Campbell and Australian Securities and Investments Commission - [2001] AATA 205

DECISION AND REASONS FOR DECISION [2001] AATA 205

ADMINISTRATIVE APPEALS TRIBUNAL )

) No W1999/270

GENERAL ADMINISTRATIVE DIVISION       )
           Re      ANTHONY JOHN CAMPBELL
  Applicant
           And    AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
  Respondent

DECISION

Tribunal Associate Professor S D Hotop, Deputy President Mr R D Fayle, Senior Member

Date16 March 2001
PlacePerth

Decision      The decision under review is affirmed.
  ..............................................
  Deputy President
CATCHWORDS
CORPORATIONS – securities – applicant a representative of a dealer – banning order made against applicant – whether grounds for making banning order – whether applicant contravened a securities law – whether Tribunal has jurisdiction to determine that applicant contravened a securities law – whether applicant contravened s780, s849, s851 or s1078 of Corporations Law – whether applicant did not perform "efficiently, honestly and fairly" the duties of a representative of a dealer – whether appropriate to make banning order – appropriate duration of banning order.

Corporations Law ss 9, 93, 780, 829(d), 829(f), 830, 837, 849, 851, 1077, 1078

Australian Securities Commission v Cooke (1996) 22 ACSR 580
Australian Securities Commission v Kippe (1996) 67 FCR 499
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Re Farley and Australian Securities Commission (1998) 16 ACLC 1502
Re Kippe and Australian Securities Commission (1998) 16 ACLC 190
Story v National Companies and Securities Commission (1988) 13 NSWLR 661

REASONS FOR DECISION

16 March 2001 Associate Professor S D Hotop, Deputy President Mr R D Fayle, Senior Member

On 28 May 1999 a delegate of the Australian Securities and Investments Commission ("the respondent") made a "banning order", under s829 of the Corporations Law ("the Law"), against Anthony John Campbell ("the applicant") prohibiting him "for a period of two (2) years from 18 March 1999 from doing an act as a representative of a securities dealer or an investment adviser". A statement of the delegate's reasons for making the banning order, dated 23 July 1999, was subsequently furnished to the applicant. On 20 August 1999 the applicant lodged with the Tribunal an application for review of the delegate's decision to make the abovementioned banning order.
At the hearing the applicant was represented by Mr M de Kerloy and Ms K Bennett, solicitors, and the respondent was represented by Mr M Gething of the office of the respondent's Regional General Counsel for Western Australia. The Tribunal had before it the documents ("T documents" – comprising T1-T51, pp 1-809) lodged by the respondent pursuant to s37 of the Administrative Appeals Tribunal Act 1975, a Statement of Agreed Facts filed by the parties on 11 May 2000 (Exhibit A1), and the following documentary exhibits tendered by the respondent at the hearing:
·     Policy Statement 121 – "Investment advisory services: retail investor protection requirements" – issued by the respondent on 3 March 1997 (R1)
·     Policy Statement 122 - "Investment advisory services: the conduct of business rules (s849 and s 851)" – issued by the respondent on 3 March 1997 (R2)
·     Extracts from Ascot Production System Professional Register Enquiry regarding the duration of a "proper authority" from each of Barkworth Securities Pty Ltd, The Banalasta Oil Plantation Limited and Barkworth Management Limited to the applicant (R3).

There was no oral evidence.
The Law

The relevant provisions of the Law are as follows:
"780(1) A person must not:
(a)      carry on a securities business; or
          (b)      hold out that the person carries on a securities business;
unless the person holds a dealers licence or is an exempt dealer.
(2)      A dealers licence may authorise a person to do either or both of the following:
          (a)      to carry on a securities business
          (b)      to operate:
(i)       a managed investment scheme; or
(ii)        managed investment schemes of a particular kind.
…
829     Subject to section 837, the Commission may make a banning order against a natural person (other than a licensee) if:
(a)       he or she becomes an insolvent under administration;
(b)       he or she is convicted of serious fraud;
(c)he or she becomes incapable, through mental or physical incapacity, of managing his or her affairs;
(d)       he or she contravenes a securities law;
(e)the Commission has reason to believe that he or she is not of good fame and character;
(f)the Commission has reason to believe that he or she has not performed efficiently, honestly and fairly the duties of:
(i)        a representative of a dealer; or
(ii)       a representative of an investment adviser; or
(g)the Commission has reason to believe that he or she will not perform efficiently, honestly and fairly the duties of:
(i)        a representative of a dealer; or
(ii)       a representative of an investment adviser.

830(1) Where this Division empowers the Commission to make a banning order against a person, the Commission may, by written order, prohibit the person:
(a) in any case - permanently; or
(b)except where the Commission is empowered by virtue of paragraph 828(c) or 829(e) to make the order - for a specified period;

from doing an act as:
(c)       a representative of a dealer;
(d)       a representative of an investment adviser; or
(e)       a representative of a dealer or of an investment adviser;

whichever the order specifies.
(2) The Commission shall not vary or revoke a banning order except under section 831, 832, or 833.
…
837(1) The Commission shall not:
(a)refuse, otherwise than by virtue of section 836 or subsection 839 (1), an application for a licence;

(b) impose conditions on a licence;
(c) vary the conditions of a licence;
(d)revoke or suspend a licence otherwise than by virtue of section 824, 825 or 825A or paragraph 827 (1) (a);
(e)make, otherwise than by virtue of paragraph 828 (a) or (d) or 829 (a), (b) or (c), an order under section 830 against a person;
(f)make under subsection 831 (2) an order varying a banning order against a person; or

(g) refuse an application by a person under section 832;

unless the Commission complies with subsection (2) of this section.
(2) The Commission shall give the applicant, licensee or person, as the case may be, an opportunity:
(a)to appear at a hearing before the Commission that takes place in private; and
(b)to make submissions and give evidence to the Commission in relation to the matter.

…
849(1) This section applies where a securities adviser makes a securities recommendation to a person (in this section called the 'client') who may reasonably be expected to rely on it.
(2) The securities adviser shall:
(a)if the recommendation is made orally - when making the recommendation, disclose to the client orally; or
(b)if the recommendation is made in writing - set out in that writing, in such a way as to be no less legible than the other material in that writing;

particulars of:
(c)any commission or fee, or any other benefit or advantage, whether pecuniary or not and whether direct or indirect, that the securities adviser or an associate has received, or will or may receive, in connection with the making of the recommendation or a dealing by the client in securities as a result of the recommendation; and
(d)any other pecuniary or other interest, whether direct or indirect, of the securities adviser or an associate, that may reasonably be expected to be capable of influencing the securities adviser in making the recommendation.

(3)Subsection (2) does not apply in relation to a commission or fee that the securities adviser has received, or will or may receive, from the client.

…
851(1) A securities adviser who:
(a)makes a securities recommendation to a person who may reasonably be expected to rely on it; and
(b)does not have a reasonable basis for making the recommendation to the person;

contravenes this section.
(2) For the purposes of subsection (1), a securities adviser does not have a reasonable basis for making a securities recommendation to a person unless:
(a)in order to ascertain that the recommendation is appropriate having regard to the information the securities adviser has about the person's investment objectives, financial situation and particular needs, the securities adviser has given such consideration to, and conducted such investigation of, the subject matter of the recommendation as is reasonable in all the circumstances; and

(b) the recommendation is based on that consideration and investigation.

(3)       A person who contravenes subsection (1) is not guilty of an offence.
…
1078(1)    A person shall not, whether by appointment or otherwise, go from place to place:
(a)       issuing invitations to subscribe for or buy securities of a corporation; or
(b)       offering securities of a corporation for subscription or purchase.

…".

The Factual Background

A Statement of Agreed Facts, filed by the parties on 11 May 2000 (Exhibit A1), is as follows:
"1.       Background
1.1Anthony John Campbell ('Campbell') was a proper authority holder of Barkworth Securities Pty Ltd (appointed 6 May 1998) and of Banalasta Oil Plantation Ltd appointed (16 June 1998). Each company is the holder of a dealers licence under the Corporations Law ('CL').
1.2Barkworth Securities Pty Ltd's Dealers Licence restricts the licensee to carrying on a securities business only in relation to prescribed interests in agricultural, horticultural and forestry schemes and to prescribed interests in the Rydal Hard Rock Joint Venture Project No 1.
1.3Banalasta Oil Plantation Ltd's Dealer Licence restricts the licensee to carrying on a securities business only in relation to Banalasta Oil Plantation Project No 1 and Banalasta Natural Oil Joint Venture Project No 1.
2.The Rydal Hard Rock Joint Venture
2.1The Rydal Hard Rock Joint Venture (the 'Hard Rock JV') is a prescribed interest scheme for which Jedidiah Management Limited ('JML') issued a prospectus. Barkworth Securities Pty Ltd ('Barkworth') marketed and promoted the prospectus. Kevin Phillip Sleight is a director of both Barkworth and JML.
2.2The prospectus, dated 25 May 1998, requires a minimum subscription of 450 interests.
2.3An applicant to the Hard Rock JV acquires an interest in the business of the development of a quarry. The business will extract hard rock and process it for use as aggregate in the road building and construction industries.
2.4JML is the manager of the Hard Rock JV. Rydal Management Pty Ltd ('Rydal') is the Technical Manager of the Hard Rock JV.
2.5Australian Rural Group Limited ('ARG') is the Representative under the Hard Rock JV Deed.
2.6Upon application, each participant must pay a minimum capital contribution of $19,450 per interest purchased.
2.7Participants have the option of funding the investment with a loan from Horizon Lending Company Pty Ltd.
2.8Upon commencement of the Hard Rock JV JML will pay the following fees from the capital contributed by the participants:
(a)       to JML, management fee of $200 per interest;
(b)       to Rydal, the licence fee of $1,250 per interest;
(c)       to Rydal, technical management fee of $18,000 per interest issued.
2.9      In years 2 to 7 the fees will be 55% of Hard Rock JV revenue.
2.10ARG is entitled to a fee paid quarterly in advance. The first year's fee is $25,000 and $25 per interest above minimum subscription. Rydal will pay this from its technical management fee. Fees in subsequent years will be paid from Hard Rock JV revenue.
2.11The anticipated revenue from the scheme takes the form of monies earned from the sale of 'product'. The Prospectus defines product as rock, stone or other material extracted from the quarry whether processed or not.
2.12The Hard Rock JV is for a period of 7 years. There is no provision for buy back.
2.13The total projected earnings per interest after 7 years are estimated to be between $33,500 and $87,600.
3.The Barkworth Olive Groves Project No 2
3.1The Barkworth Olive Groves Project No 2 (the 'Olives JV') is a prescribed interest scheme with a prospectus issued by Barkworth Olive Groves Ltd ('BOGL') and Barkworth Management Ltd ('BML'). The directors are common to both companies.
3.2The prospectus dated 9 March 1998 requires a minimum subscription of 175,000 shares.
3.3The aim of the project is to increase the size of Barkworth Group's operations and to engage in downstream processing of olives.
3.4An applicant in the Olives JV acquires shares in BOGL (generally 1 x parcel of 500).
3.5Certain rights attach to the shares including the right to appoint BML to manage their interest. The cost of the investment is $17,630 over 2 years in addition to the 500 x $1 shares in BOGL.
3.6Potential investors may elect to have the cost funded through a loan from Barkworth Finance Pty Ltd. The loan amount will be advanced in 2 tranches. The first advance, $12,890, is at commencement and $4,700 one year later.
3.7In year one the cost consists of:
(a)Management, Processing and Marketing Fees $5,350 to BML;
(b)Drainage and Erosion $2,865 to BML;
(c)Irrigation $3,050 to BML;
(d)Brand Licence $1,000 to BML;
(e)Factory Access $450 to BOGL; and
(f)Farm Administration $175 to BOGL.
3.8In year 2 the cost consists of:
(a)Management, Processing and Marketing Fees $4,100 to BML;
(b)Factory Access $450 to BOGL; and
(c)Farm Administration $150 to BOGL.
3.9The estimated return from the investment is shown to be a total of $61,148 after the end of year 20.
3.10BML is the manager of the Olives JV. BML will receive prepaid annual fees of $5,350 for year one and $4,100 for year 2. In year 3 BML will receive 70% of the gross income generated from the sale of processed olives. In the following years, fees will be a percentage of the gross from sales at the farm gate plus a % of the gross from sales of processed olives.

Year No. % Gross Income from Olives % Gross Income from Processed Olives

90% 70%
90% 70%
60% 70%
50%     70%
8 to 20 40%     70%
4.        The Banalasta Natural Oil Joint Venture Project No.1
4.1The Banalasta Natural Oil Joint Venture Project No. 1 (the 'Oil JV') is a prescribed interest scheme promoted and managed by Banalasta Oil Plantation Ltd ('Banalasta').
4.2An applicant in the Oil JV acquires an interest in the business of the research and development of Core Technology to produce research results for the purpose of commercialising those results. The research focuses specifically on the penetration abilities of eucalyptus oil.
4.3Banalasta is also the manager of the Banalasta Plantation Project. In its latter capacity Banalasta found a source that had been investigating the properties of eucalyptus oil. An associate of Banalasta, Armidale Management Development Centre Pty Ltd, then acquired the rights to this Core Technology.
4.4Under the agreement Banalasta must conduct the research. Banalasta will subcontract these duties to Australian Natural Oil Institute Pty Ltd, another associate.
4.5Each participant must pay research fees for years one and two and an annual management fee.
4.6Participants purchase a minimum of one Participation Interest. The cost of each is $6,500 in year one and $7,500 in year 2 (2 x $3,000 research fees; and management fees of $3,500 and $4,500). Fees are paid yearly in advance. The management fee for years 3 to 10 is 48% of the gross income.
4.7The participant has the option of funding the investment by way of a loan from Plantation Equity Pty Ltd, also an associate of Banalasta.
4.8The anticipated revenue from the scheme takes the form of monies earned from the sale of products developed by the joint venture.
4.9The Oil JV is for a fixed period of 10 years. There is no provision for buy back.
4.10The estimate of total projected earnings after 10 years are $51,000 less loan interest and principal.
5.Robyn Margaret Adamson
5.1Campbell is a tax agent and for a number of years has completed Adamson's personal income tax return.
6.Noel Charles Mackey
6.1In or around October 1997 Mackey asked Campbell to prepare his 1996/1997 income tax return.
6.2Around October 1997 Mackey told Campbell he wanted to do 'more' with his money. He asked Campbell if he could recommend investments.
6.3At no time has the Australian Taxation Office given a ruling that the deductions claimed in respect of the Hard Rock JV are allowable.
7.Michael Ross Hooper
7.1In his Examination pursuant to Section 19 of the Australian Securities and Investments Commission Act on 20 November 1998, Mr Hooper stated, 'he [Campbell] said I could go shares if I wanted, and a few other things.'
7.2Hooper also stated, 'He [Campbell] said we could've gone into debt for a lot more, as he said, but I thought no, I'm just not one for it [debt]'.
8.Other Matters
8.1Campbell has never been authorised to deal in shares."

The Evidence

The applicant did not give oral evidence and both parties chose not to call any witnesses. In these circumstances the Tribunal's capacity to make relevant findings of fact is limited to the extent that such findings can be made only on the basis of the T documents and the exhibits tendered in evidence. The parties invited the Tribunal to make its factual findings on that basis.
The T documents contain, inter alia, a transcript of an examination, conducted by officers of the respondent pursuant to s19 of the Australian Securities and Investments Commission Act 1989 ("the ASIC Act"), of each of the following persons with whom the applicant had relevant dealings, namely, Robyn Adamson (T15), Derek Hoare (T16), Noel Mackey (T14), Timothy Dwyer (T17), and Michael Hooper (T18). The T documents also contain a written statement by Malcolm Adamson (the husband of Robyn Adamson) and a written statement by the applicant in relation to each of the abovementioned persons (T25, T26, T27, T29 and T30) and in relation to Michael Edwards (T28) with whom the applicant also had dealings. In addition the T documents contain a transcript of a hearing, conducted by officers of the respondent pursuant to s51 of the ASIC Act on 7 May 1999, for the purpose of deciding whether a banning order should be made against the applicant under s829 of the Law (T41). The Tribunal notes that the applicant did not appear in person at that hearing but he was represented by Ms K Bennett, solicitor, who made oral submissions on his behalf.
The Tribunal will now refer to the relevant material in the T documents in relation to each of the abovementioned persons.
Robyn Adamson
The Tribunal notes at the outset that, although the applicant had relevant dealings with both Mr and Mrs Adamson together (as a married couple), the respondent's officers chose to examine only Mrs Adamson pursuant to s19 of the ASIC Act. That examination took place on 18 November 1998 at the respondent's offices in Perth and was conducted by Ms E Renton and Mr G Harrington. Relevant extracts from the transcript of that examination (T15) are as follows:
"…
Ms RENTON: … Mrs Adamson, I understand that you know Anthony John Campbell?
Mrs ADAMSON: Yes.
Ms RENTON: How do you know him?
Mrs ADAMSON: He has done our tax for the last nearly 10 years maybe.
Ms RENTON: Okay. And is tax all he does for you?
Mrs ADAMSON: Up until last year – or this year – yes, that's all he has done for us.
Ms RENTON: And when you say 'this year', do you mean this year that's just finished?
Mrs ADAMSON: Well, yeah, up until April when he phoned us.
Ms RENTON: April 1998?
Mrs ADAMSON: Yes.
Ms RENTON: Okay. And what happened in April 1998?
Mrs ADAMSON: He phoned us regarding some shares that were available.
Ms RENTON: What shares were they?
Mrs ADAMSON: He actually spoke to my husband. He rang and I said, well, 'Talk to my husband' which is Malcolm, which he did regarding some shares in Federation.
Ms RENTON: Federation Resources?
Mrs ADAMSON: Yes.
Ms RENTON: And what -
Mrs ADAMSON: Sorry, before that we actually asked him to have a look at – we were thinking of buying a property – a business – and we asked him to have a look at that for us as well.
Ms RENTON: What sort of business was that?
Mrs ADAMSON: A video store.
Ms RENTON: And when you say you asked him to have a look, do you mean to look at the books?
Mrs ADAMSON: Well, we – my husband and I – yes – had gone and had a look at it, so we thought, well, he was our accountant so we would get the books sent to him for him to have a look through it for us.
Ms RENTON: And apart from the shares in Federation Resources, has he introduced you to any other sorts of investments?
Mrs ADAMSON: And the investment with the hard rock.
Ms RENTON: The hard rock project?
Mrs ADAMSON: Project, yes.
Ms RENTON: And how did that one come about?
Mrs ADAMSON: There again he phoned us to say that he had some investments that he thought we might like to have a look at so we went up there, both my husband and I went up there and had a look through them.
Ms RENTON: And the Federation Resources matter arose about April 1998 did you say?
Mrs ADAMSON: Yes, yes.
Ms RENTON: And was the rock – hard rock project before or after that?
Mrs ADAMSON: That was after.
Ms RENTON: And approximately what date?
Mrs ADAMSON: He had been phoning us for a while regarding that but we didn't do anything about that until getting close to the end of June I think it was.
Ms RENTON: So do you know why he phoned you, first of all in relation to the Federation Resources shares?
Mrs ADAMSON: No, not really. He just thought that seeing, I suppose, seeing that we had dealt with him for the – asking him about the business, that we may be interested in the shares.
Ms RENTON: Had you intimated to him at any stage that you were interested in investing?
Mrs ADAMSON: We had done an investment through someone else that he knew of and so he knew that we had done an investment.
…
Ms RENTON: Now, before he phoned you in relation to the Federation Resources shares, had you apart from the fact that you had to tell him that you had this business deduction in relation to the plantation, had you ever discussed investing with him or asked him to look out or –
Mrs ADAMSON: No.
Ms RENTON: - told him what sort of investment -
Mrs ADAMSON: No, we'd never – other than this Northern Rivers one, we hadn't really worried about it.
Ms RENTON: Okay. So you've never specifically said to him that you were interested in any sort of investment over another or -
Mrs ADAMSON: Not that I can remember, no. No.
Ms RENTON: Okay. Now I'd like to look at the two separately -
Mrs ADAMSON: Yes.
Ms RENTON: - so if I could ask you first about the hard rock venture?
Mrs ADAMSON: Yes.
Ms RENTON: He phoned you, you said, a couple of times in relation to this.
Mrs ADAMSON: Yes, he phoned us and said if we wanted to get a group of people together he would come or come to his office and he would discuss it with us. None of our other friends wanted to do anything so it was just Mal and I – my husband and I – that went.
Ms RENTON: And so did you make an appointment to go and see him at his office?
Mrs ADAMSON: Yes, we did.
Ms RENTON: And what happened when you went to see him at his office?
Mrs ADAMSON: As far as I can remember we went to his office and he had two investments. I think we quickly looked through them and I think we decided – I think it was that day that we decided we'd go with the hard rock.
…
Ms RENTON: When did you decide that you would make this investment?
Mrs ADAMSON: It was more or less on the day that we went.
Ms RENTON: Did you go home and discuss it and then come back or?
Mrs ADAMSON: No, we didn't, which probably is unusual that we don't, but no, we just – we did it there and then on the spot that day.
Ms RENTON: So – I know you can only speak for yourself, not your husband – what sort of things did you take into account when you were deciding to take in this investment?
Mrs ADAMSON: To be honest, I cannot remember.
Ms RENTON: You can't remember?
Mrs ADAMSON: No, there were a lot of things, family things going on – had gone on in our life, so at that stage, no, I really can't remember why we specifically did that one, no.
Ms RENTON: In general, what would be your goals in selecting an investment that you were going to make?
Mrs ADAMSON: Well, more for, I suppose as we're getting older, just sort of looking out for something for, you know, later on in life.
Ms RENTON: So you were looking for a long-term -
Mrs ADAMSON: Term. Well, yes, but I mean, I suppose it's more just – yeah, just something for us for, you know, as we were getting older, some investments, you know, that will come – mature as we're getting older, would be there for us.
Ms RENTON: And this one, even though it's only for seven years, would fit into your strategy?
Mrs ADAMSON: I don't – yeah, I don't think we sort of even thought about it only being for seven years. It was just – we'd just decided there and, you know, between the two of us we said, yes, we'd do it.
Mr HARRINGTON: At that meeting when you decided to invest in hard rock, did you know then that it was only for a term of seven years?
Mrs ADAMSON: I can't remember to be honest. I think we may've, yes, at that time, but I really can't be sure that we did. I know, like, with the other one, I know that's sort of – is coming up soon, but no, I really can't remember whether we knew it was only for seven years or what.
Mr HARRINGTON: Did you read the prospectus fully before you decided?
Mrs ADAMSON: Probably not, no.
Mr HARRINGTON: Did you read any part of the prospectus before you signed up?
Mrs ADAMSON: I didn't; I think my husband may have read some of it, but, you know, because we were only there for a short period of time so probably we didn't read all of it.
Mr HARRINGTON: How long were you there for the total meeting?
Mrs ADAMSON: Maybe only half an hour.
Mr HARRINGTON: Did Mr Campbell explain any matters from the prospectus to you?
Mrs ADAMSON: There again I cannot – I honestly cannot remember what he said to us at the time. I know we took half share each in it, we took a half share each.
Mr HARRINGTON: Did you and your husband discuss it between you separately before you signed the documents?
Mrs ADAMSON: No, he was always there with us.
…
Ms RENTON: So in relation to the risks associated with the investment, can you remember any of the risks that Mr Campbell told you about?
Mrs ADAMSON: I don't honestly remember him telling us anything about the risks.
Ms RENTON: So you don't remember that he told you anything about the risks or do you think that had he said something you would remember it?
Mrs ADAMSON: I would think so, yes. I did speak to my husband and ask him if he could remember anything, you know, saying like what you said that the Taxation Department may not – or it may not be allowed to go through and he honestly couldn't remember anything being said about it either.
Ms RENTON: Do you think that he – either or both of you would've remembered it had it been said?
Mrs ADAMSON: I think he would've, yeah, because that would've – we certainly would've taken that into consideration and we probably wouldn't have – I'm not saying – we probably wouldn't maybe have gone through with it if we'd known that there was a risk involved in it.
Ms RENTON: You would like to have been given the opportunity to have known, is that what you are saying?
Mrs ADAMSON: Yeah, yeah. I did read some of it last night and it did say – it did have something in there –
Ms RENTON: Yes.
Mrs ADAMSON: - but –
Ms RENTON: It is in the prospectus -
Mrs ADAMSON: Yes.
Ms RENTON: - and obviously, as you recognise, people would expect to read a prospectus, but on the other hand perhaps you also would expect that if someone was advising on an investment he would point out the risks, would you expect that?
Mrs ADAMSON: Yes.
Ms RENTON: Would you have expected to have been told?
Mrs ADAMSON: Yeah, I would've expected that to be told.
Ms RENTON: Okay. Now in relation to the loan that goes with the money that you borrowed -
Mrs ADAMSON: Yes.
Ms RENTON: - if the deduction was turned down, are you able to repay that loan from your own resources?
Mrs ADAMSON: Yes, yes.
Ms RENTON: It wouldn't put too much pressure on you?
Mrs ADAMSON: It probably would, but yes, we'd still be able –
Ms RENTON: You would be able to -
Mrs ADAMSON: Yeah, we'd still be able to pay it back, yes.
Mr HARRINGTON: Was that a consideration that you took into account when you made the investment, that you may have to repay the loan yourselves?
Mrs ADAMSON: No, no. Well, there again, we didn't know.
Mr HARRINGTON: How did you expect the loan to be repaid?
Mrs ADAMSON: Well, I suppose I never thought of that, you know. I have only ever thought of it as an investment, not ever having to actually pay it back.
…
Ms RENTON: In relation to this hard rock project, what sort of goal did you have there or in -
Mrs ADAMSON: I suppose to make a profit, you know, to get something out of it, but I hadn't really thought of how much or anything else, you know, that we would actually get out of it.
Ms RENTON: So, not talking in dollar terms, but you were expecting that it would presumably bring you an income?
Mrs ADAMSON: Well, yeah, I mean if it's an investment then you would expect that somewhere along the line you would get something for it, like buying a block of land, if you keep it long enough and sell it, then yes, you – you know, get something out of it.
Ms RENTON: But you are aware that you can't sell this investment?
Mrs ADAMSON: No. I don't – no.
Ms RENTON: There is no – well, I'm not saying that you can't sell it, there is no secondary market for it; it says so quite clearly that it would be unlikely that you would be able to find someone to buy this investment from you.
Mrs ADAMSON: Right.
Ms RENTON: Were you aware of that?
Mrs ADAMSON: I don't think so, no.
Ms RENTON: Would that have taken part of your consideration if it had been pointed out to you?
Mrs ADAMSON: I suppose – I don't really know because I'm sort of – I'm not into – I suppose I've never been explained that to me – that part of it.
Ms RENTON: Would you expect it to be explained to you?
Mrs ADAMSON: Well, I would think so, yes, so that we knew what was going on, that we couldn't sell it or do something or gain something from it. I mean, that's the whole idea of an investment, is that you are able to get something out of it somewhere along the line.
Ms RENTON: And so not being able to – or there not being a ready market for it would be something that you might take into consideration?
Mrs ADAMSON: Yeah.
Ms RENTON: And something that you weren't aware of until I pointed it out?
Mrs ADAMSON: Yeah, yeah. No, I didn't know that.
Ms RENTON: And in relation to the project itself, in general terms do you know what the aim of it is?
Mrs ADAMSON: Probably not now.
Ms RENTON: That it would – presumably you know that they were intending to perhaps quarry rock. Did you know that?
Mrs ADAMSON: No, no. I haven't even read through it or anything to be honest. I was just there at the time. I haven't even read through the prospectus or anything so I really don't know much about it.
Ms RENTON: So were you trusting that it was -
Mrs ADAMSON: I was – well, we trusted him to do the best for us.
Ms RENTON: So you believed that what you were buying presumably was a venture that was going to be profitable?
Mrs ADAMSON: Yes.
…
Ms RENTON: And when Mr Campbell gave you the prospectus and you signed it straight away, presumably he was aware that you hadn't read the prospectus?
Mrs ADAMSON: Yeah. Well, he was there when he handed it to us so he was there with us and that was the first time we'd seen it so he knew that we hadn't read all the way through it – hadn't read it all.
Ms RENTON: Did he encourage you to read it to your recollection?
Mrs ADAMSON: Not that I can recall, no. I know my husband kind of flicked through it but, I mean, that's not reading it – reading every little detail on it.
Ms RENTON: Did he say anything to the effect of, 'Well, why don't you go home, read it, and make a decision and then come back?'
Mrs ADAMSON: No. Not that I can recall.
Ms RENTON: And do you think that if he had have said something like that you would remember?
Mrs ADAMSON: Probably, yes. Yeah, because we would've gone away and sort of discussed it.
…
Mr HARRINGTON: What sort of work do you and your husband do?
Mrs ADAMSON: I work in a solicitor's office in accounts, and my husband is a purchasing officer with a stationery company.
Mr HARRINGTON: Okay. And these are the only investments you've ever made -
Mrs ADAMSON: Yes.
Mr HARRINGTON: - other than bank accounts and that sort of thing?
Mrs ADAMSON: Yep. And – Oh, we've got a block of land that we've had for quite a lot of years.
Mr HARRINGTON: Who actually made the decision to make the investment, yourself or your husband?
Mrs ADAMSON: I suppose we both sort of agreed there and then to do it.
Ms RENTON: I don't want to put words into your mouth, but -
Mrs ADAMSON: No.
Ms RENTON: - presumably, when Mr Campbell phoned you in relation to come in to look at this prospectus, I assume that you'd have some sort of discussion with your husband in general about investments, and that maybe there'd been some indication that there might be some benefit. Would that be fair?
Mrs ADAMSON: Yeah, yeah
Ms RENTON: So you went there with an expectation that you would find something that suited you?
Mrs ADAMSON: Well, I don't know whether we'd find something that suited us. That's – it's very hard to say, but when you have someone that says they've got some investments, you would think that they would – I mean, he's been doing our tax for so long so he has known more or less our financial situation and everything. So I suppose we put a lot of faith in him to do the best thing by us – by saying that – you know – if he's got some investments that would help us in the long run then – you know – that we sort of took it that they would.
Ms RENTON: Now you are absolutely certain that it was he who phoned you about the investments?
Mrs ADAMSON: Yes, definitely.
Ms RENTON: That you didn't go to him and say, 'I want you to find me an investment'?
Mrs ADAMSON: No.
Ms HARRINGTON: What does he know about your's and your husband's financial situation?
Mrs ADAMSON: Well he knew that we were looking at a business, and he knows that we've bought – like, we've got the block of land which we've had for quite a while. He knows that we're with Mortgage Monitors, because we had told him, and he said that – in the course of conversation before – that when we were starting up that he would – had – you know – was talking – thinking about something on those lines. So he knew that we – the way that Mortgage Monitors had set up our account for, you know, I suppose the way they work with their – getting your bank accounts and you having your line of credit with them, so I suppose he knew that.
…
Mr HARRINGTON: Did he offer you any other options such as gearing into the share market or gearing into further property or?
Mrs ADAMSON: No.
Mr HARRINGTON: So did he talk about negative gearing to you at all?
Mrs ADAMSON: No.
Ms HARRINGTON: Okay.
Ms RENTON: At what stage during this conversation did he tell you about the sorts of commission that he was going to get for selling you the investment?
Mrs ADAMSON: I don't think he ever did.
Ms RENTON: He didn't at any stage tell you that he was getting commission for selling you the investment?
Mrs ADAMSON: No, not that I can remember, no.
Mr HARRINGTON: Did you have any understanding as to how he would be paid for providing you the advice to invest in Hardrock?
Mrs ADAMSON: No."

Mrs Adamson was then shown various documents related to the Rydal Hard Rock Joint Venture Project, including an Application Form for an Interest in that Project, a Loan Application Form, and a Loan Contract. She confirmed that those documents, which were all dated 27 June 1998, bore the signatures of herself and Mr Adamson. Asked whether she read them all thoroughly before signing them, she replied "probably not" and agreed that she would have relied on the applicant to inform her of anything of significance in the documents. Mrs Adamson was next shown a document entitled "Letter of Instruction", dated 27 June 1998, whose contents were as follows:
"Letter of Instruction
I understand that Anthony John Campbell, who holds a Proper Authority with Barkworth Securities Pty Ltd, is able to advise only on the products covered by that company's Restricted Securities Dealers Licence.
I have chosen to provide some details of my financial information, in order to receive limited advice on Primary Production and other Business Opportunities.
I understand I may receive taxation benefits however my involvement is primarily motivated by my desire for an income stream and a possible supplement to my future retirement income. I understand that the information provided by Anthony John Campbell will be limited to that contained in a Worksheet which he will provide to me and to that contained in the current Prospectus for the relevant business opportunity or opportunities selected.
I further understand that by doing this I may risk making a financial commitment to a business opportunity that may not be appropriate for my financial needs, circumstances or objectives and I acknowledge that Barkworth Securities Pty Ltd, its agents, officers and employees have no liability whatsoever as to the appropriateness of the selected product for my circumstances. I also acknowledge that the products selected are not endorsed by H & R Block."

Mrs Adamson confirmed that the signatures appearing at the foot of that document were those of Mr Adamson and herself. The transcript of her examination in relation to that document reads as follows:

"Ms RENTON: … Now, do you know what this letter of instruction says? Would you like to just take two minutes to read it?
Mrs ADAMSON: Yep.
Ms RENTON: Okay, Now, in a nutshell, what this is saying is that you asked Mr Campbell for advice; you specifically asked him for advice about tax effective schemes; that you gave very limited information deliberately about your circumstances; that you were prepared to make your own decision based on what was in the prospectus, and that you understand by doing that you risk making an unsuitable investment. Would that be fair to say those were your instructions?
Mrs ADAMSON: No. I don't know.
Ms RENTON: Did you ask him specifically for investment advice?
Mrs ADAMSON: No. Well, as I said, he rang – he rang us.
Ms RENTON: Do you recollect why he asked you to sign this?
Mrs ADAMSON: No, I don't.
Ms RENTON: Okay.
Mrs ADAMSON: No.
Mr HARRINGTON: In the third paragraph in that letter of instruction, where it talks about the fact that 'you understand and appreciate that you may be making an investment that's not that appropriate for your financial needs, circumstances or objectives.' Is that true?
Mrs ADAMSON: I hadn't – I don't understand.
Mr HARRINGTON: The third paragraph there says that you – yourself and your husband -
Mrs ADAMSON: Yeah.
Mr HARRINGTON: understand that by doing what you're doing, that is, giving limited information to Campbell, that you may risk making a financial commitment to a business opportunity – which is what he is terming the investment to be -
Mrs ADAMSON: Yeah.
Mr HARRINGTON: - that may not be appropriate for your financial needs, your circumstances or your objectives. Now, did you understand when you signed this that you may be making an investment that was not appropriate for what you are?
Mrs ADAMSON: No, I didn't.
Mr HARRINGTON: And was that your intention at the time, that you should make an inappropriate investment?
Mrs ADAMSON: No. I mean, I hate doing anything that I am not supposed to do. That's what sort of - when I got all this, I sort of didn't want – to be honest, I didn't want to get involved, because I'm – I don't like doing things that sort of – that is not done the right way. I hate it, and that's what – when all this came up, I just – you know – I just sort of – I mean we sort of trusted him to do the right thing by us.
Ms RENTON: I appreciate that.
Mr HARRINGTON: Further on in that paragraph it says that you acknowledge that Barkworth Securities Pty Ltd, for whom Anthony Campbell is a proper authority holder, you agree that they have no liability whatsoever as to the appropriateness of the selected product for your circumstances. Do you recall agreeing to absolve Barkworth Securities from any responsibility?
Mrs ADAMSON: I don't even remember that name being mentioned to be honest.
Mr HARRINGTON: So at what stage have you learned that Campbell was a proper authority holder for Barkworth Securities?
Mrs ADAMSON: Probably not until now, because I don't remember anything ever being said about it.
Mr HARRINGTON: Okay.
Ms RENTON: I don't know whether you understand, to a certain extent, that an investment adviser has got to give you appropriate advice and advice that's suitable for your circumstances.
Mrs ADAMSON: Yeah.
Ms RENTON: Did you understand that when you were signing this that you were waiving that right?
Mrs ADAMSON: No, I don't think we did.
Ms RENTON: Would you have signed it if you had known that that was what you were doing?
Mrs ADAMSON: Probably not. No."

Mrs Adamson was then referred to a document entitled:

"THE RYDAL HARD ROCK JOINT VENTURE
DISCLOSURE STATEMENT".

The contents of that document, which was dated 22 June 1998, are as follows:

"In accordance with Sections 848 to 853 inclusive and Section 1025 of the Corporations Law, I, Anthony John Campbell declare a relevant interest in the securities referred to in this publication and will receive commission from clients' transactions in those securities. The commission received per interest is based on the volume of sales generated as follows:
NO OF SALES AMOUNT PAID
1-50$400 per interest
51-100$480 per interest

101+ $560 per interest

KJ Group Pty Ltd provides administration and marketing support and will be paid an amount of $640.00 per interest which can increase to a maximum amount of $800.00 per interest if volume of sales generated by Anthony John Campbell does not exceed 50 interest.
IMPORTANT FURTHER DISCLOSURE Kevin Phillip Sleight is both a Director and Shareholder of Jedediah Management Limited – The Manager – see pages 55 and 56 of the prospectus for details. He is also a Director of Barkworth Securities Pty Ltd and KJ Group Pty Ltd.
Applications can only be made on the application form attached to a copy of the Prospectus dated 9th March 1998.
I/We ______Malcolm and Robyn Margaret Adamson_________________________
of …____________________________________________________________
hereby request Anthony John Campbell, an authorised representative of Barkworth Securities Pty Ltd to implement a participation of __1__ interest(s) in The Rydal Hard Rock Joint Venture.
I acknowledge that I have been advised of the commission to be received by Anthony John Campbell and also by KJ Group Pty Ltd as disclosed above."

Mrs Adamson confirmed that the signatures appearing at the foot of that document were those of Mr Adamson and herself. The transcript of her examination in relation to that document reads as follows:

"Ms RENTON: Now this is a disclosure statement, where Mr Campbell discloses that he is a proper authority holder and he's going to receive commission, Was the content of this discussed with you before you signed it?
Mrs ADAMSON: I don't think so. No.
Ms RENTON: So were you aware that he was getting a commission for selling you the investment?
Mrs ADAMSON: No.
Ms RENTON: Would you have liked to have known?
Mrs ADAMSON: Well, yeah. I suppose. Yeah, because – I mean, if he was making something out of it, then, yes, we probably should've known about it. But, no –
Mr HARRINGTON: Would it have made any difference to your decision to invest had you known that he was making -
Mrs ADAMSON: Well, I think if we'd – if we'd probably taken more time about it we would have read everything more closely and we probably would've asked a few more questions regarding it.
Mr HARRINGTON: There's another name on the disclosure statement, Kevin Phillip Sleight. He's a director of Jeddediah (sic) Management Ltd. Is that a name that you know?
Mrs ADAMSON: No, I've never heard – never heard of him before.
Mr HARRINGTON: Okay. Thankyou.
Ms RENTON: Have you heard of Jeddediah (sic) Management?
Mrs ADAMSON: No.
Mr HARRINGTON: If we can go back to the letter of instruction, the third paragraph down. That's the page before that –
Mrs ADAMSON: The other page. Yep.
Mr HARRINGTON: Yes. The third paragraph down, sort of towards the middle. It says, 'You understand that the information provided by Campbell will be limited to that contained in a work sheet, which he'll provide to me, and to that contained in the current prospectus.' The work sheet, I presume, is the page before?
Mrs ADAMSON: Yes.
Mr HARRINGTON: And the prospectus is the prospectus that you obtained at the meeting. Did you understand or did you agree to the fact that the advice and information provided by Campbell would simply be limited to that piece of paper and the prospectus, or did you expect him to give you more fulsome advice than that?
Mrs ADAMSON: Well, there again, I sort of – he'd worked it all out for us, so – taking our income and everything and – and we had the prospectus which we just took home and put down and that was it. So, I mean, that's all we sort of – hadn't thought any more about it.
Ms RENTON: So you were relying on Mr Campbell?
Mrs ADAMSON: Yeah.
Ms RENTON: To give you appropriate advice?
Mrs ADAMSON: Yes."

The transcript of Mrs Adamson's examination continues as follows:
"Ms RENTON: If we could just move along to Mr Giovanazzo?
…
So I think you said it was in April that Mr Campbell phoned you up about –
…
So do you know what was said to your husband – what Mr Campbell said to your husband?
Mrs ADAMSON: Only that there was some shares that he had and would we like to buy them, and –
Mr HARRINGTON: When you said that 'he had', that who had?
Mrs ADAMSON: Mr –
Mr HARRINGTON: Giovanazzo?
Mrs ADAMSON: That's it. Yeah.
Ms RENTON: So if we could just go back. How did Mr Giovanazzo get your number?
Mrs ADAMSON: He didn't – he didn't actually phone us. It was Anthony Campbell that phoned us regarding that.
Ms RENTON: Right. So Anthony phoned you and said, 'Mr Giovanazzo's got some shares'?
Mrs ADAMSON: Yes. And, as I said, spoke to my husband. And I was – I was home the next day and I was just told that he would be there at a certain time, which he came. I wrote the cheque out, signed the documents, and the next week – he said, the next week I would get a receipt and the paperwork, which has never arrived.
Ms RENTON: So did you speak to Mr Giovanazzo?
Mrs ADAMSON: Yes, I – I spoke to him.
Ms RENTON: Mr Campbell made the appointment for Mr Giovanazzo, did he?
Mrs ADAMSON: Yes.
Ms RENTON: So, the first time you -
Mrs ADAMSON: The first time I ever met him was the day that he came to home.
Ms RENTON: Did Mr Giovanazzo say anything to you, or do you recollect anything he might have said?
Mrs ADAMSON: No, I can't.
Ms RENTON: So do you know when Mr Campbell spoke to your husband, did he say how many shares were involved?
Mrs ADAMSON: 40,000 at five dollars –
Ms RENTON: Five cents -
Mrs ADAMSON: - five cents a share.
Ms RENTON: So how much was the cheque you wrote out?
Mrs ADAMSON: For $2,000.
Ms RENTON: And did Mr Campbell give any reason why it would be a good buy?
Mrs ADAMSON: He just thought we might be able to make a quick dollar on it.
Ms RENTON: Right.
Mrs ADAMSON: That it would possibly, in about two or three weeks, go up and we might be able to sell them.
Ms RENTON: Right.
Mrs ADAMSON: And that was about it.
Ms RENTON: So you took his word for it?
Mrs ADAMSON: Yes.
Ms RENTON: Did he give you any idea of how much profit you would make?
Mrs ADAMSON: No, no. Just said it might go up. I think he said it might go up to 7 cents, or 8 cents, or something. I can't – I can't remember a figure, but I know he thought that, you know, that we'd – might be able to get – make some quick – you know.
Mr HARRINGTON: Did he say to you that the shares were listed on the Stock Exchange?
Mrs ADAMSON: There again, I don't know, because I wasn't actually talking to him, so I don't know what he actually said to my husband. I don't know. I can't – and I can't honestly remember whether my husband said that to me or not. I just know –
…
Ms RENTON: Okay. If I rang you up and said somebody's coming tomorrow to sell you some shares for $2,000, would you do it? I mean, was there any particular reason why you did it because it was Mr Campbell?
Mrs ADAMSON: I suppose because he had organised it through – so I thought, well he must know him, so – and I just took it that that was the person who was there.
Ms RENTON: So would it be fair to say you relied on Mr Campbell's advice?
Mrs ADAMSON: I would say that, yes. Yeah.
…
Ms RENTON: What did you do when the paperwork didn't arrive?
Mrs ADAMSON: Well, I'd – we had spoken – I had told my husband. He asked me what was happening. I told him. And after it didn't arrive we just thought, 'Well, we've done our money. We've dome the wrong thing,' and left it. We did contact Mr Campbell quite a while afterwards to find out what was going on, and it wasn't until probably when we went to – there for the Hardrock that we actually found out that things had – what had actually happened. That we'd lost our – more or less lost our money. That – that he had a debt – Mr Giovanazzo had had a debt from previously and all the money in the shares had gone to that. We had – I mean, my husband had phoned him once or twice and he said he was still trying to find out what was going on. And that was about it. We sort of accepted that we done the wrong thing and –
Ms RENTON: Did Mr Campbell tell you that there were no shares?
Mrs ADAMSON: No, I don't think – not – he – it wasn't until we went there for Hardrock that I think we actually found out what was going on.
…
Ms RENTON: Basically, you bought the shares because Campbell recommended it?
Mrs ADAMSON: Yes. Otherwise we wouldn't have known anything about it.
Ms RENTON: And were you regarding Campbell's giving you advice to buy the shares or was it -
Mrs ADAMSON: Well, I suppose – there again, we sort of expect – well, he's our accountant and he does our tax, so he should know what, you know, what's good for us, to look after us as – we take it – as a client. So we expect him to do the right thing by us.
Ms RENTON: So you would pay more credence to him advising you to buy shares than perhaps your next door neighbour advising you to buy?
Mrs ADAMSON: Well, probably, yes, because he – you would think he would know the right thing to do and the right things. So, yes, we would probably expect to have the right thing done by us.
Mr HARRINGTON: Did you ever say to Campbell that you wanted to save for tax, or get tax deductions, or reduce your tax, or anything of that nature?
Mrs ADAMSON: Not that I can recall, no. No.
Mr HARRINGTON: So you've never asked to go find some tax benefits for you?
Mrs ADAMSON: No.
Mr HARRINGTON: Has he ever mentioned to you that you ought to do something to reduce the level of tax you pay?
Mrs ADAMSON: No, not that I can recall. No. Because, I mean, as I said, he's been doing our tax for quite a long time, and it was more or less only when he found out that we'd started – that my husband had done the Northern Rivers investment that – then he said, 'Oh, don't go anywhere else before you do another one.' Come for him first.
Ms RENTON: Okay.
Mrs ADAMSON: So I suppose that that's when we thought – well, if he's got these investments then he – they must be all right.
Mr HARRINGTON: So he said to you after he heard about your investment into Northern Rivers, that you should before you go and see someone else about another investment, come and see him?
Mrs ADAMSON: Mm.
…
Mr HARRINGTON: Has Mr Campbell every told you that he will refund you the $2,000 that you paid to Giovanazzo?
Mrs ADAMSON: Only in the last couple of weeks that he has – since you phoned me he knew that – that you had – or he rang to say that you would be phoning – probably phoning. And since then he has mentioned that he would try and pay it back but we still haven't had anything or received anything from him.
Mr HARRINGTON: Can you tell me about that conversation?
Mrs ADAMSON: Only that he feels guilty – sorry, 'guilty' probably is the wrong word – that he feels bad that it's happened and he regards us as a good client and he doesn't – didn't like to see us lose our money, and that he would try and pay it back. But, other than that, no, we haven't seen anything.
Mr HARRINGTON: When was that conversation?
Mrs ADAMSON: It would be after you rang.
Ms RENTON: After I rang you?
Mrs ADAMSON: Yes.
Ms RENTON: But it was he that rang you, not the other way round, was it?
Mrs ADAMSON: No. He rang us.
Ms RENTON: You didn't ring him after I'd spoken to you, he rang you?
Mrs ADAMSON: He left a message on my answering machine about two days after you rang.
Ms RENTON: So he knew I was going to ring you?
Mrs ADAMSON: Yeah.
Mr HARRINGTON: Did he say how he knew that Ms Renton would call you?
Mrs ADAMSON: Only that you'd been to his office and taken my file.
Ms RENTON: And did you tell him that I'd already spoken to you?
Mrs ADAMSON: Yes, I did.
Ms RENTON: Did he ask you what was said – just curious?
Mrs ADAMSON: Yeah, he did. Yeah. He was asking me what was – what sort of questions were asked and everything.
…".

A document entitled "Statement of Malcolm Adamson", which is signed and dated 10 May 1999, appears in the T documents (T44). That document states:
"…
2.On or about April 1998 I asked Mr Campbell to provide some advice in relation to purchasing a video store venture. I approached him because he was my tax agent.
3.After further investigations and advice from Mr Campbell I decided not to purchase the video store and asked Mr Campbell to let me know if he knew of any other investments or if heard of any tips to pass them on.
4.Following on from this conversation Mr Campbell rang me and told me he had heard that some shares may be a good buy.
5.It was my own decision to invest in the shares. I understand that there are risks involved with any investment.
6.Some time later and at my request, Mr Campbell telephoned me to let me know that he had certain agricultural investments that I might be interested in and upon which he could advise me.
7.He telephoned me shortly thereafter to make an appointment for my wife and I to see him.
8.Mr Campbell took my wife and I through the Rydal Hard Rock Venture (sic) prospectus.
9.I do remember Mr Campbell explaining the risks of the project and the risks in relation to the ATO requirements.
10.I also remember reading and signing documentation at the meeting. This included a statement outlining Mr Campbell's commission.
11.After discussing with Mr Campbell and after my wife and I had reviewed the prospectus I decided that I wanted to invest in the Rydal Hard Rock Joint Venture."

A document entitled "Statement of Anthony John Campbell in relation to Adamson", which is signed and dated 4 May 1999, appears in the T documents (T25). That document states:
'1. I have known Mr and Mrs Adamson for approximately 8 years.
2.For the past 8 years I have prepared and lodged Mr and Mrs Adamson's tax returns.
3.In or about April 1998, Mr Adamson telephoned me to ask me to look over some figures in relation to a proposed purchase of a video store.
4.I told Mr Adamson that I would need to see the company's financial statements and other relevant documents for at least the last 3 years. I also told Mr Adamson that I would need to look at their own financial situation in more detail.
5.After about 1 week Mr Adamson provided me with this information by facsimile.
6.I then undertook some investigation of the video industry and made some enquiries.
7.As a result of these enquiries and the information provided by Mr Adamson in relation to the particular video store I formed the view that it was not a viable investment.
8.I then telephoned Mr and Mrs Adamson and told them that I did not believe they should invest in the video venture.
9.Mr Adamson then asked me to let him know if I was aware of any other investments including possible investments in shares.
10.I told Mr Adamson that I had a licence which allowed me to advise on a number of projects similar to the Northern Rivers Tea Tree Project that he and his wife were already involved in. He indicated to me he would be interested in this and any other opportunity to invest. I said he would need to come in and discuss these with me.
11.Approximately two weeks later Mr Adamson telephoned me and asked if he and Mrs Adamson could come into my office to discuss the agricultural projects available and I made an appointment for them.
Federation Resources Shares
12.Before Mr and Mrs Adamson came to see me at my office in relation to the investment projects, I telephoned Mr Adamson to let him know that I knew someone who had some shares he wanted to sell, off the market. I did this because Mr Adamson had told me he was looking for investments and had told me to let him know if I became aware of any. The phone was answered by Mrs Adamson who, when I explained the nature of my call told me that she did not deal with investments and put me through to her husband.
13.I told Mr Adamson that if they were interested in buying shares I could give Mr Giovanazzo their telephone number.
14.I did not go into detail about the share purchase other than that they were shares in a company called Federation Resources and that it was an off market transaction.
15.Mr Adamson said they were interested and would like to meet with Mr Giovanazzo and asked me to give Mr Giovanazzo their telephone number.
16.After I gave Mr Giovanazzo their number I had nothing further to do with the matter.
17.About six weeks later Mr Adamson telephoned me to ask me if I knew where the share scrip for the shares in Federation Resources was.
18.I told him that I did not know as I was not involved in the matter however, I told him that I would follow it up with Mr Giovanazzo for him.
19.I then spoke to Mr Giovanazzo and told him about Mr and Mrs Adamson's concerns.
20.Mr Giovanazzo did not give me any satisfactory explanations as to why they had not received their Share Certificate. He made some excuses and told me that it would be available soon.
21.I continued to follow the matter up with Mr Giovanazzo on behalf of Mr and Mrs Adamson for the next month or so.
22.I then discovered that Mr Giovanazzo was being investigated by the Fraud Squad and I reported this matter to the Fraud Squad. I had no further dealings with him.
23.At no stage did I recommend to Mr and Mrs Adamson that they invest in the shares.
24.I did not provide any financial advice to Mr and Mrs Adamson in relation to the shares, nor did I recommend them. Mr and Mrs Adamson knew that I was not authorised to give any advice in relation to shares as we had previously discussed the limited nature of the advice I could give in relation to investments.
25.Mr Adamson had asked me whether I knew of any other investments and I passed on the information about the shares but I did not provide particulars or recommendations.
26.Mr and Mrs Adamson met with Mr Giovanazzo. I was not present at this meeting.
The Rydal Hard Rock Joint Venture Project No.1
27.On or about June 1998, Mr and Mrs Adamson came to my office to discuss agricultural projects.
28.I have been involved in providing advice in relation to these projects for about two years.
29.I have a standard procedure which I adopt for every client when showing them the projects. The procedure may vary slightly in accordance with the individual client. The basic steps are as follows:
(a)Explain the restrictions on the type of investment advice I am authorised to offer;
(b)Explain the type of investment projects I am authorised to advise on and explain the limited nature of the advice provided;
(c)Explain the concepts of negative gearing shares and property and other alternatives;
(d)Look at the financial situation of the client and their financial goals;
(e)Review in detail certain projects as instructed by the client including reviewing the relevant prospectus in detail;
(f)In particular, when reviewing the prospectus I highlight to the client the risks involved with the venture. This includes outlining the effect on the client if the project was to fail and/or the project was not approved by the Australian Taxation Office. I work out the likely cost of that scenario to the client.
(g)Completion of a worksheet which gives an outline of the cash flow effect of becoming involved in the project or projects selected;
(h)Encourage client to consider the prospectus and worksheet and to make a further appointment to answer any queries;
(i)Dependant on the level of query, the prospectus would be explained again before any documentation was completed;
(j)Complete documentation including comprehensive commission disclosure statement;
(k)I then give the client all copies of working papers and other relevant documentation.
30.I had previously advised Mr and Mrs Adamson of the limitations of the advice I was authorised to give them. These occasions were as follows:
(a)In 1997 when Mr and Mrs Adamson attended at my office to do their tax returns, they had already invested in the Northern Rivers Project and asked me what possible other projects they could invest in for the following year. At this stage I explained the concept of negative gearing for rentals and shares and told them that there were other alternatives similar to what they had already invested in and that they might consider or seek other advice about.
I then explained that I had a restricted licence and could only advise on certain types of projects only. I told them that I was not authorised to advise on any other type of investment including shares and trusts;
(b)At the beginning of the meeting in June 1998 I again advised Mr and Mrs Adamson of my restricted licence;
(c)After the meeting when I asked Mr and Mrs Adamson to read and sign the Letter of Instruction I explained the contents of it again and the fact that my licence was restricted. Mr and Mrs Adamson both read the document and then signed it.
31.At the meeting with Mr and Mrs Adamson I initially looked at their financial position and goals.
32.I was already familiar with their financial position as I had been doing their tax returns for some time and had recently looked in more depth at their position in relation to a proposed investment in the video store.
33.As far as I can recall Mr and Mrs Adamson's financial position was strong. They had a small mortgage over their family home in Padbury and no other significant debts. Both Mr and Mrs Adamson were wage earners on a family income of approximately $60,000. They also had a block of land which was unencumbered.
34.Mr Adamson had recently changed jobs and was looking to purchase a business. This meant that he was not sure of what he would be earning over the next couple of years. If an opportunity to invest in a business presented itself he may have purchased it.
35.Mr and Mrs Adamson told me that they had already had a long term investment in Northern Rivers Tea Tree Project (I also knew this from doing their tax returns) and they wanted to invest in a more short term returning investment.
36.Mr and Mrs Adamson were financially sound and felt that they were capable of sustaining a risk factor associated with these investments.
37.I then gave them a brief overview of each project and let them know what projects were available.
38.These were Barkworth Olive Groves Project No.2, Banalasta Euc. Project, The Banalasta Natural Oil Joint Venture and The Rydal Hard Rock Joint Venture Project ('Rydal Joint Venture').
39.We looked at each project and eliminated each one until Mr and Mrs Adamson found something that met their goals and this was the Rydal Joint Venture.
40.Mr and Mrs Adamson wanted to invest in Rydal Joint Venture for the following reasons:
(a)This project was short term and they wanted a short term project as they already had a long term investment in Northern Rivers Tea Tree Project;
(b)Projected income was to be received earlier than the other projects;
(c)The risk factor and returns of the balance of the projects were not suitable for their requirements. The comparable projects involved a financial commitment in Year 2 of the project. Mr and Mrs Adamson did not want to have this commitment in Year 2 as Mr Adamson was unsure of what his income would be in Year 2;
(d)The finance options available were attractive.
41.I then took Mr and Mrs Adamson through the Rydal Joint Venture Prospectus in detail and explained the risks involved. The risks were laid out in the registered prospectus on page 6.
42.In going through the whole prospectus I highlighted the relevant factors in relation to timing of projected return, the structure from a tax office point of view and also the options available to finance the investment if required.
43.At the meeting I gave Mr and Mrs Adamson the Disclaimer which confirms that they understand that I have a restricted licence and that the advice provided is on a 'limited advice basis'.
44.At the meeting and before signing the documents I told Mr and Mrs Adamson that I would be receiving a commission if they were to decide to sign up on the Rydal Joint Venture.
45.I advised Mr and Mrs Adamson that the amount of commission I would be receiving was based on the number of sales of the Rydal Joint Venture I made and, therefore, was unable to advise them of the exact figure for the commission. However, all levels of commission are clearly shown on the Disclosure Statement.
46.I gave Mr and Mrs Adamson the Disclosure Statement and asked them to read it. The statement clearly outlines how the commission is calculated and the amounts paid expressed in whole dollars.
47.Mr and Mrs Adamson read the documents I had discussed with them and made the decision to proceed with an investment of one interest held jointly in the Rydal Joint Venture. All documentation including application form, finance application form, loan agreement and loan indemnity agreement together with the commission disclosure and disclaimer form were completed in my office at this time.
48.This concluded the meeting. Mr and Mrs Adamson then left and I did not see them again until July 1998 in relation to preparing their tax returns."

Derek Hoare

An examination of Derek Hoare was conducted, pursuant to s19 of the ASIC Act, by Ms E Renton and Mr G Harrington at the respondent's Perth offices on 18 November 1998. A transcript of that examination appears in the T documents (T16). In his examination Mr Hoare said that he had known the applicant since their school days when they attended the same high school, and that the applicant had acted as his accountant for the last 3 financial years. He said that, in addition to providing accountancy services, the applicant had sold him one investment product – namely, an investment in the Rydal Hard Rock Joint Venture. Asked how this investment came about, Mr Hoare said that he and his friends used to talk generally about investment deals at barbecues and other social functions. At one such function, at which the applicant was present, Mr Hoare and others were talking about investments generally and he asked the applicant if he had "anything coming up". He said that the applicant then got a prospectus for the Rydal Hard Rock Joint Venture from his car and gave it to him. Subsequently the applicant visited Mr Hoare at his home "to do all the paperwork" and he then explained to Mr Hoare the nature of the investment in the Rydal Hard Rock Joint Venture and that it would probably operate at a loss for the first 5 years but thereafter would start to make a profit and pay dividends to investors. Mr Hoare, when asked how long the project was to last for, said that he was not sure. Mr Hoare's examination continued as follows:
"Ms RENTON: And how much money were you going to put into the scheme each year?
Mr HOARE: Each year? There was a – I wouldn't –
Ms RENTON: Approximately?
Mr HOARE: Yeah, I'm not real sure – the amounts we spoke of at the time, but he explained the way it all worked out and did figures and everything for me at – when he came around with all – with the paperwork explaining what was – what the deal was, but I can't remember the exact – or roughly, about the right numbers.
Ms RENTON: Where were you going to get the money from to put into it? Have you got savings?
Mr HOARE: No.
Ms RENTON: So where were you going to get the money to put into the scheme?
Mr HOARE: Oh, yeah. The way – the way he's explained about the venture and the way it was set up is that – with all the legal guidelines, was – that worked – that – how did he put it? –
Ms RENTON: If I can help you without putting words into your head, were you going to get a tax deduction out of the scheme?
Mr HOARE: Yeah. Well, that's the way it – yeah. That's the way it – it was explained – is that it would reduce your – reduce your tax and the amount from your tax would go – the amount – the majority of your tax return would go as your deposit on the loan that was taken out, because your repayment for the loan was the majority part of the tax return.
Ms RENTON: So you were taking out a loan to fund the project?
Mr HOARE: Yeah.
Ms RENTON: And because you were taking out a loan you were going to get a tax refund?
Mr HOARE: Yeah.
Ms RENTON: And then the tax refund was going to go to pay off the loan?
Mr HOARE: Yeah.
Ms RENTON: Is that how it was explained to you?
Mr HOARE: Yeah.
Ms RENTON: Who explained that to you?
Mr HOARE: Anthony explained that.
Ms RENTON: And did Mr Campbell also explain to you what might happen if the tax refund was refused by the Tax Office?
Mr HOARE: The – on the – on the day he came around there was a few distractions and all that – had the TV going – and a lot of, as you saw earlier – a lot of things that are sort of read and explained, I don't pick up on the first go, and with the distractions and all, but he said that following the – the venture follows all the legal guidelines in that respect and there was no – no – no way of there being a problem with it. And, yeah, just a general – general conversation around that time – he was sort of like doing a load of figures and everything, which I questioned a couple of times – had a few questions about, and sort of made it clear in my mind that – that everything was legal and above board.
Mr HARRINGTON: So did you ask Mr Campbell if the tax deduction was assured?
Mr HOARE: Assured?
Mr HARRINGTON: Well, did you ask him whether it's guaranteed that you would get a tax deduction or did you ask him anything about the likelihood of the tax deduction being definite?
Mr HOARE: Yeah, because I – I – was aware that there – there were problems with past ventures, and that's why I brought up the questions about their legal requirements and everything. Yeah, and he said the venture is – meets all the legal requirements.
Mr HARRINGTON: How were you aware that there were problems with other ventures?
Mr HOARE: My brother is currently going through some litigation about a venture that he went into.
…
Ms RENTON: So – if we just go back – if you don't get a tax refund or if the Tax Office were to turn down the refund, you understand that you've got to pay it from your own money. Is that correct?
Mr HOARE: Yeah, yeah.
Ms RENTON: And did Mr Campbell tell you that at the time?
Mr HOARE: Yeah. He may have – he – at the time – as I said there was distractions; my little boy was running round out of the room and all, so there's – I dare say there was quite a few things that I missed out during the - during the conversations that we had.
…
Ms RENTON: So you asked him specifically about whether the Tax Office had accepted it? Is that correct?
Mr HOARE: No. I asked him specifically that if it was all – there's no chance of it – not so much no chance – there was all the – the legal requirements were all – all set and all – all okay. There was no chance that – that it may –
Ms RENTON: If I could just recap: Your brother's having problems with a scheme, I think you said. Is that correct?
Mr HOARE: Yeah.
Ms RENTON: Do I understand that the problem your brother's having with the scheme is that the Tax Office has refused the deduction?
Mr HOARE: It's – yeah. He said it's under litigation, yeah.
Ms RENTON: Yeah, and it's because the Tax Office –
Mr HOARE: Yeah.
Ms RENTON: - has refused the deduction?
Mr HOARE: Yeah.
Ms RENTON: So with that in mind, you asked Mr Campbell whether the same thing could happen with Rydal Hard Rock? Would that be fair?
Mr HOARE: Yeah, yeah.
Ms RENTON: Mr Campbell said, 'Yes, it could happen'. Is that right?
Mr HOARE: I was – yeah. I guess he did say – he would have said something to that effect, but then he sort of qualified himself in saying that all the legal requirements have been met.
Ms RENTON: If we could just rest on the tax one at the moment. He did say, 'Yes, the Tax Office could turn it down'?
Mr HOARE: Yeah, I guess so, yeah.
Ms RENTON: And despite that you decided to go ahead with the project?
Mr HOARE: Yeah. Yes – yeah. Yeah.
…
Mr HARRINGTON: You said a few minutes ago that you don't recall how much you borrowed to invest in Rydal Hard Rock?
Mr HOARE: Mm.
Mr HARRINGTON: Do you now recall how much you borrowed?
Mr HOARE: No.
Mr HARRINGTON: And you've told us also that if the project makes no money and if you get no tax deduction and no tax refund, you're prepared to pay that loan back?
Mr HOARE: Yeah.
Mr HARRINGTON: Do you know how much that might be?
Mr HOARE: No, not off the top of my head. No.
Ms HARRINGTON: Can you afford to repay the loan yourself without any income from the investment?
Mr HOARE: I'd have to.
Ms HARRINGTON: Can you?
Mr HOARE: Currently, with the work I'm doing, probably not.
Mr HARRINGTON: And what do you base that on if you don't know how much the loan is?
Mr HOARE: Well, with the repayments that are about, as in this year, $9,000, I'd have to – extra work to make up the difference.
Mr HARRINGTON: Can you do that?
Mr HOARE: Either extra work or find another job paying more money.
Ms RENTON: And in relation to any tax adjustment that might be made, you understand that you would have to repay the Tax Office any money that they refunded you. That was explained to you, was it?
Mr HOARE: I suppose it wasn't really explained at the time, but I –
Ms RENTON: It was or it wasn't?
Mr HOARE: It wasn't.
Ms RENTON: It wasn't?
Mr HOARE: Yeah.
Ms RENTON: So it wasn't explained to you that if the Tax Office refused the deduction you would have to repay it?
Mr HOARE: No, what you said just then, if they paid me any money already that I'd have to repay that.
Ms RENTON: Yes.
Mr HOARE: Yeah. Well, that wasn't explained, but at the time I hadn't received anything at that time.
…
Ms RENTON: Okay. Did you read the prospectus?
Mr HOARE: Not fully.
Ms RENTON: It does say on the front that the venture is only for seven years.
Mr HOARE: Oh, right. Oh well, it got me.
Ms RENTON: You didn't read it?
Mr HOARE: No.
Ms RENTON: It wasn't pointed out to you?
Mr HOARE: Oh well, yeah, it could've – could've been.
Mr HARRINGTON: If it was pointed out to you that you would only receive two years' income after you'd started to make an income –
Mr HOARE: Mm.
Mr HARRINGTON: - would you have invested in it?
Mr HOARE: It depends – yeah. It depends on the – yeah. It depended on the – the amount of income I would've got back over that time, I guess.
Mr HARRINGTON: But not knowing how much you borrowed and how much your loss is going to be over five years -
Mr HOARE: Mm.
Mr HARRINGTON: - and now not being able to tell us how much income you might even expect to make out of it, how did you make a decision to invest in it? On what basis did you make that decision, or did you simply trust someone else's explanation and advice?
Mr HOARE: Probably trusted his – trusted his advice. Not in a – not a – not – as you can see, I'm not one in a big – not a big financial player at all, and my knowledge of the whole – whole deal isn't probably as - as astute as some bank manager or anything like that.
…
Mr HARRINGTON: Did you trust Mr Campbell to have read the prospectus and to have understood the project before he sold it to you?
Mr HOARE: Yeah.
Mr HARRINGTON: Do you know whether or not he had read and understood the prospectus?
Mr HOARE: No. I would've trusted him to have done it.
Mr HARRINGTON: And did you make your decision, either entirely or partly, based on your expectation and trust that Mr Campbell understood the prospectus and had read it and understood the risks that he was putting you to?
Mr HOARE: Can you say that one again?
Mr HARRINGTON: Sorry. When you make your decision to actually invest in Rydal, after you had spoken to Mr Campbell -
Mr HOARE: Mm.
Mr HARRINGTON: - and you'd looked at the prospectus but not in any depth, did you make your decision to actually go ahead with the investment based on your trust of Mr Campbell giving you all of the detail about what was in the prospectus that was important to you? Did you trust him to tell you if there was something missing -
Mr HOARE: Yeah.
Mr HARRINGTON: - which would've made a difference to you making the investment?
Mr HOARE: Yeah, I – I'd trust him to know what he was talking about and not put me in a position where I'd be in any sort of trouble.
Mr HARRINGTON: Did you, at the time you made the investment, expect that you ought to have read the entire prospectus and understood every part of it before you made the investment? Or did you leave that to someone else to advise you on that?
Mr HOARE: Yeah, I probably took the slack way out and left it to someone to advise me.
Mr HARRINGTON: Would you think that if you had read the prospectus fully, that you would necessarily understand everything that was in the prospectus?
Mr HOARE: No, probably not.
Mr HARRINGTON: Okay. The loan that you took out, do you recall how much that was of your total personal wealth? As a proportion, was it 10 per cent, 100 per cent?
Mr HOARE: My personal wealth? As I say, I'm not quite sure of the total amount, but –
Ms RENTON: $21,000.
Mr HOARE: That's the total amount of the – yeah – probably about – about close to – yeah – being pretty much all I have, yeah.
Mr HARRINGTON: So at the time you made the investment, what was your situation? Did you own a home?
Mr HOARE: Buying.
Mr HARRINGTON: Buying a home?
Mr HOARE: Yeah.
Mr HARRINGTON: How much was the mortgage on that home?
Mr HOARE: It was – at the time?
Mr HARRINGTON: Roughly.
Mr HOARE: About – between 95 and 100,000.
Mr HARRINGTON: How much is the home worth roughly?
Mr HOARE: It's probably up around 115 to 120 – be 120 at that time.
…
Mr HARRINGTON: So do you have much spare money after you pay your mortgage and your loan and your normal household bills?
Mr HOARE: Yeah. It sort of varies, depending on the amount of work.
Mr HARRINGTON: Do you think that you can save much of that money? Do you have the capacity to save a lot?
Mr HOARE: Save? Not a lot, but – yeah – could – yeah – start getting a savings thing happening.
Mr HARRINGTON: So if it eventuated that you needed to repay this $21,000 from your own sources without any other income -
Mr HOARE: Mm.
Mr HARRINGTON: - you could easily afford that?
Mr HOARE: Easily afford? Probably have some sort of stress involved, but I'd sort it out.
Mr HARRINGTON: So on your current situation that you had faced at the time that you took the investment out, that was the case. If you'd continued in that situation, with your job, with your mortgage, with your personal loan and your normal commitments of living in a house -
Mr HOARE: Mm.
Mr HARRINGTON: - you would be able to repay that loan in the term that they wanted it repaid without causing you to lose any of your benefits?
Mr HOARE: No, probably not. Not – not without sort of doing extra.
Mr HARRINGTON: Okay. Did you tell that to Mr Campbell at the time you made the investment?
Mr HOARE: No. Anthony was pretty aware, I think, of my financial situation. He did my tax.
…
Mr HARRINGTON: At that time, would you say you trusted Mr Campbell to take into account what he knew about you before he made the recommendation to buy Rydal Hard Rock?
Mr HOARE: Yeah, I think so. Because if he – if he – I'm pretty sure if he didn't think – you know, didn't think I would be able to manage it in any way he wouldn't have sold it.
…
Ms RENTON: And when did Mr Campbell tell you how much he was going to get as commission?
Mr HOARE: He didn't say how much exactly. He just said he takes a commission and – and – yeah.
Ms RENTON: When did he tell you that?
Mr HOARE: At the time we were signing the papers.
…".

Mr Hoare was then shown various documents related to his investment in the Rydal Hard Rock Joint Venture, including an Application Form for an Interest in that project (dated 23 June 1998), a Loan Application Form (dated 26 June 1998, in which his gross salary is stated as $42,000), a Loan Contract (dated 25 June 1998, for a loan amount of $21,733), and an Indemnity Agreement (dated 22 June 1998), and he confirmed that he had signed those documents. He was also shown a document entitled "Letter of Instruction" and a document entitled "THE RYDAL HARD ROCK JOINT VENTURE DISCLOSURE STATEMENT" (whose terms were identical to the corresponding documents in relation to Mr and Mrs Adamson set out in paragraph 9 above), and he confirmed that he had signed those documents (which were both dated 26 June 1998).

A written statement of Derek Hoare, dated 13 May 1999, appears in the T documents (T48). That statement is as follows:
"…
2.On 18 November 1998, I attended at the offices of ASIC. I was then asked a series of questions in relation to Anthony Campbell.
3.At the time I felt threatened and intimidated by the examination. I felt that I was being accused of doing something wrong. In this environment I found the questions confusing. I could not think clearly.
4.I saw Mr Campbell in or about late June 1998 because I wanted him to advise me on certain investments.
5.I have read the attached document which outlines Mr Campbell's standard procedure when providing investment advice to clients. Mr Campbell followed that procedure at our meeting. I do not now recall the particulars of all the information given to me.
6.After reviewing a number of different investment projects I decided that I wanted to invest in the Rydal Hard Rock Joint Venture.
7.Mr Campbell told me that if I wanted to invest in this project then he would receive a commission. He did not tell me an exact figure.
8.Mr Campbell showed me a document headed 'Disclosure Statement' which outlined the basis of how his commission is calculated. I read, understood and signed the document.
9.Mr Campbell also showed me a Letter of Instruction in relation to the restricted nature of his advice and limited licence. I also read and understood and signed this document.
10.During the meeting Mr Campbell, while going through the prospectus, explained to me the risks of the project and the risks associated with the Australian Taxation Office (ATO). He told me that I should look at the prospectus in detail before making a decision. I was particularly interested in the risks associated with the ATO as my brother had had some trouble with what I understood to be similar projects.
11.I asked Mr Campbell a number of questions in relation to these risks. He told me that there is a possibility that the tax deduction could be disallowed, and I may have to refund the deduction with interest and pay additional penalties.
12.However, Mr Campbell also showed me a legal opinion in the prospectus which supports the view that the ATO will allow the deductions. I understood from this that the project met the ATO's requirements. In light of this opinion I was prepared to take the risk of the deductions being disallowed."

A written statement of the applicant, dated 4 May 1999, regarding Derek Hoare also appears in the T documents (T29). That statement is as follows:
"1.I have known Mr Hoare since 1980 when we went to school together from Year 9 in Port Hedland.
2.In or about late 1996 Mr Hoare contacted me by telephone to ask me whether I would prepare his and his de facto's tax returns.
3.I agreed to undertake this work and made an appointment to see him and his de facto.
4.From this time onwards I have prepared Mr Hoare and his de facto's tax returns at the end of each financial year.
5.Over a period of about 18 months I had numerous discussions with Mr Hoare in relation to investing in various projects.
6.Mr Hoare had told me that he was looking to sort out his finances and asked me whether I could help him in this regard.
7.Mr Hoare and I often talked about options such as negative gearing shares and/or property and agricultural investments.
8.Mr Hoare had told me that he had been speaking with some of his friends who had invested in agricultural products, including his brother and that he was interested in finding out whether that type of investment would suit him.
9.Mr Hoare then made an appointment to see me in or about late June 1998. I went to Mr Hoare's house in Kewdale to discuss the projects.
10.Through prior discussions with Mr Hoare and having prepared his tax returns for the last 3 years I already had a knowledge of Mr Hoare's financial status.
11.I reviewed Mr Hoare's financial position at the time to confirm my understanding and to work out whether his position had changed. This included working out in detail his assets, income and commitments. I followed the standard procedure set out in my Statement in relation to Adamson.
12.Mr Hoare told me that he was on an income of approximately $42,000 per annum. Mr Hoare has a wife and a young child. Mr Hoare was employed by Western Power as an electrician. He had been in that job for approximately four years. As far as I can recall Mr Hoare had a significant mortgage over his property but no other debts.
13.Mr Hoare and I then discussed his short-term and long-term position and goals. Mr Hoare told me that he did not really have any long-term financial goals or investment strategy, but that he was interested in a short-term investment with a relatively quick return.
14.We then looked at a number of options that may fit Mr Hoare's financial needs. At the time I showed him three products being Barkworth Olive Groves Project No.2, the Rydal Hard Rock Joint Venture and Banalasta Natural Oil Joint Venture Project No.1 and No.2.
15.Of those options Mr Hoare was particularly interested in the Rydal Hard Rock Joint Venture as it filled Mr Hoare's objectives of a short-term project relatively quick returning.
16.The Barkworth Olive Groves Project was long-term (20 years) with no projected income until the end of the third year. The Rydal Hard Rock Joint Venture Project was a seven year project with projected income in the first year. The Banalasta Projects were also longer terms.
17.We then went through the prospectus in detail and I explained the risks involved and the contents of the prospectus. I had previously given Mr Hoare a copy of the prospectus about three weeks prior to our meeting. He told me that he had looked over the prospectus.
18.Mr Hoare then asked me some questions in relation to the venture as to parts and contents of the prospectus including implications for tax, paying tax on the profit, ongoing commitments and risks involved.
19.Mr Hoare and I spent some time discussing possible tax implications of the project as Mr Hoare's brother had had some trouble with an investment scheme in relation to the ATO disallowing some deductions. Because of what had happened to his brother there was a lot of discussion about the tax effect. I advised Mr Hoare of the risks in detail.
20.Mr Hoare then had some discussion with his de facto who was present at the meeting.
21.Mr Hoare then told me that he wanted to invest in the Rydal Hard Rock Joint Venture.
22.I explained to Mr Hoare that I would receive a commission if he agreed to invest in the project.
23.I showed him the Disclosure Statement which outlines how my commission is calculated.
24.Mr Hoare said he knew I would be receiving a commission and that he wasn't really interested in how it was calculated.
25.I told Mr Hoare that I was required to make him aware of my commission and how it was calculated whether he was interested in it or not.
26.Mr Hoare read the document and signed accordingly.
27.Since this time I have continued to prepare Mr Hoare's tax returns."

Noel Mackey

An examination of Noel Mackey was conducted, pursuant to s19 of the ASIC Act, by Ms E Renton and Mr G Harrington at the respondent's Perth offices on 12 November 1998. A transcript of that examination appears in the T documents (T14). In his examination Mr Mackey said that he first met the applicant when, on the recommendation of another person, he consulted him about the preparation of his 1996/97 income tax return. He said that at that consultation he (Mackey) raised the subject of investing and asked the applicant for some general advice. The examination continued as follows:
"Ms RENTON: And at that stage, did he ask you any questions in relation to what sort of investment you had in mind or?
Mr MACKEY: I'm a pretty conservative sort of person so I said, 'I don't want to do anything illegal' was the first thing and 'I don't want to risk a lot of money' was the second thing. Because this was my, if you like, my first venture into anything like that, I wanted to by – I guess I wanted an iron-clad guarantee, but that's me, so.
Ms RENTON: So you told him at that stage that you didn't want to risk your money, that you wanted a safe investment. Would that be fair?
Mr MACKEY: I did – yeah, that would be a fair comment.
Ms RENTON: Do you remember using a word like 'safe' or -
Mr MACKEY: I can't remember that, no.
Ms RENTON: Or do you believe that you would've said -
Mr MACKEY: I pretty well gave the indication that I was conservative and I would do that as a natural course of anything risking my money if you like. So whether I used the word 'safe', I couldn't tell you.
…
Ms RENTON: So if I could recap, you've had your tax return done -
Mr MACKEY: Yep.
Ms RENTON: - you've brought up the question of investment -
Mr MACKEY: Yes.
Ms RENTON: - have indicated that you are conservative and so you want an investment that would be in line with that – an investment strategy in line with that -
Mr MACKEY: Yes.
Ms RENTON: - and Mr Campbell indicated that he had some experience in advising in investments -
Mr MACKEY: Yes.
Ms RENTON: Would that be fair?
Mr MACKEY: That'd be a fair comment.
Ms RENTON: And that he would contact you, what? – later when he knew of something?
Mr MACKEY: Yes. I think it was maybe February or March some time that he contacted me.
Ms RENTON: He then contacted you in February and March. And did he telephone you?
Mr MACKEY: Yes, he did.
Ms RENTON: And what happened as a result of that telephone call?
Mr MACKEY: I made an appointment to see him in regard to that.
Ms RENTON: Right.
Mr MACKEY: I then went to the appointment."

Mr Mackey said that, at that meeting, the applicant presented him with 3 investment options, namely, the Rydal Hard Rock Joint Venture, an olive groves project and a eucalyptus plantation project. He said that the applicant was "leaning towards" the olive groves project but that he chose the Rydal project instead because it did not require as much money to be "put upfront" and it seemed to be the safest, or least risky, of the 3 options.

During his examination Mr Mackey was shown various documents related to his investment in the Rydal Hard Rock Joint Venture, including an Application Form for an Interest in that project, a Loan Application Form (in which his gross salary is stated as $40,000), a Loan Contract (for a loan amount of $21,733), and an Indemnity Agreement, all of which were dated 18 June 1998, and he confirmed that he had signed those documents. He was also shown a document entitled "Letter of Instruction" (whose terms were identical to the corresponding document in relation to Mr and Mrs Adamson set out in paragraph 9 above) and he confirmed that he had signed that document (which was also dated 18 June 1998). Mr Mackey's examination then continued as follows:
"Mr HARRINGTON: The final paragraph in that letter, could you just take a look at that and see whether or not – and tell me whether or not you agree that that was your circumstances at the time?
Mr MACKEY: I guess so, yes.
Ms RENTON: If I could just ask you a question. Is that in line with your earlier instructions that you wanted a conservative investment?
Mr MACKEY: Pretty conservative. Yeah.
Ms RENTON: Do you see any conflict?
Mr MACKEY: I do see some risks. Yeah.
Ms RENTON: I mean, did you sign this knowing that that was what your instructions were? Did you read it?
Mr MACKEY: I read – I guess when you read everything-
Ms RENTON: Yes.
Mr MACKEY: - it gets a little bit confusing really. Anthony gave that to me and I quickly gave it a read and then I signed it. Yes.
Ms RENTON: So did you sign it without really considering what it was saying?
Mr MACKEY: I did. Yes.
Mr HARRINGTON: So did you expect and ask for advice from Mr Campbell that was appropriate to your needs and circumstances?
Mr MACKEY: I think – yes.
Mr HARRINGTON: So you didn't at any stage say to him: 'I'm happy to get advice from you that is not appropriate to my needs.'?
Mr MACKEY: Why would I say that?
Mr HARRINGTON: Well, I'm just -I'm not sure.
Mr MACKEY: Yes. My understanding is that this was, you know, it's legalistic language and I'm not very good with legalistic language.
Ms RENTON: Did you ask what the form meant or was it a matter of perhaps, 'Sign this form. You've got to sign it to do this.'?
Mr MACKEY: No. I did question to a point – 'What am I signing?' And he said that, 'This is an indication that you are interested in investing and not primarily – your primary concern is not to seek tax relief.'
Ms RENTON: Okay.
Mr HARRINGTON: Did he say anything else about what the letter of instruction was about?
Mr MACKEY: No.
Mr HARRINGTON: Did he explain to you that final paragraph?
Mr MACKEY: No.
Mr HARRINGTON: Did you understand that you were getting limited advice?
Mr MACKEY: I presumed I was getting limited advice.
Mr HARRINGTON: Why did you presume that?
Mr MACKEY: Well, I'm only speaking to one guy. I mean if –
Mr HARRINGTON: When I say 'limited advice' I'm not meaning limited to one adviser.
Mr MACKEY: Oh, right.
Mr HARRINGTON: Were you expecting to get from Campbell very limited advice or any sort of limitation on the advice that he was going to give you, or did you expect -
Mr MACKEY: I didn't know what I expected, really. As I say, that was my first jump into the big pond, if you like.
Ms RENTON: If there were risks associated with any investment you're going to make, would you expect to be told what they were?
Mr MACKEY: I would hope that I would be told, yes.
Ms RENTON: Would you expect they would be told in the normal course of -
Mr MACKEY: Yes.
Ms RENTON: And were the risks involved in this particular venture explained to you?
Mr MACKEY: I guess it was a case of, yes, there are risks like in any investment, and I guess it was down that sort of track. Not this particular one – no.
Ms RENTON: This particular investment, were the risks associated with this investment explained to you?
Mr MACKEY: No.
Mr HARRINGTON: Did Mr Campbell say anything to you in the course of giving you the advice and causing you to sign these documents – did Mr Campbell say anything to you about risk – any risk?
Mr MACKEY: I believe he did.
Mr HARRINGTON: Can you recall -
Mr MACKEY: But I can't be specific about it, no. I mean, if you've asked for someone an investment, they will always tell you that there's a risk.
Mr HARRINGTON: Did he say that in this case?
Mr MACKEY: I can't recall, but I would hope he had – and being conservative, if he'd said, 'There's absolutely no risk', then the red light would have gone on and I would've questioned it I think.
Mr HARRINGTON: You were comfortable, were you, at the time when he gave you the advice that you were purchasing an investment that suited your conservative nature?
Mr MACKEY: Yes.
…
Ms RENTON: In relation to the tax effective part of the investment, was it explained to you – the tax refund relating for (sic) the purchase of the investment was, as I understand it, going to pay the first instalment of the loan. Is that correct?
Mr MACKEY: Yes, that's correct. Yes.
Ms RENTON: Okay. Was it explained to you that the tax deduction wasn't certain?
Mr MACKEY: No.
Ms RENTON: Was it explained to you that the Tax Office could disallow the tax deduction?
Mr MACKEY: That was my fear and I did query that.
Ms RENTON: And what was said?
Mr MACKEY: From – what was said?
Ms RENTON: What was Mr Campbell's response?
Mr MACKEY: His response at this stage was that, 'It has been approved by the Taxation Office that you would get a tax relief.'
Ms RENTON: Are you certain that he said to you, 'It's been approved by the Taxation Office', or words to that effect?
Mr MACKEY: Words to that effect. I mean, I'm saying that but he could have generalised it, you know what I mean.
Ms RENTON: But was his response sufficient to reassure you that the tax deduction was certain?
Mr MACKEY: Yes …
…
Mr MACKEY: What you're asking, was it an iron clad guarantee from the Taxation Office, at that stage, under my belief, that that would go through?
Mr HARRINGTON: Yes.
Ms RENTON: Yes.
Mr MACKEY: I understood that to be the case.
…
Ms RENTON: Did Mr Campbell encourage you to read the prospectus?
Mr MACKEY: I think he did. I can't be sure.
Ms RENTON: Did he point out any of these special risks that are in the prospectus?
Mr MACKEY: No, he didn't.
Mr HARRINGTON: Did he point out and lead you to read any specific part of the prospectus?
Mr MACKEY: No."

Later in his examination Mr Mackey was questioned about his financial circumstances. He said that he is employed as a photocopier technician with Canon and that his gross salary (including monthly "bonuses") is about $42,500. As regards assets, Mr Mackey said that he owns a house (with a mortgage debt of approximately $53,000) and has a small amount of savings and a credit card debt of about $1,000, but no stocks or shares. He said that the applicant did not ask him any questions regarding his assets or liabilities or living expenses. Asked whether he would have sufficient savings to make the first loan repayment instalment of approximately $7,000 required under the Loan Contract he entered into for the purpose of investing in the Rydal Hard Rock Joint Venture, in the event that the expected tax deduction was disallowed by the Australian Taxation Office, Mr Mackey replied: "No". Later, he said that the prospect of having to repay an amount of $7,000 or $8,000 would be "devastating".

Finally, Mr Mackey was referred to the document entitled "THE RYDAL HARD ROCK JOINT VENTURE DISCLOSURE STATEMENT" (whose terms were identical to the corresponding document in relation to Mr and Mrs Adamson set out in paragraph 9 above) and was questioned as follows:
"Ms RENTON: Just in relation to the commissions that he received, did he tell you about the commissions he received?
Mr MACKEY: No.
Ms RENTON: In relation to setting the project -
Mr MACKEY: Project up?
Ms RENTON: - the project?
Mr MACKEY: No.
Ms RENTON: Now, you did in fact sign a document which – I'm sorry – this is one, two, third document from the back. Have you found it?
Mr MACKEY: One, two three. Yes.
Ms RENTON: Which tells you what commission that he receives. Did you read that document before you signed it?
Mr MACKEY: Actually, I didn't read it. No.
Ms RENTON: Sorry?
Mr MACKEY: I did not read it.
Ms RENTON: Did he explain to you that this is a document that tells you that he gets commission for selling you the investment?
Mr MACKEY: No. Now that you're mentioning it I can see it plainly before my eyes.
Ms RENTON: Yes, But the thing is, when he asked you to sign this document, did he say, 'This document explains what commission I receive'?
Mr MACKEY: No.
Mr HARRINGTON: When – sorry.
Ms RENTON: Sorry. Did he explain to you that there is a relationship between the company for which he is an authorised representative, a proper authority holder, and the company selling the -
Mr MACKEY: He didn't say that, no, but I presumed. I – I had a hunch, if you like."

A written statement of Noel Mackey, dated 12 May 1999, appears in the T documents (T45). That statement reads:
"…
2.On 18 November 1998 I attended the offices of the Australian Securities Investment Commission (sic). I was asked a series of questions in relation to Anthony Campbell. At the time I felt threatened and intimidated. I could not think clearly and was often confused by the nature of the questions asked.
3.At one point I felt that I was being accused of some wrong doing in relation to the signing of a cheque for the loan application fee. This had the effect of distracting me even further.
4.I found that I could not recall the answers to a number of questions asked. When I told Ms Renton and Mr Hamington (sic) that I did not remember, the questions would then be put to me again in a different way. I found this confusing.
5.Mr Campbell and I had discussed various investments at prior meetings and in this context I asked him to telephone me to let me know when the projects for 1998 were available. In or about early June 1998, Mr Campbell telephoned me to make an appointment to see him regarding certain investments as I had requested.
6.Mr Campbell and I did not discuss the investments on the telephone. I made an appointment for my wife and I to see him at his offices shortly after.
7.After reviewing a number of projects and Mr Campbell explaining the benefits and risks of each, I chose the Rydal Hard Rock Joint Venture to invest in as I believed it best suited my needs. I made my own decision to invest in Rydal Hard Rock Joint Venture. It was not a recommendation from Mr Campbell.
8.I do not recall whether or not Mr Campbell went through the prospectus with me but I believe that he referred to it at the meeting.
9.I do not remember the particulars of the advice given in relation to the risks involved with the project and the ATO, but I do remember Mr Campbell going through them.
10.Again, I cannot recall the details of Mr Campbell's commission but I do remember Mr Campbell reviewing the documentation. I remember that I read, understood and signed the documents at the time. I believe that part of these documents was a Disclosure Statement outlining commission particulars. I also believe that I read and understood the Letter of Instruction before signing. As a matter of practice I do not sign documents without reading and understanding them first.
11.If there was anything I did not understand I would have asked Mr Campbell."

A written statement of the applicant, dated 4 May 1999, regarding Noel Mackey also appears in the T documents (T27). That statement reads:
"1.I first met Mr and Mrs Mackey through a referral from their church minister who is an existing client of mine and has been for many years.
2.In or about July 1997 Mr and Mrs Mackey came to see me and asked me if I could prepare their tax returns.
3.Mr and Mrs Mackey's financial situation was complicated because it involved Mrs Mackey earning an income from the church which was not taxable. Mr and Mrs Mackey asked me to provide advice as to how this affected their entitlements to social security and other government benefits including tax rebates.
4.After I had provided this advice and finished Mr and Mrs Mackey's tax returns, Mr Mackey asked me about a number of different investments including negative gearing.
5.I explained the concept of what negative gearing was in relation to property and shares. Mr Mackey asked me whether there were any alternatives.
6.I told Mr and Mrs Mackey that there were a number of other alternatives involving various agriculture investment projects and showed them a copy of the 1997 Northern Rivers T-Tree (sic) Project Prospectus as an example. I explained to them what was involved with such projects including possible returns and associated risks. I told Mr and Mrs Mackey that I was authorised to advise them on these projects and explained the restrictive nature of my licence.
7.Mr and Mrs Mackey asked me to let them know when the following years projects were available as they were interested in these projects as alternative investments.
8.I cannot recall whether I called Mr and Mrs Mackey or they called me, but we spoke in or about early June 1998 and I let them know that I had a number of projects on offer. I did this because Mr and Mrs Mackey had asked me to telephone them and let them know when the projects were available.
9.Mr and Mrs Mackey said that they were interested in finding out more about the projects and made an appointment to see me at my office to discuss the same.
10.I followed the standard procedure outlined in my statement in relation to Adamson. I follow this procedure as a matter of practice.
11.At the beginning of the meeting, Mr and Mrs Mackey watched a video on Barkworth Olive Groves Project No.2.
12.I asked Mr and Mrs Mackey what their financial position was at the time. As far as I can recall it was as follows:
(a) Equity in house;
(b) Mortgage;
(c)Mrs Mackey was earning the equivalent of $250 per week which was being paid directly into the mortgage;
(d)Mr Mackey was earning approximately $40,000 at Canon. Mr Mackey had been in the same job for a long time and expected this would continue. He was about 36 with two small children.
13.I asked Mr and Mrs Mackey what their financial goals were.
14.They told me their goals were:
(a)Low risk:
(b)Long-term goal was to own a second home;
(c)Short-term goal was to accumulate enough cash for a deposit on second rental property;
(d)They did not want to invest in shares.
15.I then showed Mr and Mrs Mackey a number of investment alternatives. These included the Barkworth Olive Groves Project No. 2, Banalasta Oil Plantation Project No. 1 and the Rydal Hard Rock Joint Venture.
16.I went through each prospectus. Mr and Mrs Mackey showed interest in the Rydal Hard Rock Joint Venture ('the Rydal Joint Venture').
17.I then took them through the Rydal Joint Venture prospectus in detail.
18.In accordance with my standard practice I highlighted the risks for Mr and Mrs Mackey.
19.I told Mr Mackey that the ATO may not allow the deductions and that they may reclaim that tax deduction. I also explained other consequences including the risk of personal culpability.
20.Mr and Mrs Mackey wanted to invest in Rydal Joint Venture because it met their goals as it is a short-term project, with no commitment in Year 2. Mr and Mrs Mackey wanted a quick returning project.
21.At the meeting I gave Mr Mackey the Disclaimer which confirms that they understand that I have a restricted licence and that the advice provided is on a 'limited advice basis'.
22.At the meeting before signing any documentation I told Mr Mackey that I would be receiving a commission if he decided to sign up on the project.
23.I explained the schedule of commissions and pointed out that I was unable to give him an exact figure because it depended on the volume of sales.
24.Mr Mackey read the Disclosure Statement and then signed it.
25.The Disclaimer was also given to Mr Mackey and explained. Mr Mackey read and signed it."

Timothy Dwyer

An examination of Timothy Dwyer was conducted, pursuant to s19 of the ASIC Act, by Ms E Renton and Mr G Harrington at the respondent's Perth offices on 18 November 1998. A transcript of that examination appears in the T documents (T17). In his examination Mr Dwyer said that the applicant is his accountant and has prepared his income tax returns for the last 2 years. He confirmed that he had made a "long-term investment" through the applicant. Asked how he came to make that investment, Mr Dwyer said that when he went to see the applicant about his 1996/97 tax return in about October/November 1997 he told him that he wanted an investment "for when we [ie he and his wife] get older", and that the applicant said that he had some "plans coming up" and he would give him a ring when they eventuated. Subsequently Mr Dwyer and his wife went to the applicant's office where they watched a video presentation regarding the "Barkworth Olive Groves Project No 2" and were given the relevant prospectus by the applicant. The examination continued as follows:
"Ms RENTON: So you went into the office and watched the video?
Mr DWYER: Yeah.
Ms RENTON: And he gave you a prospectus at the same time, correct?
Mr DWYER: Yeah.
Ms RENTON: And you signed up on the same day?
Mr DWYER: Yeah, same day.
Ms RENTON: Okay. So before you signed up, did he tell you that there were any risks associated with the investment?
Mr DWYER: Not that I can recall.
Ms RENTON: You took out a loan to pay for the investment, is that correct?
Mr DWYER: No, we just gave him the money when it was all signed up.
…
Mr HARRINGTON: How much money did you give him?
Mr DWYER: 300 – ".

As regards the applicant's communications with the abovenamed persons in relation to either Rydal, Barkworth or Banalasta (as the case may be), the material before the Tribunal does not support the proposition that those communications were in the nature of "hawking" those securities by going "from place to place", or telephoning persons "at different places", issuing invitations to subscribe for or buy those securities or offering those securities for subscription or purchase, as required by s1078(1). On the contrary, in each case the relevant communications were made in response to a request by the person concerned for investment advice, and there is nothing in the material before the Tribunal to suggest that any of those communications would otherwise have been made.
Accordingly, the Tribunal finds that the applicant's communications with Robyn Adamson, Noel Mackey, Timothy Dwyer and Michael Hooper in relation to investing in Rydal, Barkworth or Banalasta (as the case may be) did not involve a contravention by him of s1078(1) of the Law.
As regards the applicant's communications with Robyn Adamson and Michael Hooper in relation to Federation Resources shares, the material before the Tribunal does not establish to the Tribunal's satisfaction either that the applicant issued an invitation to each of them to subscribe for or buy such shares or offered such shares to each of them, for subscription or purchase, on the one hand, or that he went from place to place or telephoned each of them at different places for that purpose, on the other. Instead, according to the material before the Tribunal, in the case of Robyn Adamson no discussions took place between her and the applicant regarding her subscribing for or buying shares in Federation Resources, and in the case of Michael Hooper the applicant merely made him aware of an opportunity to buy such shares and did not make any recommendation or offer any advice to him that he should buy such shares.
Accordingly, the Tribunal finds that the applicant's communications with Robyn Adamson and Michael Hooper in relation to shares in Federation Resources did not involve a contravention by him of s1078(1) of the Law.
Is there reason to believe that the applicant has not performed "efficiently, honestly and fairly" the duties of a representative of a dealer?
Pursuant to para (f) of s829 of the Law the respondent (and, on review, the Tribunal) is authorised to make a banning order against a person if it "has reason to believe that he or she has not performed efficiently, honestly and fairly the duties of … a representative of a dealer; …". It is common ground in the present case that, at all material times, the applicant was a "representative of a dealer" within the meaning of para (f) of s829.
The meaning of the phrase "efficiently, honestly and fairly" was considered by the Supreme Court of New South Wales (Young J), in the context of former legislation (namely, s60(1)(b) of the Securities Industry (New South Wales) Code 1980) which was equivalent in substance to s829(f) of the Law, in Story v National Companies and Securities Commission (1988) 13 NSWLR 661. His Honour said (at 672):
"Thus I turn to the phrase 'efficiently, honestly and fairly'. In one sense it
is impossible to carry out all three tasks concurrently. To illustrate, a police
officer may very well be most efficient in control of crime if he just shot every
suspected criminal on sight. It would save a lot of time in arresting, preparing
for trial, trying and convicting the offender. However, that would hardly be
fair. Likewise a judge could get through his list most efficiently by finding for
the plaintiff or the defendant as a matter of course, or declining to listen to
counsel, but again that would hardly be the most fair way to proceed.
Considerations of this nature incline my mind to think that the group of
words 'efficiently, honestly and fairly' must be read as a compendious
indication meaning a person who goes about their duties efficiently having
regard to the dictates of honesty and fairness, honestly having regard to the
dictates of efficiency and fairness, and fairly having regard to the dictates of
efficiency and honesty.
To take the contrary view, as the defendant Commission did is to read
'and' as 'or'. That proposition, of course, runs contrary to Blackburn J's
famous dictum that 'the proposition that "and" can sometimes mean "or" is
true neither in law nor in English usage': Re Licensing Ordinance (1968) 13
FLR 143 at 147. There are, of course, cases where in a statute one does
construe 'and' as 'or', but I cannot see how, in the instant case, those
exceptions apply as there is no absurdity or unintelligibility in reading 'and'
as 'and', or giving the word some dispersive effect. However, in the long run
it does not seem to me to much matter whether one reads the words
cumulatively or disjunctively, because unless a licence holder possesses the
three attributes whether as one package or as three separate parcels, the
Commission can revoke his licence.
So far as 'efficient' is concerned, someone is an efficient person or
performs his duties efficiently if he is adequate in performance, produces the
desired effect, is capable, competent and adequate: see, eg, Spotts v Baltimore
& Ohio Railroad Co 102 F (2d) 160 at 162 (1939). Although that definition
comes from a case dealing with handbrakes on railway cars, it seems to me
that it can be applied to the word used in the current statute.
I do not think I need dwell on the meaning of the word 'honestly' except
to remark that it is significant that it is used in conjunction with the word
'fairly'. Those words tend to give the flavour of a person who not only is not
dishonest, but also a person who is ethically sound…".

Later his Honour said (at 674) that the "ordinary construction" of the phrase "has reason to believe" is "that the person in question had the relevant belief and there were reasonable grounds or cause for that belief". He went on to say (at 676-677):

"What the section requires is the Commission to formulate a belief about the
performance of the functions of the licensee. If that belief is that he is
inefficient having regard to honesty and fairness, unfair having regard to the
matters of efficiency and honesty, or dishonest having regard to the matters
of efficiency and fairness, then the Commission may determine that if the
facts remain the same after a s62 hearing, it may well revoke the dealer's
licence."

Finally, his Honour expressed the test of inefficiency as follows (at 679):

"…does the relevant conduct show that the performance
by the plaintiff of his functions falls short of the reasonable standard of
performance by a dealer that the public is entitled to expect …?"

Submissions and Findings – s829(f) of the Law

Mr Gething (for the respondent) made submissions in support of the proposition that the applicant had not performed efficiently, honestly and fairly the duties of a representative of a dealer, within the meaning of s829(f) of the Law, on the basis of paragraphs 5, 8, 12, 16 and 19 of the grounds relied upon by the respondent for the making of a banning order against the applicant (see paragraph 34 above). Mr de Kerloy (for the applicant) made submissions to the effect that none of those grounds was made out on the evidence before the Tribunal and that s829(f) of the Law was not satisfied in this case.
The Tribunal will now make separate findings in respect of the applicant's dealings with each of Robyn Adamson, Derek Hoare, Noel Mackey, Timothy Dwyer and Michael Hooper. For the purpose of making such findings the Tribunal, for the reasons indicated in paragraph 49 above, proposes to attach greater weight to the evidence given by each of the abovenamed persons in their examination pursuant to s19 of the ASIC Act than to the relevant unsworn written statements made by them or others (including the applicant).
Robyn Adamson
Although the Tribunal has already found (see paragraph 47 above) that the applicant did not contravene s851 of the Law in making a recommendation to Robyn Adamson and Malcolm Adamson in or about June 1998 that they each invest in Rydal, it finds that the applicant did not perform efficiently the duties of a representative of a dealer, within the meaning of s829(f) of the Law, in connection with the making of that recommendation. In particular, on the basis of Robyn Adamson's evidence at her examination pursuant to s19 of the ASIC Act (T15 – see paragraphs 8 and 9 above) the Tribunal finds that the applicant's meeting with her and Malcolm Adamson at which they signed the necessary documents for their investment in Rydal was of approximately 30 minutes' duration and that at that meeting the applicant:

provided them with a copy of the Rydal prospectus but did not advise or encourage them to read and thoroughly assess its contents before making a decision on whether or not to invest in that project;
did not emphasise to them the speculative nature of the Rydal project and the risks associated with an investment therein, as disclosed in the Rydal prospectus;
did not fully explain to them the nature of an investment in Rydal, including the duration of the project, their possible loan repayment obligations, and its likely lack of liquidity; and
presented them with the relevant documentation for signature, including a document entitled "Letter of Instruction" (see paragraph 9 above) and failed to ensure that Robyn Adamson understood the contents of that document before she signed it.

In the Tribunal's opinion, having regard to the abovementioned findings, the applicant's performance of his duties in relation to Robyn Adamson and Malcolm Adamson fell short of "the reasonable standard of performance by a [representative of a] dealer that the public is entitled to expect" (Story, at 679).

Accordingly, the Tribunal finds that, in relation to the applicant's recommendation to Robyn Adamson and Malcolm Adamson in or about June 1998 that they each invest in Rydal, he did not perform "efficiently, honestly and fairly the duties of … a representative of a dealer", within the meaning of s829(f) of the Law, in that he did not perform those duties "efficiently".
Derek Hoare
The Tribunal has already found (see paragraphs 50 and 51 above) that the applicant did not have a reasonable basis for making a recommendation to Derek Hoare in June 1998 that he invest in Rydal and that the applicant thereby contravened s851(1) of the Law. On the basis of that finding alone, the Tribunal also finds that the applicant, in the same circumstances, did not perform "efficiently, honestly and fairly the duties of … a representative of a dealer" within the meaning of s829(f) of the Law, in that he did not perform those duties "efficiently".
Noel Mackey
The Tribunal has already found (see paragraphs 56 and 77 above) that the applicant, in making a recommendation to Noel Mackey in or about June 1998 as a result of which he invested in Rydal, contravened both s849 and s851(1) of the Law. On the basis of that finding alone, the Tribunal also finds that the applicant at the same time did not perform "efficiently, honestly and fairly the duties of … a representative of a dealer" within the meaning of s829(f) of the Law, in that he did not perform those duties "efficiently".
Furthermore, on the basis of Mr Mackey's evidence in his examination pursuant to s19 of the ASIC Act (T14 – see paragraphs 16 and 17 above), the Tribunal finds that the applicant, in making the abovementioned securities recommendation to Mr Mackey:

did not sufficiently emphasise the speculative nature of the investment in Rydal and the risks associated with it, as disclosed in the relevant prospectus, including the risk that the Australian Taxation Office might disallow tax deductions claimed by investors in connection with their investment in that project; and
presented him with the relevant documentation for signature, including a document entitled "Letter of Instruction" (in identical terms to the document set out in paragraph 9 above) and failed to ensure that he understood the contents of that document before he signed it.

In those respects the applicant's performance, in the Tribunal's opinion, fell short of "the reasonable standard of performance by a [representative of a] dealer that the public is entitled to expect" (Story, at 679) and, accordingly, the Tribunal finds that he did not perform his duties "efficiently". On that basis also, therefore, the Tribunal finds that the applicant did not perform "efficiently, honestly and fairly the duties of … a representative of a dealer", within the meaning of s829(f) of the Law.
Timothy Dwyer

The Tribunal has already found (see paragraphs 60 and 61 above) that the applicant did not have a reasonable basis for making a recommendation to Timothy Dwyer in May 1998 that he invest in Barkworth and that the applicant thereby contravened s851(1) of the Law. On the basis of that finding alone, the Tribunal also finds that the applicant, in the same circumstances, did not perform "efficiently, honestly and fairly the duties of …a representative of a dealer" within the meaning of s829(f) of the Law, in that he did not perform those duties "efficiently".
Furthermore, on the basis of Mr Dwyer's evidence in his examination pursuant to s19 of the ASIC Act (T14 – see paragraphs 21-25 above), the Tribunal finds that, at the relevant meeting between the applicant and Mr Dwyer in May 1998, at which Mr Dwyer signed the necessary documentation for his investment in Barkworth, the applicant:

provided him with a copy of the Barkworth prospectus but did not advise or encourage him to read and thoroughly assess its contents before making a decision on whether or not to invest in that project;
did not advise him of the risks associated with the project, as disclosed in the prospectus, including the risk that the Australian Taxation Office might disallow tax deductions claimed by investors in connection with their investment in that project;
did not adequately advise him regarding the cost of the investment in Barkworth or explain to him that it was to be funded by his borrowing the sum of $26,385.00;
presented him with the relevant documentation for signature, including a document entitled "Option Form", and did not first explain to him the contents of that documentation in general and, in particular, make him aware that the abovementioned document constituted an application to Barkworth Finance Pty Ltd for a loan of $26,385.00 and a request for an indemnity.

In the Tribunal's opinion, having regard to the abovementioned findings, the applicant's performance, as outlined above, also fell short of "the reasonable standard of performance by a [representative of a] dealer that the public is entitled to expect" (Story, at 679) and, accordingly, the Tribunal finds that he did not perform his duties "efficiently". On that basis also, therefore, the Tribunal finds that the applicant did not perform "efficiently, honestly and fairly the duties of … a representative of a dealer" within the meaning of s829(f) of the Law.
Michael Hooper

The respondent's only submission, in relation to s829(f) of the Law, concerning the applicant's dealings with Michael Hooper was that the applicant had "not performed efficiently, honestly and fairly the duties of a representative of a dealer in that he did not explain to Mr Hooper the cost of the investment [in Banalasta] or that it was being purchased by way of a loan".
The Tribunal has had regard to the evidence given by Mr Hooper in his examination pursuant to s19 of the ASIC Act (T18 – see paragraph 27 above) and regards that evidence as somewhat vague and, for the reasons mentioned in paragraph 80 above, has doubts about its reliability. Accordingly, the Tribunal is not prepared to make a finding adverse to the applicant in relation to s829(f) of the Law on the basis of that evidence. Moreover, the written statements of Mr Hooper, his wife, Anne Kathleen Hooper, and the applicant (T47, T46 and T30 respectively – see paragraphs 30 and 31 above) suggest that such a finding should not be made. On the other hand, there is, in the Tribunal's assessment, insufficient information in the abovementioned material to enable it to make a positive finding that the applicant, in his dealings with Michael Hooper in relation to the latter's investing in Banalasta, did perform the duties of a representative of a dealer "efficiently, honestly and fairly". What the Tribunal is able to conclude, however, is that, on the material before it, it does not have reason to believe that the applicant did not perform "efficiently, honestly and fairly" the duties of a representative of a dealer in relation to the investment by Michael Hooper in Banalasta in June 1998.
The Tribunal finds, therefore, that, as regards the applicant's dealings with Michael Hooper in June 1998 as a result of which the latter invested in Banalasta, the ground set out in s829(f) of the Law is not made out.
Summary of Findings
The Tribunal's findings, in summary form, in this matter are as follows:

as regards Robyn Adamson's investment in Rydal, the applicant did not contravene s780(1), s849, s 851(1) or s1078(1) of the Law, but he did not perform "efficiently, honestly and fairly the duties of … a representative of a dealer", within the meaning of s829(f) of the Law;
as regards Robyn Adamson's purchase of shares in Federation Resources, the applicant did not contravene s780(1) or s1078(1) of the Law;
as regards Derek Hoare's investment in Rydal, the applicant did not contravene s849 of the Law, but did contravene s851(1) of the Law, and did not perform "efficiently, honestly and fairly the duties of … a representative of a dealer", within the meaning of s829(f) of the Law;
as regards Noel Mackey's investment in Rydal, the applicant did not contravene s1078(1) of the Law, but did contravene s849 and s851(1) of the Law, and did not perform "efficiently, honestly and fairly the duties of … a representative of a dealer", within the meaning of s829(f) of the Law;
as regards Timothy Dwyer's investment in Barkworth, the applicant did not contravene s849 or s1078(1) of the Law, but did contravene s851(1) of the Law, and did not perform "efficiently, honestly and fairly the duties of … a representative of a dealer", within the meaning of s829(f) of the Law;
as regards Michael Hooper's investment in Banalasta, the ground set out in s829(f) of the Law is not made out;
as regards Michael Hooper's purchase of shares in Federation Resources, the applicant did not contravene s780(1) or s1078(1) of the Law; and
as regards the applicant's dealings with Robyn Adamson, Noel Mackey, Timothy Dwyer and Michael Hooper collectively, the applicant did not contravene s1078(1) of the Law.

Is it appropriate that a banning order be made against the applicant?

Since the Tribunal has found that the grounds for a banning order contained in paras (d) and (f) of s829 of the Law have been established, the discretionary power to make such an order, conferred by s829, is enlivened in this case. The question therefore arises as to whether that discretionary power should be exercised adversely to the applicant and, if so, to what degree (as regards the nature and duration of the banning order).
The purpose for which Parliament conferred the power to make a banning order under s829 of the Law was explained by the Federal Court of Australia (Full Court) in Australian Securities Commission v Kippe (1996) 67 FCR 499 at 508:
"If the question is asked as to whether the purpose of a proceeding which may result in a banning order is for the imposition of a penalty, the short answer is that it is not for such a purpose. Although a banning order has the consequence of excluding an individual from acting as a representative of a dealer or investment adviser, the making of such an order is not designed to punish or impose a penalty on that person for an offence or contravention of any norm of conduct…
… Consideration of the grounds on which a banning order is made does not support the suggestion that the banning order is of a penal nature… Rather, the grounds set out in s829 clearly point to the conclusion that it is properly characterised as protective.
…
The immediate and direct legal effect intended by a banning order is not to impose a penalty or punishment on the person concerned, but to be preventive in that it removes a perceived threat to the public interest and to public confidence in the securities and futures industry by removing that person from participation therein.
Chapter 7.3 of the Law, the legislative context in which s829 is found, is concerned with persons engaged in the securities industry. Division 5 is concerned with the exclusion of persons from participation in the industry and to preserve the effective operation of the industry. The broad range of discretionary remedies supports the view that the purpose of the provision is to protect the operation of the industry by moulding the remedy to the particular circumstances of the individual case under consideration.
A proceeding which may result in a banning order under s829, in our view, is to be characterised, …, as 'protective' in purpose and not as one for the imposition of a penalty…".

Mr de Kerloy (for the applicant) submitted that, even if there were grounds, pursuant to paras (d) and (f) of s829 of the Law, to make a banning order against the applicant, the circumstances of the present case were not such as would warrant the making of such an order. In particular he submitted that there had been no element of dishonesty in the applicant's dealings with his abovementioned clients and that, rather than make a banning order against him, it would be more appropriate to require him, as a condition of his being permitted to continue to act as a representative of a dealer, to undergo suitable retraining and testing in order to raise the standard of his performance to an acceptable level.
Mr Gething (for the respondent) conceded that there was no evidence of "deliberate dishonesty in the sense of deceptive practices" on the part of the applicant in this case but submitted that the Tribunal could appropriately dispose of this matter on the "inefficiency" ground alone and need not make any findings of dishonesty on the part of the applicant. He submitted that it is in the public interest that the applicant be banned from acting as a representative of a dealer because his conduct in relation to his abovementioned clients demonstrates that he has no real appreciation of the minimum standards required of such a representative. Finally, as regards the appropriate form of such a banning order, Mr Gething referred to some authorities (by way of comparison with the present case) and suggested a number of options open to the Tribunal in terms of "crafting" an appropriate conditional banning order in this case.
The Tribunal notes that none of its abovementioned findings adverse to the applicant in relation to s829(f) of the Law, as regards his dealings Robyn Adamson, Derek Hoare, Noel Mackey and Timothy Dwyer, involved a finding of dishonesty – either in the narrow sense of fraud or deliberate deception, on the one hand, or in the broader sense of commercial immorality or impropriety or unethical conduct (see Re Kippe and Australian Securities Commission (1998) 16 ACLC 190 at 220), on the other. Those findings, instead, each involved a finding that the applicant's performance of his duties "[fell] short of the reasonable standard of performance by a dealer that the public is entitled to expect" (Story, at 679) – that is, a finding that the applicant did not perform his duties "efficiently", within the meaning of s829(f) of the Law. In addition to its findings of inefficiency against the applicant, the Tribunal has also found that the applicant contravened s849 of the Law (as regards Noel Mackey) and s851(1) of the Law (as regards each of Derek Hoare, Noel Mackey and Timothy Dwyer).
In those circumstances, and notwithstanding the absence of any finding of dishonesty on the part of the applicant, the Tribunal is of opinion that the abovementioned findings of inefficiency and contraventions of the Law on the part of the applicant are sufficiently serious to warrant the making of a banning order against him in the interests of protecting members of the public from the potential adverse financial consequences of his demonstrably inadequate securities advice practices, and of maintaining public confidence in the securities industry.
As regards the appropriate form or duration of such a banning order the Tribunal has had the benefit of hearing the abovementioned submissions made on behalf of the parties. Unfortunately, however, since the applicant chose not to give oral evidence in this matter the Tribunal has not had the benefit of observing him and hearing from him at first hand as regards, inter alia, his present thoughts in relation to the circumstances that resulted in the banning order being made against him on 28 May 1999 and his plans (if any) for participation in the securities industry in the future. Such evidence might have assisted the Tribunal to formulate an order precisely in accordance with the applicant's personal circumstances. Without the benefit of such oral evidence – a disadvantage, the Tribunal notes, that was also suffered by the officers of the respondent who conducted the hearing pursuant to s51 of the ASIC Act on 7 May 1999 (referred to in paragraph 6 above) – the Tribunal must determine, on the basis of the documentary material before it, an appropriate form of banning order in the applicant's case.
Having regard to the material before it and to the findings adverse to the applicant that it has made, the Tribunal is of opinion that a banning order of 2 years' duration is appropriate in this case. That was, of course, the duration of the banning order made by the delegate of the respondent on 28 May 1999. The banning order made by the delegate was expressed to commence from 18 March 1999 – being the date on which the applicant ceased to hold a "proper authority" from Barkworth Securities Pty Ltd. That date of commencement, in the Tribunal's opinion, was also appropriate. The Tribunal concludes, therefore, that the decision under review was the correct or preferable decision.
Decision
For the above reasons, the Tribunal affirms the decision under review.

I certify that the 120 preceding paragraphs are a true copy of the reasons for the decision herein of Associate Professor S D Hotop, Deputy President
Mr R D Fayle, Senior Member
Signed:
.....................................................................................
Associate
Dates of Hearing  14 & 15 September 2000
Date of Decision  16 March 2001
Counsel for the Applicant        Mr M de Kerloy and Ms K Bennett
Solicitor for the Applicant         Mony de Kerloy
Counsel for the Respondent    Mr M Gething
Solicitor for the Respondent    Regional General Counsel for Western Australia, Australian Securities and Investments Commission