Callychurn and Australian Securities and Investments Commission
[2016] AATA 114
•29 February 2016
Callychurn and Australian Securities and Investments Commission [2016] AATA 114 (29 February 2016)
Division
TAXATION & COMMERCIAL DIVISION
File Number(s)
2015/1419
Re
Meenakshi Callychurn
APPLICANT
And
Australian Securities and Investments Commission
RESPONDENT
File Number(s)
2015/1420
Re
Unique Mortgage Services Pty Ltd
APPLICANT
And
Australian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal Prof R Deutsch, Deputy President
Date 29 February 2016 Place Sydney 1.The decision under review in relation to Ms Callychurn (2015/1419) is set aside and substituted with a decision that Ms Callychurn is banned from providing or engaging in credit activities for a period of 4 years.
The decision under review in relation to Unique Mortgage Services Pty Ltd (2015/1420) is affirmed.
.............................[sgd]...........................................
Prof R Deutsch, Deputy President
CATCHWORDS
CORPORATIONS - consumer credit - banning order - whether contravention of credit act - whether fit and proper person to engage in credit activities - whether likely to contravene credit act in future - decision set aside and substituted
CORPORATIONS - consumer credit - cancellation of Australian Credit Licence - decision affirmed
LEGISLATION
National Consumer Credit Protection Act 2009 (Cth) ss 37(2), 55, 80 (1) and (2), 81, 225 (2) and (5), 267, 327
CASES
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127
SECONDARY MATERIALS
Regulatory Guide 204 Applying for and varying a credit licence
REASONS FOR DECISION
Prof R Deutsch, Deputy President
29 February 2016
INTRODUCTION
These two matters were heard together as they are closely connected as will become apparent shortly.
The first matter (proceeding 2015/1419) relates to a banning order made on 27 February 2015 by a delegate of the Respondent which prohibits the Applicant, Meenakshi Callychurn (Ms Callychurn) from engaging in credit activities for a period of five years. This banning order was effected pursuant to sections 80 and 81 of the National Consumer Credit Protection Act 2009 (Cth) (the Credit Act).
The second matter (proceeding 2015/1420) relates to the cancellation of the Australian Credit Licence (ACL) of the Applicant, Unique Mortgage Services Pty Limited (UMS) also on February 2015. This cancellation was effected pursuant to section 55 of the Credit Act.
Pursuant to section 327 of the Credit Act, both Ms Callychurn and UMS have applied to this Tribunal for reviews of those decisions.
PRELIMINARY MATTERS ALREADY DEALT WITH
In related proceedings the following decisions have already been made:
(a)In a decision made on 18 June 2015 an application seeking a stay of the orders made by the Respondent, the Tribunal decided that, having regard to all the relevant factors, it was inappropriate for a stay to be granted: Callychurn and Anor and Australian Securities and Investments Commission [2015] AATA 567.
(b)In a decision made on 18 September 2015 an application to this Tribunal seeking my recusal on the grounds of apprehended bias, the Tribunal decided to refuse the recusal application. In the same decision the Tribunal considered and refused an application to reopen the hearing to take in new and different evidence to that which was put forward at the original hearing. The Tribunal accepted, as it had already indicated it would at the conclusion of the original hearing, an application to accept further evidence from both the Applicant and the Respondent specifically as to the status of the Respondent’s website and in particular the way in which its automated systems produced certain pre-filled aspects of the Applicant’s Certificates of Compliance particularly that which applied for the 2012 year: Callychurn and Anor and Australian Securities and Investments Commission [2015] AATA 726.
This decision will now deal with the substantive matters being the banning order in respect of Mrs Callychurn and the licence cancellation in respect of UMS only.
RELEVANT LEGISLATION REGARDING THE BANNING ORDER
Section 80(1) of the Credit Act provides that
ASIC may make a banning order against a person:
…
(d) if the person has:
(i) contravened any credit legislation; or
…(e) if ASIC has reason to believe that the person is likely to:
(i) contravene any credit legislation; or
…
(f) if ASIC has reason to believe that the person is not a fit and proper person to engage in credit activities.
Relevantly, credit legislation is defined in section 5 of the Credit Act to include the Credit Act itself as well as other Acts and parts of Acts.
In considering section 80(1)(e) and (f), section 80 (2) when read together with 37(2)(a) to (f) and (g)(i) provides that ASIC must have regard to;
·whether a registration under in particular an Australian financial services licence of the person has ever been suspended or cancelled;
·whether a banning order or disqualification order under Part 2-4 has ever been made against the person;
·whether a banning order or disqualification order under Division 8 of Part 7.6 of the Corporations Act 2001 (Cth) has ever been made against the person;
·whether the person has ever been banned from engaging in a credit activity under a law of a State or Territory;
·any relevant information given to ASIC by a State or Territory, or an authority of a State or Territory, in relation to the person;
·whether the person has been insolvent;
·whether the person has ever been disqualified from managing corporations under Part 2D.6 of the Corporations Act 2001;
·any criminal conviction of the person within 10 years before the application was made;
·any criminal conviction of the person within 10 years before the banning order is proposed to be made;
·any other matter ASIC considers relevant; and
·any other matter prescribed by the regulations.
THE BASES ON WHICH A BANNING ORDER IN RESPECT OF MS CALLYCHURN IS SOUGHT
The Respondent asserts that the banning order in respect of Ms Callychurn arises because:
·she has contravened certain provisions of the Credit Act thereby activating section 80 (1)(d)(i) of that Act;
·she is not a fit and proper person to engage in credit activities thereby activating section 80(1)(f); and
·she is likely to contravene credit legislation in the future thereby activating section 80 (1)(e)(i).
DID MS CALLYCHURN CONTRAVENE ANY PROVISIONS OF THE CREDIT ACT?
Section 225 of the Credit Act is headed “Offences relating to documents lodged with ASIC etc” and applies to any document required under or for the purposes of the Credit Act and any document lodged with or submitted to ASIC under or for the purposes of the Credit Act.
Two subsections are particularly pertinent to the present circumstances namely sub-sections (2) and (5) which provide as follows.
Section 225(2)
A person must not:
(a) make, or authorise the making of, a statement in the document if the person knows, or is reckless as to whether, the statement:
(i) is false in a material particular or materially misleading;
… (iii) is based on information that is false in a material particular or materially misleading, or has omitted from it a matter or thing the omission of which renders the document materially misleading….
Civil penalty: 2000 penalty units.
Section 225(5)
A person must take reasonable steps to ensure that the person does not:
(a) make, or authorise the making of, a statement in the document that:
(i) is false in a material particular or materially misleading; or
(ii) has omitted from it a matter or thing the omission of which renders the document materially misleading; or
(iii) is based on information that is false in a material particular materially misleading, or has omitted from it a matter or thing the omission of which renders the document materially misleading; or
(b) omit, or authorise the omission of, a matter from the document, without which the document is false in a material particular or materially misleading.
Civil penalty: 2,000 penalty units
In this case the critical issue which has given rise to possible breaches of section 225 of the Credit Act is that Ms Callychurn on behalf of and as the representative of UMS has completed, signed and lodged with ASIC the Annual Compliance Certificates for 2011 and 2012.
In doing so in respect of both years she was called upon to answer a series of questions regarding licences and authorisations in particular as follows:
·Does the licensee certify that it has no reason to believe that any of its fit and proper people have:
obeen refused the right or been restricted in the right to carry on any trade, business or profession for which an authorisation (licence, certificate, registration or other authority) is required by law?
obeen subject to disciplinary action in relation to any such authorisation?
owithin Australia or overseas been the subject of any investigations or proceedings that the current or pending and which may result in disciplinary action being taken in relation to any such authorisation?
In respect of both the 2011 and 2012 annual compliance certificates each of these three questions were answered with a simple one word “Yes”.
The 2011 Annual Compliance Certificate
Looking first at the 2011 annual compliance certificate it appears that this certificate:
·is signed by Mrs Callychurn on 5 February 2012;
·has a compliance date of 24 December 2011; and
·was lodged with ASIC on 5 February 2012
There are two people listed as fit and proper people in relation to UMS as at the annual compliance date - Ms Callychurn and a person identified as Mr Rudy Frugtniet.
It now transpires that on 8 April 2011 Mr Frugtniet was the subject of certain action which was taken by the Law Institute of Victoria in the Victorian Civil and Administrative Tribunal (VCAT) for intentionally misrepresenting himself to a barrister and a magistrate as a lawyer who was entitled to appear before the Magistrates Court. He was disqualified for a period of three years for the purposes of Division 3 of Part 2.2 of the Legal Profession Act 2004 (VIC) (the LPA).
The immediate effect of that disqualification was that Mr Frugtniet could not practice as a lay associate of a legal practice in Victoria without the approval of the Legal Services Board.
Further, the disqualification was treated as what is loosely referred to in the LPA as a suitability matter which had the consequence that if Mr Frugtniet applied again for admission to practice the matter would count against his fitness to practice. It was therefore clearly a matter of some importance as it operated as a potential constraint on Mr Frugniet’s future professional activities.
Mr Frugtniet appealed to the Victorian Court of Appeal but that appeal was dismissed on 13 August 2012.
It would seem to be difficult to argue that the VCAT order of 8 April 2011 constituted anything other than a restriction on Mr Frugtniet’s right to carry on business as a lay associate. While there was no specific authorisation previously required for him to do so, the effect of the order was to impose a requirement that he obtain authorisation from the Legal Services Board to carry on a business as a lay associate. In other words he was quite clearly restricted in the right to carry on business for which an authorisation was required by law. The first of the questions posed in the Annual Compliance Certificate specifically refers to whether any of the fit and proper people have been restricted in their right to carry on any trade business or profession for which an authorisation is required by law. Clearly while ordinarily there is no authorisation required to carry on a business as a lay associate, there is such a restriction in circumstances where by order of a Tribunal authorisation is now specifically required from the Legal Services Board. Furthermore, it is clear that this was the position well before the annual compliance date of 24 December 2011.
In addition Mr Frugtniet was restricted in his right to carry on practice as a lawyer by virtue of the order made by the VCAT on 8 April 2011. The question posed in the Annual Compliance Certificate is not whether the person has sought admission to a profession in being denied the right to do so but simply whether there is any restriction on the person to carry on the relevant trade or business for which an authorisation is required by law.
Furthermore, the question as to whether the Proceedings constituted disciplinary action is specifically raised as a result of the second question posed in the Annual Compliance Certificate. Certainly the Court of Appeal in the appeal proceedings characterised it as such, specifically referring to it as “legal disciplinary proceedings”. The best that Ms Callychurn could provide in this context was to say that they were not disciplinary proceedings or actions on the basis that Mr Frugtniet had told her that they were not proceedings of that nature.
Overall, it is difficult to accept that this was not a disciplinary action in the manner referred to in the question.
The fact that at the time of the lodgement of the 2011 Annual Compliance Certificate on 5 February 2012 there was an appeal pending does not significantly or meaningfully assist Ms Callychurn. If one looks to the third question that was posed in the Annual Compliance Certificate, the appeal itself would have been a current or pending proceeding which may result in disciplinary action being taken namely the confirmation of VCAT’s order.
Mr Frugtniet concedes in his own statement (see T18-162)] that the consequence of the VCAT order would be to put his other authorisations at risk. These included authorisations that he held which entitled him to carry on business as a conveyancer under the Conveyancers Act 2006 (VIC) and as a migration agent under the Migration Act 1958 (Cth). Again, this would seem to suggest that the answer to question three is clearly that there were proceedings pending at the time of the annual compliance date in respect of the 2011 Annual Compliance Certificate which could result in disciplinary action being taken in respect of the conveyancing and migration authorisations.
Having regard to all these matters, it seems to me to be clear that Ms Callychurn did not take reasonable steps to ensure that she did not make or authorise the making of a statement in the document that is false or material in a material particular or materially misleading. She seems to be splitting hairs about what constitutes disciplinary action and whether or not there was an authorisation required in order for Mr Frugtniet to carry on his activities as a lay associate.
In the circumstances, I am satisfied that Ms Callychurn contravened the Credit Act in the manner in which she answered the questions in the 2011 Annual Compliance Certificate.
The 2012 Annual Compliance Certificate
In relation to the 2012 Annual Compliance Certificate the argument run by Ms Callychurn is quite different to that which she pursued in respect of the previous year.
The 2012 annual compliance certificate:
·is signed by Ms Callychurn on 6 February 2013;
·has a compliance date of 24 December 2012; and
·was lodged with ASIC on 6 February 2013.
On this certificate there was only one person listed under the heading “List of fit and proper people as at the licensee’s annual compliance date” namely Ms Callychurn.
Factually this was not correct since as at the compliance date of 24 December 2012, Mr Rudy Frugtniet was still a person who UMS treated as a fit and proper person.
However, he ceased to hold such a position on 12 January 2013 a date which was 19 days after the compliance date but almost a month before the signing and lodgement of the certificate.
At the hearing, Ms Callychurn indicated in her evidence that the 2012 Annual Compliance Certificate was completed electronically. She also indicated that the effect of completing the section “Notification of ceasing to be a fit and proper person” stating that Mr Frugtniet ceased to be a fit and proper person on 12 January 2013 was that Mr Frugtniet’s name was automatically removed from the “List of fit and proper people as at the licensee’s annual compliance date”.
In Supplementary Submissions filed by consent by the Respondent after the hearing, the Respondent has confirmed that this evidence given by Ms Callychurn was correct and that Mr Frugtniet’s name was automatically removed from the relevant list as a result of the notification of him ceasing to be a fit and proper person. This was the case it seems even though the date that Ms Callychurn had entered for Mr Frugtniet’s cessation as a fit and proper person (namely 12 January 2013) was after the annual compliance date (namely 24 December 2012).
There is no doubt that the computer problem that gave rise to the outcome that Mr Frugniet’s name was automatically removed from the list of fit and proper people as at the licensees annual compliance date simply because he ceased to be a fit and proper person at some stage after the annual compliance date, was not a circumstance that was created by Ms Callychurn.
That however does not lead to the consequence that she can take advantage of that computer glitch by assuming that the omission of Mr Frugniet from the list of fit and proper people as at the licensees annual compliance date is in some way accurate. The form clearly referred back to the whole of the year to 24 December 2012 and Mrs Callychurn well knew that Mr Frugniet was a fit and proper person for the whole of that year. Accordingly, in my view it cannot be considered to be acceptable for Mrs Callychurn to take advantage of the incorrectly generated form and proceed on the basis that the certification only applies to her and not to Mr Frugniet.
The proper course of action for Ms Callychurn to have taken in relation to completing the 2012 Annual Compliance Certificate would have been to have contacted the Respondent about these matters and to seek clarification as to how best to complete the form so as to accurately reflect the true position. In this context Mrs Callychurn has submitted that the phone number which appears at the foot of the relevant form does not appear on the original that she was provided with. Even if that is the case, I do not accept that as a complete answer as Mrs Callychurn was perfectly capable of ascertaining the contact number and liaising as appropriate with the Respondent or its representative.
This is reinforced by the wording of section 225(5) of the Credit Act which states that “a person must take reasonable steps to ensure that the person does not … make … a statement in a document that is false or misleading”. Contacting the Respondent and seeking clarification as to the way in which to complete the relevant form could not be considered to be beyond what could be described as a reasonable step.
As it is she signed a form which she knew, or ought to have known, was false in a material particular.
This was clearly a serious matter that could well affect the ability of the Regulator to appropriately monitor UMS and to ensure it complies with its compliance obligations.
In the circumstance I am satisfied that Ms Callychurn contravened the Credit Act in the manner in which she answered the questions in the 2012 Annual compliance certificate
IS MS CALLYCHURN A FIT AND PROPER PERSON TO ENGAGE IN CREDIT ACTIVITIES?
In relation to the meaning of the phrase “fit and proper person” a number of authorities and references are of relevance including the following:
(a)Firstly, in considering whether a person is or is not a fit and proper person to engage in credit activities, section 80(2) of the Credit Act provides that ASIC must have regard to the following matters:
·whether a relevant licence has ever been suspended or cancelled;
·whether a relevant banning order has ever been made against the person;
·whether the person is ever been banned from engaging in a credit activity under a law of the State or Territory;
·any relevant information given to ASIC by a State or Territory or an authority of a State or Territory in relation to that person;
·whether the person has ever been insolvent; and
·whether the person has ever been disqualified from managing a corporation under the relevant provisions of the Corporations Act 2001.
(b)Secondly, the meaning of the phrase “fit and proper purpose” was discussed in Hughes & Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127 at 156-157 and the High Court emphasised in particular that the word “fit” in relation to an office involves honesty, knowledge and ability.
(c)Thirdly, in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 380 the High Court said:
The expression “fit and proper”, standing alone, carries no precise meaning. It takes its meaning from its context, from the activities in which the person is or will be engaged and the ends to be served by those activities. The concept of “fit and proper” cannot be entirely divorced from the conduct of the person who is or will be engaging in those activities. However, depending on the nature of the activities, the question may be whether the improper conduct has occurred, whether it is likely to occur, whether it can be assumed that it will not occur, or whether the general community will have confidence that it will not occur. The list is not exhaustive but it does indicate that, in certain contexts, character (because it provides indication of likely future conduct (or reputation (because it provides indication of public perception as to likely future conduct) may be sufficient to ground a finding that a person is not fit and proper to undertake the activities in question.
(d)Fourthly, the Respondent has released its own Regulatory Guide namely RG 204 Applying for and varying a credit licence which relevantly provides that to be a fit and proper person to engaging credit activities means that the person:
·is competent to operate a credit business (as demonstrated by the persons knowledge, skills and experience);
·has the attributes of good character, diligence, honesty, integrity and judgement;
·is not disqualified by law from performing their role in the credit business; and
·either has no conflict of interest in performing their role in the credit business, or any conflict that exists will not create a material risk that the person will fail to perform their role in the credit business properly.
In essence, it seems that the Respondent is asserting that Ms Callychurn is not a fit and proper person to engage in credit activities for three principal reasons:
·first, she allowed continuing control over the credit activities of UMS to be exercised almost solely by Mr Frugniet during times in which she was the sole director, the only fit and proper person and the key person of UMS;
·secondly, the responses to the Respondent’s requests for information was poor and at times misleading; and
·thirdly, in responding to the banning order and cancellation of UMS’s licence, Ms Callychurn was less than fully forthcoming in relation to who she had appointed as an additional director in order to seek to set aside the banning order and licence cancellation.
The Control Issue - Mr Frugtniet controlled the credit activities of UMS
It is asserted by the Respondent that Mr Frugtniet controlled the credit of the activities of UMS and that this is demonstrated in four different ways.
First, UMS had an agreement with a company known as Australian Finance Group Ltd (AFG) under which loan applications would be submitted for credit to AFG by UMS. This agreement extended to various other lenders as well.
At all times between 2 August 2010 and 25 September 2013, Mr Frugtniet was the only person recorded with AFG as having been the authorised person to submit loan applications on behalf of UMS.
However, the reality was that from 12 January 2013, Ms Callychurn was the sole fit and proper person in relation to UMS and from 6 March 2013 she was the sole key person in relation to UMS. Ms Callychurn did have an accreditation with AFG but this only applied to a period of time up to January 2010 and prior to 8 October 2013 she had never submitted any loan applications on behalf of UMS.
This would suggest quite strongly that Mr Frugtniet was the only person involved in writing loans for UMS during a period of time when Ms Callychurn was the sole key person and the sole fit and proper person in relation to UMS. The Respondent alleges that this gives rise to a conclusion that Ms Callychurn failed to maintain control over the affairs of UMS and that she was not engaged in operating the business and attending to the duties associated with the Australian Credit Licence held by UMS.
Mr Frugtniet held and controlled the only relevant bank account
Secondly, the evidence indicates that as from 15 April 2004, Mr Frugtniet held a business cheque account with one of Australia’s big four banks which was titled “Mr Rudy Noel Frugtniet trading as Unique Mortgage Services”. It appears to be the case that Mr Frugtniet was the sole signatory to that account and commission monies were paid directly into that account by AFG.
That position was still extant as at 24 February 2014 even though the directorship, fit and proper person and key person specifics in relation to UMS had changed substantially by then such that Mr Frugtniet was no longer a director, a fit and proper person or a key person in respect of UMS. It appears that nothing changed until at the very earliest 4 March 2015 when Ms Callychurn advised ASIC that she had opened up a new business account with Suncorp Bank.
Mr Frugtniet was the only relevant contact provided for on the relevant website
Thirdly, in September of 2013 the contact details listed on the UMS website were those of Mr Frugtniet even though it is clear that he had ceased to be a fit and proper person in respect of UMS some eight months earlier and had ceased to be the key person in respect of UMS some six months earlier.
Ms Callychurn sought to explain that situation by pointing to the fact that the UMS website was a multi-disciplinary website and that it referred to the non-credit activities of UMS.
Notwithstanding Ms Callychurn’s explanation an unsuspecting member of the public would have been in little doubt from the content of the website that Mr Frugtniet was the public face of UMS and was the primary go to person in relation to the credit activities of UMS.
Mr Frugtniet was the only person listed to deal with complaints regarding UMS
Fourthly, Mr Frugtniet was the person listed as the complaint contact for UMS as at 13 October 2014 and indeed in July 2013 a complaint made against UMS was referred to and dealt with by Mr Frugtniet. This was the case notwithstanding the fact that by this time Mr Frugtniet was not a fit and proper person or the key person in respect of UMS.
Control Issue – Conclusion
Each of these matters even viewed on their own are troubling. When viewed holistically, it seems clear that Ms Callychurn had allowed control in almost all material respects to rest with Mr Frugtniet who controlled the receipt and processing of loan applications, the bank account of UMS, the website and complaints against the company.
By relinquishing her rights to control she was failing in her duties as a director and was in effect largely abdicating her responsibility as such a director.
In my view, she had shirked her responsibilities and lacked a clear understanding of the role she needed to perform as a fit and proper person and key person of UMS.
Responses to ASIC
On 27 March 2014 the Respondent issued two Notices one to a company called Ozwide Financial Services Pty Limited (Ozwide) and the other to UMS.
In relation to Ozwide, it appears to be the case that Mrs Callychurn was the director of that company at all relevant times.
The Notice called for the production of certain books by 10 April 2014. Ozwide did not comply with that Notice and provided no satisfactory explanation for that failure other than to assert that Ozwide did not need to comply as it did not engage in credit activities. Section 267 of the Credit Act provides that:
267 Notice to produce documents in person’s possession
(1) ASIC may give to a person (the recipient) a written notice requiring the production to a specified ASIC member or ASIC staff member, at a specified place and time, of specified books that are in the recipient’s possession, custody or control and relate to:
(a) affairs of a licensee, credit representative or other person who engages, or has engaged, in a credit activity; or
(b) a matter referred to in paragraph 266(1)(d) or (e).
(2) ASIC may give to a person (the recipient) a written notice requiring the production to a specified ASIC member or ASIC staff member, at a specified place and time, of specified books that are in the recipient’s possession, custody or control and that relate to the question whether an auditor has complied with audit requirements under the Commonwealth credit legislation.
On its face there would appear to be no basis for resisting compliance with the Notice based on the ground that Ozwide was not engaged in credit activities.
In relation to UMS, the Notice also called for the production of certain books pursuant to section 266 of the Credit Act in particular being documents submitted to Suncorp in relation to loan applications made in the names of Leonard Kneebone and Shao Deng.
It appears to be the case that these documents were in the possession of UMS but again there was a failure to comply with no explanation provided.
These failures in and of themselves may not be at the serious end of non-compliance but they certainly contribute to a general view that Ms Callychurn has not always acted with the honesty and openness required in dealing with the regulatory authorities that govern the operation of companies.
The purported appointment of Mrs Seyfarth
Mrs Seyfarth was appointed as an additional director on 28 April 2015 and Mrs Callychurn argues that her appointment should be favourably taken into account in determining whether or not to set aside the banning order and the cancellation of UMS’s licence.
Somewhat belatedly it became apparent that:
·Ms Seyfarth’s former surname is Frugniet;
·Ms Seyfarth is in fact Mr Frugniet’s niece; and
·Ms Seyfarth herself was bankrupt from 11 March 2004 to 12 March 2007 and was consequently automatically disqualified from managing corporations during that time.
These matters, while clearly relevant, were not disclosed directly to the Respondent on a timely basis and no such details were provided until the Respondent became aware and began asking relevant questions as to Ms Seyfarth’s connection with the Applicant and her general financial position.
Within the context of these proceedings, it is surprising and somewhat concerning that the disclosure of the background of persons who are proposed to be charged with the future management of UMS has been, at worst, suppressed or, at best, ignored.
This again points to a troublesome pattern of non-disclosure.
IS MS CALLYCHURN LIKELY TO CONTRAVENE CREDIT LEGISLATION IN THE FUTURE?
The pattern of behaviour over recent years suggests that there is some reason to believe that Ms Callychurn lacks the knowledge, skill, experience and judgement which is required particularly in relation to the conduct of the business of UMS and its relations with and disclosure obligations towards the Respondent.
There are a number of factors which point to some change in her behaviour and these matters must be considered.
First, according to Ms Callychurn she has actively sought to exclude Mr Frugtniet from the conduct of UMS’s business activities.
Secondly, Ms Callychurn has made attempts to bring in other directors into UMS including Ms Seyfarth as mentioned above and Mr David Fu.
Thirdly, it is the case that Annual Compliance Certificates in respect of the 2013 and 2014 years have been lodged and they did not raise any concerns with the Respondent.
These are undoubtedly relevant matters to consider in weighing up whether it is likely that Ms Callychurn is likely to breach credit laws in the future. However, most of these matters are of limited relevance in making that assessment because
·apart from her undertaking there is no clear evidence that Mr Frugniet’s influence over the operations of UMS has been neutralised and will continue to be neutralised in the future;
·the position of Ms Seyfarth and the lack of candour about her relationship with Mr Frugtniet is and remains a concern about Ms Callychurn’s on-going behaviour;
·little information has been provided about the background, position and relationship of Mr Fu to any of the relevant parties.
THE TRIBUNALS CONCLUSIONS ON THE BANNING ORDER
There are a number of matters which cut both ways in this case and it is important to weigh these matters in the balance.
In Ms Callychurn’s favour, it is true that
·her behaviour did not cause serious detriment or financial loss to the public;
·it did not amount to serious fraud or evasion; and
·the Respondent’s compliance model was deficient in the way the Annual Compliance Certificates were pre-filled.
On the other hand:
·there were discrepancies in the preparation of the 2011 Annual Compliance Certificate;
·the preparation of the 2012 Certificate was less than completely candid in its disclosures
·there was a failure on her part to take reasonable care in the preparation of the relevant information returns to the Respondent;
·she improperly and inappropriately delegated her responsibilities as a director of UMS to Mr Frugtniet
·she failed to comply on a timely basis or at all with the Respondents requests for information or documentation, and
·she deliberately omitted to provide important background information regarding the family connections of Ms Seyfarth.
While Ms Callychurn seeks to describe these failings as mere “housekeeping matters”, the Tribunal is of the view that the deficiencies are more than that and demonstrate a pattern of behaviour which is not consistent with those that would be expected of a person who is a fit and proper person for the purposes of the relevant legislation.
Taking all that into account the Tribunal concludes that a banning order should be imposed but this should be imposed at the lighter end of the scale – in the circumstances a ban of four years is considered to be the appropriate duration.
CANCELLATION OF THE ACL HELD BY UMS
The cancellation of the ACL held by UMS must inevitably follow if Ms Callychurn is the only director of UMS.
In this case Ms Seyfarth has been nominated as a director but for all the reasons enunciated above that would be an unacceptable outcome and on that basis the cancellation of the ACL of UMS would still follow.
Belatedly, Ms Callychurn has nominated My David Fu as a director but without providing any detailed information as to his background. In particular,
·what are his qualifications for acting as the sole director of UMS;
·does he have a family or other connection with Ms Callychurn or Mr Frugtniet?
·what assurances can he provide that at least during the period of her ban, he will not be subject to the control and/or the influence of Ms Callychurn; and
·what assurances can he provide that he will not be subject to the control and influence of Mr Frugtniet.
DECISION
The decision under review in relation to Ms Callychurn (2015/1419) is set aside and substituted with a decision that Ms Callychurn is banned from providing or engaging in credit activities for a period of 4 years;
The decision under review in relation to Unique Mortgage Services Pty Ltd (2015/1420) is affirmed.
I certify that the preceding 87 (eighty -seven) paragraphs are a true copy of the reasons for the decision herein of Prof R Deutsch, Deputy President ..........................[sgd]..............................................
Associate
Dated 29 February 2016
Date(s) of hearing 2 June 2015 Date final submissions received 13 November 2015 Applicant In person Counsel for the Respondent Mr P Herzfeld, Counsel Solicitors for the Respondent Ms A Rees, Australian Securities & Investments Commission
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