Grubisa and Australian Securities and Investments Commission
[2023] AATA 3328
•10 October 2023
Grubisa and Australian Securities and Investments Commission [2023] AATA 3328 (10 October 2023)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2022/2728-2729
Re:Dominique Eva Grubisa
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Deputy President Bernard J McCabe
Date:10 October 2023
Place:Sydney
The reviewable decisions are set aside and in substitution it is decided the applicant should not be banned under either s 920A of the Corporations Act or s 80 of the NCCP Act.
............................[SGD]............................................
Deputy President Bernard J McCabe
CATCHWORDS
CORPORATIONS - banning order - whether applicant should be banned from providing financial services - whether applicant should be banned from engaging in credit activities - whether discretion to ban enlivened - where applicant holding out to have financial services license - where applicant holding out to have credit license - where applicant not providing financial services - where applicant not engaged in credit activities - decision under review set aside - in substitution applicant not banned
LEGISLATION
Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)
Family Law Act 1975 (Cth)National Consumer Credit Protection Act 2009 (Cth)
CASES
Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd [2015] HCA 7; (2015) 255 CLR 352
Australian Securities and Investments Commission v Administrative Appeals Tribunal [2010] FCA 807
Australian Securities and Investments Commission v PE Capital Funds Management Ltd (administrators appointed) [2022] FCA 76
Australian Securities and Investments Commission v TAL Life Limited (No 2) [2021] FCA 193
Bowker and Australian Securities and Investments Commission [2020] AATA 573
Hughes and Vale Pty Ltd v New South Wales (No 2) [1955] HCA 28; (1955) 93 CLR 127
In the matter of Vault Market Pty Ltd [2014] NSWSC 1641
MRWL and Australian Securities and Investments Commission [2022] AATA 3366
Schroeder and Australian Securities and Investments Commission [2021] AATA 3519SECONDARY MATERIALS
Legal Profession Uniform General Rules 2015
REASONS FOR DECISION
Deputy President Bernard J McCabe
10 October 2023
Dominique Grubisa has earned a rare if dubious distinction: she has been the subject of banning orders that prevent her from providing financial services or engaging in credit activities despite the fact she was not (and does not plan to be) in the business of doing either of those things. Ms Grubisa actually leads a business that provides seminars to members of the public through the ‘DG Institute’. The seminars purport to educate paying subscribers about wealth creation.
The decision to ban Ms Grubisa from providing financial services was made under s 920A of the Corporations Act 2001 (Cth). The decision to ban her from engaging in credit activities was made under s 80(1) of the National Consumer Credit Protection Act 2009 (Cth) (the NCCP Act). The reviewable banning decisions were both made by delegates of the regulator, the Australian Securities and Investments Commission (ASIC).
While ASIC acknowledges Ms Grubisa and her associated entities (a) were not involved in the provision of financial services and (b) did not engage in credit activities, ASIC’s delegates found Ms Grubisa had effectively claimed she held:
·an Australian Financial Services Licence (AFSL) in contravention of s 911C(a) of the Corporations Act; and
·an Australian Credit Licence (ACL) in contravention of s 30(1)(a) of the NCCP Act.
If those findings are sustained, that would enliven the discretion in each statute to take regulatory action against Ms Grubisa. At the hearing, ASIC pointed to other matters which suggest sharp practice, and which may involve contraventions of various laws. There is also a question over whether the applicant is a fit and proper person to carry out the activities in accordance with the licences. ASIC says those matters also provide a basis for concluding the discretion to make the banning orders under both statutes has been enlivened.
ASIC says a banning order is appropriate in each case notwithstanding that the applicant, Ms Grubisa, is not seeking to provide financial services or engage in credit activities. ASIC’s delegates imposed banning orders under both statutes and concluded each ban should be for a duration of five years. ASIC now says the duration of the banning orders should be extended to 8 years given conduct that came to light since the reviewable decision was made.
I am satisfied grounds exist to make the banning orders under both statutes, but I am not satisfied the discretion in either case should be exercised.
I will begin by explaining the legislative framework under which the reviewable decisions are made. I will then explore the factual allegations and make findings before considering the exercise of the discretion.
THE LEGISLATIVE FRAMEWORK
I will deal firstly with the relevant provisions of the Corporations Act before I turn to the provisions of the NCCP Act. It makes sense to proceed in that order given the hearing tended to focus on the Corporations Act provisions. As it happens, the provisions in both statutes invite similar considerations because the regime ordained in each statute is broadly similar.
The Corporations Act provisions
Chapter 7 of the Corporations Act deals with the regulation of financial services and markets. The object of the chapter is set out in s 760A. That section provides:
The main object of this Chapter is to promote:
(a) confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and
(aa) the provision of suitable financial products to consumers of financial products; and
(b) fairness, honesty and professionalism by those who provide financial services; and
(c) fair, orderly and transparent markets for financial products; and
(d) the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities.
At the risk of generalisation, an analysis of the various components of the object tends to confirm the regulatory framework is concerned with consumer protection and the efficient operation of markets for financial products.
Consistent with that object, the Corporations Act establishes licensing regimes that apply to those who carry out different functions within the purview of the legislation. Chapter 7.6 deals with the licensing of financial services providers. Section 911A requires a person who carries on a financial services business to hold an AFSL that covers the provision of those financial services. Section 911B permits a person to provide a financial service on behalf of another entity which holds an AFSL that covers those services provided certain conditions are met. Section 911C contains the prohibition which enforces the licensing requirement in the other two sections. Section 911C provides:
Prohibition on holding out
A person must not hold out:
(a) that the person has an Australian financial services licence; or
(b) that a financial service provided by the person or by someone else is exempt from the requirement to hold an Australian financial services licence; or
(c) that, in providing a financial service, the person acts on behalf of another person; or
(d) that conduct, or proposed conduct, of the person is within authority (within the meaning of Division 6) in relation to a particular financial services licensee;
if that is not the case.
The prohibition in s 911C is a financial services law. A holding out in contravention of s 911C is a criminal offence under s 1311.
The expression ‘holding out’ is not defined in the legislation. It involves making a representation: see In the matter of Vault Market Pty Ltd [2014] NSWSC 1641 at [28] per Brereton J. A ‘holding out’ typically consists of an overt statement. Of course, a representation might also occur in the event of strategic silence (eg, a failure to speak up to negate either (a) a statement made to, or (b) a known assumption made by, the listener) where the effect of the silence is to effectively adopt or convey an impression as if it were an overt statement. Importantly:
·whether a representation was made “is a question of fact to be addressed by considering what was said and done against the background of all the surrounding circumstances”: see Australian Securities and Investments Commission v TAL Life Limited (No 2) [2021] FCA 193 at [110] per Allsop CJ. His Honour was referring in that case to contraventions of the prohibition against misleading or deceptive conduct in s 1041H but Cheeseman J concluded in Australian Securities and Investments Commission v PE Capital Funds Management Ltd (administrators appointed) [2022] FCA 76 at [107] that the same analysis applied to the ‘holding out’ requirement contained in s 911C.
·one must have regard to how the representation will be understood by the audience to whom it is addressed: see Vault Market at [30].
The contravention of the section occurs once it is possible to identify a holding out has occurred. The contravention does not de-materialise because subsequent conduct corrects the misimpression.
The prohibition is important because it supports the integrity of the licensing system. That system is designed to ensure that only competent persons of integrity are eligible to provide financial services: see MRWL and Australian Securities and Investments Commission [2022] AATA 3366 at [31] per SM Grigg. To that end, s 913B sets out the circumstances in which an AFSL may be granted after an application is made pursuant to s 913A. Section 913B(1) includes the following criteria:
(b) ASIC has no reason to believe that the applicant is likely to contravene the obligations that will apply under section 912A if the licence is granted; and
(c) the requirement in section 913BA (fit and proper person test) is satisfied in relation to the applicant and the licence applied for;
The fit and proper person test is dealt with in ss 913BA and 913BB. Section 913BA(1)(a) provides the requirement that a person be a fit and proper person to hold an AFSL in 913B(1)(c) is satisfied “if ASIC is satisfied that there is no reason to believe… the… person is not a fit and proper person to provide the financial services covered by the licence”. (The ‘fit and proper person’ formulation is adapted to apply to other entities where a senior participant of that entity does not meet the standards: see ss 913BA(1)(b)-(f).) When deciding whether somebody is a fit and proper person, ASIC is required to have regard to matters referred to in s 913BB. None of the enumerated matters appear to be relevant here, save (at least potentially) for the last which refers to “any other matter ASIC considers relevant”. It stands to reason that, as a matter of statutory interpretation, those ‘other matters’ will be limited to matters which are consistent with the examples that have been enumerated, or which – at a minimum – are relevant when one has regard to the purposes of the legislation and the exercise of the particular power. Those provisions suggest a focus on excluding persons who do not possess the competence and integrity to carry out the functions under the AFSL. The enquiry does not extend to matters that are irrelevant to the functions of an AFSL.
The holder of an AFSL has obligations set out in Division 3. The general obligations are set out in s 912A(1). These general obligations include a requirement that the holder of an AFSL:
(a) do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly; and
(b) comply with the conditions on the licence; and
(c) comply with the financial services laws; …
I have already mentioned that s 911C is a financial services law for the purposes of this chapter. The definition of financial services laws in s 761A is broad. The expression includes (relevantly):
·any of the provisions of Chapter 7 and some other chapters of the Corporations Act;
·provisions of Part 2 Division 2 of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). Part 2 Div 2 deals with unconscionable conduct and consumer protection in relation to financial services; and
·“any other Commonwealth, State or Territory legislation that covers conduct relating to the provision of financial services (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial services”.
The provisions of Chapter 7 includes s 1041H which prohibits misleading or deceptive conduct in relation to financial products and services. A range of other prohibited conduct (including conduct that gives rise to criminal sanctions) is set out in Part 7.10 Division 2, but there are other provisions which create obligations and standards of conduct sprinkled throughout Chapter 7.
Where a person already holds an AFSL, the AFSL may be varied (s 915A), suspended or cancelled (ss 915B and 915C) on the grounds set out in those sections. Ms Grubisa did not hold an AFSL, so those provisions are not relevant to this discussion.
That brings me to the power to make banning orders which is found in Part 7.6 Division 8. The specific power to make a banning order is found in s 920A. The content of a banning order – that is, the conduct which a banning order prohibits – is dealt with in s 920B. The grounds upon which a banning order may be made are outlined in s 920A(1). Many of the grounds assume the individual holds or acts under an AFSL, but that is not the case here. The grounds which are said to be relevant in this case include:
(e) the person has not complied with a financial services law …; or
(f) ASIC has reason to believe that the person is likely to contravene a financial services law;
The contravention of a financial services law alleged here is the contravention of s 911C. I should add ASIC also potentially relies on Ms Grubisa being involved in another person’s contravention of a financial services law to the extent the applicant argues she was never making claims on her own behalf about her credentials but was instead speaking on behalf of the corporate group she controlled.
The other ground which ASIC relies upon is s 920A(1)(d) which is available where:
(d) ASIC has reason to believe that the person is not a fit and proper person to:
(i) provide one or more financial services; or
(ii) perform one or more functions as an officer of an entity that carries on a financial services business; or
(iii) control an entity that carries on a financial services business; …
The NCCP Act provisions
The NCCP Act includes a licensing regime which requires that persons engaging in a credit activity must hold (or work for or represent someone that holds) an ACL. A person who engages in credit activities otherwise than under an ACL that authorises those activities is guilty of an offence under s 29 of the Act. Section 30 include a specific prohibition on holding out which is comparable to s 911C of the Corporations Act. Section 30 of the NCCP Act says:
(1) A person must not hold out:
(a) that the person holds a licence; or
(b) that the person holds a licence authorising the person to engage in a particular credit activity; or
(c) that a credit activity engaged in by the person or by someone else is exempt from a requirement to hold a licence; or
(d) that, in engaging in a credit activity, the person acts on behalf of another person; or
(e) that conduct, or proposed conduct, of the person is within the authority of a licensee;
if that is not the case.
The licensing regime is contained within Part 2-2 of the NCCP Act. The cornerstone provision is found in s 35 which explains an ACL “is a licence that authorises the licensee to engage in particular credit activities”. The credit activities authorised under a particular licence are specified in the conditions which attach to that licence. The expression ‘credit activities’ is defined widely in s 6.
While one of the companies which form part of the group controlled by Ms Grubisa actually held an ACL, there is no suggestion that the licensee or any other company in the group – or Ms Grubisa herself – was actually engaging in credit activities.
A person who wishes to apply for an ACL must meet the criteria in s 37(1). Those criteria include:
(b) ASIC has no reason to believe that the person is likely to contravene the obligations that will apply under section 47 if the licence is granted; and
(c) the requirement in section 37A (fit and proper person test) is satisfied in relation to the applicant and the licence applied for;…
The fit and proper person test applied under the NCCP Act is found in s 37A with a list of matters that must be taken into consideration pursuant to s 37B. The provisions parallel the fit and proper person provisions found in the Corporations Act that I have already discussed. The language of the provisions makes clear the inquiry into fitness is directed to the applicant’s fitness to engage in the credit activities authorised under the ACL.
The holder of an ACL has a series of general obligations set out in s 47 of the NCCP Act. They are the equivalent of those in s 912A of the Corporations Act.
The power to ban or disqualify persons from engaging in credit activities is found in Part 2-4 of the NCCP Act. ASIC has the power to make a banning order under s 80(1) on a range of grounds. The grounds identified in s 80(1) are the equivalent of those identified in s 920A of the Corporations Act. The grounds in s 80 of the NCCP Act include:
(d) if the person has:
(i) contravened any credit legislation; or
(ii) been involved in a contravention of a provision of any credit legislation by another person;
(e) if ASIC has reason to believe that the person is likely to:
(i) contravene any credit legislation; or
(ii) be involved in a contravention of a provision of any credit legislation by another person; or
(f) if ASIC has reason to believe that the person is not a fit and proper person to:
(i) engage in one or more credit activities; or
(ii) perform one or more functions as an officer (within the meaning of the Corporations Act 2001 ) of another person who engages in credit activities; or
(iii) control another person who engages in credit activities;…
It should be made clear that credit legislation for the purposes of this section includes s 30, which prohibits holding out that one holds or is authorised under an ACL. ASIC is able to consider a contravention of s 30 when deliberating over regulatory action even if the individual concerned has not been charged and convicted of an offence under the section in question: see, generally, Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd [2015] HCA 7; (2015) 255 CLR 352 at [32]-[33] per French CJ, Hayne, Kiefel, Bell and Keane JJ.
Section 81 of the NCCP Act explains what a banning order prohibits, and s 82 explains the effect of a banning order.
Interestingly, the NCCP Act does not include a specific statement of object like that found in s 760A of the Corporations Act. The purpose of the NCCP Act can nonetheless be readily divined from the text and structure of the legislation. The licensing regime under the NCCP Act is plainly intended to ensure that only competent persons of integrity can engage in credit activities given the public interest in consumer protection and efficient credit markets.
WHAT THE APPLICANT SAID AND DID
The holding out
The primary allegation against Ms Grubisa is that she contravened the holding out provisions in both statutes. Ms Grubisa denies that what she said, when evaluated in context, amounts to a holding out in either case. To the extent there was a technical breach of either provision, she said it was minor and inconsequential. I will come back to the evidence on this specific question below. But first, I should explain Ms Grubisa’s business because that is the context in which any representations were made.
Ms Grubisa was the director of a company called Master Wealth Control Pty Ltd (MWC). MWC, trading as ‘DG Institute’, offered courses to members of the public that dealt with wealth creation and asset protection. The DG Institute offerings included courses titled:
·‘Master Wealth Control’ which promised to educate the subscriber about asset protection strategies;
·‘Real Estate Rescue’, a ‘property investment course’ that would show subscribers how to identify opportunities for quick profits in real estate;
·‘Business Turnaround’ which educated the subscriber on how to “takeover & turnaround businesses for profit”;
·‘Property Uplift Program’ which revealed the secrets of becoming a successful developer of small real estate projects.
The price of the courses varied between $5500 and $10,200. Most of the courses were livestreamed although video recordings were also accessible online through a portal. There was also a ‘premium’ course which included access to all the other courses together with some supplementary services for a higher fee of $25,000.
The seminars were mostly marketed through social media channels. As part of the marketing process, the DG institute hosted livestreamed marketing events directed to prospective subscribers. (I understand the livestream format came to be the norm during Covid. Nothing turns on the mode of delivery: the fact events were recorded and delivered online just means they are potentially viewed by a wider audience, but it also means there is an incontrovertible record of what was said.) Those events were streamed live but they were also preserved and accessible online through YouTube, Facebook and the DG Institute website. As we shall see, the applicant disputes the extent to which those videos were publicly available and actually accessed. I will return to that evidence below.
The marketing videos featured Ms Grubisa in particular. There is no dispute that she was the public face of the DG Institute, and she was given to speaking as if she and the DG Institute and the wider group were synonymous.
A sample marketing video was played at the hearing. It was contained in a YouTube presentation made on 7 November 2020 in connection with a ‘Property Development Summit’, an event hosted by the DG Institute. Towards the beginning of the presentation, Ms Grubisa makes what amounts to a marketing pitch directed at the potential subscribers which explains why they should sign up to the course(s) offered by the DG Institute. The pitch was particularly important once the DG Institute shifted to online events during Covid. During cross-examination, Ms Grubisa explained (transcript at p 84):
It was part of what I had to do at the start of a presentation when we switched to live stream, because when people come out for, you know, three hours to have a seminar - a free seminar - at a hotel, they’ve sort of made a commitment. But when they just switch on, you could lose them in two or three minutes. So I have to tell them who I am, why they should listen and what they’re going to learn - what’s in it for them. And I have to do that in the first, yes, 10 minutes. So the spiel - I guess, if you want to call it - changed when we switched to live stream.
Ms Grubisa strikes a quasi-philosophical tone at the outset of the presentation, referring to Benjamin Franklin’s observation that “If a man empties his purse into his head, no man can take it away from him. An investment in KNOWLEDGE always pays the best dividends”. She then proceeds to explain how she developed a knowledge base in relation to investing and wealth creation. She breaks down her knowledge base into three streams. Her oral exposition is reinforced by bullet points appearing on the screen.
The first ‘stream of knowledge’ is said to be “What I know”. Ms Grubisa refers briefly to her legal credentials and her admission as a solicitor and then a barrister. She then goes on to refer to the second stream which is said to be of particular value for potential subscribers on their “journey” because she possessed “insider knowledge that I have access to because of the various licences that I hold and work that I do” [Emphasis added]. She mentioned that, as a practising lawyer, she knew the judiciary and the legislature. She then descended into details about the licences. She asserted:
I’m an ASIC credit licensee. So that’s a money lender’s licence. Basically, since 2009, everyone - all the players in banking and finance in Australia have to have a special licence in order to offer credit. And, we all know that credit markets drive other markets. If people can have access to money, they’re going to spend it in the economy. So, in a time of massive change and a slumping economy right now, it’s the biggest lever the government can pull. And, we have massive changes around credit, and I’ll be sharing that with you today and what it means for you.
Having referred to the fact she was a credit licensee as evidence of her expertise in relation to credit markets and their implications for wealth management, she went on to make a similar claim in relation to her expertise in financial services. She said:
I have an Australian Financial Services Licence. So we operate under that licence. It means we’re across compliance and that sort of thing. So we dot our ‘i’s and cross our ‘t’s.
As she made these points, the screen included text which read:
Who I know
·Lawyer
·ASIC Credit Licensee
·AFS Licensee
·Migration Agent’s Licence
·Real Estate Agent’s licence
Ms Patterson, counsel for ASIC, asked Ms Grubisa in cross-examination about Ms Grubisa’s assertion in the video that she was an “ASIC Credit Licensee”. The following exchange ensued (transcript at p 85):
Ms Patterson: Now, it’s right, isn’t it, that in this video you say the words, “I’m an ASIC credit licensee,” correct?
Ms Grubisa: Yes.
Ms Patterson: And you’ve never held a credit licence, have you?
Ms Grubisa: My company, Master Wealth Control, did.
Ms Patterson: You have never held a credit licence, have you?
Ms Grubisa: No.
Ms Patterson: And I want to suggest to you your statement: “I’m an ASIC credit licensee,” was not true, was it?
Ms Grubisa: No. It was loose language and I regret it now.
Ms Grubisa went on to deny that a person in the audience who heard the claims I have already recounted would form the view that she personally held the licence notwithstanding her language. She explained (transcript at p 86):
Because they had been through various websites and webpages and clicked on ads about the DG Institute. They knew that we were a group, and they knew they were going to an event, and they knew that I was the speaker. They would’ve had my bio and known my background. But it was technically incorrect. I should’ve and could’ve just as easily have said my company has an ASIC credit licence, so I know about finance. I was trying to convey that the world had changed, and it is, like, a two and a-half hour presentation, so I get into it later on, but what I was trying to say is that - and it did come later in the presentation. I don’t know if it’s appropriate if I say it now, but that there was a banking royal commission. It was really hard to get loans, and then in COVID they changed their policies. APRA said to the banks, “Lend money”, and it was - and people were borrowing and they were pumping money into the economy, and that’s why I was telling people there was a window of opportunity, and I was telling them how I knew that. That’s where that was leading to. And with hindsight I was right: there was a big property boom in 2021.
There is a self-serving dimension to that answer, but the essence of Ms Grubisa’s claim about the likely understanding of the audience was emphasised in written closing submissions. That submission was made notwithstanding the claim about being an ASIC credit licensee was part of a more-or-less standard spiel repeated in a number of these presentations, and it was mentioned on the DG Institute website: transcript at p 87.
Ms Grubisa also referred in her evidence to the existence of an informal referral arrangement between the companies in the DG Institute and an authorised representative of an unrelated AFSL holder. The authorised representative was referred to in some of the video presentations. In written submissions filed on Ms Grubisa’s behalf, it was argued that the existence of that arrangement needed to be factored in when evaluating her claim that she held an AFSL. I note one of the group companies had also been an authorised representative of an AFSL holder in the past – but that relationship had concluded in December 2019 (ie, almost a year before the video presentation I have discussed).
The ‘third stream of knowledge’ that Ms Grubisa highlighted arose out of her “bitter experience” which included successful and unsuccessful decisions. She said she learned from that experience and was pleased to impart her insights in the courses she was marketing.
The focus on Ms Grubisa’s knowledge in this presentation was intentionally personalised. She was not just the front-person for the DG Institute: her presentation focused on what she had learned and knew, and what insights she could impart as a consequence. Her whole pitch was that she was a savvy investor who had learned certain tricks and insights, and that she could impart that personalised knowledge to those who were willing to pay. The fact she made the presentation on behalf of the DG Institute does not change the context. The relevant circumstances include the nature of the audience. While I do not have enrolment or participation data which would enable me to make conclusive findings, that is unnecessary for present purposes. It seems clear from the nature of the courses and the circumstances in which they were marketed that the audience was almost certainly comprised of comparatively unsophisticated individuals with limited experience in investment. The marketing efforts appeared to emphasise Ms Grubisa’s stature as an expert around which the courses were constructed. The institute was synonymous with her: her initials were incorporated into its name.
While there were subsequent references in the courses to other services available through other divisions or companies in the group, or services available through authorised representatives of other licence holders, the spiel I have cited clearly amounts to a holding out by Ms Grubisa under both statutes. I reach that conclusion in light of what was actually said, and the fact it was said early on in the promotional video to capture the interest of the audience. Subsequent references to other entities in the group might eventually correct the misimpression, but one cannot assume that would occur given the likely lack of sophistication of that audience. That audience would have understood they were being offered the benefit of Ms Grubisa’s experience which was premised on her holding an AFSL and an ACL. It is unlikely such an audience would have paused to reflect on the niceties of a corporate structure, even if the applicant did occasionally use the word ‘we’. Those references, in context, would be understood as the majestic plural (pluralis majestatis) in which the speaker does not distinguish between herself and the legally separate entities which she leads.
I note Ms Tannous, the chief operating officer of MWC, confirmed Ms Grubisa was given to referring to herself in meetings when she was actually intending to refer to the entities in the group: [statement of Jocelyn Tannous at [12].] In cross-examination, Ms Grubisa made the same point when she explained (transcript at p 106) why she referred to herself when she meant the company:
I knew that a corporate entity was a holder of the licence, and I thought of myself as the company, which I shouldn’t have, which is wrong, but I just thought - it’s like Richard Branson saying, “I’ll fly you to Melbourne.” I just think of the company as mine. But I agree that it’s wrong and I shouldn’t have said it.
That evidence is ultimately irrelevant. It does not matter what Ms Grubisa meant or intended to communicate by her statement. The real issue is what she said and how it was understood.
It is unclear how the audience would come to acquaint itself with the details of the corporate structure and responsibilities within the group so that they might absorb the meaning Ms Grubisa said she intended to convey. ASIC pointed out in its written submissions that a detailed review of a ‘webcapture’ of the DG Institute’s website is included in the T documents at T3.14. A perusal of that (lengthy) document does not confirm any other entity in the group holds an ACL or AFSL, and it does not clarify the relationship between Ms Grubisa or the group (on one hand) and any other third party that holds an AFSL.
Ms Grubisa did not hold either licence, and her false statements in the presentation which suggest she did hold those licences amount to a ‘holding out’ in breach of the relevant provisions of the legislation. It follows I am satisfied the applicant has contravened s 911C of the Corporations Act, which is a financial services law. That contravention on its own enlivens the discretion to ban pursuant to s 920A(1)(e) of that statute. I am also satisfied she has contravened s 30 of the NCCP Act which is a contravention of credit legislation. That contravention on its own enlivens the discretion to ban pursuant to 80(1)(d).
I should add Ms Grubisa would enliven the discretion to ban under s 920A of the Corporations Act even if I did accept her argument that she was making the representations about holding an AFSL on behalf of one or more group companies. The fact remains that none of the companies in her group held an AFSL at the time, and the existence of an informal (or even a formal) referral relationship with an authorised representative of an unrelated AFSL holder cannot be what she was referring to in her promotional videos. To the extent any of the group companies was taken to say they did hold such a licence – because Ms Grubisa said so on their behalf – she would, at a minimum, be involved in that company’s contravention of the same provision. That would enliven the discretion to ban under s 920A(1)(g).
The position in relation to the ACL is slightly more complicated if I were to accept Ms Grubisa were speaking on behalf of one of the other companies in the group rather than herself. The complication arises because DGI Finance and MWC held an ACL even if they did not engage in any credit activities under those licences. ASIC points out Ms Grubisa was not an officer or shareholder in DGI Finance, so it is unclear why she would be purporting to speak on its behalf. That reality supports the interpretation I have already given – namely, that she was not speaking on behalf of anyone (particularly not on behalf of a company in which she did not have an interest) other than herself when she made the claim in question.
It should be emphasised that the holding out I have analysed in the presentation was not an isolated instance. ASIC provided video recordings of a number of presentations which include slides and representations from Ms Grubisa to similar effect. There were also references on the website to Ms Grubisa holding the licences in question without qualification: see, for example, the landing page reproduced as a ‘webcapture’ at document T3.14 at p 337. Those assertions were only expunged after ASIC pointed out the issue in November 2020.
For the sake of completeness, I note Ms Grubisa said in her statement that she did not recall how she came to be described on the website as an “ASIC licensed debt specialist”: statement at [112]-[113]. She said she could not be sure how that expression came to be used and repeated but speculated it may have been used on the website without her knowledge by contractors who generated copy for the website: statement at [114]-[115]. I acknowledge there was evidence provided by Mr Klopper, a marketing consultant who worked for MWC, suggesting it was likely an external copywriter that came up with the term: statement of Mr Gregory Klopper at [12]. Mr Klopper confirmed Ms Grubisa did not play any role in approving copy for the website until ASIC communicated its concern over the contents of the website in December 2020 at [13].
Even if I accept Ms Grubisa was the hapless victim of a rogue copywriter, that does her little credit. This was a business that was closely identified with her. At a minimum, she should have had processes in place to review content on her website.
The applicant’s problematic response to ASIC’s regulatory action
While I have focused on the contraventions that arose out of the marketing presentations and associated material on the DG Institute website, there was other conduct that ASIC identified which raised ‘holding out’ issues. One of them relates to the account of the relationship between DGI Wealth Management Pty Ltd (one of the group companies of which Ms Grubisa was the sole director from 21 August 2019) and Mr Ben Wise. Mr Wise was an authorised representative of another unrelated company that held an AFSL. The relationship between DGI Wealth Management and Mr Wise apparently commenced in early 2020. (DGI Wealth Management had at one stage been an authorised representative of another unrelated entity that held and AFSL, but that relationship had ceased by 11 December 2019.)
The relationship between DGI Wealth Management and Mr Wise appears to have been an informal one under which clients of the DG Institute who desired financial services could be referred to Mr Wise. In the course of his oral evidence, Mr Wise resisted describing the arrangement as a referral relationship (transcript at p 94) because:
…that would infer some form of payment between entities. It was a very loose arrangement. It never really got off the ground, to be honest.
The relationship, such as it is, is referred to in a string of emails that were tendered into evidence as exhibit 7. Ms Grubisa suggested the documentation provided amounted to a formal contractual relationship: see transcript at p 109-110. Mr Wise made clear he did not regard the arrangement as being the subject of a written agreement: transcript at p 96. I have some doubts as to whether exhibit 7 is a contract but that is beside the point. At best, the parties had a referral arrangement. The problem for Ms Grubisa lies in the fact the DGI Wealth Management website included statements that may suggest the entity is carrying on a financial services business of its own rather than merely providing referrals. The statements were identified in correspondence from ASIC to Ms Grubisa dated 22 April 2020 (reproduced in document T3.48). The letter set out three statements which were regarded as being problematic. The three statements read:
·Our independent financial advisors aim to act in your best interests by determining the best way forward and advising what options are suitable for you.
·Our advisors are committed to providing you with advice that’s appropriate for your circumstances and determining whether a SMSF is the right option for you.
·Our investment portfolios have outperformed peer group benchmarks. They also offer you more diversity in your fund if you hold property.
The letter went on to say:
Our records show that neither you, nor the Company, hold an AFS licence at this time, or are authorised by an AFS licensee. We understand that Company was an Authorised Representative (number 1267027) of Financial Masterplan Pty Ltd (AFS license 344628), but this ceased on 11 December 2019.
The letter required a response by 6 May 2020. Ms Grubisa initially reacted to the correspondence from ASIC by emailing Mr Wise. That email is reproduced in a document T3.51. She advised Mr Wise of the warning letter from ASIC and added:
I know that we were an authorised rep when Chris Tsiolis was employed. I didn’t know this ceased and I am not sure how we are operating now?
Are you able to assist me in answering the below please Ben?
Mr Wise responded by email the same day (reproduced in document T3.52) to confirm (a) DGI Wealth Management had ceased to be an authorised representative of an AFSL holder; (b) he was authorised by another AFSL holder and “all advice is provided under my authorisation”; and (c) DGI Wealth Management had an “association” with him. Later that day, Mr Wise conveyed that information to ASIC in an email that was reproduced in document T3.53. Interestingly, that email was sent from an email address associated with DGI Wealth Management rather than from Mr Wise’s usual work address.
The informal relationship appeared to remain in place until December 2020, although neither party remembers many clients being referred. Mr Wise said he had decided to wind down the relationship from the end of 2020 after receiving a notice from ASIC which troubled the compliance team working for the AFSL holder he represented: transcript at p 98.
In closing submissions, Ms Grubisa’s counsel urged me to treat Mr Wise’s evidence with caution given he might have an interest in downplaying the relationship. I do not think that submission assists the applicant. The problem lies in the statements made on her company’s website. They do not comport with the relationship that existed between DGI Wealth Management and Mr Wise as that relationship was described in Mr Wise’s correspondence with Ms Grubisa and with ASIC on Ms Grubisa’s behalf.
Mr Grubisa got into further difficulty when ASIC decided to cancel the dormant ACL of MWC on 11 May 2021. ASIC issued a press release announcing its action which was reported in the media. The announcement apparently prompted some concerned enquiries. DGI Wealth Management prepare a template email which sought to put the cancellation decision in perspective – and to reassure clients that the cancellation was not a response to wrong-doing. The email included a link to a short video presentation by Ms Grubisa. While both the email and the video acknowledged the cancellation of the ACL, they also both referred to DGI Wealth Management continuing to “provide… financial planning services under authorisation of an AFSL holder.” That was untrue. Ms Grubisa knew that was wrong given the response Mr Wise had provided in his email dated 22 February 2021 wherein he described the way in which the relationship worked – and in which he confirmed DGI Wealth management had long ceased to be an authorised representative in its own right.
The representations in the email and video presentation amount to a further holding out in contravention of s 911C(d) of the Corporations Act. Those representations wrongly claim DGI Wealth Management provided financial planning services and was authorised to do so under an AFSL.
In written submissions, counsel for Ms Grubisa argued the representations were not incorrect, or – if they were – they were unintentional. I am satisfied the representations were incorrect for reasons I have explained, and the applicant’s intention is ultimately irrelevant: the holding out focuses on what was said in context, and how it was understood. The submissions also referred to evidence given by Ms Grubisa to the effect that she was under the impression from one her staff that Mr Wise had been consulted about the wording that made its way into the email. Mr Wise denied he had been consulted about the wording and insisted he would have advised using different words if he had been approached: transcript at p 96. Ms Grubisa’s counsel suggested I should treat those denials with caution, but they are ultimately beside the point. DGI Wealth management and Ms Grubisa were the ones making the problematic representations, and the contravention occurred when they engaged in the holding out.
The evidence which ASIC says gives it reason to believe the applicant is likely to contravene a financial services law and likely to contravene credit legislation
I turn now to the other grounds which ASIC has identified as bases for the banning decisions. The first of these is the prospect of the applicant contravening a financial services law in the future, which is mentioned in s 920A(1)(f) of the Corporations Act. The companion provision in the NCCP Act which deals with the prospect of contravening credit legislation is found in s 80(1)(e) of that statute.
ASIC points out I need only be satisfied there is reason to believe the applicant is likely to contravene the relevant legislation in the future. This (slightly tortured) concept was explained by Dowsett J in Australian Securities and Investments Commission v Administrative Appeals Tribunal . In that case, his Honour explained (at [51]):
In order that there be a banning order, it is not necessary that either ASIC or the Tribunal be satisfied that [the subject of the order] will, in the future, breach a financial services law. It is only necessary that the relevant decision-maker have reason to believe that he will do so.
ASIC says the fact Ms Grubisa has repeatedly made erroneous statements in her marketing presentations and on the website about the licences is reason enough to believe the applicant is likely to contravene the legislation in the future. ASIC points out I do not need to be specific about which provision of the legislation might be contravened: it is enough that the applicant’s conduct suggests she is either careless with respect to her legal obligations, or is prepared to disregard them.
Counsel for Ms Grubisa disputed that characterisation. He suggested in submissions that Ms Grubisa was unlikely to make the same mistake (assuming it was one) about her licences in the future. Counsel added the applicant had acted quickly in response to ASIC’s notice of concerns in December 2020 when she instructed her team to review the website and remove the offending statements. ASIC points out the response to the notice of concerns was not wholly effective as some of the problematic videos remained available for some time.
Ms Grubisa did not impress me as somebody who was across her legal obligations, notwithstanding her credentials. She also did not appear to have a commitment to orderly processes and procedures, like reviewing the content of websites. I accept she may have learned lessons from this experience – or at least realised she must do more to forestall further regulatory action – but the fact she held herself out and has come to downplay the significance of that conduct is a matter of concern.
ASIC referred to another matter that suggested Ms Grubisa might readily misunderstand or even disregard her legal obligations. It arises out of one of the tips Ms Grubisa provided to subscribers to the Real Estate Rescue course, one of the property courses offered through the DG Institute. Subscribers were told one way to identify cheap or distressed property was to scan the ‘press list’ issued by the Family Court each day. Many individuals referred to on those lists might be inclined to dispose of assets at bargain prices. Referring students to the lists was not in and of itself a problem, but the DG Institute arranged for information from the lists – including the names of parties to the proceedings - to be reproduced in spreadsheets that were circulated to the subscribers.
That is potentially a problem because s 121(2) of the Family Law Act 1975 (Cth) makes it an offence to disseminate “a list of proceedings under this Act, identified by reference to the names of the parties to the proceedings, that are to be dealt with by a court…”. Ms Grubisa acknowledged in cross-examination that she had not turned her mind to whether there was a problem in disseminating the spreadsheets. ASIC said that reflected poorly on her competence given that, as an experienced legal practitioner, she should have appreciated the sensitivity of the material and the need to ensure the business she oversaw was operating within the bounds of the law.
Counsel for Ms Grubisa pointed out the Family Court had not seen fit to take any action against the applicant even though the Court had been made aware of the practice. He also questioned whether it was clearly established that a contravention had occurred in circumstances where the spreadsheet only included the names of parties without connecting them to case numbers. He also doubted whether it was appropriate for ASIC (and the Tribunal on review) to give weight to alleged non-compliance with laws that had nothing to do with financial services or credit activities.
It is not for me to comment on the Court’s decision (assuming there was one) to not pursue the apparent contravention of s 121. I am satisfied there likely was such a contravention in circumstances where the names of parties were published in the spreadsheets, even if the names were not accompanied by the case numbers or other details in the daily lists. Of course, even if the applicant did not technically contravene the provision, that is not because she reviewed the law and determined she was safe to proceed. ASIC’s point is that it did not occur to her that she should consider the lawfulness of what was being done.
I am satisfied there is reason to believe the applicant is likely to contravene the legislation in question. Given the lax approach the applicant has demonstrated towards legal obligations in the past, there is every reason to believe she might fall short in the future. It follows that I am satisfied these additional grounds have been made out for the banning orders under each statute.
Is there reason to believe the applicant is not a fit and proper person?
The banning powers in both statutes provide for regulatory action on the ground there is reason to believe the individual is not a fit and proper person to provide the services in question.
The ‘fit and proper person’ concept has been discussed in a long line of cases including Hughes and Vale Pty Ltd v New South Wales (No 2) [1955] HCA 28; (1955) 93 CLR 127. In that case, Dixon CJ, McTiernan and Webb JJ held (at 156-157) the fit and proper requirement:
...is said to involve three things, honesty, knowledge and ability: “honesty to execute it truly, without malice, affection or partiality; knowledge to know what he ought duly to do; and ability as well in estate as in body, that he may intend and execute his office, when need is, diligently, and not for impotency or poverty neglect it”.
The Tribunal explained in Schroeder and Australian Securities and Investments Commission [2021] AATA 3519 that fitness was nonetheless a fluid concept. That case dealt with fitness under the Corporations Act. The Tribunal (Thomas J and DP McCabe) said (at [90]):
It is well-understood that the precise meaning of the expression ‘fit and proper person’ will depend on the context in which it is used. In this case, the benchmark is what is expected of a person playing a role in a financial services business. Section 913BB directs us to matters we must consider in deciding whether an individual meets the standard. As it happens, none of the matters referred to in s 913BB(2)(a)-(j) are relevant here – but the residual category referred to in s 913BB(2)(k) (i.e. “any other matter ASIC considers relevant”) brings us back to the general understanding of the concept.
I have already explained the same approach is followed in the NCCP Act which enumerates the other considerations in 37B. That section also refers to “any other matter ASIC considers relevant”. That brings us back to the general concept of being a fit and proper person to provide financial services or engage in credit activities.
ASIC says the following conduct of the applicant provides reasons to believe the applicant is not a fit and proper person:
·The holding out that she was licensed under both regimes on a numerous occasions in the course of video presentations;
·The holding out which occurred on materials published on the website. She says at least some of those references (if not all) were supplied by copywriters without her knowledge. At a minimum, ASIC says the website material is said to reflect on the applicant’s fitness insofar as she was not across the detail of her own business and did not see the need for formal processes and policies regulating marketing and representations – something that would be important for anyone who was involved in a financial services business or who engaged in credit activities. She compounded that lack of attention to detail in her slow reaction to ASIC’s concerns about the problematic assertions;
·The applicant was, at a minimum, incurious about the potential difficulties arising out of using information about parties contained in lists of proceedings published by the Family Court.
That list is not exhaustive. ASIC says there were other reasons for believing the applicant was not and is not a fit and proper person to undertake the regulated activities.
Marketing the short sale strategy
The so-called ‘short sale strategy’ occupied a good deal of time at the hearing. The strategy was explained to subscribers (potential investors) in the Real Estate Rescue course offered by the DG Institute. The course purported to educate subscribers on how to identify distressed and undervalued property assets. It included a course manual which was reproduced in document T3.78. That material was supplemented by video presentations featuring the applicant.
The manual makes for interesting reading. Early in the manual, at p 7, it counsels:
Homeowners who are in financial difficulties are emotionally stressed people. They suffer from fear about what is going to happen to them and they invariably get into a state of denial or become defensive and aggressive. No one likes to admit they are broke so when you deal with distressed owners it helps you to be ‘understanding’ of their predicament and to be dependable. They will want to rely on you for help because they are usually too afraid to talk to the bank or to seek help elsewhere.
The manual observes (at p 8) that “Banks have been greedy and have lent too much with little or no lending criteria or responsible lending practices in place”. The manual – which is characteristically written in the first person voice of Ms Grubisa - then goes onto explain:
In reality lenders do not bother to “foreclose” and get themselves on the title, they take the property as a mortgagee in possession and try and sell it as expediently as possible whilst still achieving the highest possible market price.
The manual then offers insights into the foreclosure process and introduces the concept of the ‘short sale’ which the manual says is the best way to maximise value – for the course subscriber. The short sale occurs once the homeowner become distressed but before the mortgagee takes possession and exercise its power of sale. That process is messy and onerous, and it creates opportunities for investors like the subscribers of the DG Institute. The manual explains (at p 10):
Short Sales are a deal that can be cut with the lender to pay out the loan on the property for less than what is owed on it. The lender agrees to accept full payment for the mortgage debt in an amount that is less than the homeowner actually owes.
None of this is illegal or unethical, Ms Grubisa assured her clients (at pp 11-12). She said:
Yes, there are people you will meet who are in dire situations. You will be tested emotionally and hear some heartbreaking stories. You did not cause it, nor can you necessarily fix it. And you don't need to take advantage of it to make a profit. When you are negotiating foreclosure transactions you should never feel guilty about what you are doing.
If you don't help the homeowner then someone else will. Worse still, if no-one intervenes the bank will cause untold damage and heartache for them for many months and years to come. You are their knight-in-shining-armour. …
…Nothing I ever suggest or teach in any way should be construed or used for illegal or unethical practices. Do it the right way and you will build a great reputation and make some good friends along the way.
The manual then explains the way in which most foreclosure proceedings evolve. The manual notes the lender may commence legal proceedings. At that point, opportunity knocks for the savvy investor, as the manual explained at p 21:
How can you use this information?
The real estate investor must remain aware of the tendency of the homeowner to slip into denial and become immobile, taking no action. It is at this point that the repossession of the property and the borrowers’ woes become public knowledge (at least for you – most people do not know where to look or what this means). Court lists are now publicly available online (and in daily newspapers) and this is the starting point for our research. This is the time for you to research, strategise, and implement your distressed asset purchasing strategy.
The reference to the utility of court lists will remind the alert reader of the problems that may be associated with harvesting and republishing information from Family Law lists. But the manual does not stop there. The manual refers to the valuable opportunity that arises when judgment is entered against a distressed homeowner but before the property is put up for auction. The manual points out potential investors can scour bankruptcy lists and cultivate friendly real estate agents in the search for distressed assets: at pp 78-79. The manual even suggests placing advertisements offering to help distressed asset-owners (at p 85) and reviewing notices regarding deceased estates (at p 88). The manual then goes onto school the potential investors on how to manage the approach to the distressed homeowner who they have identified in their search. Once the potential investor has the owner’s attention, the manual addresses the Strategy they should follow.
The manual recommends a ‘short sale’ strategy if the homeowner is ‘upside down’ in their home mortgage. (It acknowledges other strategies might be appropriate in different circumstances.) The manual explains (at p 132):
Once a homeowner is "upside-down" in their home mortgage, there is an opportunity to use this to your advantage while helping them out of a tough situation. A successful short sale requires that all parties involved see that it is in their best interests, in other words everybody wins.
The essence of the short sale strategy was explained as follows (at p 132):
When a lender releases a homeowner from their mortgage at anything less than the full amount owed, they are accepting an amount "short" of the agreed-on pay out figure. The costs to legally repossess a home can be quite high, with estimates starting at $30,000 in costs on average for the lender. It's not hard to see that the lender might be willing to accept something short of the entire mortgage balance in order to get out of the situation. In a short sale, the bank is basically taking or accepting a smaller percentage on each dollar owed.
If the lender proceeds to a mortgagee repossession, it is a legal action, and the time necessary to carry it to completion can be months to more than a year. When the mortgagee sale is over, if the amount received doesn't cover the mortgage, fees, and costs, the lender can pursue the borrower for the difference.
[Emphasis in original]
The manual then goes onto explain that a short sale requires the cooperation of both the bank and the owner. The following passages (at p 133-134) deal with how the bank’s consent to the deal might be obtained in circumstances where the bank might be reluctant to make a deal. I will set out those passages in full to capture the flavour of what was being proposed:
You may find that by the time you get to speak to the owner, they have already been in contact with the bank and have informed the bank in on the status of their financial position. If you find that the owner you are dealing with has a good understanding of their situation and an appreciation of what you are proposing for them and they feel comfortable talking to the bank, then you may get the best results by asking them to speak to the bank in the first instance without revealing anything further to the bank from your side. The home owner would simply ring the person at the bank who has been corresponding with them and say something along the lines of:
“I have found a buyer who has agreed to purchase the property at $x. Would you allow me to sign the contract for a sale at this figure?”
You may need to coach the owner on how to discuss this with the bank and what they should say (and not say). They should be stressing that they have spoken to agents and that this offer represents the best they think they can get in this market given the state of the property and they are keen to accept it with the lender’s blessing as they want to try and mitigate the loss (to themselves and the lender). They must not mention that there is money on the side or that there is some sort of history with you (this is an arm’s length transaction with a separate, disinterested third party buyer at market price (ie you) for all intents and purposes.
The upside to this is that if the bank agrees, you have bypassed many of the issues that commonly have to be resolved when we approach the bank as a third party and ask to buy the property from them at a substantial discount. The bank sometimes suspect collusion or something untoward or a conflict of interest insofar as you have a power of attorney and are trying to rip them off and steal the property cheaply.
The downside is that because you will not have contacted the bank with a Power of Attorney to confirm the mortgage details with the lender, you are relying upon what the homeowner has advised when you work out your figures as to what you can offer the bank. Therefore you should just set your own price for the property – what you can pay, plus duty and renovation costs etc and still make the deal work (as opposed to working backwards from what you think the mortgage is – eg 10% less than what the owner tells you is owed). If you choose this approach, it would be best to get an up to date mortgage statement from the homeowner showing the outstanding balance. If they do not have one, then ask them to obtain a copy from the bank before you proceed.
You should also ask to see any letters the bank has sent them demanding payment, as they will show the amount that is in arrears. You will then need to micro-manage the owner in relation to their call to the lender telling the lender about your offer to purchase. It is easier to do it this way in the scheme of things if you have a homeowner who can handle the call.
Importantly, the manual counsels the prospective investor (at p 132):
A lender will not accept a short sale proposal where the borrower is getting paid some cash so ensure that this is not a term of the contract. Any cash or benefit to the owner must be on the side.
This all makes for uncomfortable reading, although Ms Grubisa was slow to see any issue when asked about it in cross-examination. The manual goes on at p 134 to acknowledge the bank will only agree to a short sale as a last resort because it wants to be satisfied the borrower really has nothing further to give. The short sale strategy appears to be premised on communicating that impression to the bank, even where the investor was simultaneously offering an incentive to the homeowner that the investor and the owner would contrive to conceal from the bank (see case study at p 138).
The concept of undisclosed side payments passing between the would-be investor and the seller was referred to throughout the manual and in companion video presentations that were included in the form of document T20.
When pressed about the propriety of undisclosed side payments and the possibility of misleading the bank in these tri-partite transactions, Ms Grubisa was reluctant to acknowledge there was problem with the strategy beyond infelicitous language: transcript at p 158.
The short sale strategy appears to rely on misleading or deceptive conduct. I do not need to reach a final view about the legality of whether the strategy contravened the provisions of the Australian Consumer Law because it is clear the applicant does not appear to have turned her mind to that possibility. The absence of a ready explanation of how the short sale strategy described in at least some of the case studies is lawful is startling given that strategy rings so many alarm bells. I accept the conduct in question does not relate to financial services, and it does not amount to credit activities (although it does involve dealing with banks). Yet the applicant’s willingness to promote this sort of sharp practice without stopping to ensure it was lawful gives reason to doubt she is a fit and proper person to engage in financial services and credit activities. I reach that view because the materials in the manual and the video which are presented by Ms Grubisa (or in her name, so as to suggest she has had a hand in their creation) raise questions about her commercial and ethical judgment and about her commitment to scrupulously observing the law – qualities that are important to anyone involved in the provision of financial services, or who engages in credit activities.
While I am satisfied the ‘fit and proper person’ ground has been made out on this basis alone, I should note for the sake of completeness ASIC identified several other matters which were also potentially relevant to that assessment. I will deal with them briefly below.
The applicant’s apparent failure to comply with obligations under MWC’s ACL
The first of these concerns arose out of the applicant’s conduct as the key contact person, sole director and sole responsible manager named on MWC’s ACL. As the holder of an ACL, MWC was required to comply with the obligations in the NCCP Act and with the conditions of its licence. One of those obligations arose out of the combined effect of s 64 which said the authority of anyone appointed as a credit representative would lapse if that person ceased to be a member of an approved external dispute resolution scheme. If that authority lapsed, s 70 required that the holder of the ACL must formally revoke that authority. ASIC points out MWC appointed up to 98 authorised representatives. A number were not members of an approved dispute resolution scheme for at least part of the time they purported to hold the authority, but the applicant did not take any steps to revoke their authorisations as required.
When asked about that in cross-examination, Ms Grubisa acknowledged the error but put it down to a misunderstanding. She said she understood the authority effectively lapsed of its own accord if it was not renewed by the representative on an annual basis: transcript at p 188-189.
ASIC says this was another example of Ms Grubisa failing to research, embrace and discharge her legal obligations. Those failures reflect poorly on her fitness. I agree her demonstrated failure to grasp the detail of her obligations gives me further reason to believe she is not a fit and proper person to undertake the regulated activities.
The applicant’s failure to disclose matters to the Victorian Legal Services Board (the VLSB)
It is well-known that the rules which regulate the legal profession require a practitioner to hold a practising certificate. The rules applicable in each state require that a practitioner must be a fit and proper person to obtain, hold and renew a practising certificate. To that end, Rule 13 of the Legal Profession Uniform General Rules 2015 entitles regulators to have regard to a range of matters, including:
(a) whether the applicant is currently of good fame and character,
…
(f) whether the applicant—
(i) is currently subject to an unresolved complaint, investigation, charge or order under an Australian law relating to the legal profession or under a corresponding foreign law, or
(ii) has been the subject of disciplinary action, however expressed, under an Australian law relating to the legal profession, or under a corresponding foreign law, that involved a finding adverse to the applicant,
Rule 12 says a person making an application for the grant or renewal of a practising certificate is required to address all of the matters in Rule 13. As a practical matter, the renewal application form asks questions like the following which Ms Grubisa answered on or about 20 May 2020 when she was seeking renewal of her practising certificate in Victoria:
·Is there any fit and proper matter which is applicable to you and which you have not previously disclosed to the [VLSB]?
Ms Grubisa answered ‘No’ to that question. But that answer was untrue.
Ms Grubisa also held a practising certificate in New South Wales. At the time she sought renewal in Victoria, she was aware a complaint had been made about her to the Law Society of New South Wales in April 2020. The complaint had been lodged by a Mr Chris Baker. Mr Baker appears to have assumed the role of Ms Grubisa’s nemesis. A history of their troubled interactions is included in Ms Grubisa’s second statement at [104]ff. Mr Baker has been the source of a number of professional complaints against Ms Grubisa and he has been active in the media, agitating for action to be taken against her and her business. (Mr Baker was present on the first day of the hearing.) I do not need to express a view about the legitimacy of those complaints. The fact remains Mr Baker had registered a formal complaint with a competent authority which was under investigation. Ms Grubisa was informed of the existence of that complaint on or about 16 April 2020. She engaged solicitors to act on her behalf. The complaint remained unresolved at the time Ms Grubisa completed the application of renewal of her Victorian practising certificate in May. She confirmed she knew that was so in cross-examination: transcript at p 194.
Further complaints were made against the applicant in June 2020. Those complaints were still on foot by the time Ms Grubisa came to complete her application for renewal of her Victorian practising certificate the following year. Once again, in the form she completed on or about 9 June 2021, the applicant confirmed there were no matters that needed to be disclosed even though she was aware of the unresolved complaints.
The applicant says she thought she only needed to disclose matters that suggested dishonesty. She said she did not realise she was also required to disclose unresolved complaints made against her in relation to her conduct as a lawyer. She would have realised that was not the case if she had read the rules.
I am not satisfied the applicant’s failure to disclose the existence of the complaints against her can be attributed to dishonesty. I suspect she might have discounted the complaints because she regarded Mr Baker as a pest. I am also prepared to accept she did not acquaint herself with the content of the rules. In the circumstances, the problem is not dishonesty but Ms Grubisa’s insouciance that is the problem. The lack of attention to the underlying rules which are supposed to regulate her conduct tends to reinforce the adverse conclusion I have already reached from other evidence about her fitness.
The picture of Ms Grubisa’s dealings with the VLSB was complicated by late-breaking evidence. In her statements, Ms Grubisa noted correspondence between the VLSB and her lawyers over the disclosure issues which had come to light. In her second affidavit, Mr Grubisa confirmed there was no further regulatory action taken by the VLSB after those exchanges: at [82]. The affidavit was sworn on 9 December 2022. In written submissions, ASIC said that evidence was plainly an invitation to accept the matters had been resolved.
ASIC informed the applicant in advance of the hearing that it had come into possession of a letter from the VLSB dated 9 June 2022. That letter said the VLSB had a number of concerns about Ms Grubisa’s conduct and was considering whether to refuse her application for renewal of her practising certificate on the basis she was not a fit and proper person. The letter also foreshadowed further investigatory action. Ms Grubisa’s solicitor wrote to the VLSB and formally withdrew her application for renewal of the practising certificate. That withdrawal forestalled further regulatory action.
When asked about all this in cross-examination, Ms Grubisa defended her failure to disclose the existence of the letter from the VLSB because she said it was irrelevant: transcript at p 213. She did concede the evidence in her second statement was incorrect to the extent she positively asserted there had been no response from the VLSB at the time: transcript at p 211.
Ms Grubisa must have known the letter from the VLSB dated 9 June 2022 should have been disclosed. Her failure to disclose it reflects poorly on her fitness – especially given she had made a positive statement that there was no further communication. I am satisfied that conduct gives me good reason to believe she is not a fit and proper person to undertake the regulated activities in circumstances where the regulated activities demand candour with the regulators.
THE DISCRETION TO BAN IS ENLIVENED UNDER BOTH STATUTES. SHOULD THE DISCRETION BE EXERCISED IN EITHER CASE?
I have found the discretion to ban the applicant under s 920A of the Corporations Act and s 80 of the NCCP Act has been enlivened in both cases on a range of grounds.
There appears to be no doubt that a person who does not currently provide financial services can nonetheless be subject to a banning order under s 920A of the Corporations Act in an appropriate case. That much was made clear in the Tribunal’s decision in Bowker and Australian Securities and Investments Commission [2020] AATA 573. In Bowker, the applicant did not provide financial services (and had no plans to do so) but he was involved in misleading or deceptive conduct in contravention of s 1041H when he supplied a list of names of people to a stockbroker who were said to be genuine investors in an initial public offering. The list of names was required to meet the so-called ‘minimum spread requirement’ in the ASX Listing Rules. It turned out that a number of the individuals on the list were not genuine investors. The list was used to frustrate the proper operation of the listing rules.
After referring to the objectives of the regulatory regime in s 760A of the Corporations Act (and the objectives of ASIC set out in s 1 of the ASIC Act), the Tribunal considered the exercise of the discretion. It ultimately elected to ban the applicant (albeit for a shorter duration than was sought by ASIC), explaining (at [99]):
A banning order is appropriate because it will ensure other participants appreciate the costs of being dishonest with the market regulator. Participants in the market who might otherwise be tempted to effectively ignore the listing rules (and the minimum spread requirement in particular) need to know that sort of behaviour will be met with a stringent response. Indeed, Mr Bowker’s casual approach to the listing rules clearly indicated that he, at least, did not see them as having any real force or effect. The broker he dealt with appeared to regard the listing rules as an inconvenience to be managed rather than a substantive requirement. A banning order will send a clear signal that the listing rules have teeth. It will educate other participants in the market and promote compliance, and it will give investors confidence in the rules, the market and the regulator.
The reasoning makes clear that if the power to ban under s 920A is available, it may only be exercised for the regulatory purposes contemplated in the legislation. If the ban does not serve a regulatory purpose, the discretion should not be exercised regardless of the seriousness of the conduct in question. To be clear: the ban in Bowker was imposed because it was necessary and appropriate to send a message to participants in the market about the importance of taking seriously the ASX Listing Rules. The ban was calibrated to achieve the objects of the regulatory regime. I am satisfied the same analysis applies to the parallel discretion in s 80 of the NCCP Act. And therein lies the problem for ASIC.
ASIC says a banning order would deter others who might consider holding themselves out as having licences that did not possess. (The specific deterrent effect against Ms Grubisa is likely to be limited: the protracted and expensive proceedings as well as other regulatory action and media attention leave little work for a banning order to do.) There may yet be a general deterrent effect if a ban were imposed. Of course, there are already criminal provisions against holding out which play that role, and there may yet be sanctions and civil liability under the provisions of the Australian Consumer Law. I accept a criminal provision is not a perfect regulatory substitute for administrative action. A criminal sanction involves a higher standard of proof whereas administrative sanctions might be more accessible. Yet it is unclear whether a banning order against Ms Grubisa will communicate a greater deterrent effect to existing participants in the market given the uniqueness of the circumstances of her contravention.
Ms Grubisa does not pose a threat to consumers of financial services or credit services, or to the efficient operation of either market. Whether there may be issues arising out of her conduct as an educator or solicitor is a matter for other regulators to consider. The fact her conduct was in a sense ‘adjacent’ to the markets for financial services and credit does not inevitably suggest a banning order is appropriate. A more convincing rationale is required that explains how the ban would further the objectives of the regulatory regime.
If Ms Grubisa were to apply for an AFSL or an ACL, or were she to become involved in an organisation that provided financial services or carried on credit activities, she would face an uphill battle obtaining the relevant approvals if the findings of fact I have made were to be considered (and any organisation involved in those industries would think twice before engaging her). But that is not the application before me, and it is not clear that such an application would ever be made.
CONCLUSION
I have made serious adverse findings against the applicant. There may yet be consequences for her under other legislation administered by other regulators. But I do not step into the shoes of those other bodies. I only wear ASIC’s shoes. ASIC’s actions are informed by the objectives of the legislative regimes it administers, and by the objects of the ASIC Act itself. I am informed by the same matters. I do not see how a banning order made pursuant to the Corporations Act or the NCCP Act will further a legitimate regulatory interest. In reaching that conclusion, I do not mean to excuse the applicant’s problematic behaviour that has been uncovered through ASIC’s diligent investigations. But the issues she presents are issues for a different decision-maker.
The reviewable decisions are set aside. I decide in substitution that the applicant should not be banned under either s 920A of the Corporations Act or s 80 of the NCCP Act.
I certify that the preceding 125 (one hundred and twenty-five) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe
..............................[SGD]..........................................
Associate
Dated: 10 October 2023
Date(s) of hearing: 11, 12, and 13 April 2023 and 30 May 223 Date final submissions received: 23 May 2023 Solicitors for the Applicant: Assure Lawyers Counsel for the Respondent: Ms S Patterson Solicitors for the Respondent: Self-Represented
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