HUNTLEY MANAGEMENT LIMITED and Australian Securities and Investments Commission - [2023] AATA 2290

HUNTLEY MANAGEMENT LIMITED and Australian Securities and Investments Commission [2023] AATA 2290 (21 July 2023)
Division:  TAXATION AND COMMERCIAL DIVISION
File Number(s):          2023/1939
Re:  HUNTLEY MANAGEMENT LIMITED
APPLICANT

And Australian Securities and Investments Commission
RESPONDENT

DECISION
Tribunal:  Senior Member D K Grigg
Date:     21 July 2023
Place:   SYDNEY
The Tribunal varies the decision under review and substitutes it with the following decision:
1.Pursuant to s 915C(1) of the Corporations Act 2001 (Act), the Tribunal suspends the Australian financial services licence number 229754 (AFSL) held by Huntley Management Limited ACN 089 240 513 (Applicant).
2.Pursuant to s 915H of the Act:
a.the AFSL continues in effect as though the suspension had not occurred for the purposes of the provisions of Chapter 5C and Chapter 7 of the Act except in relation to RNY Property Trust ARSN 115 585 709 (RNY Scheme).
b.in relation to the RNY Scheme, the AFSL continues in effect as though the suspension had not occurred for the purposes of Chapter 5C and Chapter 7 of the Act to the extent that the Applicant is permitted to provide the financial services that are necessary for, or incidental to, the day-to-day operation of the RNY Scheme, other than services related to the issue of interests in the RNY Scheme.

3.ASIC is to lift the suspension immediately upon the lodgement of the outstanding reporting requirements in respect of the RNY Scheme, namely the annual financial reports for the full year ended 31 December 2021 and the compliance plan audit reports for the years ended 2020 and 2021.

............[SGD]...................
Senior Member D K Grigg
CATCHWORDS
FINANCIAL SERVICES INDUSTRY – STAY APPLICATION – breaches of sections 292, 301, 319, 601HG and 912A of the Corporations Act – Suspension order for 12 months under s 915C of the Corporations Act – discretionary power to suspend financial services licence – public interest –- decision under review varied
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)
CASES
David Hickie and ASIC [2013] AATA 853
Norfolk Ridge Vineyards Ltd and Australian Securities and Investments Commission [2005] AATA 1234
Olive Financial Markets Pty Ltd and Australian Securities and Investments Commission [2022] AATA 5229
Rainbow Legend Group Pty Ltd and Australian Securities and Investments Commission [2016] AATA 665
Sovereign Capital Limited and Australian Securities and Investments Commission [2008] AATA 901; 109 ALD 398
Westeq Ltd and Australian Securities and Investments Commission [2006] AATA 34
Williams and Australian Securities and Investments Commission (Taxation) [2018] AATA 2312
SECONDARY MATERIALS
Australian Securities and Investments Commission Regulatory Guide 98: ASIC’s powers to suspend, cancel and vary AFS licences and make Suspension orders (November 2022)
Australian Securities and Investments Commission Regulatory Guide 43: Financial Reports and audit relief (May 2011)
REASONS FOR DECISION
Senior Member D K Grigg
21 July 2023
Contents
INTRODUCTION
LEGISLATIVE REQUIREMENTS
Corporations Act
Chapter 7 Financial Services and Markets
Australian Financial Services Licence
Compliance Plans/Annual Reports
Australian Securities and Investments Commission Act 2001
Registers
Suspension Orders
Purpose of a Suspension order
Australian Securities and Investments Commission Regulatory Guide 98: ASIC’s powers to suspend, cancel and vary AFS licences and make Suspension orders (“Guide”)
Application for Review
Issues for the tribunal
ASIC Investigation
THE APPLICANT’S EVIDENCE/SUBMISSIONS
ASIC’S SUBMISSIONS
Consideration
Breaches
Failure to give auditor information and lodge report - Breach of 601HG
Failure to Lodge Reports - Breach of sections 292, 301 and 319
Failure to Report Breaches on Time: section 912DAA
Should the Discretion be Exercised?
Conclusion
Will the issuance of a suspension of the Applicant’s AFSL promote the objects of Chapter 7 of the Act?
Decision
INTRODUCTION

At all material times the Applicant held an Australian financial services (AFSL) licence which includes an authorisation to operate certain specified registered managed investment schemes (MIS).[1]
[1] Exhibit 1, Tribunal documents, T05, 77-108 (‘T documents’).
The Applicant has held a AFSL since 2004.[2]
[2] Exhibit 16, Applicant’s Chronology, 1.
The Applicant is currently the responsible entity (RE) for 12 MIS, including the RNY Property Trust ARSN 115 585 709 (RNY Scheme). The Applicant was appointed as the responsible entity for the RNY Scheme on 2 July 2018.[3] The RNY Scheme is a property scheme which currently holds an indirect 75% interest in five commercial property investments in the State of New York, United States of America (USA) (RNY Properties).[4]
[3] T Docs (n 1) T19, 1459 [2].
[4] Ibid T19, 1459 [3].
The Respondent, the Australian Securities and Investment Commission (ASIC), is concerned with statutory obligations of the Applicant relating to the RNY Scheme. There is no criticism by ASIC regarding the other 11 MIS of which the Applicant is the RE.
Pursuant to the Corporations Act 2001 (Cth) (Corporations Act) an operator of a registered MIS is under an obligation to lodge an audit report of the MIS’ compliance plans and annual financial reports with ASIC.
It is not in dispute that the Applicant has not complied with its reporting obligations with respect to the RNY Scheme for the 2020 and 2021 financial years.
ASIC found that the Applicant was aware of the failure to report breaches from at least 15 June 2021. This was the date the Applicant reported the breaches to ASIC.[5]
[5] Ibid T07, 113-115.
ASIC accepts that the Applicant has been attempting to rectify the issue. However, given that the Applicant had been unable to confirm when all the breaches will be rectified, ASIC determined that it was appropriate that the Applicant’s AFS be suspended in part.
Following an investigation and hearing, ASIC decided to suspend the Applicant’s financial services licence number 229754 until 21 March 2024, subject to a specification pursuant to sections 915C(1) and 915H of the Corporations Act (“Suspension Decision”).[6]
[6] Ibid T02, 25-38.
A copy of the suspension order was sent to the Applicant on 21 March 2023 as required by section 915C(3) of the Corporations Act. The suspension order provides (Suspension Order):
That under s915C(1) of the Corporations Act 2001 Australian financial services licence number 229754 held by Huntley Management Limited be suspended until 21 March 2024.
Under s915H of the Corporations Act 2001, ASIC specifies that the licence continues in effect, while suspended, as though the suspension had not happened for the purposes of the provisions of the Corporations Act 2001 specified in Schedule C in relation to the schemes listed in Schedule A and the matters in Schedule B.
As a result of the Suspension Order, ASIC suspended the Applicant’s ability to provide financial services, except in relation to certain specified schemes.
On 23 March 2023 the Applicant appealed the Suspension Decision and made an interlocutory application for a stay, pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”), of ASIC’s Suspension Decision pending the hearing and decision of the Administrative Appeals Tribunal.[7]
[7] Exhibit 3, Applicant’s Outline of Submissions, 28 April 2023, 2 [9]..
On 10 May 2023 Deputy President McCabe made the following orders:
1. The operation of the decision made on 21 March 2023 to suspend the applicant’s Australian financial services licence (number 229754) under section 915C(1) of the Corporations Act 2001 is stayed in relation to the Link Mortgage Fund until the Tribunal hears and determines the application for review.
2. The operation of the reviewable decision made on 21 March 2023 under section 915C(1) of the Corporations Act 2001 is not otherwise stayed in relation to the other schemes of which the applicant is the responsible entity.
3.       The stay referred to in (1) is subject to the condition that Huntley Management Ltd is to provide the notification set out in Schedule one (the Notification) to the following persons (the Notification Class):
a.       all persons currently invested in Link, within 5 days of this order; and
b.       any person that is offered to invest in Link, at least 3 days prior to their investment.
The Tribunal has jurisdiction to review the Suspension Decision pursuant to section 25 of the AAT Act and section 1317B of the Corporations Act.
The Applicant submits that the making of any suspension order is contrary to the objectives of the Corporations Act and Australian Securities and Investment Act 2001 (Cth) (ASIC Act).
The Applicant submits the decision under review should be set aside. Alternatively, the Applicant submits that if a suspension order needs to be made, the Suspension Order under review should be varied, and in its place, the suspension of HML’s AFSL ought to be proportionate to its non-compliance and directed against the RNY Scheme only, such that (Applicant’s Proposed Order):[8]
a) whilst HML would be prevented from issuing new interests in the RNY Scheme, it would still be permitted to provide the financial services that are necessary for, or incidental to, the day-to-day operation of the RNY Scheme; and
b) any suspension would be immediately lifted upon the lodgement of the outstanding compliance plan audit reports and annual reports.
[8] Exhibit 4, Applicant’s Outline of Submissions, 19 May 2023 (Applicant’s Submissions), 10 [94]-[95]; Exhibit 5, Applicant’s Outline of Submissions, 5 July 2023, 13 [94]-[95].
At the hearing, the Respondent proposed that a variation to the Suspension Order under review should be made as the correct or preferrable decision in this matter (ASIC’s Proposed Order). There are two changes proposed to the original Suspension Order. The Suspension Order originally imposed a suspension period of 12 months. In ASIC’s Proposed Order, the time for the suspension to run coincides with the time it takes the Applicant to comply with its section 912A(1)(c) obligation. The second difference between the Suspension Order and ASIC’s Proposed Order is that ASIC has agreed that the Applicant can now issue new interests in the Link Mortgage Fund. This amendment was accepted by ASIC as appropriate following receipt of information from the Applicant regarding the detrimental impact a blanket suspension order would have on the Link Mortgage Fund. With respect to the other MIS, ASIC contends that while the Applicant can undertake reasonable services for day-to-day operations, it should not be permitted to issue any new units in those MIS. ASIC’s Proposed Order reads as follows:
Form of order proposed by ASIC as the correct and preferable decision
Under s915C(1) of the Corporations Act 2001, the Tribunal hereby suspends Australian financial services licence number 229754 held by Huntley Management Limited ACN 089 240 513 (HML) until such time as ASIC has confirmed in writing to the Tribunal that Huntley Management Limited is in compliance with s 912A(1)(c) of the Corporations Act 2001.
Under s915H of the Corporations Act 2001, the Tribunal specifies that the licence continues in effect, while suspended, as though the suspension had not happened for the purposes of the provisions of the Corporations Act 2001 specified in Schedule C in relation to the schemes listed in Schedule A and the matters in Schedule B.
Schedule A
1.       Link Mortgage Fund ARSN 608 870 462
2.       NTT Land Trust ARSN 602 458 720
3.       NTT Mahogany Project 2006-2008 ARSN 118 011 457
4.       NTT Mahogany Project ARSN 103 557 517
5.       Premium Real Estate Investment Platform ARSN 644 599 039
6.       Prequin Securities Monthly Income Fund ARSN 608 870 524
7.       Prequin Securities Select Mortgage Fund ARSN 608 870 748
8.       Property Collect Growth Trust ARSN 621 450 397
9.       RNY Property Trust ARSN 115 585 709
10.     Solar Cloud Scheme ARSN 612 098 110
11.     TFS Premium Sandalwood Project 2004 ARSN 108 714 736
12.     Wallan West Development Trust ARSN 608 870 686
Schedule B
i.The provision by Huntley Management Limited of financial services that are reasonably necessary for, or incidental to, the day-to-day operation of the schemes listed in Schedule A, but excluding services related to the issue of interests in those schemes (subject to the provision regarding the Link Mortgage Fund below);
ii.The provision by Huntley Management Limited of financial services that are reasonably necessary for, or incidental to, the issue of interests in the Link Mortgage Fund; and
iii.The provision by Huntley Management Limited of financial services that are reasonably necessary for, or incidental to, the winding up or transfer to a new responsible entity of one or more of the schemes listed in Schedule A.
Schedule C
The provisions of Chapter 5C and Chapter 7 of the Corporations Act 2001.
LEGISLATIVE REQUIREMENTS
Corporations Act
Chapter 7 Financial Services and Markets
Chapter 7 of the Corporations Act concerns financial services and markets. The objects of Chapter 7 are set out in section 760A as follows:
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 providefinancial 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.
Australian Financial Services Licence
Part 7.6 of the Corporations Act concerns the licensing of providers of financial services.
With some exceptions which are not relevant here, a person who carries on a financial services business in this jurisdiction must hold an Australian financial services licence covering the provision of the financial services (section 911A, Corporations Act).
Section 912A of the Corporations Act sets out the mandatory obligations for a financial service licensee, which are, among other things to:
(a) do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly; and
…
(c) comply with the financial services laws; and
…
Compliance Plans/Annual Reports
Registered schemes are required to have compliance plans which set out adequate measures the responsible entity is to apply in operating the scheme to ensure compliance with the Corporations Act and the scheme's constitution: section 601HA.
One of the financial services laws which must be complied with is set out in section 601HG which provides relevantly:
Audit of compliance plan
(1) The responsible entity of a registered scheme must ensure that at all times a registered company auditor, an audit firm or an authorised audit company is engaged to audit compliance with the scheme's compliance plan in accordance with this section. This auditor, firm or company is referred to as the auditor of the compliance plan .
(2) A person is not eligible to act as the individual auditor, lead auditor or review auditor of the compliance plan if the person is:
(a) an associate of the responsible entity; or
(b) an agent holding scheme property on behalf of the responsible entity or an associate of an agent of that kind; or
(c) the auditor of the responsible entity's financial statements.
(2A) However:
(a) the auditor of the compliance plan and the auditor of the responsible entity's financial statements may work for the same firm of auditors or audit company; and
(b) the lead auditor or review auditor of the compliance plan (on the one hand) and the lead auditor or review auditor of the responsible entity's financial statements (on the other hand) may work for the same firm of auditors or audit company.
(3) Within 3 months after the end of a financial year of the scheme, the auditor of the compliance plan must:
(a) examine the scheme's compliance plan; and
(b) carry out:
(i) if the scheme has only had one responsible entity during the financial year--an audit of the responsible entity's compliance with the compliance plan during the financial year; or
(ii) if the scheme has had more than one responsible entity during the financial year--an audit of each responsible entity's compliance with the compliance plan during that part of the financial year when it was the scheme's responsible entity; and
(c) give to the scheme's current responsible entity a report that states whether, in the auditor's opinion:
(i) the responsible entity, or each responsible entity, complied with the scheme's compliance plan during the financial year or that part of the financial year when it was the scheme's responsible entity; and
(ii) the plan continues to meet the requirements of this Part.
Contravention by individual auditor
(4) An individual auditor conducting an audit of a compliance plan contravenes this subsection if:
(a) the auditor is aware of circumstances that:
(i) the auditor has reasonable grounds to suspect amount to a contravention of this Act; or
(ii)  amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a personinvolved in the conduct of the audit (see subsection (12)); or
(iii)  amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and
(b) if subparagraph (a)(i) applies:
(i) the contravention is a significant one; or
(ii) the contravention is not a significant one and the auditor believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor's report or bringing it to the attention of the directors; and
(c) the auditor does not notify ASICin writing of those circumstances as soon as practicable, and in any case within 28 days, after the auditor becomes aware of those circumstances.
Contravention by audit company
(4A) An audit company conducting an audit of a compliance plan contravenes this subsection if:
(a) the lead auditor for the audit is aware of circumstances that:
(i) the lead auditor has reasonable grounds to suspect amount to a contravention of this Act; or
(ii)  amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a personinvolved in the conduct of the audit (see subsection (12)); or
(iii)  amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and
(b) if subparagraph (a)(i) applies:
(i) the contravention is a significant one; or
(ii) the contravention is not a significant one and the lead auditor believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor's report or bringing it to the attention of the directors; and
(c) the lead auditor does not notify ASICin writing of those circumstances as soon as practicable, and in any case within 28 days, after the lead auditor becomes aware of those circumstances.
Contravention by lead auditor
(4B) A person contravenes this subsection if:
(a) the person is the lead auditor for an audit of a compliance plan; and
(b) the person is aware of circumstances that:
(i) the person has reasonable grounds to suspect amount to a contravention of this Act; or
(ii)  amount to an attempt, in relation to the audit, by any person to unduly influence, coerce, manipulate or mislead a personinvolved in the conduct of the audit (see subsection (12)); or
(iii)  amount to an attempt, by any person, to otherwise interfere with the proper conduct of the audit; and
(c) if subparagraph (b)(i) applies:
(i) the contravention is a significant one; or
(ii) the contravention is not a significant one and the person believes that the contravention has not been or will not be adequately dealt with by commenting on it in the auditor's report or bringing it to the attention of the directors; and
(d) the person does not notify ASICin writing of those circumstances as soon as practicable, and in any case within 28 days, after the person becomes aware of those circumstances.
(5) The auditor of the compliance plan:
(a) has a right of access at all reasonable times to the books of the scheme; and
(b) may require an officer of the responsible entity to give the auditor information and explanations for the purposes of the audit.
(6) An officer of the responsible entity must:
(a) allow the auditor of the compliance plan to have access to the books of the scheme; and
(b) give the auditor information or an explanation required under subsection (5); and
(c) otherwise assist the conduct of the audit.
(7) The responsible entity must lodge the auditor's report under subsection (3) with ASIC at the same time as the financial statements and reports in respect of the scheme are to be lodged with ASIC (see sections 292 and 321).
(7A) An offence based on subsection (1), (3), (6) or (7) is an offence of strict liability.
Note:          For strict liability, see section 6.1 of the Criminal Code .
(8) The auditor of the compliance plan has qualified privilege in respect of:
(a) a statementmade in a report under subsection (3); or
(b) a notification to ASIC under subsection (4).
(9) This section does not prevent the responsible entity from arranging for the auditor of the compliance plan to carry out audits in addition to those required by this section.
Significant contraventions
(10) In determining for the purposes of this section whether a contravention of this Act is a significant one, have regard to:
(a) the level of penaltyprovided for in relation to the contravention; and
(b) the effect that the contravention has, or may have, on:
(i) the overall financial position of the company, registered scheme, notified foreign passport fund or disclosing entity; or
(ii) the adequacy of the information available about the overall financial position of the company, registered scheme, notified foreign passport fund or disclosing entity; and
(c) any other relevant matter.

The auditor of the compliance plan must carry out the audit within three months after the end of a financial year of the scheme: section 601HG(3)(b) and report whether the compliance plan meets the requirements of Part 5C.4: section 601HG(3)(c)(ii).
The responsible entity of the registered scheme must lodge the auditor’s report at the same time as the financial statements and reports in respect of the scheme are to be lodged with ASIC: section 601HG(7).
All registered schemes must prepare a financial report and a directors' report for each financial year: section 292(1)(d), Corporations Act.
Financial reports must be audited, and an auditor’s report obtained: section 301(1), Corporations Act.
The financial report, directors report and audit report (annual reports) for a registered scheme must be lodged with ASIC within 3 months after the end of the financial year: section 319(1), (3)(a)
Pursuant to section 912DAA a financial services licensee must lodge a report with ASIC within 30 days if there are reasonable grounds to believe that a reportable situation has arisen.
“[R]eportable situations” are defined in section 912D:
What are reportable situations?
(1) There is a reportable situation in relation to a financial services licensee if one of the following paragraphs is satisfied:
(a) the financial services licensee or a representative of the financial serviceslicensee has breached a core obligation and the breach is significant;
(b) the financial services licensee or a representative of the financial serviceslicensee is no longer able to comply with a core obligation and the breach, if it occurs, will be significant;
(c) the financial services licensee or a representative of the financial serviceslicensee conducts an investigation into whether there is a reportable situation of the kind mentioned in paragraph (a) or (b) and the investigation continues for more than 30 days;
(d) an investigation described in paragraph (c) discloses that there is no reportable situation of the kind mentioned in paragraph (a) or (b).
…
(3) Each of the following is a core obligation :
(a) an obligation under section 912A or 912B, other than the obligation under paragraph 912A(1)(c);
(b) the obligation under paragraph 912A(1)(c), so far as it relates to provisions of this Act or the ASIC Act referred to in paragraphs (a), (b), (ba) and (c) of the definition of financial services law in section 761A;
(c) in relation to financial services, other than traditional trustee company servicesprovided by a licensed trustee company--the obligation under paragraph 912A(1)(c), so far as it relates to Commonwealth legislation that is covered by paragraph (d) of that definition and that is specified in regulations made for the purposes of this paragraph;
(d) in relation to traditional trustee company servicesprovided by a licensed trusteecompany--the obligation under paragraph 912A(1)(c), so far as it relates to Commonwealth, State or Territory legislation, or a rule of common law or equity, that is covered by paragraph (d) or (e) of that definition;
(e) an obligation of a representative of the licensee under the financial services law, so far as it relates to provisions of this Act or the ASIC Act referred to in paragraphs (a), (b), (ba) and (c) of the definition of financial services law in section 761A.
(4) For the purposes of this section, a breach of a core obligation is taken to be significant if:
(a) the breach is constituted by the commission of an offence under any law and the commission of the offence is punishable on conviction by a penalty that may include imprisonment for a maximum period of:
(i) if the offence involves dishonesty--3 months or more; or
(ii) in any other case--12 months or more; or
(b) the breach is constituted by the contravention of a civil penaltyprovision under any law, other than a civil penaltyprovisionprescribed by the regulations for the purposes of this paragraph; or
(c) the breach is constituted by a contravention of subsection 1041H(1) of thisAct or subsection 12DA(1) of the ASIC Act (misleading or deceptive conduct in relation to a financial product or a financial service); or
(d) the breach results, or is likely to result, in material loss or damage to:
(i) in the case of a managed investment scheme--a member or members of the scheme; or
(ii) in the case of a superannuationentity--a member or members of the entity; or
(iii) in all cases--a person or persons to whom the financial services licensee or a representative of the financial services licenseeprovides a financial product or a financial service as a wholesale or retail client; or
(e) any other circumstances prescribed by the regulations for the purposes of this paragraph exist.
(5) Otherwise, for the purposes of this section, a breach of a core obligation is significant having regard to the following:
(a) the number or frequency of similar breaches;
(b) the impact of the breach on the financial services licensee's ability to providefinancial services covered by the licence;
(c) the extent to which the breach indicates that the financial services licensee's arrangements to ensure compliance with those obligations are inadequate;
(d) any other matters prescribed by regulations made for the purposes of this paragraph.
(6) Regulations for the purposes of paragraph (4)(b) may prescribe a civil penaltyprovision to the extent that it relates to the following:
(a) contraventions of specified provisions;
(b) specified matters.
(emphasis added)

Australian Securities and Investments Commission Act 2001

ASIC’s statutory obligations in carrying out its duties and exercising its powers are to (section 1(2) ASIC Act):
(a) maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy; and
(b) promote the confident and informed participation of investors and consumers in the financial system; and
(d) administer the laws that confer functions and powers on it effectively and with a minimum of procedural requirements; and
(e) receive, process and store, efficiently and quickly, the information given to ASIC under the laws that confer functions and powers on it; and
(f) ensure that information is available as soon as practicable for access by the public; and
(g) take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it.
In fulfilling its objectives, ASIC is under an obligation to “consider the effects that the performance of its functions and the exercise of its powers will have on competition in the financial system”: section 1(2A), ASIC Act.
One of the critical underlying purposes of the ASIC Act is the objective of protecting the public from harm.[9]
[9] Mawhinney v Australian Securities and Investments Commission [2022] FCAFC 159, at [110].
Registers
Section 1274(1) of the Corporations Act obligates ASIC to keep such registers as it considers necessary in such form as it thinks fit.
Section 1274(11) refers to compliance defaults and provides:
(11) If a body corporate or other person, having madedefault in complying with:
(a) any provision of this Act or of any other law that requires the lodging in any manner of any return, account or other document or the giving of notice to ASIC of any matter; or
(b) any request of ASIC to amend or complete and resubmit any document or to submit a fresh document;
fails to make good the default within 14 days after the service on the body or person of a notice requiring it to be done, a court may, on an application by any member or creditor of the body or by ASIC, make an order directing the body or any officer of the body or the person to make good the default within such time as is specified in the order.
Section 1274(13) provides that a person must not contravene an order made under subsection (11).
Suspension Orders
ASIC’s power to make a Suspension order comes from section 915C of the Corporations Act which provides relevantly:
Suspension or cancellation after offering a hearing
(1) ASIC may suspend or cancel an Australian financial services licence (subject to complying with subsection (4)) in any of the following cases:
(a) the licensee has not complied with their obligations under section 912A;
(aa) ASIC has reason to believe that the licensee is likely to contravene their
obligations under section 912A
…
(4) However, ASIC may only suspend or cancel an Australian financial services licence under this section after giving the licensee an opportunity:
(a) to appear, or be represented, at a hearing before ASIC that takes place in private; and
(b) to make submissions to ASIC on the matter.
Pursuant to section 915D:
(1) A suspendedAustralian financial services licence has no effect while it remains suspended.
(2) Subsection (1) has effect subject to section 915H.
Section 915H provides:
In the written notice of suspension or cancellation that ASIC gives to the licensee, ASIC may specify that the licence continues in effect as though the suspension or cancellation had not happened for the purposes of specified provisions of this Act in relation to specified matters, a specified period, or both.
A Suspension order takes effect from the date it is given to the person (s 915F).
Once a Suspension order has been made, ASIC must publish a notice in the Gazette as soon as practicable (s 915F(2)).
Purpose of a Suspension order
The obligations on holders of AFS licenses set out in section 912A indicate a suspension order is primarily directed to protecting the public interest by ensuring that only those who are competent, and fit and proper can provide financial services.
Suspension and cancellation orders also function as both a personal and general deterrence.[10]
[10] See Olive Financial Markets Pty Ltd and Australian Securities and Investments Commission [2022] AATA 5229, at [247]-[251].
In Olive Financial Markets Pty Ltd and Australian Securities and Investments Commission [2022] AATA 5229, at [249], the Tribunal noted that the “deterrent value of a particular form of regulatory action is an important and relevant consideration”.
Australian Securities and Investments Commission Regulatory Guide 98: ASIC’s powers to suspend, cancel and vary AFS licences and make Suspension orders (“Guide”)
The purpose of the Guide is to provide guidance in relation to the matters ASIC will generally take into account when exercising its powers to suspend, cancel or vary an AFS.[11]
[11] See RG 98.1-98.2.
The Guide provides that ASIC will take suspension action where necessary to promote the objects of the financial services regime (s 760A) and:
RG 98.36 … where there is a need to protect investors and consumers, where there is a need to deter misconduct, or where conduct of the licensee may result in investor or consumer detriment. Whether administrative action will be taken will depend on the facts of each matter. In general, we may consider:
(a) suspending, cancelling or varying an AFS licence where we have concerns about the licensee, or the way their business is being or has been conducted;
(emphasis added)
Table 1 in the Guide sets out factors ASIC will take into account (Table 1 Factors).

The Guide then provides some examples, although not exhaustive, of conduct which may result in cancellation or suspension:
RG 98.42 Examples of misconduct that may result in an AFS licence being cancelled or suspended include:
(a) dishonesty by a licensee;
(b) the licensee failing to implement and maintain effective compliance measures;
(c) systemic or persistent breaches of the licensee’s obligations;
(d) the licensee, at senior levels of management, misleading or hindering ASIC, including by concealing or deliberately destroying records it is required to keep;
(e) there is actual or potential significant risk to investors and consumers because the licensee does not comply with its obligations under s912A, for example, by:
(i) not having adequate resources, risk management arrangements or arrangements to manage conflicts of interest to continue to meet its obligations; or
(ii) not complying with the conditions of its licence; and
(f) the licensee giving information to ASIC that is false in a material particular or materially misleading, or omits a material matter.
Note: These examples are not exhaustive and are intended to only give an indication of misconduct that might lead to ASIC taking administrative action.
(emphasis added)
APPLICATION FOR REVIEW
On 23 March 2023 the Applicant applied to this Tribunal for review of the Suspension Decision.[12]
[12] T Docs (n 1) T01, 1-24.
As referred to above, an interim stay order in relation to the Suspension Decision has been in place since 10 May 2023. At the hearing of the application the parties agreed that those interim orders should remain in place pending this decision.
ISSUES FOR THE TRIBUNAL
The issue for the Tribunal is whether the Suspension Decision should be set aside or varied. If the Suspension Order is to be varied the Tribunal needs to consider if it should be varied in accordance with ASIC’s Proposed Order or the Applicant’s Proposed Order.
ASIC INVESTIGATION
On 9 December 2021 ASIC wrote to the Applicant reminding it of its statutory reporting obligations.[13]
[13] Ibid T8, 116.
On 15 February 2022 ASIC again wrote to the Applicant and noted that the RNY Scheme had failed to lodge its compliance audit report for the financial year ending 2020. ASIC then issued a notice, under section 1274(11) requiring the Applicant to lodge its compliance audit report for the financial year ending 2020 within 14 days.[14]
[14] Ibid T09, 117-118.
ASIC met with the Applicant on 24 August 2022 where the Applicant explained the reasons for the delay in reporting included COVID interruptions and having to wait for information from the property manager in the USA, CBRE Inc (CBRE).[15]
[15] Ibid T13, 139-142.
Following the meeting ASIC wrote to the Applicant and requested additional information of investors, assets, and liabilities of its MIS.[16] The Applicant provided the information requested on 8 September 2022 and notified ASIC that it could not give an estimate of time to rectify the breach.[17]
[16] Ibid T14, 143-144.
[17] Ibid T15, 145-156.
On 1 February 2023 ASIC issued a hearing notice to the Applicant, pursuant to section 915C of the Act, stating that it was considering cancelling or suspending its AFS.[18]
[18] Ibid T03, 39-51.
ASIC invited the Applicant to appear at a hearing to demonstrate why its licence should not be suspended. The hearing was held on 15 March 2023 (ASIC Hearing).
The Applicant appeared at the ASIC Hearing with legal representation and provided written submissions and witness statements.
At the ASIC hearing, and before this Tribunal, the Applicant acknowledged it had failed to comply with financial services laws (sections 319 and 601HG, Corporations Act) by not lodging the 2020 and 2021 reports with ASIC within the required statutory timeframes.[19]
[19] Ibid T19, 1464 [60]; Exhibit 6, Witness Statement of William James Foxall, 28 April 2023, 2 [8] (First Statement of Mr Foxall).
The Applicant says the delay in lodgement is because the RNY Scheme’s property manager, CBRE, failed to provide timely information to enable the scheme and compliance plan auditors to complete their audits.[20]
[20] Applicant’s submissions (n 8), 1 [9].
At the ASIC hearing the Applicant provided its response to the Table 1 Factors as follows:

The Applicant highlighted the fact that the RNY Scheme’s activities do not engage the general public and that the non-compliance is specific to the RNY Scheme’s circumstances.
The ASIC delegate found that a suspension order subject to various specifications was necessary:[21]
[6] …in the interest of ensuring investors in the schemes currently operated by HML are not disadvantaged by the suspension order”:
[21] Ibid T02, 29 [6].
On 21 March 2023, the delegate ASIC suspended the Applicant’s AFSL for 12 months.[22]
[22] Ibid T02, 25-38.
THE APPLICANT’S EVIDENCE/SUBMISSIONS
Mr William James Foxall, General Manager and Company Secretary, provided three witness statements and gave evidence at the hearing. Mr Foxall has been the general manager of the Applicant since 2002 and the company’s secretary since 2005.
The Applicant accepts it is in breach of its reporting obligations.
The Applicant says it first requested information from CBRE in January 2021 and this had been followed up by consistent requests from itself, Aurora, Keybridge and Grant Thornton.[23]
[23] Ibid T19, 1464 [63].
The Applicant self-reported the non-compliance issue on 15 June 2021. The Applicant reported to ASIC that there were “two significant breaches of [its] licence provisions in regard to the RNY Property Trust as follows:
1. Failure to lodge audited Annual Financial Statements and Reports for 2020 by 30 April 2021; and
2. Failure to lodge Audit report for the RNY Compliance Plan by 30 April 2021”.[24]
[24] Ibid T07, 113.
In relation to why the Applicant took until 15 June 2021 to report its lack of compliance Mr Foxall said he was aware the deadlines were missed and said he has used the Applicant’s policies and kept the Applicant’s board and compliance committee involved and sometimes it takes longer than expected.
In answer to the question of why the Applicant did not notify ASIC sooner and seek relief from having to comply with the time frames, Mr Foxall said:
70.1.when the Applicant’s take over a scheme it tries to avoid non-compliance issues; and
70.2.the RNY Scheme was difficult because of its complex structure and location. The Applicant advised ASIC as quickly as it could of the difficulties.
Mr Foxall said they did not seek relief from compliance because the focus was on trying to comply and concentrating on complying and “rather than seeking and drawing attention to our difficulties by making an application for relief”. At the hearing Mr Foxall acknowledged that in hindsight he should have sought relief from compliance, but he said he has continued to provide ongoing updates to ASIC.
Mr Foxall was asked why the Applicant had not lodged “qualified reports”. Mr Foxall says this is a matter for the auditor and has not been discussed with the auditor. The Tribunal agrees that the obligation on the Applicant under section 601HG is to provide information to the auditor. The remainder of the obligations in that section are directed at the auditor. It is up to the auditor to file the report. It is not something the Applicant could direct the auditor to do.
Mr Foxall told the Tribunal that he takes compliance issues seriously and that:
[he] has always been concerned with compliance issues during his time at [the Applicant]…and since [his] appointment has acted as the compliance officer for [the Applicant]…
I take a serious view about [compliance] issues…and tries to keep current with compliance requirements
On 28 April 2023 Mr Foxall reported that the RNY Scheme draft financial report for the year ended 30 December 2021, and half year ended 30 June 2021, had been provided to Grant Thornton for audit and financial statements for 30 June 2022 and the year ended 30 December 2022 are in progress pending information from CBRE and completion of the preceding year audits.[25]
[25] First statement of Mr Foxall (n 19) 2 [12].
Mr Foxall confirmed, and it is not disputed, that, other than the RNY Scheme, all of the Applicant’s other MIS are compliant with their financial services law obligations.[26]
[26] Ibid 3 [13]-[14].
In his 28 April 2023 statement Mr Foxall stated:
15. The RNY Scheme would also be compliant but for the inability of CBRE (the property manager for the RNY Scheme) to provide timely information that the Applicant has continually requested in order for the scheme and compliance plan auditors to complete their audits.
16. For completeness, I also confirm that, since the Applicant's appointment as RE, we have only received one payment from CBRE in April 2019, being the first progress bill in relation to the year ended 31 December 2018 audit of the RNY Scheme. That payment was sent to Ernst and Young (the then auditors of the RNY Scheme).
17. Apart from this payment, the Applicant has not received any funds from CBRE to provide for the ongoing operations of the fund in Australia including RE, accounting and audit costs among others.

Mr Foxall states that the impact of the suspension in its current form and in the ASIC Proposed Order is and will be as follows:[27]
[27] Ibid 3-9 [18]-[59].
77.1.All of its MIS will be impacted because:
77.1.1.It cannot issue new interest in any of its MIS;
77.1.2.It is not permitted to operate the MIS in the normal course which involves the acquisition of new investors;
77.1.3.New and prospective clients are impacted;
77.1.4.Schemes ready to commence operations are unable to do so because the Applicant’s AFSL is suspended;
77.1.5.It is impractical for replacement RE’s to be made and this is not in the investor’s interests;
77.2.It impacts the Applicant’s reputation and ongoing relationships are effected; and
77.3.Prospective clients have put further discussions on hold.
In a supplementary statement dated 19 May 2023 Mr Foxall denied that there was any dispute with CBRE as to who would bear the costs of compliance. Mr Foxall says:
78.1.who bears the cost of the compliance is not the reason for the delay in lodging the required reports;
78.2.the project documentation allows for CBRE to be paid from the proceeds of rent collection in the USA;
78.3.there are currently 256 unitholders in the RNY Property Trust ARSN 115 585 709;
78.4.Thirteen unitholders, owned by either Aurora Funds Management Limited or Keybridge Capital Limited, or by their related entities, represent 97.2% of the total units issued;
78.5.the remaining unit holders in the RNY Property Trust who represent 2.4% of the total units issued, are comprised of four large corporate investors, two family superannuation funds and one individual; and
78.6.the majority of unitholders, being 213 out of 256 unitholders, hold unmarketable parcels, which means that, under the ASX operating rules, the parcel of securities held is worth $500 or less. The investor profile of this class of unitholders consists predominantly of individuals, family superannuation funds and a few small corporate investors.
Aurora Funds Management Limited ACN 092 626 885, also a holder of an AFSL(Aurora), is the investment manager for the RNY Scheme. [28] Aurora engaged CBRE as the property manager for the RNY Properties.[29]
[28] T Docs (n 1) T19 1461 [27].
[29] Ibid T19 1463 [50].
The Applicant submits the conduct complained of by ASIC does not justify the Suspension Decision and that any suspension would:
80.1.be “catastrophic” for the Applicant’s business operations;
80.2.would not constitute the correct regulatory approach;
80.3.would be contrary to public interest;
80.4.is not proportionate to the breach; and
80.5.set a dangerous precedent and overreach of administrative power.
The Applicant submits that the “sole reason for its non-compliance is the present inability of CBRE Inc (CBRE), the property manager of the RNY Properties, to provide the financial statements and supporting information for the RNY Properties in a timely manner”.[30]
[30] Applicant’s Submissions (n 8) 1 [9].
The Applicant referred to the Guide and points out that the factors which would typically be present in a decision to suspend or cancel a licence are not present in this case.[31]
[31] See Table 1 of ASIC’s Regulatory Guide 98.
Other than with respect to the RNY Scheme, there are no other compliance breaches. The Applicant’s other registered MIS are in compliance with their financial services law requirements.
The Applicant submits that its non-compliance has not been due to:[32]
84.1.any wilful disregard of the law;
84.2.any dishonesty, recklessness or negligence;
84.3.any systematic non-compliance; or
84.4.any prospect of there being a benefit to be gained.
[32] Applicant’s Submissions (n 8) 5 [44].
The Applicant also submits that:[33]
85.1.it understands its statutory obligations, as is evidence by its self-reporting of the non-compliance; and
85.2.there is no suggestion of any evidence of it failing to maintain the requisite high standard expected of a financial services licensee.
[33] Ibid 5 [45].
The majority investors in the RNY Scheme are aware of ASIC’s Suspension Order and have made no complaints or requests that the Applicant should be exchanged as the RE. They have not asked ASIC to take any action against the Applicant. There is no complaint by unitholders regarding the Applicant’s competency.
The RNY Scheme is in the wind-up phase. Of the original 25 properties held, there are now only 5 properties remaining to be sold.
In these circumstances, the Applicant submits:
88.1.a suspension of its licence will not serve the regulatory regime or ASIC’s protective jurisdiction because:
88.2.the scope of the suspension is disproportionate to the Applicant’s non-compliance;
88.3.its conduct does not fall short of reasonable standards expected by the public;
88.4.there is minimal risk to the public; and
88.5.a suspension is contrary to existing unitholders’ interests.
The Applicant submits that a suspension is not warranted or consistent with authorities and points to:
89.1.Sovereign Capital Limited and Australian Securities and Investments Commission [2008] AATA 901; 109 ALD 398 (Sovereign Capital) where the Tribunal overturned ASIC’s cancellation of the relevant AFSL, despite the Tribunal confirming that RE’s “instruct and forget” way of doing business and absence of proper processes. The Tribunal found the managing director of Sovereign Capital was inexperienced and lacked appropriate training. The Tribunal also found significant substantive breaches including that the RE had denied investors the opportunity to inspect the register of members and permitted a member to make an early withdrawal from the scheme.
89.2.The matter of Rainbow Legend Group Pty Ltd and Australian Securities and Investments Commission [2016] AATA 665 (“Rainbow”), where the Tribunal changed a cancellation of the party’s AFSL to a suspension. This is despite the RE’s “overall impression is one of sloppiness, of insufficient knowledge, of an inattention to proper process.”12
89.3.The matters of Westeq Ltd and Australian Securities and Investments Commission [2006] AATA 34 and Norfolk Ridge Vineyards Ltd and Australian Securities and Investments Commission [2005] AATA 1234 which both involved the licence holder not having the mandated limit of professional indemnity and fraud insurance. In those matters the Tribunal affirmed ASIC’s decision to cancel the AFSL.
The Applicant submits that a proportionate response to the lack of reporting compliance would be to:
90.1.prevent the Applicant from issuing new interests in the RNY Scheme while retaining the ability to provide necessary, or incidental, financial services for the day-to-day operation of the RNY Scheme; and
90.2.immediately lift the suspension upon the lodgement of the outstanding compliance plan audit reports and annual reports.

ASIC’S SUBMISSIONS

ASIC submits:[34]
91.1.a suspension limiting the Applicant from issuing any new units in any of its schemes (excluding Link) is more in keeping with the purposes of the legislative scheme set out under s 760A of the Corporations Act and section 1 of the ASIC Act;
91.2.the Applicant’s Proposed Order would have no practical impact on the Applicant in circumstances where it does not intend to issue additional units in RNY Scheme;
91.3.the suspension furthers the objects of the financial services regime because it will “focus HML’s attention on complying with its obligations” as it provides “an incentive for HML to resolve its non-compliance with the Corporations Act as soon as possible, ensuring investors in RNY are provided with relevant information promptly;” and
91.4.the Applicant’s contentions that “throughout its history, HML has been a competent and compliant AFSL holder” (AS [37], [81]) and that the current non-compliance “remains an isolated incident in HML’s history” (AS [79](a)) are overstated (see paragraphs 113 below).
[34] Exhibit 13, Respondent’s Outline of Submissions, 16 June 2023, 2 [9] (Respondent’s Submissions).
ASIC originally disputed the reason for the non-compliance and suggested it has arisen:
[O]ut of a disagreement [between the Applicant and CBRE] as to who would bear the ultimate costs of compliance, or where those funds would come. In ASIC’s view, such commercial considerations are not a legitimate excuse for not remaining compliant.[35]
[35] Exhibit 11, Respondent’s Submissions on the Stay Application, 5 May 2023, 5 [25] (Respondent’s Stay Submissions).
As referred to above this was categorically refuted by Mr Foxall who states there is no dispute regarding compliance costs.
At the time of this hearing ASIC no longer presses any allegation that the delay in compliance is due to a dispute. The contention regarding commercial considerations therefore does not arise.
ASIC submits that the non-compliance has been ongoing for over two years, and in that time the Applicant has not:[36]
95.1.submitted qualified financial reports;
95.2.replaced CBRE; or
95.3.applied to ASIC for an extension of time to file the required reports.
[36] Respondent’s Submissions (n 34) 12 [66].
ASIC states that these factors are concerning and indicates that the Applicant does not understand the importance of ensuring financial and audit requirements are met in a timely manner.
ASIC submits that no explanation has been given by the Applicant to explain why it did not report the breaches within the statutory time limit.
ASIC also referred to the decision of Rainbow. In that matter a company failed to lodge financial statements together with an auditor’s report for two financial years. The Tribunal determined that a suspension of 9 months (without the corresponding carve out under s 915H enabling day to day business to continue) was appropriate and found “the applicant has fallen short of the standards that are rightly expected of entities holding an AFSL” (at [41]).
ASIC confirms that it does not allege any dishonesty. ASIC says it is:[37]
concerned that the information received from HML in respect of the contravention, and HML’s inclination to place blame exclusively at the foot of CBRE, demonstrate a failure to comprehend its own obligations.
[37] Respondent’s Stay Submissions (n 35) 5 [24].
It is the Applicant’s obligation to ensure compliance with the Corporations Act.
ASIC submits it must take action where there is conduct in breach of section 912A of the Corporations Act.[38]
[38] Respondent Stay Submissions (n 35) 8 [40].
ASIC submits that a suspension is appropriate because:
102.1.cancellation of the AFSL is not appropriate in circumstances where it accepts the Applicant has been, and continues to, attempt, albeit unsuccessfully since January 2021,[39] to obtain relevant information from CBRE and there are prospects that the reports will be lodged in the future;
102.2.this would give the Applicant an opportunity to lodge the 2020 and 2021 reports;
102.3.there appears to be no strategy to get the information other than to keep asking for it, which to date has not worked;
102.4.the Applicant cannot say when it is likely to comply.
[39] See T Docs (n 1) T19.
ASIC says it has included the specification pursuant to section 915H in consideration of:
103.1.the interests of investors in RNY and Link; and
103.2.the Applicant wanting to wind up some of the MIS during the suspension period.
ASIC referred to the Australian Securities and Investments Commission Regulatory Guide 43: Financial Reports and audit relief (Guide 43) which explains how ASIC may exercise its powers to grant relief from the financial reporting and audit requirements of Pt 2M.2, 2M.3 and 2M.4 (other than Div 4) of the Corporations Act.[40] Guide 43 sets out the objectives behind the statutory reporting obligations is to protect and maintain investor confidence:
[40] T Docs (n 1) T43.
The objectives of financial reporting
RG 43.1 Chapter 2M of the Corporations Act 2001 (Corporations Act) contains the financial reporting and audit requirements for companies, disclosing entities and registered schemes:
(a) The financial reporting provisions impose requirements about keeping financial records, annual financial reporting, half-yearly reporting and disclosure obligations.
(b) The audit provisions provide users with an independent opinion on the information in the financial report.
These provisions are directed at maintaining investor confidence, enhancing market efficiency and ensuring the accountability of management through the provision of timely and reliable financial information.
RG 43.2 The purpose behind requiring entities to prepare and lodge with ASIC financial reports that comply with the requirements of Ch 2M is to make information available that is useful to a wide range of users, to help them make economic decisions. The legislative policy underlying these requirements indicates an expectation that there are ‘users’ of the financial reports.
Guide 43 (RG43.7) sets out that the discretion to grant relief from compliance with reporting requirements can only be exercised if ASIC is satisfied that compliance would:
(a) render the financial report or other reports misleading (see RG 43.13–RG 43.14);
(b) be inappropriate in the circumstances (see RG 43.15–RG 43.21); or
(c) impose unreasonable burdens (see RG 43.22–RG 43.53): s342(1).
ASIC contends the suspension is limited to restricting the Applicant only in relation to new interests.
ASIC submits that the suspension order:
107.1.Balances the needs to protect investors in RNY and Link and the Applicant’s desire to wind down and transfer the schemes, with the public interest of maintaining investor confidence;[41]
107.2.“is specifically intended to focus Mr Knox and Mr Foxall’s attention on ensuring HML’s compliance with s601HG and s391 in the next 12 months”.[42]
[41] Respondent’s Stay Submissions (n 35) 6 [32.1]
[42] Ibid 6 [32.2].
Prior to the hearing, following the receipt of additional evidence, ASIC agreed “there should be a further carve out for the issuance of new interests in one of the schemes, the Link Mortgage Scheme (Link), so as not to disadvantage existing investors in that scheme. ASIC also confirms that it is content for an order to be made that the suspension will be lifted upon ASIC confirming that the outstanding compliance plan audit reports and financial reports have been filed.”[43]
[43] Respondent’s Submissions (n 34), 1 [7].
ASIC submits that the suspension proposed by the Applicant does not further the objects of the Act and is inutile in circumstances where the Applicant admits it has no need to issue additional units.[44]
[44] Ibid 10 [56].
ASIC submits its proposed suspension does further the objects of the Act because:[45]
110.1.it provides an economic incentive for HML to resolve its non-compliance with the Corporations Act and to provide the relevant outstanding reports and information to investors in RNY as soon as possible, thereby allowing for confident and informed decision making by those investors;
110.2.it removes the potential of HML being distracted by other prospective but as yet uninitiated investments in circumstances where it has extensive and serious ongoing non-compliance; and
110.3.it encourages professionalism by HML and other AFSL holders by creating reasonable costs for non-compliance (in the form of delayed opportunities).
[45] Ibid 10 [57].
ASIC says there is no evidence that ASIC’s proposed suspension would contrary to the best interests of the RNY unitholders.
The Applicant stated it has no previous history of non-compliance.[46]
[46] T Docs (n 1) T19, 1468 [103]; Applicant Submissions (n 8) 4 [37], 8 [79], 9 [81].
Despite this claim, ASIC has identified the following historical examples of non-compliance:[47]
[47] Respondent Submissions (n 34) 3-4 [12].
… ASIC refers to the following historical matters:
12.1. On 3 June 2010, ASIC sent a letter to HML in respect of the failure to lodge financial statements and reports and a compliance plan audit for the financial year ending in 2009 for 2006 Calypso Mango Project (Supp TDoc 28).
12.2. On 22 July 2010, ASIC issued notices to HML under s 1274(11) of the Corporations Act in respect of the failure to lodge financial statements and reports and a compliance plan audit for the financial year ending 2009 for 2006 Calypso Mango Project (Supp TDoc 29).
12.3. On 28 July 2011, ASIC sent a letter to HML in respect of the failure to lodge the compliance plan audit report for the financial year ending in 2010 for 2006 Calypso Mango Project (Supp TDoc 30).
12.4. On 22 June 2012, ASIC sent a letter to HML in respect of the failure to lodge the compliance plan audit report for the financial year ending in 2011 for Brooklyn Park Organic Olive Groves Bonni-Foi Property Trust (Supp TDoc 31).
12.5. On 30 May 2013, ASIC sent a letter to HML in respect of the failure to lodge the compliance plan audit report for the financial year ending in 2012 for Brooklyn Park Organic Olive Groves Bonni-Foi Property Trust (Supp TDoc 32).
12.6. On 16 May 2014, ASIC sent a letter to HML in respect of the failure to lodge the financial statements and reports for the financial year ending in 2013 for Brooklyn Park Organic Olive Groves Bonni-Foi Property Trust (Supp TDoc 33).
12.7. On 16 May 2014, ASIC sent a letter to HML in respect of the failure to lodge the compliance plan audit report for the financial year ending in 2013 for Brooklyn Park Organic Olive Groves Bonni-Foi Property Trust (Supp TDoc 34).
12.8. On 16 May 2014, ASIC sent a letter to HML in respect of the failure to lodge the compliance plan audit report for the financial year ending in 2013 for 2007 Macgrove Project (Supp TDoc 35).
12.9. On 16 May 2014, ASIC sent a letter to HML in respect of the failure to lodge the financial statements and reports for the financial year ending in 2013 for 2007 Macgrove Projects (Supp TDoc 36).
12.10. On 29 September 2015, ASIC issued an infringement notice to HML in respect of alleged contraventions of s 12DB(1)(e) of the ASIC Act in connection with representations made in the AFR on 25 November 2014 and 11 February 2015 (Supp TDoc 37).
12.11. On 29 September 2015, ASIC issued an infringement notice to HML in respect of alleged contraventions of s 12DB(1)(e) of the ASIC Act in connection with representations made on the HML website between 4 May 2015 and 7 September 2015 (Supp TDoc 38).
12.12. Together, the conduct the basis of the infringement notice identified in paragraphs [12.1012.9] and [12.11] above, were the subject of civil penalty orders against HML in ASIC v Huntley Management Limited [2017] FCA 770.
12.13. On 8 May 2017, ASIC sent HML a letter with respect to its compliance with Regulatory Guide 133 – “Managed investments and custodial or depository services: Holding assets”, expressing concern as to areas of apparent non-compliance (Supp TDoc 39).
12.14. On 15 December 2017, ASIC sent a letter to HML regarding several matters of concern, including historical failures to lodge statutory reports for managed investments schemes, noting that “notwithstanding that all statutory lodgements appear to now be up to date, we consider the previous breaches to be a systemic failure in HML’s compliance framework to address obligations under the Act” (Supp TDoc 40).
12.15. On 16 May 2019, ASIC sent a letter to HML regarding the failure to lodge the compliance plan audit report for the financial year ending in 2018 for RNY (Supp TDoc 41).
12.16. On 17 July 2019, ASIC issued a notice to HML under s 1274(11) of the Corporations Act in respect of the failure to lodge the compliance plan audit report for the financial year ending in 2018 for RNY (Supp TDoc 42).
ASIC contends that the Tribunal must start from the position that the Applicant has breached, and continues to breach, its statutory reporting obligations.

ASIC notes that:
HML's non-compliance with the Corporations Act has extended for over two years. While ASIC does not take the view that the delay is connected with any deliberate obfuscation or untoward behaviour on the part of HML, ASIC considers the length of the delay in and of itself, and HML’s failure to avail itself of possible alternative remedies, reflects a failure to comprehend the serious nature of non-compliance with the Corporations Act. By way of example, HML has not (a) submitted qualified financial reports (b) taken action to replace CBRE or (c) applied to ASIC for an extension for filing (see Corporations Act, s 340 and ASIC Regulatory Guide 43 Financial reports and audit relief (RG 43)). Coupled with the historical non-compliance referred to above, ASIC submits that HML’s conduct represents a failure to understand the seriousness of ensuring financial and audit requirements are met in a timely manner.[48]
[48] Ibid 12 [66].
ASIC consents to an order to the effect that the suspension will be lifted upon ASIC confirming that the outstanding compliance plan audit reports and annual reports have been filed.
CONSIDERATION
Breaches
The Applicant is in breach of its statutory reporting obligations.
It is not in dispute the ASIC’s power to suspend or cancel the AFS licence has been enlivened under s915C(1)(c) [49] because of the Applicant’s failure with respect to the RNY Scheme to:
118.1.lodge compliance plan audit reports for the 2020 and 2021 financial years in accordance with s 601HG of the Act;
118.2.lodge annual reports for the 2020 and 2021 financial years in accordance with ss 292, 301 and 319 of the Act;
118.3.report its failure to comply with the statutory periods on time.
[49] Applicant’s Submissions (n 8) 8 [75].
Failure to give auditor information and lodge report - Breach of 601HG
The obligation on the Applicant under section 601HG is to:
119.1.ensure that at all times a registered company auditor, or an audit firm, is engaged to audit the scheme’s compliance plan (s 601HG(1); and
119.2.give the auditor relevant information and explanations (s 601HG(6)); and
119.3.to lodge the auditor’s report when complete (s 601HG(7)).
The remainder of section 601HG is concerned with the auditor’s obligations.
The Applicant is compliant with section 601HG(1) but not 601HG(6) and 601HG(7) The sole reason for its lack of compliance is because of the inaction of a third party.
Failure to Lodge Reports - Breach of sections 292, 301 and 319
It is not in dispute that the Applicant failed to lodge its financial audited reports as required by sections 292(1)(d), 301(1) and 319.
Failure to Report Breaches on Time: section 912DAA
It is not in dispute that the Applicant failed to report its inability to comply with reporting timeframes in accordance with section 912DAA.
Should the Discretion be Exercised?
The issue is whether the discretion to suspend the Applicant’s AFS licence should be exercised.
The Applicant says it is endeavouring to correct the ongoing non-compliance. ASIC confirmed there was no challenge to Mr Foxall’s evidence of what actions the Applicant has taken to obtain the necessary information for the auditor.
The Tribunal found Mr Foxall to be very candid in his evidence and clearly concerned about the lack of compliance. Mr Foxall was also prepared to acknowledge in hindsight that perhaps reporting the Applicant’s issues to ASIC earlier than it did, or considering applying for relief was something the Applicant could have done. The Tribunal accepts the unchallenged evidence of the impacts that the Suspension Order or ASIC’s Proposed Order would have on the Applicant.
On 5 April 2023, the Applicant lodged the financial reports for the full year ending 31 December 2020. The remaining reports, namely the financial reports for the full year ending 31 December 2021, together with the compliance plan audit reports for 2020 and 2021, are yet to be lodged.
There is ongoing non-compliance.
The Applicant provided an update on 5 July 2023. Mr Foxall states that financial reports for the full year ended 31 December 2021 have now been provided to Grant Thornton, the RNY Scheme auditors.[50] Mr Foxall states that once audited, the Applicant will lodge these reports with ASIC as soon as possible. At this point, the Applicant's outstanding reporting requirements will consist of the 2020 and 2021 compliance plan audit reports.[51]
[50] Exhibit 8, Third Witness Statement of William James Foxall, 5 July 2023, 2 [5].
[51] Ibid 2 [6]-[7].
In response to the historical compliance issues referred to be ASIC, Mr Foxall says:
130.1.those matters are “all historical appointments that have been closed and deregistered, with the lodgement issues arising prior to 2015”;[52] and
130.2.“the circumstances, it is submitted, reflect the significant compliance difficulties that are often faced by a replacement responsible entity (RE) being appointed and taking over stressed and underperforming schemes from another RE. This was the case for each of the Mango Project, Bonni-Foi and Macgrove Project.”[53]
[52] Ibid 2 [11].
[53] Ibid 3 [14].
The historical compliance issues were not taken into account by ASIC when it made the Suspension Decision. Further, no action was taken by ASIC at the time in relation to those issues. The Tribunal notes and accepts Mr Foxall’s unchallenged evidence that RE’s that take over MIS are often faced with stressed, underperforming or non-compliant schemes. Mr Foxall stated the RNY Scheme was one such scheme. He says they try to regularise the scheme as soon as possible. In most cases where the Applicant has taken over a MIS Mr Foxall says financial and compliance issues have been a mess and it has taken some time to regularise them. Generally, the Applicant has taken over a MIS as the RE where investors have been unhappy with a former RE’s performance. Mr Foxall says they continue to try, daily through the RNY Scheme’s investment manager, to get the necessary information for the compliance plan to be audited.
Mr Foxall told the Tribunal that in relation to the RNY Scheme non-compliances that the Applicant reported those circumstances, and the reasons, to ASIC.
In relation to other matters raised by ASIC Mr Foxall stated the following in a further written statement filed on 5 July 2023:
Others matters raised in paragraph 12 of ASIC's Submissions
Infringement Notices
59. On 29 September 2015, ASIC served two infringement notices relating to the Applicant's incorrect use of the word "approved", instead of "registered", in an advertisement in the Australian Financial Review newspaper on 25 November 2014 and 11 February 2015 and on the Applicant's website between 4 May 2015 and 7 September 2015.
60. The Federal Court ordered that the Applicant pay a fine of $50,000 and undertake not to make any representation to the effect that any project of the Applicant is approved by ASIC and make corrective advertising on the Applicant's website.
61. This was done and the fine was paid. The Applicant no longer advertises its services.
ASIC Correspondence dated 8 May 2017
62. The Applicant responded to ASIC's correspondence on 9 June 2017 (a copy of which is at Tab 21 of Exhibit WJF-1). The response acknowledged the concerns in the ASIC letter and provided some undertakings concerning the points raised.
AS/C correspondence dated 15 December 2017
63. ASIC's correspondence was a response to the Applicant's letter of 9 June 2017 and acknowledged various steps that the Applicant had made. This letter also acknowledges that the Applicant's statutory lodgements were up to date.
RNY Scheme
64. The Compliance Plan auditor for the RNY Scheme, Deloitte, was not prepared to complete the 2018 Compliance plan audit and audit report until such time as the 2018 Financial audit and audit report was completed and available for their review
65. The 2018 audit of the Compliance Plan for the RNY Scheme was lodged on 16 March 2020.
ASIC's Updated Submissions
66. Briefly, this section responds to ASIC's latest submission that the Applicant could have utilised "possible alternative remedies" in respect of the RNY Scheme.
67. As previously indicated to ASIC, the RNY Scheme auditor, Grant Thornton, was not prepared to complete its audits until it was provided with the audited financial statements for the Scheme properties. ln the absence of this information, Grant Thornton also never raised the prospect of qualified reporting.
68. ln terms of replacing CBRE, at the Applicant's meeting with ASIC on 24 August 2022, John Patton of Aurora Funds Management confirmed that CBRE would have to remain as the property manager until the refinancing and insurance matters involved in the RNY Scheme were resolved.
69. These issues remain ongoing in light of the appointment by the mortgagee of a rent receiver over the RNY Scheme properties, and the need for any change to be approved by the Supreme Court of New York.
The Applicant noted the decisions made under section 912A are generally of more serious nature such as misleading and deceptive conduct,[54] or where there has been a serious departure from requisite performance standards.[55]
[54] Re Hres and Australian Securities and Investments Commission [2008] AATA 707
[55] Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023.
In Rainbow, the licencee failed to lodge its financial statements and auditor’s report on time. There were also findings regarding false and misleading statements. The Tribunal found (at [22]) Rainbow had a “somewhat languid approach to compliance with” its reporting obligations. The Tribunal found no dishonesty, nor was there any evidence that a client had suffered a detriment. Despite the “sloppiness” and failure to properly supervise an employee which led to misleading statements on some “rogue” websites, the Tribunal thought cancellation of the licence was unnecessary and instead ordered suspension for 9 months which could be lifted once compliance issues attended to.
The Tribunal does not find Rainbow to be particularly helpful here as it involved allegations of misleading and deceptive conduct, albeit unintentional. The Tribunal also found that the late lodgements was due to a combination of ignorance, a failure to heed ASIC’s notices, and a lack of proper management and monitoring. None of those factors are present in this matter.
ASIC referred to the matter of David Hickie and ASIC [2013] AATA 853 (Hickie). In that case the Tribunal affirmed a decision by ASIC to impose a banning order of 2 years on the director of the responsible entity for four registered managed investment schemes where the responsible entity had failed, inter alia, to comply with ss 319, 601HG(7), 912A(1)(c) and 912D(1B) of the Corporations Act. ASIC notes the conduct in Hickey was objectively far worse than anything present in this case but says it is instructive of the seriousness with which the Tribunal considers reporting breaches.
The Tribunal does not find Hickie to be helpful in its consideration of this matter. Hickie was found to have engaged in repeated failures to regard his statutory duties and the Tribunal found his evidence was implausible. Those factors are not present here.
The cases referred to by both parties are fact specific.
As this Tribunal noted in Norman and Tax Practitioners Board [2021] AATA 848:
[142] Each matter must be assessed objectively based on its own facts. DP McCabe cautioned in Ridden v Tax Practitioners Board [2020] AATA 422 (“Ridden”), at [40] that “[t]here is some danger in rifling through reported cases in search of comparisons”. The Tribunal agrees with this notion to the extent that other cases should not be slavishly followed. The Tribunal must exercise independent discretion based on the unique facts before it. It is also important that there is consistency in Tribunal decisions. Although the Tribunal is not bound by other decisions, it can be guided by them, with a view to ensuring that parties are treated equally and fairly and providing a form of precedence that the public can take notice of. In Drake Brennan J (as President of the AAT) noted (at 643) that consistency with comparable cases and decisions is “[o]ne of the factors to be considered in arriving at the preferable decision”.
Conclusion
ASIC plays an important role in society in ensuring that those providing financial services are “fit and “proper” and competent. This protects the unsuspecting community at large. One of the objects of Chapter 7 of the Corporations Act is to promote fairness, honesty, and professionalism by those who provide financial services (section 760A).
The Court in Australian Securities and Investments Commission v Hutchison [2020] FCA 978 described the object of Chapter 7 of the Corporations Act as follows (at [74]):
…protection of consumers is central, but the object recognises that such protection and the minimisation of risk is facilitated in a number of ways: by the promotion of fairness, honesty and professionalism by 'those who provide financial services'; by ensuring there is transparency in the market and by reducing systemic risk.
Will the issuance of a suspension of the Applicant’s AFSL promote the objects of Chapter 7 of the Act?
In Sovereign Capital the Honourable Dr B H McPherson CBE, Deputy President, and Senior Member Bernard J McCabe (as he then was) said the power to suspend must be exercised having regard to the purposes of the regulatory regime and that:
84. A licence should only be suspended or cancelled if it is necessary to do so in order to accomplish the objects of the legislative scheme. A suspension will ordinarily be preferable if there is a reasonable prospect that the licence-holder can remedy the defects which prompted the concern. If there is no reasonable prospect of the issues being resolved, cancellation may be the appropriate course. The power to suspend or cancel should not be used merely to punish the licence-holder for transgressions: see Story v National Companies and Securities Commission (1988) 13 NSWLR 661.
(emphasis added)
This passage from Sovereign Capital has been cited with approval in a number of Tribunal decisions.[56]
[56] See Global Financial Markets Pty Ltd and Australian Securities and Investments Commission (31 August 2017)[2017] AATA 1397; Rainbow Legend Group Pty Ltd and Australian Securities and Investments Commission [2016] AATA 665.
The non-compliance concerns only one of the twelve registered MIS managed by the Applicant. Despite this, ASIC’s proposed suspension would impact all of the Applicant’s MIS. The delegate says this was “specifically intended to focus [HML’s] attention on ensuring HML’s compliance with s 601HG and s 391 in the next 12 months”.[57]
[57] T Docs (n 1) T02, 34 [41].
The Applicant contends that a suspension order along the lines proposed by ASIC is unnecessary because any risk to consumers is minimal given that, the vast majority of unitholders, some 213 of 256, hold unmarketable parcels that are worth $500 or less, that are not tradeable on the ASX.[58] The entities that own over 97% of the unit holdings, Aurora and Keybridge, are aware of the non-compliance and are actively assisting the Applicant to obtain the required information from CBRE.[59]
[58] Applicant Submissions (n 8) 8 [71].
[59] Ibid 8 [72].
Mr Foxall was asked whether a suspension order would make any difference to how the Applicant deals with obtaining the relevant information. Mr Foxall told the Tribunal:
Yes…it came as a consequence of our difficulties. We have as a consequence of that worked that much harder to try and get the thing resolved. The longer it takes the more impact it has on our business.
Mr Foxall told the Tribunal that the consequences that would flow from the Suspension Order or ASIC Proposed order would have a “catastrophic effect on the business” because it cannot issue new units which means the Applicant cannot take on new business. The Applicant is reliant on new business to make new income. A number of its current MIS are being wound up, so new business is imperative to keep the operations running.
The suspension proposed by ASIC is not limited to RNY. The suspension means that the Applicant cannot issue new interests in any of its other MIS.
The basis for the Suspension Decision is not related to the competency or the quality of the Applicant’s work but due to a failure to comply with a statutory reporting obligation.
The Applicant has admitted its non-compliance and reported it, albeit later that statutorily required.
The conduct of the Applicant here is not egregious and is certainly at the low end of the scale. ASIC accepts that the basis for the Applicant being unable to lodge its compliance reports on time is due to the actions (or inactions) of a third party. ASIC acknowledged that the Applicant has been using its best endeavours to obtain the relevant information needed to enable it to comply. However, despite its best endeavour, the Applicant is still not in compliance. This status has now been the case for a long time.
The Tribunal considers that some form of suspension should be in place.
The failure to comply with respect to the 2020 year has been outstanding for 2 years and the failure to comply with respect to the 2021 year has been outstanding for 14 months. Further, there is nothing before the Tribunal regarding any likelihood of when the Applicant will be fully compliant with its reporting obligations. Compliance with reporting obligations is an important part of maintaining investor confidence, and assuring stakeholders that laws and regulations are being complied with.
A suspension would provide an incentive to ensure compliance (as was acknowledged by Mr Foxall at the hearing) and would act as a general deterrence and reminder to others that financial services laws need to be complied with.
Given the calibre of the offending conduct and the fact that the conduct complained of is limited to only one MIS, the Tribunal considers that the ASIC Proposed Order is out of proportion and would be more akin to a punishment. Why should those involved in the other MIS managed by the Applicant be impacted in any way? How would this serve the public interest and the objects of the financial services legislation?
The suspension order in these circumstances should be limited to the RNY Scheme. ASIC acknowledges that the RNY Scheme is being wound down and agrees to the Applicant being permitted to operate the scheme for the purposes necessary to do this.
The only suspension order that could be made is one which prevents the Applicant from issuing new interests in the scheme, as proposed by the Applicant. At the hearing the parties contended that this order would have no effect because no new interests will be issued as the scheme is in its wind down phase. Although the order may not have a direct practical impact on the Applicant, it does not mean there is no utility in making it. A limited suspension order would provide guidance to others of the nature of such orders that may be made in similar circumstances. It is also something which will be published on ASIC’s website and known about the Applicant and will be required to be disclosed.
The Tribunal considers that a suspension order should be made in the form proposed by the Applicant.
The Tribunal has decided to set aside the decision under review and substitute with the following:
1)Pursuant to s 915C(1) of the Corporations Act 2001 (Act), the Tribunal suspends the Australian financial services licence number 229754 (AFSL) held by Huntley Management Limited ACN 089 240 513 (Applicant).
2)Pursuant to s 915H of the Act:
a.the AFSL continues in effect as though the suspension had not occurred for the purposes of the provisions of Chapter 5C and Chapter 7 of the Act except in relation to RNY Property Trust ARSN 115 585 709 (RNY Scheme).
b.in relation to the RNY Scheme, the AFSL continues in effect as though the suspension had not occurred for the purposes of Chapter 5C and Chapter 7 of the Act to the extent that the Applicant is permitted to provide the financial services that are necessary for, or incidental to, the day-to-day operation of the RNY Scheme, other than services related to the issue of interests in the RNY Scheme.
3)ASIC is to lift the suspension immediately upon the lodgement of the outstanding reporting requirements in respect of the RNY Scheme, namely the annual financial reports for the full year ended 31 December 2021 and the compliance plan audit reports for the years ended 2020 and 2021.
DECISION

The Tribunal varies the decision under review and substitutes it with the following decision:
1)Pursuant to s 915C(1) of the Corporations Act 2001 (Act), the Tribunal suspends the Australian financial services licence number 229754 (AFSL) held by Huntley Management Limited ACN 089 240 513 (Applicant).
2)Pursuant to s 915H of the Act:
a.the AFSL continues in effect as though the suspension had not occurred for the purposes of the provisions of Chapter 5C and Chapter 7 of the Act except in relation to RNY Property Trust ARSN 115 585 709 (RNY Scheme).
b.in relation to the RNY Scheme, the AFSL continues in effect as though the suspension had not occurred for the purposes of Chapter 5C and Chapter 7 of the Act to the extent that the Applicant is permitted to provide the financial services that are necessary for, or incidental to, the day-to-day operation of the RNY Scheme, other than services related to the issue of interests in the RNY Scheme.
3)ASIC is to lift the suspension immediately upon the lodgement of the outstanding reporting requirements in respect of the RNY Scheme, namely the annual financial reports for the full year ended 31 December 2021 and the compliance plan audit reports for the years ended 2020 and 2021.

I certify that the preceding 161 (one hundred and sixty-one) paragraphs are a true copy of the reasons for the decision herein of Senior Member D K Grigg

...........[SGD].......................
Associate
Dated: 21 July 2023

Date of hearing:

12 July 2023

Advocate for the Applicant:

Mr L V Gyles SC and Mr J I Whealing of Counsel (by video)

Solicitors for the Applicant:

Piper Alderman Lawyers

Advocate for the Respondent:

Mr R Davies of Counsel (by video)

Solicitors for the Respondent:

ASIC

Date of hearing:	12 July 2023
Advocate for the Applicant:	Mr L V Gyles SC and Mr J I Whealing of Counsel (by video)
Solicitors for the Applicant:	Piper Alderman Lawyers
Advocate for the Respondent:	Mr R Davies of Counsel (by video)
Solicitors for the Respondent:	ASIC