamilton v Whitehead (1988) 166 CLR 121
H.L. Bolton (Engineering) Co Ltd v T.J. Graham & Sons Ltd [1957] 1 QB 159
Hogg v Cramphorn [1967] Ch 254; [1966] 3 All ER 420; [1970] Ch 122 (CA)
ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248
King v GIO Australia Holdings Ltd (2001) 184 ALR 98
Marchesi v Barnes [1970] VR 434
Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1
North-West Transportation Co Ltd v Beatty (1887) 12 App Cas 589
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 109; 14 ACSR 109
Re City Equitable Fire Insurance Co Ltd [1925] Ch 407
Re Property Force Consultants Pty Ltd (1995) 13 ACLC 1051
Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134n; [1942] 1 All ER 378
Sheahan v Verco (2001) 79 SASR 109; 37 ACSR 117
Smithers v Beveridge (1994) 14 ACSR 197
Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; (1982) ATPR 40-303
Tesco Supermarkets Ltd v Nattrass [1972] AC 153
Vrisakis v ASC (1993) 9 WAR 395; 11 ACSR 162
Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666; (1975) 1 ACLR 219
World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181
Yorke v Lucas (1985) 158 CLR 661

PARTIES: Australian Securities & Investments Commission (plaintiff)
Donald Richard Maxwell (first defendant)
Oceanwalk Projects Pty Limited (third defendant)
Procorp Investments Pty Limited (fourth defendant)
Central Development Group Pty Limited (fifth defendant)
The Wake (Waitara) Pty Limited (sixth defendant)
Alliance Property Developments Limited (seventh defendant)
Malcolm Fortune (eighth defendant)
Coakley Associates Pty Limited (ninth defendant)
Bankstown Project Two Pty Limited (tenth defendant)
Drummoyne Constructions Pty Limited (eleventh defendant)
Great Northern Constructions Pty Limited (twelfth defendant)
Homebush Project One Pty Limited (thirteenth defendant)
Liverpool Projects Limited (fourteenth defendant)
Mansions on Mann Limited (fifteenth defendant)
Maroubra Properties Pty Limited (sixteenth defendant)
Miranda Villas Pty Limited (seventeenth defendant)
Procorp Investments (Gosford) Pty Limited (eighteenth defendant)
Zepher Pty Limited (nineteenth defendant)
Jim Kolios (twentieth defendant)
Northern Sight Pty Ltd (twenty-first defendant)
George Nahed (twenty-second defendant)
Troy Pierre Fortune (twenty-third defendant)
John William Bennett (twenty-fourth defendant)
Jaul Jammal (twenty-fifth defendant)
Roy Skaf (twenty-sixth defendant)
Lloyd Coakley (twenty-seventh defendant)

FILE NUMBER(S): SC 5298/03

COUNSEL: Mr D Stack (plaintiff)
Mr D Maxwell (in person) (first defendant)
Mr P Livingstone (ninth & twenty-seventh defendants)
Ms J Leary (sol) (twentieth defendant)
Mr J Bennett (in person) (twenty-fourth defendant)
Mr R Newton (twenty-sixth defendant)

SOLICITORS: Kim Turner, Solicitor, ASIC
Hunt & Hunt (ninth & twenty-seventh defendants)
Leary & Company (twentieth defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

10 October 2006

5298/2003 Australian Securities & Investments Commission v Maxwell & Ors

JUDGMENT

1 HIS HONOUR: The plaintiff Australian Securities & Investments Commission (“ASIC”) alleges that the defendants - who comprise two groups of companies (“the ProCorp Group” and “the Central Development Group”), officers of those companies, and a consultant and an accountant to them, have committed or been involved in contraventions of the Corporations Act in the course of the promotion and conduct of schemes by which each group raised funds from the public for the purchase and development of real estate (“the ProCorp Scheme” and “the Central Development Scheme”). The companies that comprised the two Groups are all now in liquidation. ASIC seeks, against the remaining defendants, declarations of contravention (including pursuant to Corporations Act, s 1317E), pecuniary penalties (pursuant to s 1317G), injunctive relief (pursuant to s 1324), compensation orders (pursuant to s 1317H) and banning orders (pursuant to s 206C, 206D and 206E).

2 The first defendant Mr Maxwell, through his company the second defendant Business Express Success Techniques Pty Ltd (“BEST”), acted as a consultant to both Groups and was responsible for most of the fund-raising under both Schemes. He promoted the Schemes by newspaper advertisements, which referred to an opportunity to earn interest of 30% or 40% per annum on a secured and guaranteed investment of a minimum of $50,000; provided promotional material (prepared, in part, by him and, in part, by the ProCorp and Central Development Groups) to those who responded to such advertisements; and persuaded them to invest in one of or both of the Schemes.

3 The defendants Mr Malcolm Fortune, Mr Troy Fortune, Mr John William Bennett and Mr George Nahed were officers of various companies in the ProCorp Group; and the defendants Mr Jim Kolios, Mr Jaul Jammal and Mr Roy Skaf were officers of various companies in the Central Development Group. The defendants Mr Coakley and his company Coakley Associates Pty Ltd (together, “Coakleys”) were accountants, who purported to provide certificates of advice in connection with the ProCorp Scheme, which, if properly given, might have afforded an exemption from the requirements of the fundraising provisions of the Corporations Act, pursuant to s 708(10).

4 Agreements have been reached between ASIC and the remaining defendants, other than Mr Nahed, as to the orders that the Court should be asked to make, and Statements of Agreed Facts have been placed before the Court in support of the orders proposed to be made. I shall address those matters once I have considered the case against Mr Nahed, against whom the matter proceeded undefended.

THE CASE AGAINST MR NAHED

5 Mr Nahed was a director of various companies in the ProCorp Group, and the allegations against him relate to his involvement in the ProCorp Scheme.

6 These are proceedings for penalties and banning orders. The contraventions that they allege are capable of being criminal offences, as well as in some cases founding civil penalties and disqualifications. They are proceedings in which the so-called Briginshaw standard of proof applies.

The ProCorp Scheme:

7 The third defendant Oceanwalk Pty Ltd (formerly known as Belle Development Pty Ltd), of which Mr Malcolm Fortune and Mr Troy Fortune were directors, and in which Mr Troy Fortune held all the issued share capital, carried on a business of selecting, financing, marketing and project managing land development projects. The ProCorp Scheme involved the raising of funds for the purchase and development of real estate identified by Oceanwalk, including in particular properties at Homebush, Liverpool, Gosford, Five Dock, Newport, Soldiers Point and Ettalong (“the ProCorp Projects”). Mr Nahed was a builder, and companies associated with him were to be the builders of the proposed developments.

8 Separate corporate entities – of which Mr Malcolm Fortune, Mr Troy Fortune, Mr Nahed and Mr Bennett were variously directors – were established to undertake each of the ProCorp Projects: Homebush Project One Pty Ltd, for the Homebush Property; Mansions on Mann Ltd, for the Gosford Property; Liverpool Projects Ltd, for the Liverpool Property; Bankstown Project Two Pty Ltd, for the Five Dock Property; Great Northern Constructions Pty Ltd, for the Newport Property; Drummoyne Constructions Pty Ltd, for the Soldiers Point Property; and Zepher Pty Ltd and Northern Sight Pty Ltd, for the Ettalong Property (“the Project Companies”).

9 As well as obtaining finance through conventional sources from lending institutions, the ProCorp Group solicited members of the public to invest in the ProCorp Projects. On 24 September 2001, Oceanwalk retained Mr Maxwell and BEST to solicit lenders in order to raise funds for the ProCorp Projects.

10 Initially, such investments were in the form of a Loan and Guarantee Agreement, by which the investor agreed to lend money to the particular Project Company carrying on the particular ProCorp Project, and the borrower company agreed to pay a “fixed fee” for the loan, generally between 30% and 40% per annum, and covenanted to repay so much of the principal sum and the fixed fee as remained outstanding at the termination date (which was defined as the earlier of the date of settlement of the sale of the subject property, or the expiry of twelve months from the date of the agreement). At that stage of the evolution of the scheme, it was apparently envisaged that disclosure pursuant to Corporations Act, Part 6.2D, would not be required by reason of the exemption afforded by s 708(1) for personal offers, none of which would result in a breach of the twenty investors/$2 million ceiling.

11 In about September 2002, the structure of the investments was changed. The fourth defendant ProCorp Investments Pty Ltd (“ProCorp”), of which Mr Nahed, Mr Bennett and Troy Fortune were the directors and in which Mr Nahed and Troy Fortune each held 50% of the issued capital, was established for the purpose of raising finance for the ProCorp Projects. Investments thereafter were in the form of a Loan Agreement Execution Deed, which incorporated the terms contained in an Information Memorandum, by which the investor agreed to lend money to ProCorp on the basis that the moneys lent would be invested by ProCorp in a particular nominated ProCorp Project; ProCorp covenanted to repay the principal amount of the loan, or so much of it as remained unpaid, within two years of the date of the agreement, three months of completion of the specific project, or a nominated date, whichever was the earlier; ProCorp agreed to pay interest; and Oceanwalk guaranteed the obligations of ProCorp as borrower. As well as applying to new loans, at least some of the existing loans to the separate Project Companies were re-documented into this form, and backdated.

12 This change in the structure of the investments was apparently intended to expand the scope and scale of permissible fundraising, beyond the 20 investors/$2 million ceiling imposed by s 708(1), by taking advantage of the “experienced investor – financial services licensee” exemption afforded by Corporations Act, s 708(10). To that end, Oceanwalk and the ProCorp Group retained Coakleys to raise funds for the ProCorp Projects, and to act as a Financial Services Licensee for the purposes of s 708(10). Coakley Associates held a Securities Dealers Licence under the former Corporations Law, which had a continuing transitional operation after, but was not a Financial Services Licence under, the Corporations Act 2001.

13 Investors were sought, chiefly by Mr Maxwell, through the placement of newspaper advertisements and by approaching potential investors. Such advertisements appeared in the Sydney Morning Herald on 13, 20 July 2002, 3, 10, 17, 24, 31 May, 7 and 21 June 2003; and in the Parramatta Sun on 21 November, 5, 12 December 2001, 13, 20 February, 6, 13, 20, 27 March, 10 and 17 April 2003. The advertisements were to the following effect:-

Watch your MONEY GROW

30%

It’s secured & it’s guaranteed

Belle Developments Group Pty Ltd an established Building Developer require additional funds for New Projects at HOMEBUSH, GOSFORD & LIVERPOOL.

$50,000 minimum participation.

Ideal for investors, superannuates and self funded retirees

Make a move. It’s first in first served.

DON

02 9760 198 or 0418 641 148 NOW

14 Don, of course, was Mr Maxwell. Ordinarily, potential investors who responded were provided with a promotional brochure (prepared by Mr Maxwell and/or the ProCorp Group), an Offer document (prepared by Coakleys), and an Information Memorandum (also prepared by Coakleys).

15 The promotional brochures contained the following statements:-

Guaranteed Return Percentage

30% per annum

will be paid within 6 to 12 months

Capital security is by a Second Mortgage/Caveat which is placed on the Developing Property along with all the Lenders names on it and is guaranteed by the Developing Company and Oceanwalk Projects Pty Ltd

An independent financial controller is appointed who reports to each group on a monthly basis (this is an accountant) so that investors are fully aware of all money movements in the project

The Independent Financial Controller and a representative of the investors are the signatories on the Development Companies cheque account.

16 The Information Memorandum contained the following statements:-

This Information Memorandum has been prepared by ProCorp and is not a prospectus. It has been prepared for excluded offers or invitations which do not require a prospectus or a disclosure document under Chapter 6D of the Corporations Act 2001. It is not required to be lodged or registered with the Australian Securities and Investments Commission.

A loan to ProCorp may only be made by the specific party to whom an Offer is made. The specific party to whom an Offer is made is set out in the accompanying Letter of Offer.

…

This offer is an ‘excluded offer’ being made by ProCorp through a financial services licensee, Coakley Associates Pty Limited (the “FSL”). An “excluded offer” simply means that no prospectus or disclosure document is required for the offer or invitation for the securities.

Pursuant to section 708(10) of the Corporations Act 2001, the financial services licensee must be satisfied on reasonable grounds that you have previous experience in investing in securities which allows you to assess:-

· the merits and risks of the offer

· the value of the securities being offered
· the risks involved in accepting the offer
· your information needs in respect to the offer
· the adequacy of information given by the person making the offer.

All monies lent by you to ProCorp will be initially placed in a Cash Management Trust (CMT). The CMT account will be opened in the name of ProCorp Investments Pty Ltd, and to provide you with further assurance, the FSL will be the co-signatory on the CMT account.

The FSL upon being satisfied that the loan monies will be applied in accordance with the purposes of your loan will advance monies progressively to ProCorp’s Approved Development Borrowers(s).

17 The Offer document contained an offer by ProCorp to enter into a loan agreement with the potential investor, and included a statement as follows: -

Approved Development Borrower(s): Borrowers(s)approved by both FSL and ProCorp for the purposes of on-lending monies for property development projects.

18 In all, between about November 2001 and September 2003, approximately 120 investors entered into loan agreements with ProCorp or one of the specific Project Companies as borrower, and Oceanwalk as guarantor, by which a total of approximately $9.79 million was lent for the ProCorp Projects (“the ProCorp Group Loans”). Of them, approximately 94 investors entered into loan agreements with ProCorp, guaranteed by Oceanwalk, pursuant to which those investors lent a total of $8.11 million to ProCorp for the ProCorp Projects (“the ProCorp Loans”).

Mr Nahed’s role:

19 Mr Nahed was a director of each of ProCorp, Bankstown, Drummoyne, Great Northern, Homebush, Liverpool, Mansions, Miranda, Gosford, Zepher and Northern Sight. He remained a director until they went into liquidation. He held 50% of the issued share capital in each of ProCorp, Bankstown, Drummoyne, Great Northern, Homebush, Liverpool, Mansions, Miranda, Gosford and Zepher, and all the issued share capital in Northern Sight.

20 One of the investors, Miled Charles Habib, who had known Mr Nahed for some years, regarded him as a friend and knew him to be a builder, was approached by him in about October 1991 with a proposal: “I’m working with Belle Development Group. There’s a new development at Homebush that requires investors. You can earn 40% p.a. on your money over a short period of time. I’ve got an interest in the company. I won’t let you down. If you get other people involved you will get a commission out of it. We will look after you”. Mr Habib says: “To the best of my recollection, George provided me with an Information Memorandum for Homebush”, and that in the same month, at Oceanwalk’s offices in Drummoyne, Mr Nahed introduced him to Malcolm Fortune, whom Mr Nahed described as “the Boss. He is running the office”. According to Mr Habib, Mr Nahed and Malcolm Fortune explained the scheme to him, following which he invested $25,000 in Homebush. In April 2002, Mr Habib had a further conversation with Mr Nahed and Malcolm Fortune in which they made representations about the Five Dock project, following which he invested a further $25,000, in Bankstown (which was the Project Company for the Five Dock project).

21 Insofar as Mr Habib suggests that Mr Nahed gave him an Information Memorandum in October 2001, I am unpersuaded: Mr Habib’s evidence on the point has the appearance of uncertainty, but more significantly I can find no evidence that there was any Information Memorandum in existence before 2002.

22 On 30 July 2002, Mr Coakley forwarded by facsimile a memorandum addressed to Malcolm Fortune, Troy Fortune, Mr Bennett, Mr Nahed, Mr Karl Burnett (a solicitor who advised ProCorp and Coakleys) and Dominic Milgate, which enclosed the Agenda for a meeting to be held on 1 August and drew attention to several “areas of concern which need to be fixed ASAP”. It emphasised Coakley Associates’ responsibility for any “excluded offer documentation”.

23 Mr Nahed is a signatory to a Deed of Fixed and Floating Charge between Zepher and Australian Equity Investors (“AEI”) dated 23 July 2003, in the capacity of one of the directors of Zepher as chargor; a Financier Agreement dated 23 July 2003 between Zepher, AEI as Financier and the Messrs Fortune and Mr Nahed as Covenantors, by which AEI agreed to lend Zepher up to $500,000 for a project at Crows Nest, and Zepher agreed to acquire and develop the Crows Nest property, enter into a loan agreement with AEI, and provide a mortgage and fixed and floating charge; and a Financier Agreement Variation dated 22 August 2003, which increased the amount of the facility to $550,000. However, as AEI’s investment was of $500,000, it was exempt from the disclosure requirements, pursuant to s 708(8).

24 By 9 September 2003, approximately half of the ProCorp Loans were “technically overdue”.

The October 2003 loans:

25 Fundraising then appears to have reverted to the original model, using specific Project Companies as borrowers. Between 3 October 2003 and 10 October 2003, deposits from four investors were made into the accounts of specific Project Companies, involving a total of about $500,000, as follows:

· Strauss Bankstown 3/10/03 $100,000

· Strauss Great Northern 3/10/03 $100,000

· Kelly Liverpool 9/10/03 $50,000

· Baillie Northern Site 10/10/03 $40,000

· Baillie Mansions 10/10/03 $100,000

· Baillie Homebush 10/10/03 $100,000

· Huin Liverpool 10/10/03 $10,000

26 Mr Nahed appears to have executed the loan agreements referable to the two Strauss investments on behalf of the borrower. Although a signature, which purports to be his, appears on that referable to the Kelly investment, witnessed by Mr Maxwell, it is quite different to his usual signature and I do not accept, without more, that it is his. The other loan agreements are not in evidence.

The proceedings:

27 ASIC commenced these proceedings, initially against the first nineteen defendants, which include all the ProCorp Group companies, on 15 October 2003, on which date orders were made ex parte restraining the defendants from dealing with or disposing of any money received from or held on behalf of any client/investor introduced by Mr Maxwell, BEST, Oceanwalk, ProCorp, Central Developments, Malcolm Fortune or Coakley Associates; from dealing with or disposing of any real estate or other property purchased with money received from any such client/investor; and from alienating, encumbering, disposing of, dealing with or removing from Australia, any of their assets. On 20 October 2003, those orders were continued, and the defendants were restrained from carrying on a financial services business and/or from providing a financial service on behalf of another person or entity that carries on a financial business. In addition, a Mareva disclosure order was made.

28 After 15 October 2003, Mr Nahed executed a Financier Agreement Variation dated 17 October 2003, between Zepher and AEI, in the capacity of one of three “Covenantors” (the others being the Messrs Fortune), which purported to vary the Financier Agreement dated 23 July 2003 and an earlier variation dated 22 August 2003; a Mortgage by Zepher to AEI dated 17 October 2003, in the capacity of one of the directors of Zepher as mortgagor; and a Deed of Guarantee and Indemnity dated 17 October 2003 between Mr Nahed and the Messrs Fortune and guarantors and AEI as financier.

The Post-order loans:

29 After (and despite) the orders of 15 October 2003, a total of $590,000 was raised for specific Project Companies from a further nine investors, as follows:-

· Coombes Liverpool 16/10/03 $50,000

· Coombes Bankstown 16/10/03 $100,000

· Coombes Drummoyne 16/10/03 $100,000

· Burke Bankstown 16/10/03 $50,000

· Bennett Bankstown 7/11/03 $100,000

· Rothwell Drummoyne 12/11/03 $50,000

· Baillie Liverpool 24/11/03 $30,000

· Sollner Liverpool 26/11/03 $50,000

· Kelly Liverpool 26/11/03 $30,000

· Donnan Liverpool 3/12/03 $50,000

· Peterson Northern Sight 10/12/03 $80,000

30 Mr Nahed appears to have executed the loan agreements referable to the three Coombes investments, the Burke investment and the Rothwell investment, on behalf of the borrowers. Although a signature, which purports to be his, appears on those referable to the others, apparently witnessed by Mr Maxwell, it is quite different to his usual signature and I do not accept, without more, that it is his. It follows that I do not accept that he is shown to have executed any loan agreement dated later than 12 November 2003. Upon receipt, the proceeds of these Post-order loans were initially deposited into the appropriate bank account of the specific Project Company for the project to which the investment related, which was the borrower. However, a large proportion was spent, almost immediately, and almost entirely on purposes other than the development of the relevant property.

31 Thus, in the case of Liverpool, $11,000 was withdrawn and deposited into an account in the name of BEST, Mr Maxwell’s company, on or about 16 October 2003; $4,500 was paid to Wayne Maxwell, Mr Maxwell’s son, on or about 16 October 2003; $13,500 was paid to Wayne Maxwell on or about 16 October 2003; $17,000 was paid to Coldwell Mortgage Services on or about 29 October; $3,750 was paid to Stephen Edwards on or about 21 November 2003; $7,500 was paid to Raphael Ann on or about 21 November 2003; $51,250 was paid to Tamal and Dr Rina Bhattacharya on or about 28 November 2003; $7,500 was paid to Leslie Moore on or about 21 November 2003; $10,000 was transferred to an account in the name of Homebush Project One on or about 5 December 2003; $2,000 was transferred to an account in the name of Citisquare Pty Ltd, a company controlled by Mr Nahed, on or about 8 December 2003; $1,300 cash was withdrawn on or about 9 December 2003; $15,007.50 cash was withdrawn on or about 9 December; and there was a cash cheque withdrawal of $24,750 on or about 7 January 2004.

32 In the case of Bankstown, $43,395 was paid to BEST on or about 15 October 2003; $10,000 was paid to BEST on or about 16 October 2003; a cash payment of $30,000 was made to Wayne Maxwell on or about 21 October 2003; a cash payment of $15,000 was made to Wayne Maxwell on or about 21 October 2003; $50,000 was paid to J Owen, the vendor of the Homebush Property, on or about 18 November 2003; $50,000 was paid to F & P Smith, investors in the Liverpool project, on or about 20 November 2003; $10,007.50 was withdrawn on 27 November 2003; $5,000 was transferred to an ANZ account in the name of Citisquare on 27 November 2003; and $1,000 was transferred to an ANZ account in the name of Citisquare on 4 December 2003.

33 In the case of Drummoyne, $10,000 was paid to Wayne Maxwell on or about 21 October 2003; $15,000 was withdrawn on 27 October 2003, payable to H Gaziler; $15,000 was withdrawn 30 October 2003, payable to Y and F Huseyin; $15,000 was withdrawn 17 November 2003, payable to S Edwards; $10,007.50 cash was withdrawn on 19 November 2003; $20,000 was withdrawn on 26 November 2003; $6,000 was transferred to an ANZ account in the name of Citisquare on 1 December 2003; and $41,861 cash was withdrawn on 15 December 2003.

34 In the case of Great Northern, $10,000 was paid to BEST on or about 16 October 2003; $50,000 was paid to Bankstown on or about 16 October 2003; and $12,532.49 was paid to Citisquare Pty Ltd on or about 10 November 2003. In the case of Northern Sight, there was a payment of $4,000 to BEST on or about 16 October 2003; a cash withdrawal of $35,000 on or about 17 November 2003; a cash withdrawal of $45,000 on or about 17 December 2003; a cash withdrawal of $25,000 on or about 17 December 2003; and a cash withdrawal of $3,000 on or about 7 January 2004.

35 From 27 November 2003, Mr Nahed was the sole director of ProCorp, Bankstown, Drummoyne, Homebush, Liverpool, Mansions, Miranda, Gosford and Zepher, until they went into liquidation.

36 On 3 March 2004, the Court ordered, on the application of ASIC, that Oceanwalk, ProCorp, Alliance, Bankstown, Great Northern, Liverpool, Mansions, Miranda, Gosford and Northern Sight be wound up in insolvency. On 9 March 2004, the Court ordered, on the application of ASIC, that Zepher be wound up in insolvency, and that a provisional liquidator be appointed to Drummoyne and Homebush; those two companies were ultimately wound up in insolvency on 7 March 2005.

37 The liquidator, Mr Donnelly, has reported that there are deficiencies of liabilities over assets in the Project Companies in the order of many millions of dollars. Although that was not so in the case of ProCorp itself, that was only because the liquidator allocated debts to investors against the relevant Project Company, even where ProCorp was the debtor under the loan documentation. Although investors received some interest payments, they have, for all practical purposes, lost their capital.

Notice to Mr Nahed:

38 Mr Nahed has had notice of the proceedings from an early stage. Before he was joined personally as a defendant, on 28 November 2003, he swore an affidavit in support of an application on behalf of the ten corporate defendants that were related to him, to vary the Mareva orders for the purpose of permitting some of the developments to proceed.

39 An affidavit sworn on 23 February 2006 by Philip James Thompson, a Senior Investigator of ASIC and the Team Leader for the investigation of the Schemes, establishes that the Originating Process (and ex parte orders of 16 October 2003) were served on the ten corporate defendants related to Mr Nahed on 16 October 2003. Mr Nahed was joined as a defendant on 17 May 2004. He filed a Notice of Appearance on 26 May 2004. He has been represented in the proceedings by a solicitor, Mr Martin. He filed a defence (to the Second Amended Statement of Claim) on 8 July 2004. Mr Martin advised ASIC that he no longer acted for Mr Nahed on 4 November 2005.

40 On 23 January 2006, ASIC delivered a letter that contained notification of the hearing, and 15 folders comprising its Tender Bundle, to Mr Nahed at his home address. On 2 February 2006, Mr Thompson received a telephone call from Mr Nahed, in the course of which Mr Nahed provided contact details, including a home address and phone number, a business address and phone number, and a mobile phone number. A meeting ensued on 3 February 2006, at which amongst other things Mr Thompson confirmed the hearing date and the requirement that Mr Nahed attend; Mr Nahed indicated that he proposed to consult Mr Martin.

41 There was no further contact prior to the commencement of the hearing on 6 February, when Mr Nahed was called but did not appear. On 10 February, Mr Thompson delivered to Mr Nahed’s home address a letter which amongst other things advised that the proceedings had commenced in his absence, had been adjourned for the purposes of permitting a settlement to be negotiated with certain other defendants, and would resume on 20 February, when ASIC would be seeking to proceed against him. An identical letter was delivered to Mr Nahed’s business address on 13 February.

42 There was no appearance by Mr Nahed on 20 February, when the case against him commenced, and was adjourned to 23 February. On 21 February, Mr Thompson received an email from Mr Martin requesting information relating to the proceedings, and on the same day Mr Thompson told Mr Martin on the telephone that the hearing in relation to Mr Nahed had commenced on 20 February and had been adjourned to 23 February; Mr Martin responded that he was not at that stage acting, but would inform ASIC of his intentions on 22 February. Late on 22 February, Mr Thompson received a telephone message from Mr Martin to the effect that he did not have instructions to act for Mr Nahed and had been unable to contact him since 21 February.

43 I am satisfied that Mr Nahed had due notice of the hearing and did not appear, and that it is permissible to proceed in his absence, pursuant to UCPR r 29.7(2)(a).

Fundraising without a disclosure document:

44 ASIC’s primary contention is that the ProCorp Scheme contravened the fundraising provisions of the Corporations Act, by reason of the absence of disclosure in accordance with the requirements of Chapter 6D. It contends that the solicitation of persons to lend money for the ProCorp Scheme between about November 2001 and July 2003, resulting in the 120 ProCorp Group Loans and the 94 ProCorp Loans (“the ProCorp Solicitations”), involved contraventions of:-

· s 727(1), which provides:

A person must not make an offer of securities, or distribute an application form for an offer of securities, that needs disclosure to investors under Part 6D.2 unless a disclosure document for the offer has been lodged with ASIC.

· s 734, which provides:

(1) A person must not:

(b) publish a statement that directly or indirectly refers to;

an offer, or intended offer, of securities that would need a disclosure document but for subsection 708(1) (exception for 20 issues in 12 months).

(2) If an offer, or intended offer, of securities needs a disclosure document, a person must not:

(a) advertise the offer or intended offer; or

(i) directly or indirectly refers to the offer or intended offer; or

(ii) is reasonably likely to induce people to apply for the securities.

45 Sections 727 and 734 are contained within Chapter 6D of the Corporations Act, entitled “Fundraising”. Part 6D.2 governs when an offer of securities requires disclosure under the fundraising rules. Section 706 provides that an offer of “securities” needs disclosure under Part 6D.2 unless s 708 says otherwise.

46 Section 700 provides that, in Chapter 6D, “securities” has the same meaning as in Chapter 7. Corporations Act, s 761A, provides that, for the purposes of Chapter 7 of the Corporations Act, “security” means, inter alia, “a debenture of a body”. “Debenture” is defined, in s 9, to mean:

a chose in action that includes an undertaking by the body to repay as a debt money deposited with or lent to a body. The chose in action may (but need not) include a charge over property of the body to secure repayment of the money …

47 The terms of the loan agreements into which the investors entered with ProCorp (and previously with the Project Companies) included a covenant by the borrower company to repay the principal amount of the loan. That is an undertaking to repay as a debt money deposited with or lent to the borrower. Accordingly, each loan agreement was a “debenture” within s 9, and a “security” for the purposes of Chapter 7 of the Corporations Act, and an offer to enter into such loan agreements was an offer of securities for the purposes of Part 6D.2. It follows that, unless they fell within one of the exemptions afforded by s 708, offers to enter into the loan agreements required disclosure under Part 6D.2. [In the light of these conclusions, it is unnecessary to consider ASIC’s alternative allegation that the ProCorp Scheme was a managed investment scheme].

48 As has been mentioned, the ProCorp Scheme was originally apparently intended to operate under the 20 investor/$2 million exemption afforded by s 708(1), but subsequently under that afforded by s 708(10), which provides as follows:

An offer of a body's securities does not need disclosure to investors under this Part if:

(a) the offer is made through a financial services licensee; and

(b) the licensee is satisfied on reasonable grounds that the person to whom the offer is made has previous experience in investing in securities that allows them to assess:

(i) the merits of the offer; and

(ii) the value of the securities; and

(iii) the risks involved in accepting the offer; and

(v) the adequacy of the information given by the person making the offer; and

(c) the licensee gives the person before, or at the time when, the offer is made a written statement of the licensee's reasons for being satisfied as to those matters; and

(d) the person to whom the offer is made signs a written acknowledgment before, or at the time when, the offer is made that the licensee has not given the person a disclosure document under this Part in relation to the offer.

49 Coakleys apparently issued some documents, called “Statement of Reasons”, in purported compliance with s 708(10)(c). However, of 119 loan agreements identified by ASIC, there was no such “Statement of Reasons” at all in respect of 67, and in another 43 cases, such statements as there were post-dated the relevant loan agreement, so that in those 110 cases the exemption under s 708(10) was not available, by reason of non-compliance with s 708(10)(c), even if there had otherwise been compliance with the requirements of s 708(10). Moreover, the vast majority of the “Statements of Reason” that Coakleys issued do not otherwise apparently satisfy the requirements of section 708(10). Even if Coakleys is to be regarded, for relevant purposes, as a Financial Services Licensee – as, for present purposes, I am prepared, without deciding, to assume, because although Coakleys did not hold a Financial Services Licence, they held a Securities Dealers Licence under the former Corporations Law which Mr Coakley believed entitled him, pursuant to Corporations Act 2001, ss 1430 and 1432, to continue to provide financial services during the “transition period” referred to in s 1431 – Coakleys had not met most of the investors, nor investigated their financial circumstances, and they had no reasonable basis for being satisfied that those investors had previous experience sufficient to allow them to assess the merits of the offer, the value of the securities, the risks involved in accepting the offer, their own information needs, and the adequacy of the information given by the person making the offer. Mr Coakley apparently thought that strict or even substantial compliance with s 708(10) was not required because either the investors may have fallen within the 20 investor/$2 million ceiling, or else they were “transfers” of existing investors to the new structure, which he supposed was covered by s 708(15).

50 This manifestly failed to satisfy the requirements of s 708(10), which imposes stringent requirements and obligations upon the relevant financial services licensee if the exemption is to be available. The licensee’s satisfaction on reasonable grounds of the matter referred to in s 708(10)(b) is a condition of the availability of the exemption, and requires that the licensee sufficiently investigate the experience of the investor to form the relevant opinion. As Barrett J has recently said of s 708(10) [ASIC v Elm Financial Services [2005] NSWSC 1065, [10] to [11]]:

This is, as I have said, a relatively new provision. There was significant debate about it when its introduction was mooted. It was recognised at the time and must be re-emphasised now that s.708(10) casts particular responsibility upon a financial services licensee. The requirement that the licensee be “satisfied on reasonable grounds” as to the matters stated in s.708(10)(b) is one that must be approached with diligence and care. The licensee has a statutory duty to make inquiry about all matters relevant to the opinion it must form and then, of course, to consider whether, in the factual circumstances, there exist the reasonable grounds for it to be satisfied as to the matters stated. Woolly thinking about some general concept of “sophisticated investor” is entirely misplaced.

I mention this matter because it is made clear by the agreed facts that the licensed Elm companies were content to consider s.708(10) applicable where even the most cursory attention to the statutory criteria would have made it immediately clear that there were no reasonable grounds for forming the relevant opinions about the relevant investors.

51 The same applies here. The conditions for the operation of the s 708(10) exemption were not satisfied.

52 The promoters apparently took the view that while each project was separately funded, the 20 investor/$2 million ceiling permitted by s 708(1) was separately available for each Project Company. It is unnecessary to decide whether this is correct, for two reasons. First, even if it were correct for the initial structure, it did not survive the restructuring of the loans, after which 94 loans were made, not to the separate Project Companies, but to ProCorp. Secondly, s 734(1) prohibits the advertisement of, or publication of statements referring to, an offer of securities which would need a disclosure document but for s 708(1). Thus, even if disclosure was not required by reason of s 708(1), advertisement of such offers was still prohibited.

53 No disclosure of the type stipulated under Part 6D.2 was made in connection with the ProCorp Scheme, and no disclosure document was lodged with ASIC. It follows that each offer of a loan agreement by ProCorp was an offer of securities that needed disclosure to investors under Part 6D.2 and needed a disclosure document; no disclosure document for any such offer had been lodged with ASIC; it was a contravention of s 727(1) for a person to make such an offer; it was a contravention of s 734(2) for a person to advertise any such offer or intended offer, or to publish a statement that directly or indirectly referred to the offer or intended offer, or was reasonably likely to induce people to apply for the loan agreements; and insofar as any offer on behalf of the separate Project Companies was exempted from disclosure under s 708(1), it was a contravention of s 734(1) for a person to advertise any such offer or intended offer.

54 Accordingly, by making each of the offers that resulted in a ProCorp Loan, ProCorp contravened s 727(1). As there were at least 94 such loans, it would seem that there were at least 94 such contraventions.

55 The newspaper advertisements referred to a “secured and guaranteed” investment at an interest rate of 30% to 40%. That is at least an indirect reference to an intended offer of a loan agreement, and the advertisements were plainly intended and calculated to induce people to apply for loan agreements. The promotional brochures were intended and calculated to induce people to apply for loan agreements, and referred to an intended offer of a loan agreement. The Information Memorandum referred to the offer or proposed offer of a loan agreement. It follows that each publication of an advertisement, information memorandum or brochure was a contravention of s 734(2), or, insofar as any s 708(1) exemption might have been available, of s 734(1).

56 ASIC alleges that Mr Nahed contravened s 734 and s 727 by making, controlling, managing or participating in the solicitation by ProCorp of persons to lend money for the ProCorp Projects between about November 2001 and July 2003 (“the ProCorp Solicitations”). However, as to s 734, there is no evidence that Mr Nahed himself advertised an offer, or published a statement that referred to an offer. In the context of s 734(1) and s 708(1), which contemplate permissible “personal” offers, I do not think that the approaches to his acquaintance Mr Habib involved publishing a statement referring to an offer, in the sense that “publish” is used in s 734 (including its defined meaning of “issue”, which in turn is defined to include “circulate, distribute and disseminate”, which concepts connote communication to multiple recipients). And as mentioned above, I am unpersuaded that Mr Nahed gave Mr Habib an Information Memorandum in October 2001. As to s 727, the only evidence of Mr Nahed making any relevant offer, is that relating to Mr Habib (which is referable to October 2001, and April 2002, at a time before the scheme was restructured, when specific Project Companies were the borrowers, so that the 20 investor/$2 million exemption may then have been available; at least I am not satisfied that it was not. In any event, the evidence does not go so far as to establish that Mr Nahed himself made an offer to Mr Habib.

57 ASIC alternatively alleges that Mr Nahed aided, abetted, counselled or procured or was knowingly concerned in or party to contraventions by ProCorp, Mr Maxwell and BEST, and Coakleys of ss 727 and 734. This allegation picks up the terminology of Corporations Act, s 79(a) and (c), which define when a person is “involved” in a contravention by another. However, sections 727 and 734 – unlike ss 181, 182 and 183 – do not provide that a person who is “involved in” a contravention of the section, thereby himself or herself contravenes the section. In my view, the availability of s 79 to impose accessorial liability has been carefully and deliberately marked out through the Act – see ss 181(2), 182(2), 183(2) and 1041I(1) - and it was not made available in connection with ss 727 and 734. In that way, the Act specifies when, for the purposes of the Act, consequences attach being “involved” in a contravention. No such consequences are specified for being “involved” in a contravention of ss 727 or 734. Accordingly, the accessorial liability provisions of s 79 are not available, or do not have any relevance, in respect of these sections, which are in any event not civil penalty provisions.

58 I am therefore unable to find that Mr Nahed is personally liable in respect of ProCorp’s contraventions of s 727 or s 734 during the period November 2001 to July 2003. However, it follows, from my findings that ProCorp contravened ss 727 and 734 on multiple occasions during that period, and that Mr Nahed was a director of ProCorp, that he has on multiple occasions been an officer of a body corporate that has contravened the Corporations Act while he was an officer, for the purposes of s 206E(1)(a)(i).

59 Neither the Fourth Amended Statement of Claim, nor ASIC’s submissions, contain any allegation that Mr Nahed is liable for contravention of ss 727 and 734 in respect of the solicitations for Bankstown, Drummoyne, Liverpool, Great Northern and Northern Sight, which resulted, on and after 3 October 2003, in the October Loans and the Post-order Loans.

The need for an Australian Financial Services Licence:

60 ASIC next alleges that during the period November 2001 to July 2003, ProCorp carried on a financial services business in Australia without holding an Australian Financial Services Licence, in contravention of Corporations Act, s 911A, which provides that “… a person who carries on a financial services business in this jurisdiction must hold an Australian financial services licence covering the provision of the financial services.” Section 911B requires that a person (called the “provider”) must only provide a financial service in Australia on behalf of another person (called the “principal”) who carries on a financial services business if certain conditions apply, the effect of which is, inter alia, that either the principal or the provider must hold an Australian Financial Services Licence. With the arguable exception of Coakleys, none of the Defendants held an Australian Financial Services Licence.

61 By s 761A, “financial services business” means a business of providing financial services. Section 766A provides that a person provides a “financial service” when they “(a) provide financial product advice”, or “(b) deal in a financial product”. Section 766B relevantly defines “financial product advice” to mean:

a recommendation or statement of opinion, or a report of either of those things, that:

(a) is intended to influence a person or person or persons in making a decision in relation to a particular financial provide or class of financial products, or an interest in a particular financial product or class of financial products; or
(b) could reasonably be regarded as being intended to have such an influence.

62 Section 766C(1) relevantly defines “dealing in a financial product” to include the following conduct:

(a) applying for or acquiring a financial product;
(b) issuing a financial product;

…

(d) varying a financial product;
(e) disposing of a financial product.

63 Section 766C(2) of the Corporations Act extends this definition to include:

Arranging for a person to engage in conduct referred to in subsection (1) is also “dealing” in a financial product, unless the actions concerned amount to providing financial product advice.

64 Corporations Act, s 763A(1), defines a “financial product” as follows:

For the purposes of this Chapter, a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following:

(a) makes a financial investment (see section 763B);

(b) manages financial risk (see section 763C);

65 Section 764A(1)(a) specifically defines a “financial product” to include a “security” which, in turn, is defined in section 761A of the Corporations Act to include a “debenture”. As has been explained above, the loan agreements were debentures and, therefore, were financial products.

66 By distributing the Information Memorandum and the promotional brochures, which contained recommendations and statements of opinion that were intended to influence readers in making a decision in relation to the loan agreements, or at the very least could reasonably be so regarded, ProCorp was, during the relevant period, providing “financial product advice”. And by issuing the loan agreements, ProCorp issued financial products, and thereby dealt in financial products. The extent and regularity with which it did these things establishes that ProCorp was carrying on a financial services business.

67 A person is exempt from the requirement to hold an Australian Financial Services Licence for a financial service they provide in any of the circumstances described in s 911A(2), which include (by sub-s (2)(b)) where the service is the issue of a financial product by that person (called the product provider) pursuant to an arrangement (called an intermediary authorisation) between the product provider and a financial services licensee under which the financial services licensee may make offers to people to arrange for the issue of financial products by the product provider, and the product provider is to issue financial products in accordance with such offers, if they are accepted; provided that the offer pursuant to which the issue is made was covered by the financial services licensee's Australian Financial Services Licence.

68 But, despite the involvement of Coakleys, that is not in fact how the ProCorp Scheme worked: only four investors were introduced through Coakleys, and though the Offer document and the Information Memorandum were in at least some cases on letterhead of Coakleys, ProCorp issued loan agreements other than pursuant to offers made by Coakleys. Accordingly, ProCorp carried on a financial services business in Australia without holding an Australian Financial Services Licence, in contravention of Corporations Act, s 911A.

69 ASIC alleges that, in connection with the ProCorp Solicitations, Mr Nahed contravened s 911A by being in the business of providing a financial service (by providing financial product advice, through making, controlling, managing or participating in the ProCorp Solicitations between about November 2001 and July 2003) without a licence. Alternatively, ASIC alleges that Mr Nahed contravened s 911B, by providing that financial service on behalf of the ProCorp Group without a licence.

70 However, I do not accept that the evidence shows that Mr Nahed was himself in the business of providing a financial service, which is what is required to establish a contravention of s 911A. As to whether he provided a financial service on behalf of ProCorp, the only evidence of Mr Nahed’s participation, during the relevant period, in the provision of “financial product advice”, or the issuing of the loan agreements, is that relating to Mr Habib. What Mr Nahed said to Mr Habib does not amount to providing financial product advice, as defined; Mr Habib’s evidence discloses no relevant statement of opinion or recommendation by Mr Nahed.

71 Further, ASIC alleges that, in connection with the ProCorp Solicitations, Mr Nahed aided, abetted, counselled or procured or was knowingly concerned in or party to contraventions by ProCorp of s 911A. However, for reasons advanced above in respect of ss 727 and 734, the accessorial liability provisions of s 79 are not available in respect of s 911A (or s 911B).

72 ASIC next alleges that, in connection with the October 2003 and the Post-order Loans, Mr Nahed contravened s 911A by being in the business of providing a financial service (by providing financial product advice, through making, controlling, managing or participating in the solicitations for those loans) without a licence. Alternatively, ASIC alleges that Mr Nahed contravened s 911B, by providing that financial service on behalf of Bankstown, Drummoyne, Great Northern, Liverpool and Northern Sight, when neither they nor he held a licence.

73 The evidence does not establish that Mr Nahed was, during this period, himself carrying on a financial services business. But each of Bankstown, Drummoyne, Great Northern, Liverpool and Northern Sight issued loan agreements during this period, and thereby issued financial products, and thus dealt in financial products. Having regard to Corporations Act, s 18, 19 and 911D, this amounts to those companies each carrying on a financial services business, in contravention of s 911A.

74 The evidence does not establish that, during this period, lenders were given financial advice, at least by Mr Nahed; the only evidence is of dealings with Mr Maxwell, and even that is not shown to have involved “financial advice” as defined. But did Mr Nahed, on behalf of any of the companies, issue a loan agreement? I have found that Mr Nahed executed the two loan agreements dated 3 October 2003 referable to the Strauss investments (on behalf of the borrowers Bankstown and Great Northern), the three loan agreements dated 16 October 2003 referable to the Coombes investments (on behalf of the borrowers Liverpool, Bankstown and Drummoyne), the agreement also dated 16 October referable to the Burke investment (on behalf of the borrower Bankstown), and the agreement dated 12 November referable to the Rothwell investment (on behalf of the borrower Drummoyne). In each case, his signature (and that of the lenders) was witnessed by Mr Maxwell, but it does not follow that all parties signed at the same time, nor that Mr Nahed signed first; indeed I would conclude (having regard to the terms of the loan agreement, and the evidence of Mr Zollner, Mr Coombes and Mrs Kelly) that the usual practice was that Mr Maxwell produced the agreements to the lenders, who signed them, and then Mr Maxwell retained the signed documents, to which Mr Nahed’s signature was affixed subsequently. At least, I am not comfortably satisfied that Mr Nahed signed any loan agreement, in or after October 2003, before it had been signed by the lender.

75 Nonetheless, s 761E has the effect that the lenders did not “acquire” their “debentures” until the borrower executed the Loan Agreement, and the relevant financial product was therefore “issued” when Mr Nahed on behalf of the relevant company affixed his signature. The question is whether Mr Nahed thereby provided a financial service, by issuing a financial product, on behalf of the relevant company. The issuer of the debenture was undoubtedly the company, not Mr Nahed [s 761E(4)]. While s 911B is readily capable of application to the situation of an employee of a financial services business providing financial services advice, it is not so amenable to the issue by a corporation of a debenture. Mr Nahed did not issue the debentures on behalf of the companies; rather he was the organ or instrument by which the companies themselves issued the debentures, and in such circumstances the liability if any of a person in Mr Nahed’s position would be liability as an accessory for the corporation’s contravention, rather than liability as a principal for doing something “on behalf of” the corporation: cf Tesco Supermarkets Ltd v Nattrass [1972] AC 153, 170 (Lord Reid); H.L. Bolton (Engineering) Co Ltd v T.J. Graham & Sons Ltd [1957] 1 QB 159, 172 (Lord Denning MR); Hamilton v Whitehead (1988) 166 CLR 121, 127]. Accordingly, I do not accept that Mr Nahed contravened s 911B as alleged, because he did not issue the debentures on behalf of the companies.

76 Finally, ASIC alleges that, in connection with the October and Post-order Loans, Mr Nahed contravened s 911A or alternatively s 911B as an accessory. However, for the reasons already explained, the accessorial liability provisions of s 79 are not available, at least for civil purposes, in respect of these sections.

77 I am therefore unable to find that Mr Nahed is personally liable for any contravention of s 911A or s 911B. However, it follows, from my findings that ProCorp contravened s 911A during the period November 2001 to July 2003, and that Mr Nahed was a director of ProCorp during that period, that he was, once again, an officer of a body corporate that has contravened the Corporations Act while he was an officer, for the purposes of s 206E(1)(a)(i). And the same conclusion follows, yet again, from my findings that each of Bankstown, Drummoyne, Great Northern, Liverpool and Northern Sight contravened s 911A in respect of the October and Post-order loans, and that Mr Nahed was a director of those companies during that period.

Misleading and deceptive conduct:

78 ASIC next alleges that ProCorp engaged in conduct, in relation to financial products and/or financial services, that was misleading or deceptive or likely to mislead or deceive, contrary to Australian Securities and Investments Commission Act (“ASIC Act”), s 12DA(1) and/or Corporations Act, s 1041H(1).

79 ASIC Act, s 12DA(1), provides as follows:

A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.

80 Corporations Act, s 1041H(1), provides as follows:

A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive.

81 Conduct is misleading and deceptive if it leads the victim into error [Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 198 (Gibbs CJ)]. The section is contravened even if the perpetrator acted honestly and reasonably and without intent to mislead or deceive and without negligence [Parkdale v Puxu, 197 (Gibbs CJ)]. While the issue of whether conduct is misleading or deceptive, is to be determined objectively, and while evidence that some person has in fact formed an erroneous conclusion is admissible and may be persuasive, it is neither essential to nor conclusive of whether the conduct was misleading or deceptive or likely to mislead or deceive [Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; (1982) ATPR 40-303, 43,752 (Deane and Fitzgerald JJ)]. But although the test is objective, the attributes of the target audience are relevant, and once the relevant section (or sections) of the public, by reference to whom the question of whether conduct is (or is likely to be) misleading or deceptive falls to be tested is identified, then “the matter is to be considered by reference to all who come within it, including the astute and the gullible, the intelligent and the not so intelligent, the well educated as well as the poorly educated, men and women of various ages pursuing a variety of vocations” [Taco Bell, 43,751 (Deane and Fitzgerald JJ)].

82 ASIC complains about two different categories of conduct on the part of ProCorp. The first, pleaded in paragraphs 140 to 156 of the Fourth Amended Statement of Claim, concerns the advertisements, and the promotional and loan documentation issued to investors, in the period November 2001 to July 2003, which are said to have contained statements which were false or misleading or which were likely to mislead or deceive potential investors.

83 ASIC alleges that the advertisements conveyed misrepresentations (1) that the loans would be secured, (2) that they were low risk and (3) that they were suitable for superannuates and self-funded retirees. I accept that the advertisements conveyed the first representation alleged; it expressly asserted, “It’s secured …”. Since the loan documentation never contained any provision for security, not only were the loans not secured, but there were no reasonable grounds for supposing that they would be. In that respect, the advertisements were misleading. The advertisements contained no express statement that the loans were low risk, though there was an express statement that they were ideal for superannuates and self-funded retirees. In truth, as the loans would at best rank after mortgages to conventional financiers, and involved investment in speculative property development projects, they were a high-risk investment. But it does not follow that it is misleading to describe them as “ideal for investors, superannuates and self-funded retirees”, which is mere puffery. While the references to “secured and guaranteed” and to “ideal for … superannuates and self-funded retirees” on their own might suggest that the loans are a safe investment, the advertisement must be read as a whole. The advertisement also refers to “investors”, and to the interest rate of 30%, and to the investment being in building projects, the first of which is as consistent with high as with low risk, and the second and third of which implicitly suggest a higher than usual risk. I am not persuaded that read as a whole it conveys that the loans were low risk. But the representation to the effect that the loans were secured is sufficient to render the advertisements misleading.

84 ASIC alleges that the promotional brochure conveyed misrepresentations that the loans would be secured by a second mortgage over the ProCorp properties and that a caveat would be lodged to record the interests of all investors; that the loans were low risk investments; and that an independent financial controller, who was an accountant, would be appointed to supervise the accounts, and would control the expenditure of funds. I accept that the promotional brochure conveyed representations that the loans would be secured by a second mortgage over the ProCorp properties and that a caveat would be lodged to record the interests of all investors; and that an independent financial controller, who was an accountant, would be appointed to supervise the accounts, and would control the expenditure of funds. I am not persuaded that the promotional brochure conveyed a representation that the loans were low-risk investments.

85 I accept that the representations that the loans would be secured by a second mortgage over the ProCorp properties, and that a caveat would be lodged to record the interests of all investors, were misleading: given that the loan documentation never made provision to that effect, there cannot have been reasonable grounds for ProCorp to suppose that the loans would be secured. The representations about an independent financial controller are in a somewhat different category, since they are expressed in terms which relate to a future matter, and the mere circumstance that such a representation does not eventuate does not make it false or misleading: it will be so only if there was no reasonable basis for making it when it was made. In that respect, however, no independent financial controller was ever appointed, and I would infer that there was no intention on the part of ProCorp of appointing any such independent financial controller. Accordingly, although not in every respect for which ASIC contends, the promotional brochure was misleading.

86 ASIC alleges that the Information Memorandum conveyed misrepresentations (1) that no disclosure document was required for the ProCorp Scheme, and (2) that money lent would be placed in a trust account and expended under the control of Coakley who would ensure that all compliance requirements were satisfied. As to the first, what the Information Memorandum, read as a whole, conveys about the requirement for disclosure is that, if the requirements of s 708(10) are satisfied, then no disclosure document is required. I do not accept that the Information Memorandum fairly read conveyed the first suggested misrepresentation in the absolute terms alleged. Although I have found that a disclosure document was in the event required, that was because the requirements of s 708(10) were not satisfied. As to the second, no trust account was ever established and Mr Coakley and his company provided no such supervision as was represented. I would infer that there was no intention on the part of ProCorp that he do so. In that respect, therefore, the Information Memorandum was misleading.

87 ASIC alleges that the Offer document conveyed misrepresentations that Coakleys had approved the ProCorp Projects in their capacity as holder of an Australian Financial Services Licence. I would accept that the Offer document conveyed a representation that Coakleys, in their capacity as holder of an Australian Financial Services Licence, had approved the specific ProCorp Companies to which ProCorp was to on-lend the borrowed funds. The alleged falsity of this is that Coakley Associates did not in fact hold such an Australian Financial Services Licence. Coakleys held a security dealers licence under the former Corporations Law (“the old legislation”, the effect of which was that they were exempt under the transitional provisions (s 1431) until 27 September 2003 from inter alia Part 7.6 of the Corporations Act, which includes s 911A and 911B, the sections that imposes the requirement to hold an Australian Financial Services Licence. However, while a licensee under the old legislation was in some respects given authorities as if it held an Australian Financial Services Licence under the new legislation (s 1431(2)), no such authority was conferred in respect of s 708(10). It follows that Coakleys could not act as a licensee for the purposes of s 708(10), and in conveying that they held an Australian Financial Services Licence the Offer was materially misleading. However, the greater vice in the representation, I would have thought, is that it conveyed that Coakleys had undertaken a professional assessment of the Project Companies and as a result approved them, which Coakleys plainly had not. In these respects, the Offer document was misleading.

88 The advertisements, promotional brochure, Information Memorandum and Offer document were plainly issued in trade or commerce, and in relation to a financial product and/or financial services, namely the issue of debentures constituted by the resultant loan agreements. I have concluded above that each of them was, in one or more respects, misleading or deceptive or likely to mislead or deceive. By issuing them, ProCorp engaged in conduct in contravention of ASIC Act, s 12DA(1) and/or Corporations Act, s 1041H(1).

89 The second category of conduct relied upon, pleaded in paragraphs 157 to 196 of the Claim, relates to the period after 15 October 2003, when ASIC had commenced these proceedings and obtained interlocutory relief. ASIC alleges that the loan agreements which were presented to investors and executed after that date – the Post-order Loans - contained misrepresentations to the effect (1) that there were no civil proceedings pending involving the relevant Project Company as a defendant, and (2) that the moneys lent would be used for the costs of and incidental to the specific project for which the loan was made.

90 As to the first of these alleged misrepresentations, each of the relevant loan agreements contained a statement that there were no civil proceedings pending involving the relevant Project Company as a defendant. As these proceedings were by then already pending, that statement was false. As to the second, the statement led the reader to conclude that funds advanced would be expended only on the particular ProCorp Project identified. But at least from 15 October, all the ProCorp Group companies were restrained from making any such expenditure, so that such a statement was, at best, misleading.

91 These loan agreements were presented to investors for execution in trade or commerce, and the relevant statements in them were in relation to a financial product and/or financial services, namely the issue of debentures constituted by the resultant loan agreements. I have concluded above that each of them was, in one or more respects, misleading or deceptive or likely to mislead or deceive. By presenting them to potential investors, the relevant companies engaged in conduct in contravention of ASIC Act, s 12DA(1) and/or Corporations Act, s 1041H(1). I would also infer that, had the true facts been known to them, the investors who subscribed after 15 October would not have done so.

92 ASIC alleges that Mr Nahed contravened these provisions as a principal, or alternatively as an accessory. By s 1041I, a person who suffers loss or damage by conduct of another person that was engaged in in contravention of s 1041H may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention, whether or not that other person or any person involved in the contravention has been convicted of an offence in respect of the contravention, subject to section 1044B. By s 79, a person is involved in a contravention if, and only if, the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention. The widest of those concepts is that of being “knowingly concerned” in a contravention, and even that involves (a) knowledge of the essential facts which constitute the contravention which, in the case of provisions such as those in issue here, requires knowledge that the relevant representation is being made and is misleading, and (b) some intentional participation or assistance in the contravening conduct [Giorgianni v The Queen (1985) 156 CLR 473, 494, 501; Yorke v Lucas (1985) 158 CLR 661; Smithers v Beveridge (1994) 14 ACSR 197, 201]. The mere circumstance that a person is a director of a company that engages in contravening conduct is insufficient to establish that he or she is a person involved in it. As Finklestein J explained in Compaq Computer Australia Ltd v Merry (1998) 157 ALR 1, 4-5 [see also King v GIO Australia Holdings Ltd (2001) 184 ALR 98, [7]]:-

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd

Yorke v Lucas

Edwards v R

Giorganni v R

Pereira v Director of Public Prosecutions

93 The only evidence of involvement by Mr Nahed in any of the relevant pre-October 2003 conduct is the suggestion that he may have given Mr Habib a copy of the Information Memorandum. However, for reasons previously explained, I am not comfortably satisfied that Mr Nahed did so. Accordingly I am not satisfied that he engaged in, or was involved in, any of that contravening conduct.

94 As to the Post-order conduct, it was on 27 November 2003 that Mr Nahed became the sole director of ProCorp and the Project Companies. As his affidavit, sworn 28 November 2003, shows, he intended to embark on a course of endeavouring to proceed with and complete at least some of the developments, and to obtain the release of funds for that purpose. He knew, at least from some time before 27 November, that the proceedings were pending, and that the injunctions were on foot. But the evidence does not implicate him in any relevant conduct after he is shown to have knowledge of those matters: he is not shown to have known of the pendency of the proceedings and injunctions on 16 October 2003 (the date of four of the five post-order loan agreements that he signed) or on 12 November (the date of the fifth). I am unable to be comfortably satisfied that he was knowingly concerned in, and thus involved in, the contraventions of ASIC Act, s 12DA(1) and/or Corporations Act, s 1041H(1) associated with the Post-order loans.

Breach of director/officer duties:

95 It is next alleged that Mr Nahed breached his duties as a director of the ProCorp Companies – in particular, those duties referred to in sections 180(1), 181(1) and 182(2) of the Corporations Act - by permitting, allowing and participating in the various contraventions committed by those companies, namely:-

· ProCorp, making each of the offers which resulted in a loan agreement, in contravention of s 727(1);

· ProCorp, publishing each advertisement, information memorandum and promotional brochure, in contravention of s 734(2);

· ProCorp carrying on a financial services business in Australia without holding an Australian Financial Services Licence, in contravention of Corporations Act, s 911A;

· ProCorp engaging in conduct, in trade or commerce, and in relation to financial products and/or financial services, which was misleading or deceptive or likely to mislead or deceive, in contravention of ASIC Act, s 12DA(1) and/or Corporations Act, s 1041H(1), by (1) making the misrepresentations contained in each advertisement, information memorandum and promotional brochure, and (2) representing in the post-order loan agreements that there were no civil proceedings pending involving the relevant ProCorp Group company as a defendant, and that funds advanced would be expended only on the particular project identified.

96 Section 180(1) of the Corporations Act provides as follows:

A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:

(a) were a director or officer of a corporation in the corporation's circumstances; and
(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.

97 Section 181(1) provides as follows:

A director or other officer of a corporation must exercise their powers and discharge their duties:

(a) in good faith in the best interests of the corporation; and
(b) for a proper purpose.

98 Section 182(1) provides as follows:

A director, secretary, other officer or employee of a corporation must not improperly use their position to:

(a) gain an advantage for themselves or someone else; or
(b) cause detriment to the corporation.

99 The statutory duty imposed by s 180(1) reflects, and to some extent refines, that which obtains at general law. As Santow J (as his Honour then was) explained in ASIC v Adler (2002) 41 ACSR 72, [372], both the common law and equity imposes on directors a duty of care and skill [Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 109; 14 ACSR 109; Daniels (formerly practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438; 16 ACSR 607], the content of which is essentially the same as the statutory duty [Sheahan v Verco (2001) 79 SASR 109; 37 ACSR 117, 134 (Mullighan J); Daniels v Anderson, 603 (Powell JA); see also Australian Innovation Ltd v Petrovsky (1996) 21 ACSR 218, 222 (Lockhart J)]. Similarly, the statutory duties imposed by s 181 and s 182 reflect, and to some extent refine, corresponding obligations of directors under the general law.

10 BY CONSENT ORDERS that, as between the Eighth Defendant Malcolm Fortune and the Plaintiff, the Proceedings be otherwise dismissed.

SCHEDULE C - the Twenty-third Defendant, Mr Troy Fortune

As against the Twenty-third Defendant, Troy Fortune, the Court notes the matters recorded in paragraphs 1 to 7 inclusive and 11 of the document entitled “Short Minutes of Order between the Plaintiff and the Twenty-third Defendant” signed by the solicitor for Plaintiff and by the Twenty-third Defendant, initialled by me this day and placed with the papers, and:-

1 DECLARES, pursuant to Corporations Act, section 1317E(1), that the Twenty-third Defendant Troy Fortune, in contravention of Corporations Act, section 180(1) and 181(1), in the period November 2001 to July 2003, failed to exercise his powers and discharge his duties as an officer of the Third Defendant Oceanwalk Projects Pty Ltd, the Fourth Defendant ProCorp Investments Pty Ltd, and the ProCorp Companies (as defined in paragraph 73 of the Fourth Amended Statement of Claim) with the requisite degree of care and diligence, or in good faith in the best interests of those corporations and for a proper purpose, by:

a failing to take any or any proper steps to ensure that the fundraising undertaken through the ProCorp Loans, as defined in paragraph 109 of the Fourth Amended Statement of Claim, complied with the fundraising provisions of the Corporations Act ;

b otherwise permitting the ProCorp Loans, as defined in paragraph 109 of the Fourth Amended Statement of Claim, to be made in circumstances where he knew, believed and expected that investments made via those loans would not comply with the fundraising provisions of the Corporations Act ;

c failing to take any or any proper step to supervise, control and manage the conduct of Donald Richard Maxwell, the First defendant, carried out on behalf of Oceanwalk Projects Pty Ltd, ProCorp Investments Pty Ltd and the ProCorp Companies, in respect of the ProCorp Projects as defined in paragraph 71 of the Fourth Amended Statement of Claim;
d failing to take any or any proper step to ensure that the representations contained in the following documents were not misleading and deceptive:

(i) the ProCorp Advertisements, as defined in paragraph 82 of the Fourth Amended Statement of Claim;

(ii) the ProCorp Information Memorandum, as defined in paragraph 84 of the Fourth Amended Statement of Claim;

(iii) the ProCorp Offer Document, as defined in paragraph 84 of the Fourth Amended Statement of Claim; and
(iv) the ProCorp Memorandum, as defined in paragraph 84 of the Fourth Amended Statement of Claim.

e otherwise permitting the issue of the following documents to approximately 81 members of the Australian public, in circumstances where he knew or ought to have known that the contents of those documents included representations which were misleading and deceptive:

i. the ProCorp Information Memorandum, as defined in paragraph 84 of the Fourth Amended Statement of Claim,

ii. the ProCorp Offer Document, as defined in paragraph 84 of the Fourth Amended Statement of Claim, and

iii. the ProCorp Memorandum, as defined in paragraph 84 of the Fourth Amended Statement of Claim;

f otherwise permitting the publication of the ProCorp Advertisements, as defined in paragraph 82 of the Fourth Amended Statement of Claim, to the Australian public at large, in circumstances where he knew or ought to have known that the contents of those documents included representations which were misleading and deceptive.

2 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-third Defendant Troy Fortune, by himself, his servants, agents and employees is permanently restrained from conducting a financial services business, in contravention of Corporations Act, section 911A (as amended from time to time).

3 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-third Defendant Troy Fortune, by himself, his servants, agents and employees is permanently restrained from providing financial services, in contravention of Corporations Act, section 911B (as amended from time to time).

4 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-third Defendant Troy Fortune, by himself, his servants, agents and employees is permanently restrained from offering securities without a current disclosure document, in contravention of Corporations Act, section 727 (as amended from time to time).

5 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-third Defendant Troy Fortune, by himself, his servants, agents and employees is permanently restrained from advertising or publishing a statement that directly or indirectly refers to an offer or an intended offer of securities, in contravention of Corporations Act, section 734 (as amended from time to time).

6 BY CONSENT ORDERS, pursuant to Corporations Act, sections 206C(1) and/or 206E(1), that the Twenty-third Defendant Troy Fortune is disqualified from managing corporations for seven years from the date of these orders.

7 BY CONSENT MAKES NO ORDER as to costs, to the intent that each party bear its own costs.

8 BY CONSENT ORDERS that all other orders relating to the Twenty-third Defendant Troy Fortune predating the Orders set out herein be set aside, dissolved and discharged.

9 BY CONSENT ORDERS that, as between the Twenty-third Defendant Troy Fortune and the Plaintiff, the Proceedings be otherwise dismissed.

SCHEDULE D - The Twenty-Fourth Defendant, Mr Bennett

As against the Twenty-fourth Defendant, Jon William Bennett, the Court notes the matters recorded in paragraphs 1 to 6 inclusive and 10 of the document entitled “Short Minutes of Order between the Plaintiff and the Twenty-fourth Defendant” signed by the solicitor for Plaintiff and by the Twenty-fourth Defendant, initialled by me this day and placed with the papers, and:-

1 DECLARES, pursuant to Corporations Act, section 1317E(1), that the Twenty-fourth Defendant Jon William Bennett, in contravention of Corporations Act, section 180(1), in the period November 2001 to July 2003, failed to exercise his powers and discharge his duties as an officer of the Third Defendant Oceanwalk Projects Pty Ltd, the Fourth Defendant ProCorp Investments Pty Ltd, and the ProCorp Companies (as defined in paragraph 73 of the Fourth Amended Statement of Claim) with the requisite degree of care and diligence, by:

a failing to take proper steps to ensure that the fundraising undertaken through the ProCorp Loans, as defined in paragraph 109 of the Fourth Amended Statement of Claim, complied with the fundraising provisions of the Corporations Act ;

b otherwise permitting the ProCorp Loans, as defined in paragraph 109 of the Fourth Amended Statement of Claim, to be made in circumstances where those loans would not comply with the fundraising provisions of the Corporations Act ;

c failing to take proper steps to supervise, control and manage the conduct of Donald Richard Maxwell, the First Defendant, carried out on behalf of ProCorp Investments Pty Ltd and the ProCorp Companies (in particular Alliance Property Pty Limited, Liverpool Projects Limited, Mansions on Mann Limited and ProCorp Investments (Gosford) Pty Limited), in respect of the ProCorp Projects, as defined in paragraph 71 of the Fourth Amended Statement of Claim;
d failing to take proper steps to ensure that the representations contained in the following documents were not misleading and deceptive:

i. the ProCorp Information Memorandum, as defined in paragraph 84 of the Fourth Amended Statement of Claim;

ii. the ProCorp Offer Document, as defined in paragraph 84 of the Fourth Amended Statement of Claim; and
iii. the ProCorp Memorandum, as defined in paragraph 84 of the Fourth Amended Statement of Claim.
e otherwise permitting the issue of the following documents to approximately 81 members of the Australian public, in circumstances where he knew or ought to have known that the contents of those documents included representations which were misleading and deceptive:

i. the ProCorp Information Memorandum, as defined in paragraph 84 of the Fourth Amended Statement of Claim;

ii. the ProCorp Offer Document, as defined in paragraph 84 of the Fourth Amended Statement of Claim; and
iii. the ProCorp Memorandum, as defined in paragraph 84 of the Fourth Amended Statement of Claim.

2 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-fourth Defendant Jon William Bennett, by himself, his servants, agents and employees is permanently restrained from conducting a financial services business, in contravention of Corporations Act, section 911A (as amended from time to time).

3 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-fourth Defendant Jon William Bennett, by himself, his servants, agents and employees is permanently restrained from providing financial services, in contravention of Corporations Act, section 911B (as amended from time to time).

4 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-fourth Defendant Jon William Bennett, by himself, his servants, agents and employees is permanently restrained from offering securities without a current disclosure document, in contravention of Corporations Act, section 727 (as amended from time to time).

5 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-fourth Defendant Jon William Bennett, by himself, his servants, agents and employees is permanently restrained from advertising or publishing a statement that directly or indirectly refers to an offer or an intended offer of securities, in contravention of Corporations Act, section 734 (as amended from time to time).

6 BY CONSENT ORDERS, pursuant to Corporations Act, sections 206C(1) and/or 206E(1), that the Twenty-fourth Defendant Jon William Bennett is disqualified from managing corporations for five years from the date of these orders.

7 BY CONSENT ORDERS that the Twenty-fourth Defendant Jon William Bennett, pay the Plaintiff’s agreed costs of $2,000 within 21 days of the date of these orders.

8 BY CONSENT ORDERS that all other orders relating to the Twenty-fourth Defendant Jon William Bennett predating the Orders set out herein be set aside, dissolved and discharged.

9 BY CONSENT ORDERS that, as between the Twenty-fourth Defendant Jon William Bennett and the Plaintiff, the Proceedings be otherwise dismissed.

SCHEDULE E - The Ninth and Twenty-Seventh Defendants, Coakleys

As against the Ninth Defendant Coakley Associates Pty Limited and the Twenty-seventh Defendant Lloyd Antony Coakley, the Court notes the matters recorded in paragraphs 1 to 5 inclusive, 7 and 8 of the document entitled “Consent Orders between the Plaintiff and the Ninth and Twenty Seventh Defendants” signed by the solicitor for Plaintiff and by the solicitor for the Ninth and Twenty Seventh Defendants, initialled by me this day and placed with the papers, and:-

1 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Ninth Defendant Coakley Associates Pty Limited and the Twenty-seventh Defendant Lloyd Antony Coakley, by themselves, their servants, agents and employees is permanently restrained from offering securities without a current disclosure document, in contravention of Corporations Act, section 727 (as amended from time to time).

2 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Ninth Defendant Coakley Associates Pty Limited and the Twenty-seventh Defendant Lloyd Antony Coakley, by themselves, their servants, agents and employees is permanently restrained from advertising or publishing a statement that directly or indirectly refers to an offer or an intended offer of securities, in contravention of Corporations Act, section 734 (as amended from time to time).

3 BY CONSENT ORDERS, pursuant to Corporations Act, section 206E(1), that the Twenty-seventh Defendant Lloyd Antony Coakley is disqualified from managing corporations for two years from the date of these orders.

4 BY CONSENT ORDERS that all other orders relating to the Ninth Defendant Coakley Associates Pty Limited and/or the Twenty-seventh Defendant Lloyd Antony Coakley, predating the Orders set out herein be set aside, dissolved and discharged.

5 BY CONSENT ORDERS that, as between the Ninth Defendant Coakley Associates Pty Limited and the Twenty-seventh Defendant Lloyd Antony Coakley, and the Plaintiff, the Proceedings be otherwise dismissed.

6 BY CONSENT MAKES NO ORDER as to costs, to the intent that as between the Ninth Defendant Coakley Associates Pty Limited, the Twenty-seventh Defendant Lloyd Antony Coakley, and the Plaintiff, each party bear its own costs.

SCHEDULE F - the Twentieth defendant, Mr Kolios

As against the Twentieth Defendant, Jim Kolios, the Court notes the matters recorded in paragraphs 1 to 8 inclusive, and 10, 13 and 14 of the document entitled “Short Minutes of Orders between the Plaintiff and the Twentieth Defendant” signed by the solicitor for Plaintiff and by the solicitor for the Twentieth Defendant, initialled by me this day and placed with the papers, and:-

1 DECLARES, pursuant to Corporations Act, section 1317E(1), that the Twentieth Defendant Jim Kolios, in contravention of Corporations Act, section 180(1) and 181(1), in the period November 2001 to July 2003, he failed to exercise his powers and discharge his duties as an officer of Central Development Group Pty Limited, and the Central Development Companies (as defined in paragraph 210 of the Fourth Amended Statement of Claim) with the requisite degree of care and diligence, or in good faith in the best interests of those corporations and for a proper purpose, by:

a failing to take proper steps to ensure that the fundraising undertaken through the Central Development Group Loans, as defined in paragraph 228 of the Fourth Amended Statement of Claim, complied with the fundraising provisions of the Corporations Act ;

b otherwise permitting the Central Development Group Loans, as defined in paragraph 228 of the Fourth Amended Statement of Claim, to be made in circumstances where those loans would not comply with the fundraising provisions of the Corporations Act ;

c failing to take proper steps to supervise, control and manage the conduct of Donald Richard Maxwell, the First Defendant, carried out on behalf of Central Development Group Pty Ltd, The Wake (Waitara) Pty Limited, and Maroubra Pty Limited, in respect of the Central Development Projects, as defined in paragraph 209 of the Fourth Amended Statement of Claim;
d failing to take any or any proper steps to ensure that the representations contained in the following documents were not misleading and deceptive:

i. the Central Development Advertisements, as defined in paragraph 221 of the Fourth Amended Statement of Claim;

ii. the Central Development Letter, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

iii. the Central Development Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

iv. the Central Development Information Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

v. the Wake Brochure, as defined in paragraph 222 of the Fourth Amended Statement of Claim; and
vi. the Post Order Central Development Loan Agreements, as defined in paragraph 227 of the Fourth Amended Statement of Claim.
e otherwise permitting the issue of the following documents to approximately 28 members of the Australian public, in circumstances where he knew or ought to have known that the contents of those documents included representations which were misleading and deceptive:

i. the Central Development Letter, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

ii. the Central Development Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

iii. the Central Development Information Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim; and

iv. the Wake Brochure, as defined in paragraph 222 of the Fourth Amended Statement of Claim.

f otherwise permitting the publication of the Central Development Advertisements, as defined in paragraph 221 of the Fourth Amended Statement of Claim, to the Australian public at large, in circumstances where he knew or ought to have known that the contents of those documents included representations which were misleading and deceptive. g otherwise permitting the issue of the Post Order Central Development Loan Agreements, as defined in paragraph 227 of the Fourth Amended Statement of Claim, to approximately 2 Members of the Australian public, in circumstances where he knew or ought to have known that the contents of that document included representations which were misleading and deceptive.

2 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twentieth Defendant Jim Kolios, by himself, his servants, agents and employees is permanently restrained from conducting a financial services business, in contravention of Corporations Act, section 911A (as amended from time to time).

3 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twentieth Defendant Jim Kolios, by himself, his servants, agents and employees is permanently restrained from offering securities without a current disclosure document, in contravention of Corporations Act, section 727 (as amended from time to time).

4 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twentieth Defendant Jim Kolios, by himself, his servants, agents and employees is permanently restrained from advertising or publishing a statement that directly or indirectly refers to an offer or an intended offer of securities, in contravention of Corporations Act, section 734 (as amended from time to time).

5 BY CONSENT ORDERS, pursuant to Corporations Act, sections 206C(1), 206D(1) and/or 206E(1), that the Twentieth Defendant Jim Kolios is disqualified from managing corporations for eight years from the date of these orders.

6 BY CONSENT MAKES NO ORDER as to costs, to the intent that as between the Twentieth Defendant Jim Kolios, and the Plaintiff, each party bear its own costs.

7 BY CONSENT ORDERS that all other orders relating to the Twentieth Defendant Jim Kolios predating the Orders set out herein be set aside, dissolved and discharged.

8 BY CONSENT ORDERS that, as between the Twentieth Defendant Jim Kolios and the Plaintiff, the Proceedings be otherwise dismissed.

SCHEDULE G - The Twenty-Fifth Defendant, Mr Jaul Jammal

As against the Twenty-fifth Defendant, Jaul Jammal, the Court notes the matters recorded in paragraphs 1 to 8 inclusive and 12 of the document entitled “Short Minutes of Orders between the Plaintiff and the Twenty-fifth Defendant” signed by the solicitor for Plaintiff and by the Twenty-fifth Defendant, initialled by me this day and placed with the papers, and:-

1 DECLARES, pursuant to Corporations Act, section 1317E(1), that the Twenty-fifth Defendant Jaul Jammal, in contravention of Corporations Act, section 180(1), in the period November 2001 to July 2003, he failed to exercise his powers and discharge his duties as an officer of Central Development Group Pty Limited, and the Central Development Companies (as defined in paragraph 210 of the Fourth Amended Statement of Claim) with the requisite degree of care and diligence, by:

a failing to take proper steps to ensure that the fundraising undertaken through the Central Development Group Loans, as defined in paragraph 228 of the Fourth Amended Statement of Claim, complied with the fundraising provisions of the Corporations Act ;

b otherwise permitting the Central Development Group Loans, as defined in paragraph 228 of the Fourth Amended Statement of Claim, to be made in circumstances where those loans would not comply with the fundraising provisions of the Corporations Act ;

c failing to take proper steps to supervise, control and manage the conduct of Donald Richard Maxwell, the First Defendant, carried out on behalf of Central Development Group Pty Ltd, The Wake (Waitara) Pty Limited, and Maroubra Pty Limited, in respect of the Central Development Projects, as defined in paragraph 209 of the Fourth Amended Statement of Claim;
d failing to take proper steps to ensure that the representations contained in the following documents were not misleading and deceptive:

i. the Central Development Advertisements, as defined in paragraph 221 of the Fourth Amended Statement of Claim;

ii. the Central Development Letter, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

iii. the Central Development Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

iv. the Central Development Information Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

v. the Wake Brochure, as defined in paragraph 222 of the Fourth Amended Statement of Claim; and
vi. the Post Order Central Development Loan Agreements, as defined in paragraph 227 of the Fourth Amended Statement of Claim.
e otherwise permitting the issue of the following documents to approximately 28 members of the Australian public, in circumstances where he knew or ought to have known that the contents of those documents included representations which were misleading and deceptive:

i. the Central Development Letter, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

ii. the Central Development Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

iii. the Central Development Information Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim; and

iv. the Wake Brochure, as defined in paragraph 222 of the Fourth Amended Statement of Claim.

f otherwise permitting the publication of the Central Development Advertisements, as defined in paragraph 221 of the Fourth Amended Statement of Claim, to the Australian public at large, in circumstances where he knew or ought to have known that the contents of those documents included representations which were misleading and deceptive. g otherwise permitting the issue of the Post Order Central Development Loan Agreements, as defined in paragraph 227 of the Fourth Amended Statement of Claim, to approximately 2 Members of the Australian public, in circumstances where he knew or ought to have known that the contents of that document included representations which were misleading and deceptive.

2 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-fifth Defendant Jaul Jammal, by himself, his servants, agents and employees is permanently restrained from conducting a financial services business, in contravention of Corporations Act, section 911A (as amended from time to time).

3 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-fifth Defendant Jaul Jammal, by himself, his servants, agents and employees is permanently restrained from offering securities without a current disclosure document, in contravention of Corporations Act, section 727 (as amended from time to time).

4 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-fifth Defendant Jaul Jammal, by himself, his servants, agents and employees is permanently restrained from advertising or publishing a statement that directly or indirectly refers to an offer or an intended offer of securities, in contravention of Corporations Act, section 734 (as amended from time to time).

5 BY CONSENT ORDERS, pursuant to Corporations Act, sections 206C(1), 206D(1) and/or 206E(1), that the Twenty-fifth Defendant Jaul Jammal is disqualified from managing corporations for three years from the date of these orders.

6 BY CONSENT MAKES NO ORDER as to costs, to the intent that as between the Twenty-fifth Defendant Jaul Jammal, and the Plaintiff, each party bear its own costs.

7 BY CONSENT ORDERS that, as between the Twenty-fifth Defendant Jaul Jammal and the Plaintiff, the Proceedings be otherwise dismissed.

SCHEDULE H - The Twenty-sixth Defendant, Mr Roy Skaf

As against the Twenty-sixth Defendant, Roy Skaf, the Court notes the matters recorded in paragraphs 1 to 8 inclusive and 12 of the document entitled “Short Minutes of Orders between the Plaintiff and the Twenty-sixth Defendant” signed by the solicitor for Plaintiff and by the Twenty-sixth Defendant, initialled by me this day and placed with the papers, and:-

1 DECLARES, pursuant to Corporations Act, section 1317E(1), that the Twenty-sixth Defendant Roy Skaf, in contravention of Corporations Act, section 180(1) in the period November 2001 to July 2003, he failed to exercise his powers and discharge his duties as an officer of Central Development Group Pty Limited, and the Central Development Companies (as defined in paragraph 210 of the Fourth Amended Statement of Claim) with the requisite degree of care and diligence, by:

a failing to take proper steps to ensure that the fundraising undertaken through the Central Development Group Loans, as defined in paragraph 228 of the Fourth Amended Statement of Claim, complied with the fundraising provisions of the Corporations Act ;

b otherwise permitting the Central Development Group Loans, as defined in paragraph 228 of the Fourth Amended Statement of Claim, to be made in circumstances where those loans would not comply with the fundraising provisions of the Corporations Act ;

c failing to take proper steps to supervise, control and manage the conduct of Donald Richard Maxwell, the First Defendant, carried out on behalf of Central Development Group Pty Ltd, The Wake (Waitara) Pty Limited, and Maroubra Pty Limited, in respect of the Central Development Projects, as defined in paragraph 209 of the Fourth Amended Statement of Claim;
d failing to take proper steps to ensure that the representations contained in the following documents were not misleading and deceptive:

i. the Central Development Advertisements, as defined in paragraph 221 of the Fourth Amended Statement of Claim;

ii. the Central Development Letter, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

iii. the Central Development Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

iv. the Central Development Information Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

v. the Wake Brochure, as defined in paragraph 222 of the Fourth Amended Statement of Claim; and
vi. the Post Order Central Development Loan Agreements, as defined in paragraph 227 of the Fourth Amended Statement of Claim.
e otherwise permitting the issue of the following documents to approximately 28 members of the Australian public, in circumstances where he knew or ought to have known that the contents of those documents included representations which were misleading and deceptive:

i. the Central Development Letter, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

ii. the Central Development Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim;

iii. the Central Development Information Memorandum, as defined in paragraph 222 of the Fourth Amended Statement of Claim; and

iv. the Wake Brochure, as defined in paragraph 222 of the Fourth Amended Statement of Claim.

f otherwise permitting the publication of the Central Development Advertisements, as defined in paragraph 221 of the Fourth Amended Statement of Claim, to the Australian public at large, in circumstances where he knew or ought to have known that the contents of those documents included representations which were misleading and deceptive.
g otherwise permitting the issue of the Post Order Central Development Loan Agreements, as defined in paragraph 227 of the Fourth Amended Statement of Claim, to approximately 2 Members of the Australian public, in circumstances where he knew or ought to have known that the contents of that document included representations which were misleading and deceptive.

2 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-sixth Defendant Roy Skaf, by himself, his servants, agents and employees is permanently restrained from conducting a financial services business, in contravention of Corporations Act, section 911A (as amended from time to time).

3 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-sixth Defendant Roy Skaf, by himself, his servants, agents and employees is permanently restrained from offering securities without a current disclosure document, in contravention of Corporations Act, section 727 (as amended from time to time).

4 BY CONSENT ORDERS, pursuant to Corporations Act, section 1324(1), that the Twenty-sixth Defendant Roy Skaf, by himself, his servants, agents and employees is permanently restrained from advertising or publishing a statement that directly or indirectly refers to an offer or an intended offer of securities, in contravention of Corporations Act, section 734 (as amended from time to time).

5 BY CONSENT ORDERS, pursuant to Corporations Act, sections 206C(1), s 206D(1) and/or 206E(1), that the Twenty-sixth Defendant Roy Skaf is disqualified from managing corporations for five years from the date of these orders.

6 BY CONSENT MAKES NO ORDER as to costs, to the intent that as between the Twenty-sixth Defendant Roy Skaf, and the Plaintiff, each party shall bear its own costs.

7 BY CONSENT ORDERS that all other orders relating to the Twenty-sixth Defendant Roy Skaf predating the Orders set out herein be set aside, dissolved and discharged.

8 BY CONSENT ORDERS that, as between the Twenty-sixth Defendant Roy Skaf and the Plaintiff, the Proceedings be otherwise dismissed.

**********

18/10/2006 - Corrections - Paragraph(s) Paragraph 213 Schedule “F” altered to Schedule “E”.Paragraph 121 the words “does not claim” replaced by the words “also claims”.

CITATION:	Australian Securities & Investments Commission v Maxwell & ors [2006] NSWSC 1052 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	6 February 2006, 20 February 2006, 23 February 2006
JUDGMENT DATE :	10 October 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
DECISION:	Declarations of contravention pursuant to Corporations Act, s 1317E; pecuniary penalty orders pursuant to s 1317G, injunctive relief pursuant to s 1324; compensation orders pursuant to s 1317H; and banning orders pursuant to s 206C, 206D and 206E: see Schedules A to H.
CATCHWORDS:	CORPORATIONS – Fundraising – Offers of securities – whether loan agreement was “debenture” within Corporations Act, s 9, and “security” for purposes of Chapter 7 - whether offer to enter into loan agreements was offer of securities for purposes of Part 6D.2 – whether offers to enter into loan agreements required disclosure under Part 6D.2 – conditions of availability of s 708(10) exemption - licensee’s satisfaction on reasonable grounds of matters in s 708(10)(b) is condition and requires that licensee sufficiently investigate experience of investor to form relevant opinion - whether advertisement of offers prohibited if disclosure not required by reason of s 708(1) – whether to make singular personal approach to acquaintance is to “publish” a statement referring to an offer – whether Corporations Act s 79 available to impose accessorial civil liability in respect of provisions which are not civil penalty provisions – Carrying on financial services business without a licence - “financial services business” - “financial service” - “financial product advice” – “financial product” – whether loan agreements were financial products - whether by issuing loan agreements, corporation issued, and thereby dealt in, financial products – whether corporation was carrying on a financial services business - whether licensee under old legislation pursuant to transitional provisions was to be treated as if it held an Australian Financial Services Licence under new legislation for purposes of s 708(10) - Misleading and deceptive conduct – where corporations engaged in misleading and deceptive conduct by publishing advertisements and distributing brochures – whether director “knowingly concerned” - where evidence does not implicate director in any relevant conduct after he is shown to have knowledge of matters which falsify representations - Directors duties – whether breached by director authorising, permitting or failing to prevent contraventions by corporation of provisions of Corporations Act (not being civil penalty provisions) – ss 180, 181 and 182 are not concerned with any general obligation owed by directors at large to conduct affairs of company in accordance with law generally or Corporations Act in particular, but with duties owed to company - relevant considerations – whether s 181 duty of good faith is contravened in absence of deliberate conduct known to be not in interests of company - where corporations were closely held proprietary companies in which interests of directors and shareholders were identical, director was young and inexperienced and his role was to provide building and construction expertise while others were responsible for fund-raising role and directors obtained legal and accounting advice - Disqualification orders – when operation of s 206D is attracted – Consent orders – effect of agreement of parties on Court’s discretionary powers – Injunctions – whether appropriate to make orders prohibiting respondent from engaging in conduct that is misleading or deceptive or which is likely to mislead or deceive – Declarations of contravention – duplicity - whether declarations of contravention should treat as a single contravention of s 180, and as another single contravention of s 181, whole course of conduct as director of Group of companies over period, rather than particular acts or omissions – whether appropriate to make declarations of involvement (under s 79) in contravention by corporations (being contraventions of provisions which are not civil penalty provisions and do not make provision for accessorial civil liability) – Disqualification orders – relevant considerations.
LEGISLATION CITED:	(CTH) Australian Securities and Investments Commission Act 2001, ss 12DA(1), 12GD (CTH) Corporations Act 2001, ss 9, 18, 19, 79, 181, 182, 183, 206B, 206C, 206D, 206E, Chapter 6D, ss 700, Part 6D.2, ss 706, 708, 727(1), 734, Chapter 7, ss 761A, 761E, 763A, 764A, 766A, 766B, 766C, 911A, 911B, 911D, 1041H, 1041I, 1317E, 1317G, 1317H, 1324, 1430, 1431, 1432. (CTH) Trade Practices Act 1974, s 52 (NSW) Corporations Law 1989, ss 104, 786, 851
CASES CITED:	ACCC v Frances [2004] FCA 487 Angas Law Services Pty Ltd (in liq) v Carabelas (2005) 53 ACSR 208 ASC v Gallagher (1993) 11 WAR 105; 10 ACSR 43; 11 ACLC 286 ASIC v Vines (2005) 55 ACSR 617 ASIC v Adler (2002) 41 ACSR 72 ASIC v Adler (2002) 42 ACSR 80; [2002] NSWSC 483 ASIC v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305 ASIC v Doyle (2001) 38 ACSR 606 ASIC v Elm Financial Services Pty Ltd (2005) 55 ACSR 411; [2005] NSWSC 1020 ASIC v Elm Financial Services Pty Ltd & Ors [2005] NSWSC 1033 ASIC v Elm Financial Services [2005] NSWSC 1065 Australian Growth Resources Corporation Pty Ltd v Van Reesema (1988) 13 ACLR 261 Australian Innovation Ltd v Petrovsky (1996) 21 ACSR 218 Biala Pty Ltd v Mallina Holdings Ltd (No 2) (1993) 11 ACSR 785; 11 ACLC 1082; (1994) 15 ACSR 1 BMW Australia Limited v ACCC (2004) 207 ALR 452 Byrne v Baker [1964] VR 443 Chew v R (1991) 5 ACSR 473 Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115 Compaq Computer Australia Ltd v Merry (1998) 157 ALR 1 Daniels (formerly practising as Deloitte Haskins & Sells) v Anderson (1995) 37 NSWLR 438; 16 ACSR 607 Forge v ASIC (2004) 52 ACSR 1 Furs Ltd v Tomkies (1936) 54 CLR 583; 9 ALJ 419 Giorgianni v The Queen (1985) 156 CLR 473 Hamilton v Whitehead (1988) 166 CLR 121 H.L. Bolton (Engineering) Co Ltd v T.J. Graham & Sons Ltd [1957] 1 QB 159 Hogg v Cramphorn [1967] Ch 254; [1966] 3 All ER 420; [1970] Ch 122 (CA) ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 King v GIO Australia Holdings Ltd (2001) 184 ALR 98 Marchesi v Barnes [1970] VR 434 Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1 North-West Transportation Co Ltd v Beatty (1887) 12 App Cas 589 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Permanent Building Society (in liq) v Wheeler (1994) 11 WAR 109; 14 ACSR 109 Re City Equitable Fire Insurance Co Ltd [1925] Ch 407 Re Property Force Consultants Pty Ltd (1995) 13 ACLC 1051 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134n; [1942] 1 All ER 378 Sheahan v Verco (2001) 79 SASR 109; 37 ACSR 117 Smithers v Beveridge (1994) 14 ACSR 197 Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; (1982) ATPR 40-303 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 Vrisakis v ASC (1993) 9 WAR 395; 11 ACSR 162 Winthrop Investments Ltd v Winns Ltd [1975] 2 NSWLR 666; (1975) 1 ACLR 219 World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 Yorke v Lucas (1985) 158 CLR 661
PARTIES:	Australian Securities & Investments Commission (plaintiff) Donald Richard Maxwell (first defendant) Oceanwalk Projects Pty Limited (third defendant) Procorp Investments Pty Limited (fourth defendant) Central Development Group Pty Limited (fifth defendant) The Wake (Waitara) Pty Limited (sixth defendant) Alliance Property Developments Limited (seventh defendant) Malcolm Fortune (eighth defendant) Coakley Associates Pty Limited (ninth defendant) Bankstown Project Two Pty Limited (tenth defendant) Drummoyne Constructions Pty Limited (eleventh defendant) Great Northern Constructions Pty Limited (twelfth defendant) Homebush Project One Pty Limited (thirteenth defendant) Liverpool Projects Limited (fourteenth defendant) Mansions on Mann Limited (fifteenth defendant) Maroubra Properties Pty Limited (sixteenth defendant) Miranda Villas Pty Limited (seventeenth defendant) Procorp Investments (Gosford) Pty Limited (eighteenth defendant) Zepher Pty Limited (nineteenth defendant) Jim Kolios (twentieth defendant) Northern Sight Pty Ltd (twenty-first defendant) George Nahed (twenty-second defendant) Troy Pierre Fortune (twenty-third defendant) John William Bennett (twenty-fourth defendant) Jaul Jammal (twenty-fifth defendant) Roy Skaf (twenty-sixth defendant) Lloyd Coakley (twenty-seventh defendant)
FILE NUMBER(S):	SC 5298/03
COUNSEL:	Mr D Stack (plaintiff) Mr D Maxwell (in person) (first defendant) Mr P Livingstone (ninth & twenty-seventh defendants) Ms J Leary (sol) (twentieth defendant) Mr J Bennett (in person) (twenty-fourth defendant) Mr R Newton (twenty-sixth defendant)
SOLICITORS:	Kim Turner, Solicitor, ASIC Hunt & Hunt (ninth & twenty-seventh defendants) Leary & Company (twentieth defendant)