Australian Securities and Investments Commission v MyWealth Manager Financial Services Pty Ltd
[2019] FCA 2081
•29 November 2019
FEDERAL COURT OF AUSTRALIA
Australian Securities and Investments Commission v MyWealth Manager Financial Services Pty Ltd [2019] FCA 2081
File number: QUD 707 of 2019 Judge: DERRINGTON J Date of judgment: 29 November 2019 Catchwords: PRACTICE AND PROCEDURE – application to vary freezing order – orders sought against non-party bank – orders sought to direct plaintiff to intervene with bank – application dismissed – costs Legislation: Australian Securities and Investments Commission Act 2011 (Cth) Date of hearing: 29 November 2019 Registry: Queensland Division: General Division National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 20 Counsel for the Plaintiff: Mr S Seefeld Solicitor for the Plaintiff: Australian Securities and Investments Commission Counsel for the Second, Fifth, Sixth and Seventh Defendants: Mr H Forrester Solicitor for the Second, Fifth, Sixth and Seventh Defendants: Collins & Collins Lawyers Solicitor for the Fourth Defendant: Mr S Officer of Willon Legal ORDERS
QUD 707 of 2019 BETWEEN: AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
Plaintiff
AND: MYWEALTH MANAGER FINANCIAL SERVICES PTY LTD ACN 165 460 873
First Defendant
MYWEALTH PROTECTION PTY LTD ACN 604 035 850
Second Defendant
3M FINANCIAL PLANNING PTY LTD ACN 616 597 856 (and others named in the Schedule)
Third Defendant
JUDGE:
DERRINGTON J
DATE OF ORDER:
29 NOVEMBER 2019
THE COURT ORDERS THAT:
1.The interlocutory application filed 28 November 2019 be dismissed.
2.The fourth defendant pay the plaintiff’s costs of and incidental to the interlocutory application, to be taxed or as agreed.
3.As between the fourth defendant and the second, fifth, sixth and seventh defendants, the costs of the interlocutory application be each party’s costs in the cause.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DERRINGTON J:
The application before the Court was brought on for hearing urgently by the fourth defendant, although there is nothing improper about that given the circumstances in which it finds itself. There can be no criticism that it seeks to approach the Court in order to attempt to rectify, from its point of view, a situation which has arisen consequent upon the making of orders by Reeves J on 21 November 2019. His Honour’s orders were made on an application brought by the Australian Securities and Investments Commission (ASIC) against the first defendant, MyWealth Manager Financial Services Pty Ltd and a number of other defendants, the fourth of whom, Secure Investments Pty Ltd, is the applicant today.
The background of the orders made by Reeves J need not be detailed to any great extent, however, it is worthy of mentioning that ASIC’s action is in respect of the alleged conduct of the defendants in carrying on and operating an unregistered managed investment scheme. The material relied upon by ASIC raised, in at least a prima facie way, the possibility that funds “invested” by members of the public were dissipated from the unregistered managed investment scheme and may not now be recoverable.
ASIC initially sought interlocutory relief and that application was brought on urgently for interim relief. The parties have not had sufficient time to fully prepare for a final interlocutory hearing, which will occur on 10 December. In that way, I indicate that the issues are generally as yet undefended and so no final view or even an interim view can be formed in relation to them, save at a very high level. Nevertheless, the orders made by Reeves J were designed to protect assets or preserve assets for the purposes of ensuring that any party aggrieved by the conduct of the defendants might have recourse to assets to recoup their losses if ASIC’s action is successful. The written submissions before Reeves J were handed up in the course of the hearing and they obviously form the basis on which his Honour made the orders.
The difficulty which has arisen is that by order 3, his Honour imposed an injunction restraining, inter alia, the fourth defendant by itself, its officers, agents, servants and employees from withdrawing, transferring or otherwise disposing of or dealing with any moneys available in any account with any bank, building society or other financial institution in which the defendants have any legal or equitable interest. That primary restraint was subject to the orders in order 4. Order 4(c) provided what is colloquially known as a “carve out”. That is to say, an exception to the restriction.
That exception is that the second and fourth defendants are entitled to deal with their assets for certain limited purposes, including the payment of reasonable legal expenses, dealings and dispositions in the ordinary and proper course of their businesses, including paying business expenses bona fide and properly incurred, and the like. The issue which has arisen is that the orders were given to the Westpac Banking Corporation, with which the fourth defendant has a number of accounts. Since receiving the order, Westpac has effectively prevented the fourth defendant from utilising its account held with it, to any degree.
Mr Officer, who appeared for the fourth defendant, referred to it as effectively freezing the account, and that was an appropriate description of what has happened. Mr Naseeruddin, the director of the fourth defendant, who gave evidence by an affidavit of 28 November 2019, said he has attempted to access the account of the fourth defendant without success via online facilities. He has had some correspondence with Westpac, which relieved his concerns in relation to another company, but the position remains that Westpac will presently not allow the withdrawal of funds from the Secure Investments account.
Mr Naseeruddin has, in his affidavit, identified a number of expenses which he says that Secure Investments have an obligation to meet. They include supplier invoices, loan repayments, payments on leases of cars, employee wages and the like. Consequent upon Westpac’s reluctance to allow the account to be used by the fourth defendant, correspondence has passed between the solicitors for the fourth defendant and ASIC. In that correspondence, the solicitors for the fourth defendant requested, or perhaps more accurately, demanded, that ASIC reverse instructions which the solicitors said must have been given by ASIC to Westpac which had caused that bank to effectively freeze the accounts.
There is no evidence before the Court which suggests that ASIC has done other than provided to Westpac, under cover of a letter, a copy of the Court’s order of 21 November 2019, and made specific reference to order 3(e). All of that conduct was entirely appropriate and in the fulfilment of its duty to act for the preservation of assets. Subsequent to that, correspondence has passed between the parties in which ASIC has sought confirmation from the fourth defendant that the monies which it seeks to withdraw from the Westpac account will be used for purposes consistent with or within the scope of the carve out provisions in order 4 of Reeves J’s order.
The fourth defendant quite rightly submits that it has no obligation under the orders as they are currently drafted to establish to ASIC that the funds it is seeking to withdraw will be used for those purposes. However, likewise, ASIC, under the orders as they presently exist, has no duty or obligation to act at the request of the fourth defendant to intervene on its behalf with Westpac and advise it as to the veracity of the intended withdrawals from Secure Investments’ account. The consequence of all of that is that an impasse has arisen. That is, on the one hand, the fourth defendant has determined not to provide evidence of the manner in which the funds which it seeks to withdraw will be used and, on the other hand, ASIC, without such evidence, refuses to provide assistance to the fourth defendant.
That impasse has now led to today’s application. By it, Secure Investments seeks orders against ASIC or, in the alternative, against Westpac. The relief sought is:
1. Declaration that the 21 November Orders be preserved.
2.The plaintiff be ordered to direct Westpac Banking Corporation to remove the restrictions on the fourth defendant’s accounts imposed in response to the 21 November Orders.
3.Further and alternatively to 2 above, Westpac Banking Corporation (ABN 33 007 457 141) be ordered to remove the restrictions on the fourth defendant’s accounts imposed in response to the 21 November Orders.
4.The plaintiff be ordered to direct Westpac Banking Corporation (ABN 33 007 457 141) to remove the restrictions on the accounts of High Protection Services Pty Ltd (ACN 606 106 709) imposed in relation to the 21 November Orders.
5.Further and alternatively to 4 above, Westpac Banking Corporation (ABN 33 007 457 141) be ordered to remove the restrictions on the accounts of High Protection Services Pty Ltd (ACN 606 106 709) imposed in response to the 21 November Orders.
6.An order for damages against the plaintiff.
7.An order that the plaintiff pay the fourth defendant’s costs of this application.
8.Further and alternatively to 6 above, an order pursuant to r.17.03 of the Federal Court Rules 2011 (Cth) that an interlocutory application be served on Westpac Banking Corporation (ABN 33 007 457 141) pursuant to which the fourth defendant intends to seek an order for damages and costs.
9.Such further or other order or relief as the Court considers appropriate.
In relation to the orders sought against Westpac, a significant hurdle is that Westpac has not been served with these proceedings. I have no doubt that Westpac is aware of their existence, in that Mr Officer has diligently engaged in correspondence with it and, in particular, with its legal officers. Further, he has provided it with a copy of the interlocutory application and, I apprehend, the affidavits in support, and informed it that the proceedings will be heard today.
Nevertheless, in the last piece of correspondence between the bank and the solicitors for the fourth defendant, the bank, having been given a copy of the interlocutory application, indicated that it would consider any interlocutory application against it if and when the application is served. That was a reference to prayer 8 of the interlocutory application, which sought an unusual order that the fourth defendant serve an interlocutory application on Westpac pursuant to which it intends to seek an order for damages and costs. Westpac indicated it was unsure as to the purpose of that order.
The result is that although Westpac is aware of these proceedings, it has not appeared today. Nevertheless, it has not been served in a way prescribed by the Rules, and unless and until it is served in a way which requires its attendance before the Court, I would not be prepared to make an order in its absence. For that reason, I would refuse the orders in prayers 3, 5 and 8 of the interlocutory application.
The remaining question is whether or not orders against ASIC ought be made. In that respect, I was directed to no power which the Court would have to make such orders.
ASIC is subject to the obligations on it under the Australian Securities and Investments Commission Act 2011 (Cth). Nothing in that Act gives this Court supervisory control over its conduct, and nor does the bringing of proceedings in this Court afford it with supervisory control as to the manner in which it conducts itself. Supervision of ASIC’s conduct is controlled through the government departments and, ultimately, the Minister responsible. That being so, I apprehend I have no power, despite ASIC being a party before this Court, to order it to correspond with Westpac in any way. The orders sought in paragraphs 2 and 4 are refused.
Order 6 seeks “an order for damages against the plaintiff”. That was not really pursued before the Court today. It must be founded upon some cause of action which the fourth defendant has against ASIC, but none was identified and, ultimately, no failure to comply with any obligation has given rise to any loss suffered by the fourth defendant. I would add that even if the Court were directed to some power which it had to control ASIC in the manner in which it conducts itself, in the circumstances of this case, I cannot detect any reason why that would be exercised.
The effect of the orders sought by Secure Investments is that ASIC intervene on its behalf and advise Westpac to allow it to withdrawal funds. In circumstances where ASIC has brought proceedings of the nature that it has, and in the circumstances where it has great concern about a loss of funds to investors, were ASIC to act in the way sought it would open itself to criticism. The orders of the Court are not there for ASIC to determine how they ought be enforced or as the fourth defendant wishes. Quite properly, ASIC has said that it would intervene if it were satisfied by evidence that the moneys sought to be withdrawn from the account were to be used for the purposes in the carve out in order 4.
The fourth defendant has chosen not to provide that evidence, and that is a matter for it. As I said above, it was not obliged to but, equally, ASIC was not obliged to act merely on the faith of the assertion that the moneys sought to be extracted from the account would be used for the purposes within order 4. On that basis, even if I could discern a power to direct ASIC to act, I would not have utilised it in this case. In those circumstances, the application ought be dismissed.
On the question of costs, although the fourth defendant had pressing concerns about its ability to access its funds from the bank and may have perceived that ASIC had something to do with the bank’s reticence to allow access to its account, there is no evidence that such was the case. At the end of the day, as between ASIC and the fourth defendant, I see no reason not to make an order for costs now rather than reserve them to some future occasion. As the application was unsuccessful, the fourth defendant ought pay ASIC’s costs of and incidental to the application, to be taxed or as agreed.
In relation to the second, fifth, sixth and seventh defendants, who were represented by Mr Forrester, those defendants played no real part in the proceedings and no substantive submissions were made on its behalf, although I fully accept the possibility that there may have been, had the circumstances arisen. For that reason, I apprehend that the appropriate order is, as Mr Forrester suggested, that, as between the fourth defendant on the one hand, and the second, fifth, sixth and seventh defendants on the other, each party’s costs be their costs in the cause.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Derrington. Associate:
Dated: 29 November 2019
SCHEDULE OF PARTIES
QUD 707 of 2019 Defendants
Fourth Defendant:
SECURE INVESTMENTS PTY LTD ACN 169 499 218
Fifth Defendant:
MUSTAFA MOHAMMED
Sixth Defendant:
MAHEK MUSTAFA
Seventh Defendant:
MUBASHIR MOHAMMED
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