FEDERAL COURT OF AUSTRALIA
Holland v BT Securities Limited (No 2) [2023] FCA 822
File number(s): SAD 162 of 2021 Judgment of: O'SULLIVAN J Date of judgment: 20 July 2023 Catchwords: CORPORATIONS LAW – margin lending facility opened in 1997 – application for damages – eight causes of action spanning 25 years – claim alleging a failure to provide a product disclosure statement contrary to the Corporations Act 2001 (Cth) – whether the Corporations Act required the defendant to provide a product disclosure statement and supplementary product disclosure statement to the first plaintiff – further claim pursuant to the Australian Securities and Investments Commission Act 2001 (Cth) alleging unconscionable conduct, and misleading and deceptive conduct – where commission paid to a broker – equitable and common law claims alleging breach of fiduciary duty or knowingly assisting or receiving in breach of fiduciary duty, breach of contract, fraud and breach of duty of care – failure by plaintiffs to establish conduct alleged – claim dismissed. Legislation: Australian Securities Investment Commission Act 2001 (Cth), ss 5, 12BAA, 12BAA(7), (8),12BAB, 12BAB(1), 12CB, 12CB(1) & (4), 12CA, 12CC, 12DA, 12DA(1), 12GF(1)
Corporations Act 2011 (Cth), ss 763A, 765A, 765A(1), 849, 936K, 952B(1A), 952C, 963A, 963K, 964D, 965, 1012B, 1012B(3), 1017B, 1017B(1), 1017B(1A), 1022B, 1041G, 1528(1) & (4)
Corporations Amendment (Further Future of Financial Advice Measures) Act2012 (Cth), ss 1528, 1531
Corporations Legislation Amendment (Financial Services Modernisation) Act2009 (Cth)
Financial Services Reform Act2001 (Cth)
Financial Services Reform Amendment Act2003 (Cth)
Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Act2019 (Cth), Schedule 1, s 1
Trade Practices Act1974 (Cth), s 51AA(1) (repealed)
Australian Securities and Investments Commission Amendment Regulations2010 (No. 2) (Cth)
Corporations Regulations 2000 (Cth), rr 7.1.06(1)(a), 7.704
Federal Court Rules 2011 (Cth) at r 16.02(e)
Crimes Act1900 (NSW), ss 64(e) & (f), 249B, 316
Criminal Law Consolidation Act1935 (SA), ss 148 - 150
Secret Commissions Prohibition Act1920 (SA), s 5
Securities Industry Act 1975 (NSW)
Cases cited: ACCC v C G Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51
ACCC v Quantum Housing Group Pty Ltd [2021] FCAFC 40; (2021) 388 ALR 577
Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd [2000] FCA 2; (2000) 96 FCR 491
Australian Competition and Consumer Commission v Mazda Australia Pty Ltd [2023] FCAFC 45
Australian Securities and Investments Commission v AGM Markets Pty Ltd(in liq) (No 3) [2020] FCA 208; (2020) 275 FCR 57
Australian Securities and Investments Commission vKobelt [2019] HCA 18; (2019) 267 CLR 1
Barnes v Addy [1874] LR 9; Ch App 244
Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) [2008] WASC 239; (2008) 39 WAR 1 at [4849]
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- Case
- [2023] FCA 822
- Decision Date
CaseChat Overview and Summary
The court was required to determine whether the defendant was indeed obliged to provide a PDS to the first plaintiff when the facility was opened in 1997, whether any such PDS was defective, and if the Act mandated the provision of a supplementary PDS for the products issued. Additionally, the court needed to examine the merits of the plaintiffs' claims of unconscionable conduct, misleading and deceptive conduct, breach of fiduciary duty, breach of contract, fraud, and breach of duty of care. The court found that the plaintiffs had failed to establish any of the conduct alleged in their causes of action, leading to the dismissal of the claim.
The reasoning of the court hinged on several key findings. Firstly, the court established that the defendant was not obliged to provide a PDS to the first plaintiff when the facility commenced in 1997, as the Act was not in force at that time. Moreover, even if the provisions the plaintiffs relied on had come into effect, the facility was excluded from the operation of the Act until 1 January 2010. The court also found that the plaintiffs had not substantiated their claims of unconscionable conduct, misleading and deceptive conduct, breach of fiduciary duty, breach of contract, fraud, and breach of duty of care. Consequently, the plaintiffs' claim was dismissed in its entirety.
In conclusion, the court dismissed the plaintiffs' claim and ordered that the parties would be heard regarding any consequential orders, particularly concerning costs. The court found that the plaintiffs had failed to establish any of their causes of action and that the claim must be dismissed.
Orders
Orders of the court
1. The plaintiffs’ claim is dismissed.
2. I will hear the parties as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
Against the background of these factual findings, I consider each of the causes of action.CONSIDERATION OF CAUSES OF ACTION1. Non-disclosure of the payment of Commission to Centec and the failure to provide a PDS to Mr Holland: Statement of Claim [23]-[27] The pleading of the obligation to disclose is found in [24]-[27] of the statement of claim and [16] of the reply which pleads that various information should be included in a PDS including the EDA. The following issues arise in considering this cause of action:(a)Was BT obliged to provide Mr Holland with a PDS at the time the Facility was opened in April/May 1997?: [26], [27] of statement of claim;(b)If so, was the PDS defective and if so, what flows from that?; and(c)Was it a requirement of the Act that BT furnish clients with a supplementary PDS for products it issued?: [28], [29], [30] of statement of claim.First issue - Was BT obliged to provide Mr Holland with a PDS when the Facility was opened? Mr Holland alleges that:(a)BT had an EDA with Barton (amongst other stockbrokers) at the time the Facility commenced under which both leading and trailing commission on the Facility was payable to Barton;(b)The EDA was not included in any Product Disclosure Statement as required by the Corporations Act; and(c)As a consequence, any commission paid was conflicted remuneration within the meaning of the Act. The plaintiffs submit that there is no commission clause contained in the EDA documentation or the Facility application documents and neither Mr Bennett nor Barton disclosed commission receivable from BT. I have found that there is no evidence that Mr Bennett or Barton received commission from BT. I have also found that the Facility application documents disclosed that commission may be payable. Accordingly, I do not accept the plaintiffs’ submission. Mr Holland submits that neither Mr Bennett nor Centec held a pre FSR or AFSL license permitting the provision of financial advice. There is no issue and I am satisfied that none of Mr Bennett, Barton and Centec provided financial advice to Mr Holland at any time. Further, it is clear that neither Mr Bennett nor Barton promoted the Facility to Mr Holland. It is because BT recorded Mr Holland as a financial advisory client that Mr Holland submits BT was required to declare the commission payable to Centec. As I understand the argument, notwithstanding Mr Holland was not in receipt of financial advice, because he was recorded by BT as a recipient of financial advice, any commission had to be disclosed. Taking the plaintiffs’ case at its highest, and accepting for the moment that there was no disclosure in the Facility documents as I have found them that payment of commission would occur as a matter of fact, (as opposed to that a commission “may” be payable), the issue centres around the non-provision of a PDS to Mr Holland as required by the Act. This part of the cause of action may be disposed of quickly. There is no dispute that BT did not provide a PDS within the meaning of the Act to Mr Holland when the Facility commenced in 1997, however the Act was not in force at that time. Further, not only did the provisions Mr Holland appear to rely upon not come into effect until 11 March 2002, given the Facility is a margin lending facility, it was excluded from the operation of the Act until 1 January 2010.